Williams v Simpson

• Jurisdiction: New Zealand
• Judge: Heath J
• Judgment Date: 12 October 2010
• Neutral Citation: [2010] NZHC 1786
• Docket Number: CIV 2010-419-1174
• Court: High Court
• Date: 12 October 2010

Under the Insolvency (Cross-border) Act 2006

Between

Steven John Williams

Applicant

and

Alan Geraint Simpson

Debtor

[2010] NZHC 1786

CIV 2010-419-1174

IN THE HIGH COURT OF NEW ZEALAND

HAMILTON REGISTRY

Applications for recognition of English bankruptcy proceedings under Art17 of Sch1 Insolvency (Cross-border) Act 2006 (Recognition of a foreign proceeding and relief) or for assistance under s8 (High Court to act in aid of overseas courts) — whether the English proceedings qualified as a “foreign main proceeding” or “foreign non-main proceeding” for the purposes of art 2 sch1 — whether the defendant's main centre of interest was in England to qualify as a foreign main proceeding — whether the defendant had an establishment in England to qualify as a foreign non-main proceeding — if the Court did not have jurisdiction under art17, whether it should exercise its discretion to grant assistance under s8 Insolvency (Cross-border) Act 2006.

Counsel:

K J Crossland and P J Morris for Applicant

P F Gorringe for Debtor

D M O'Neill for Mr Clough (personal capacity)

C Bryant for Trustees of B V Adams No 2 Trust

M Strang for Commissioner of Inland Revenue

P Gorringe, PO Box 7098, Hamilton

D M O'Neill, PO Box 815, Hamilton

P J Morgan QC, PO Box 19021, Hamilton

JUDGMENT (NO. 5) OF Heath J

Contents

Introduction	[1]
The legislation	[5]
The history of the proceeding	[8]
Recognition	[17]
Is Mr Williams a “foreign representative”	[21]
Jurisdictional issues under Schedule 1 Recognition as a “main proceeding	[25]
(a) Centre of main interests	[30]
(b) Submissions	[35]
(c) Analysis	[41]
Recognition as a non-main proceeding	[50]
Request for aid: Section 8 of the Act	[67]
Result	[88]

Introduction

1 Mr Simpson lives at 35 Ann Street, in Hamilton. On 9 September 2009, notwithstanding his place of residence, he was adjudged bankrupt by the High Court of Justice in London (the English Court), on the petition of the Society of Lloyd's (Lloyd's). At the time the petition was presented, Lloyd's asserted that it was owed £242,920.29, based on a judgment obtained on 11 March 1998 in the sum of £163,078.92, plus accrued interest and costs. Mr Williams, an English insolvency practitioner, was appointed as trustee of Mr Simpson's bankrupt estate.

2 Mr Williams soon discovered there were no assets in the United Kingdom that he could realise for the benefit of Mr Simpson's creditors. However, he received reliable information from which he formed the view that Mr Simpson had assets in New Zealand.

3 On 10 September 2010, although Mr Simpson had been automatically discharged from the English bankruptcy the previous day, 1 Mr Williams applied to this Court for an order recognising the English bankruptcy proceeding as a “foreign main proceeding”, under Schedule 1 of the Insolvency (Cross-border) Act 2006 (the Act). Later, that application was amended, so that recognition was sought on one of

three alternative bases: as a “foreign main proceeding”, 2 a “foreign non-main proceeding” 3 or under s 8 of the Act. The form of recognition or assistance afforded will determine the relief that this Court has jurisdiction to provide

4 The application was not opposed by Mr Simpson, nor by any other parties whom I ordered to be served. 4 Nevertheless, at the conclusion of the hearing of the recognition application I reserved my judgment to determine whether the English bankruptcy should be recognised under the Act or assistance given under s 8. Like Judges in other common law jurisdictions, I take the view that the Court needs to scrutinise the application to determine whether (and if so, on what basis) recognition ought to be ordered, given that different consequences will flow from the type of recognition provided. Also, this is the first occasion on which it has been necessary for this Court to consider the approach to be taken to an application of this type.

The legislation

5 The Act creates procedural, rather than substantive, rights. It provides the basis for a modern legal framework designed to facilitate efficient disposition of cases in which an insolvent debtor is subject to a collective insolvency regime in more than one country or has assets or debts in more than one country. 5 The term “collective” distinguishes a formal insolvency regime (under which the debtors assets are realised for the benefit of all creditors) from private proceedings against a debtor, in which a single creditor seeks judgment for its own benefit. 6

6 Schedule 1 of the Act is based on the Model Law on Cross-border Insolvency (the Model Law), 7 developed by a working group of the United Nations Commission

on International Trade Law (UNCITRAL). Because of its international origins, New Zealand Courts are entitled to have regard to the Model Law and to any document relating to its creation that originates from UNCITRAL or its working group, 8 in interpreting the Act

7 Parliament foresaw the possibility that the Model Law may not be wide enough to cover all circumstances in which a representative of a collective regime in another country might wish to seek assistance from New Zealand Courts. For that reason, s 8 of the Act re-enacts a provision that enables this Court to act on any request for aid made by a Court of another country; 9 thereby providing a general discretion to the Court to assist in cases where Schedule 1 is not engaged. 10

The history of the proceeding

8 Although this proceeding was only filed on 10 September 2010, there has been much activity.

9 Immediately upon filing, Mr Crossland, for Mr Williams, sought a without notice order under art 19 of Schedule 1 for the issue of a search warrant of the dwelling and outbuildings at 35 Ann Street, Hamilton, where Mr Simpson resides. That property is owned by the trustees of the B V Adams No 2 Trust, Mr Clough and Ms Mann.

10 Article 19 allows provisional relief to be granted, pending disposition of the recognition application, if urgently required to protect assets of the debtor or the interests of creditors. The application was made because Mr Williams had information to suggest that Mr Simpson may be concealing bullion in those

premises. Initially, I did not grant that application, but did so on 17 September 2010 after more reliable evidence was put before me. 11

11 I issued a search warrant, 12 to be executed by the Court's agent, Mr Currie, the Official Assignee at Hamilton (the Official Assignee). 13 I also suspended Mr Simpson's right to transfer, encumber or otherwise dispose of any of his assets in New Zealand and authorised the Official Assignee to summon Mr Simpson for examination before an Associate Judge of this Court at 10am on 21 September 2010. 14 That relief was granted under art 19 on the basis that there was reason to believe Mr Simpson was concealing property at the Ann Street address and interim relief, pending determination of the recognition application, was required urgently to protect the assets or the interests of Mr Simpson's creditors. 15

12 I extended the scope of the search warrant during the course of its execution, on 20 September 2010, to encompass documents and computer data relevant to the subject matter of the warrant and foreign currency. 16 Bullion, foreign currency and relevant documents were found and seized. They have been put into safe storage, pending the outcome of the recognition application.

13 On 21 September 2010, Mr Simpson was examined on oath before Associate Judge Faire. 17 The next day, based on Mr Simpson's evidence at the examination, Mr Williams sought further relief, in the form of an examination order of trustees of B V Adams No 2 Trust and two bullion dealers in Auckland. I declined to make that order because the application went to questions of ownership, rather than protection of assets or the interests of creditors, for the purposes of art 19. I formed the view

that ownership issues should be dealt with after any recognition order had been made. 18

14 The following week (on 29 September 2010) further interim relief was sought. A second (without notice) application was made to search the Ann Street property. More information had been gathered by the Official Assignee. An affidavit from a builder, Mr Holloway, gave strong grounds to believe that, in December 2009, Mr Simpson had arranged for two compartments to be constructed under the floor of the dwelling. The Official Assignee believed that additional bullion, foreign currency or associated documents may have been squirreled away in those compartments and not found during the 20 September 2010 search.

15 I was not prepared to make that order on a without notice basis. I directed that the trustees of the B V Adams No 2 Trust (as registered proprietors of the property) be served. I did so on the basis that they and their solicitors were subjected to an order that the existence of the application not be communicated to Mr Simpson, pending its determination. A hearing took place at 4.00pm on 29 September 2010, following which I made orders in similar terms to those sought by the Official Assignee; but limiting the search to the two compartments and to safes that had already been searched (in case items had been moved back into them once Mr Simpson believed the first search had been completed) and their surrounds. 19

16 The second search took place that night. Additional bullion, foreign currency and documents were seized from the compartments and the safes that had already been searched. These items are also held in safe storage, pending further order of the Court. I have been told by counsel that the approximate value of bullion and foreign currency seized to...