A recent decision of New Zealand’s High Court provides guidance on what an Australian bankruptcy Trustee must prove to realise assets located in New Zealand.
On 13 February 2024, Judge Taylor, in the High Court of New Zealand, handed down a judgment in favour of an application made by our firm’s Managing Partner, Nick Cooper, to recognise a foreign proceeding so that he was able to realise property of Mr Terry Alexander Davidson (the “Respondent”) in New Zealand in his capacity as the Trustee in the Respondent’s Australian bankruptcy.
https://www.austlii.edu.au/nz/cases/NZHC/2024/158.html
Background
The Respondent was made bankrupt on 31 May 2019 and, at that time, he resided in Australia. Mr Cooper, after his appointment as the bankruptcy Trustee, made attempts to contact the Respondent to complete his Statement of Affairs (“SOA”), sending letters to the Respondent’s addresses located in New Zealand (“NZ”) and Queensland.
A month later, the Respondent responded to the letter sent to the Queensland property by calling our office. In this conversation, the Respondent advised that he lived in Queensland, but occasionally travelled to New Zealand for work. The Respondent also advised that the equity in his property in Queensland may potentially achieve the annulment of his bankruptcy and that his wife was willing to purchase his share of the equity in that property.
A further month after this, the Respondent provided Mr Cooper with his SOA, confirming that he resided in the Queensland property with his wife. A year later, the Respondent’s wife purchased the Respondent’s share in the equity in the Queensland property, for an amount that was expected to be sufficient to meet the debts of the Respondent’s bankrupt estate, which would annul the bankruptcy.
However, a few months later, our office received a call from Avanti Finance Limited (“Avanti”), advising that a judgment was obtained against the Respondent in New Zealand, the result of which was that the Respondent owed them NZ$55,560. This also meant that the proceeds of sale from the Queensland property would no longer cover the amount needed to annul the bankruptcy.
Our staff tried on several occasions to contact the Respondent to obtain further information about Avanti’s claim, however he initially failed to respond. Mr Cooper also discovered that despite just an Australian bank account and the Queensland property being disclosed in the Respondent’s SOA, he also held an interest in real property in New Zealand and a vehicle (subject to finance with Avanti).
The judgment obtained by Avanti was following their unsuccessful attempts to repossess the vehicle as it could not be located, so they sought a judgment for the outstanding finance debt. In regard to the vehicle, the Respondent had advised that he left the vehicle outside of a former address in New Zealand in late 2019 and had assumed that it had been repossessed. This was inconsistent with a claim that the Respondent had made in January 2020, which was that he sold the vehicle to Magnus Mitsubishi and the vehicle was associated with a logging company in liquidation.
Matter for determination
It was necessary for the Hight Court of NZ to recognise the Respondent’s Australian bankruptcy, so that a NZ agent could be appointed to conduct any required actions in connection with the assets in NZ.
In making this determination, the High Court needed to consider the following:
Was the proceeding a foreign proceeding?
The Court found that the Respondent’s bankruptcy in Australia was a foreign proceeding, being a judicial administrative procedure in a foreign state in which the Respondent’s assets and affairs were subject to the control/supervision of a foreign Court (in this case, being the Federal Court of Australia).
Was the proceeding collective in nature?
The Court found that the bankruptcy proceeding was collective in nature, as it was being undertaken for the benefit of all the Respondent’s creditors who have proved their debts in the bankruptcy.
Was the proceeding a foreign main proceeding?
In determining this, the Court needed to decide whether the proceeding was taking place in the State where the Respondent held the centre of his main interests. In this case, at the time of commencement of his bankruptcy, the Respondent was residing in Australia, though he had travelled to NZ without Mr Cooper’s permission, but since returned and stayed in Australia. The Judge commented that there is a presumption that an individual bankrupt’s habitual residence holds the centre of their interests, and as such it was determined that the proceeding was a foreign main proceeding.
Could a foreign representative be appointed?
This would allow an authorised agent to act on behalf of Mr Cooper to conduct any required action regarding the property in NZ. The Court found that Mr Anthony Pullman, Official Assignee for the Midlands Region, held the necessary qualifications to be entrusted with the administration and/or realisation of the Respondent’s assets located in NZ.
The judgement is a welcome step for our office to access the Bankrupt’s assets in New Zealand for the benefit of his creditors.
The judgment also provides a useful guidance on what matters need to be proved to allow an Australian bankruptcy to be recongnised in New Zealand.