Five months after the High Court dismissed a part-payment scheme designed to avoid bankruptcy, builder Ashok Maharaj was back in court seeking approval for a similar scheme. It was refused again, for similar reasons. A lack of detail about funding for the promised part-payments and Mr Maharaj’s history of trading whilst insolvent meant it was not in the public interest to postpone bankruptcy proceedings, the court said.
There is no bar on insolvent debtors making repeated proposals to creditors in an attempt to avoid bankruptcy. Insolvency Act part-payment schemes allow debtors to escape bankruptcy provided there is support from a majority of creditors and High Court approval. The necessary majority of Mr Maharaj’s creditors voted in favour of a scheme having all creditors (bar one) receiving immediately fifteen cents in the dollar. This is more than they will get if he is bankrupted, Mr Maharaj said. Westminster Finance Ltd agreed to twelve monthly payments each of some $2300 giving it fifteen cents in the dollar on principal due and five cents in the dollar for arrears of interest. Westminster had taken no steps to call up its loan; $90,000 cash advances made in 2007 and 2008.
Mr Maharaj said funding for immediate creditor payments would come from $40,000 paid across from one of his companies and the twelve monthly payments out of a salary working for that same company. Associate judge Andrew said there was no clarity about whether the $40,000 was a gift or a loan (creating more debt), what would be the employment terms with his company and whether he could meet promised creditor payments out of the undisclosed salary after meeting household expenses. The part-payment scheme was disallowed. Mr Maharaj’s bankruptcy hearing was set down for September.
re Ashok Maharaj – High Court (7.08.19)
19.145