Downey v Holland [2014] NZHC 1546 (3 July 2014)

Last Updated: 24 July 2014

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2014-404-001584 [2014] NZHC 1546

UNDER	Sections 3, 7, 8 and Schedule 1 Insolvency (Cross-Border) Act 2006
IN THE MATTER OF	VIC 16/59 of 2014/12 being the proposed Personal Insolvency Agreement of Peter Jesse Holland under Part X Bankruptcy Act 1996 (Commonwealth)
BETWEEN	JAMES PATRICK DOWNEY Applicant
AND	PETER JESSE HOLLAND Debtor

Hearing:	30 June, 2 and 3 July 2014
Counsel:	C A Murphy for the Applicant No Appearance of, or for the Debtor N W Ingram QC for Holland Corporate Limited M T Kyriak (Interested Party)
Judgment:	3 July 2014

(ORAL) JUDGMENT OF DUFFY J [re Result Ruling]

Counsel: C A Murphy, Auckland

N W Ingram QC, Auckland

Solicitors: Dermot Ross and Co (D M M Ross), Auckland

Graeme Skeates Law (G H Skeates), Auckland

Copies To: Kyriak Law, Auckland

_{P J Holland, Australia}

DOWNEY v HOLLAND [2014] NZHC 1546 [3 July 2014]

[1] On Monday, 30 June 2014, James Patrick Downey of Australia filed a without notice originating application for recognition of a foreign proceeding and relief (“the application”). The application was heard yesterday on a Pickwick basis.

[2] Mr Downey was appointed as a controlling trustee of the property of Peter Jesse Holland, pursuant to s 188 of the Bankruptcy Act 1966 (Commonwealth of Australia). So Mr Holland’s assets are now subject to Part X of the Bankruptcy Act (“the Australian proceeding”). The application seeks to invoke the rules applying to cross-border insolvency proceedings as set out in Schedule 1 of the Insolvency (Cross-Border) Act 2006 (“the Act”), so as to have the Australian proceedings recognised in this country.

[3] Holland Corporate Ltd (“HCL”) is a plaintiff in civil proceedings filed in this Court against Mr Holland (“the civil proceedings”). The substantial hearing of those proceedings was scheduled to be heard by way of formal proof on Monday, 30 June

2014. Once the Court was seized of Mr Downey’s application, it convened a conference with counsel for HCL and counsel for Mr Downey. Counsel were agreed that the application could proceed on a Pickwick basis on 2 July 2014. They were also agreed that the final application could be heard at that time. Counsel worked expeditiously and co-operatively over the intervening period to ensure that the application was ready for hearing on 2 July 2014. The formal proof hearing of the civil proceedings was adjourned until Thursday, 3 July 2014.

[4] When the application was called on 2 July 2014, counsel were agreed that the substantial application could be dealt with, though counsel for Mr Downey made submissions on interim relief, as well as final relief.

[5] Before delivering this judgment today, I again enquired of counsel if they were content that I dealt with the substantial application, and both agreed.

[6] I also enquired of Mr Kyriak, who has a separate claim against Mr Holland if the substantial application could be dealt with. Mr Kyriak was in Court and confirmed that he was content that I dealt with the application in its final form.

[7] At the end of the hearing (which concluded at approximately 4.45 pm yesterday), I had indicated to counsel that I would deliver a result ruling today, and if the result ruling was in HCL’s favour, the formal proof hearing would proceed.

[8] There are four causes of action in the civil proceeding, one of which is a recognisable proof of debt under the Australian proceedings. HCL has written to the controlling trustee regarding that proof of debt. There has been no dispute by the controlling trustee regarding its status.

[9] Mr Holland was not represented and could not be present at the hearing of the civil proceeding. He is in Australia.

[10] Mr Downey is concerned that the formal proof hearing may result in a judgment that skews the allocation of Mr Holland’s available resources unfairly in favour of HCL. Accordingly, he brings the application with a view to obtaining interim relief staying the civil proceeding, or for the Australian proceeding to be recognised as a foreign main insolvency proceeding, which will automatically lead to a stay of the civil proceeding under art 20 of the First Schedule to the Act.

[11] HCL opposes the application and, in the alternative, it has applied that any stay of proceedings under art 20 not apply to the civil proceeding. The application was made orally, and I am satisfied in the circumstances of this case that it meets the requirements of r 7.41(1)(d) of the High Court Rules. HCL wants to proceed with the formal proof later today.

[12] For reasons which I will deliver later, I am satisfied that the Australian proceeding meets the definition in s 4 of the Act as an insolvency proceeding. It also qualifies for recognition under art 17 as a main foreign proceeding.

[13] I am satisfied that art 20(1)(a) applies to the Australian proceeding. Therefore, the civil proceeding is automatically stayed.

[14] However, also for reasons that I will deliver later, I am satisfied that HCL’s application under art 20(2) has merit and, accordingly, I propose to allow that application on the following conditions:

(a) HCL’s claim against Mr Holland can proceed in relation to the breach of fiduciary duties claim (the fourth cause of action) only – which is the only cause of action that the controlling trustee can recognise as a debt in the Australian proceeding; and

(b) Any relief that HCL can recover as a result of proving its claim will not extend to an award of costs or disbursements.

[15] In this way, I aim to limit the quantum of any payment that I may find owing in the civil proceeding to the type of payments that it would be open to the controlling trustee to recognise were he so persuaded.

Duffy J