Bankruptcy of BRYERS v OFFICIAL ASSIGNEE
| Jurisdiction | New Zealand |
| Judgment Date | 06 March 2015 |
| Neutral Citation | [2015] NZHC 384 |
| Date | 06 March 2015 |
| Court | High Court |
In The Matter OF The Insolvency Act 2006
In The Matter OF
The bankruptcy of Mark Ronald Bryers
[2015] NZHC 384
In The High Court Of New Zealand Auckland Registry
Objection under the Insolvency Act 2006 (IA) by the Official Assignee (OA) to a discharge from bankruptcy or alternatively for imposition of restrictions under s299 IA (Court may restrict bankrupt from engaging in business after discharge) — bankrupt was creator of Blue Chip investment scheme — before the scheme failed, had moved to Australia and become involved in a business there — had used an alias in that business to conceal his identity from potential customers at request of directors of business — whether it was in the public interest to allow the bankrupt to be discharged — whether the bankrupt's conduct prior to adjudication and since adjudication favoured discharge — whether the activities of the bankrupt in Australia were relevant.
Mr Chisholm QC for Mr Bryers Mr P Cornege for Official Assignee
Mr Bryers was adjudicated bankrupt on 1 October 2009. He would have been entitled to a discharge, in the normal course, on 23 October 2012. However, on 12 December 2011 the Official Assignee (“OA”) objected to the discharge. As a result of the OA's objection, it became necessary to conduct an examination of Mr Bryers. 1 That examination took place on 2 and 3 March 2015.
The brief history of the matter is that Mr Bryers was the creator of a scheme of investment for retail investors carried on in New Zealand. It is not necessary to go into the detail of the corporate arrangements of the Blue Chip companies other than to note that the umbrella company was Northern Crest Investments Limited. In the wake of the collapse of the Blue Chip Groups, that company was liquidated on 2 June 2011.
Briefly summarised, the Blue Chip system enabled retail investors to buy pre- leased residential investment properties. Packages included available finance to enable him to purchase those properties.
Some time before the New Zealand Blue Chip Group met its demise, Mr Bryers had left New Zealand and he his full time place of residence since 2006 has been in Australia. He has come and gone to New Zealand on a number of occasions to attend interviews and examinations instigated by the OA's office. There is no doubt that his overseas travel and residence has been with the consent of the OA.
Northern Crest Investments Limited was eventually listed on the Australian Securities Exchange but was de-listed following its liquidation in New Zealand. An attempt to replicate a Blue Chip–type business in Australia was unsuccessful. The OA has offered the opinion that that was because of the more complicated regulatory environment in Australia and because interest is not so high in that country in investment in residential real estate
On 20 May 2010, Mr Bryers was convicted of charges of failing to comply with the Financial Reporting Act 1993 and the Companies Act 1993. Pursuant to s
385 of that Act, Mr Bryers was prohibited from managing companies for a period of five years. His counsel told me at the hearing into his discharge that Mr Bryers did not defend those proceedings “due to his financial position”In the initial submissions which Mr Cornege made on behalf of the OA, three principal concerns were put forward for the Official Assignee opposing Mr Bryers discharge from bankruptcy:
The Official Assignee has three principle concerns regarding the bankrupt's discharge from bankruptcy or future involvement in business in New Zealand:
The losses to creditors in his bankruptcy were substantial, exceeding $150 million;
The bankrupt bears some (but not complete) responsibility for the collapse of the Blue Chip group, and the resulting loss to investors (none of whom are creditors in his bankruptcy); and
It appears that the bankrupt may be in breach of ss 149/436 of the Act.
The position of the OA was stated as follows:
The outcome of the public examination will, ultimately, be a matter for the Court, and the OA does not take a firm position, particularly in light of the length of time since the bankrupt was adjudicated.
However, given the magnitude of the losses to creditors, the bankrupt's involvement in the collapse of Blue Chip, and his apparent involvement in the management of a business without consent, the OA submits that an appropriate outcome may be a discharge subject to an indefinite prohibition on the bankrupt engaging in business in New Zealand pursuant to s 299(2)(a) of the Insolvency Act 2006 ( the Act).
To complete the description of the OA's position, brief reference is required to be made to the report of the OA dated 21 October 2014. In the initial report, the summarised grounds for opposition were stated as being that Mr Bryers was directly or indirectly responsible for substantial losses of the Blue Chip Group.. There had been limited recoveries in his bankruptcy and Mr Bryers appeared to have limited insight into what went wrong for his contribution to the events.
It was also of concern that he was involved in a company called Talos, an Australian corporation. It was also contended that his involvement in that company was greater than Mr Bryers had been prepared to acknowledge.
It was submitted that Mr Bryers did not intend to return to New Zealand and that therefore it can only be because his continuing bankruptcy in New Zealand would constitute an impediment to him being a director of the Australian company that was motivating him to seek a discharge.
In the initial report, the Official Assignee expressed the view that Mr Bryers should not be discharged unconditionally, that he is a genuine commercial risk and that if he is discharged, he should be prohibited from engaging in business after discharge pursuant to s 299 of the Insolvency Act 2006 and that that prohibition have no time limit. However, as I have noted, there was some modification of that position in the submissions that were filed on behalf of the OA.
By the time the matter came to the hearing, the OA had modified her position. The OA confirmed that, given that Mr Bryers period of bankruptcy is nearing five and a half years, “no particular outcome is sought, and she is in the court's hands”.
Mr Cornege made the following submissions concerning the principles that were applicable where the Court is considering an objection to discharge.
“In ASB Bank v Hogg, the Court of Appeal said, in respect of the Court's discretion concerning discharge, that: 2
In conferring a discretion expressed in the broadest terms, the legislation recognises that each case will be different, that the relevant factors may vary from case to case and that the exercise of the discretion must be governed by the circumstances of the particular case having regard to the guidance provided by a consideration of the scheme and purpose of the legislation. In providing for automatic discharge after three years, the legislation recognises that it is not in the public interest that the bankruptcy should endure indefinitely. In providing for earlier discharge, s 108 recognises that continuing the bankruptcy to the end of the three years may not be in the public interest. Whether or not it is will be a matter for decision on the particular facts. In that regard, guidance is provided by s 109(2) which lists matters on which the assignee is to report to the High Court in such a case. The Court is to consider the assignee's report as to the affairs of the bankrupt, the causes of the bankruptcy, the manner in which the bankrupt has performed the duties imposed on him or her under the Act and his or her conduct both before and after the bankruptcy, and also as to any other fact, matter or circumstance that would assist the Court in making its decision. Clearly the Court apprised of the matter will consider the legitimate interests of the bankrupt, the creditors and wider public concerns, but it is neither required nor entitled to impose threshold requirements in the exercise of the discretion so as to derogate from the breadth of the powers conferred under s 110.
In Re Whitelaw, 3 the legal principles for consideration of an objection by the Official Assignee to a discharge from bankruptcy were summarised (under the Insolvency Act 1967, which has materially similar provisions to the Act): 4
-
(a) The onus is on the OA to satisfy the Court that it is in the public interest that the bankruptcy which would otherwise automatically be discharged after three years should continue for a further period;
-
(b) The Court has a broad discretion to exercise in regard to all the circumstances of the particular case;
-
(c) In the absence of good reasons, a bankrupt should normally obtain a discharge;
-
(d) Public interest factors may, however, mean that an order of discharge should be refused;
-
(e) As indicated by the matters on which the Assignee is required to report under section 109(2) of the Insolvency Act 1967, the Court should consider the manner in which the bankrupt has performed the duties imposed on him under the Act and his conduct both before and after the bankruptcy and any other matters that may assist the Court in making its decision; and
-
(f) The relevant matters therefore include: the interests of the bankrupt; the interests of the creditors; the public interest; and commercial morality and the conduct of the bankrupt.
The only disagreement that I have with the submissions which Mr Cornege made on this point concerns his contention that one of the objectives of bankruptcy law is punishment of the bankrupt. I prefer to follow Re Kelly ex parte Structured Finance Ltd where Asher J said: 5
The public...
To continue reading
Request your trial