The High
Court refused approval to a part payment scheme offered to creditors by
insolvent Wellington property developer Stephen John Edward Pack because of his
poor business record and his failure to tell creditors his true financial
position. Being pursued for debts
amounting to nearly three million dollars and having drawn director’s
remuneration in one year at $300,000 he claimed to have only minimal personal
assets totalling $41,500.
The court was told Mr Pack, now aged 65, has a
Wellington home held in a family trust.
He undertakes project management work through his company, Graceland
Properties Ltd. Evidence was given that
a number of his property projects failed financially: proposals for retirement
villages at Wainuiomata in Wellington and Meremere in the Waikato failed to get
off the ground and a $7.25 million commercial rebuild in Lower Hutt was
completed at a loss after cost overuns.
Unable to pay his creditors in full, Mr Park
offered a deal: unsecured creditors would share in $10,000 paid per year for
six years, a total of $60,000. On best
estimates, unsecured creditors would get three cents in the dollar. While a majority of unsecured creditors
agreed to the proposal, two objected: Inland Revenue claiming $142,000 primarily
for unpaid income tax and accrued penalties together with the liquidator of one
of Mr Pack’s property companies chasing Mr Pack for company funds siphoned off
to support his other companies and to meet his personal living expenses.
Part payment schemes designed to avoid
bankruptcy require High Court approval, even where a majority of creditors vote
in favour. Associate Judge Smith
declined approval, ruling that Mr Park failed to fully put his financial
position before creditors and that in any event the proposed part payment
proposal was not reasonable.
Judge Smith said it was unclear to what extent
two secured creditors would face a shortfall on realising their securities. This affected the dollar value of their votes
in voting on the proposal and the resulting need to get a approval of unsecured
creditors by a majority in number and 75% by value.
There was criticism of a failure to properly
disclose financial dealings between Mr Pack and his family trust. There was evidence that a boat called
the MV Lady Sylvia then valued at $150,000 had been sold to his family trust
back in 1998 with payment not due until 2018.
Creditors were not told of such deals before voting.
Court approval for the proposal was
refused. On the evidence of his past
conduct as director of three failed companies and the substantial risk that
similar conduct will occur again, there is a need to protect the business
community, Judge Smith said. There was
evidence that Mr Pack’s companies had traded whilst insolvent for a
considerable time before going into liquidation and that when problems arose he
had, in the words of his accountant, a tendency to “go to ground” and to “bury
his head”.
re Pack
– High Court (6.05.15)
15.041