Insolvency Service is holding $4.02 million from Edward John Harman’s
bankruptcy with creditors from his multiple business interests currently in
line to get twenty cents in the dollar.
The High Court rejected NZ Life Care’s $4.8 million claim to be an
unpaid Harman creditor.
Mr Harman
was bankrupted in February 2009, driven under after the global financial
crisis. He was discharged from
bankruptcy in 2012. Insolvency Service
has spent $197,000 to date dealing with the bankruptcy. Arguments over who can claim as a creditor is
delaying payments. Insolvency Service
rejected claims by liquidators of Harman companies that $22 million was due for
alleged breaches by Mr Harman of his duties as a director. Validity of these claims is set down for a
court hearing in March.
NZ Life
Care Ltd failed in its separate High Court claim that Mr Harman owed it $4.8
million. The court was told Mr Harman as
a director of NZ Life Care offered to manage the six million dollar cash
proceeds from its 2005 sale of six aged-care facilities to an infrastructure
fund managed by Macquarie Group. He was then
providing treasury services for NZ Life Care.
It said Mr Harman had personally guaranteed repayment of funds advanced
to his treasury operations and the unpaid guarantee was a bankruptcy debt.
The legal
rule for over 340 years has been that guarantees are not enforceable unless in
writing and signed. This rule is now
enshrined in the Property Law Act. It is
designed to overcome evidentiary arguments about guarantees.
Associate
judge Bell said it was more likely than not that Mr Harman did give an oral
guarantee of repayment in 2005, but nothing was committed to writing. There was evidence of sloppy business practices
by NZ Life Care around this time. No-one
followed up on getting the paper work completed. Any guarantee given in 2005 was
unenforceable; it was oral only, not in writing.
NZ Life
Care said a written guarantee did arise from an exchange of emails in 2008. Judge Bell ruled this was insufficient. Mr Harman expressed his willingness to sign a
guarantee; that did not amount to a guarantee.
And the emails did not specify terms of any guarantee. Terms were still under negotiation. There was no link back to the earlier 2005 guarantee
agreed orally.
Mr Harman
told the court he had agreed to a personal guarantee. This admission could not bind the Insolvency
Service, Judge Bell ruled. The
Insolvency Service, acting on behalf of all unpaid creditors, was entitled to decline
the $4.8 million claim because the legal requirements for a guarantee had not
been satisfied.
NZ Life Care Ltd v. Official Assignee – High Court (25.1.18)
18.027