Bankrupt: Hewitson v. Official Assignee

Bankrupted in 2009, former Invercargill tax accountant Darryl Robert Hewitson was under the mistaken belief that his bankruptcy was over when in 2014 his father gifted him $250,000.  The money was not his, it was after-acquired property available to pay his creditors who had received only twenty five cents in the dollar, the High Court ruled.

Bankrupts are automatically discharged from bankruptcy after three years, but this is calculated not from the date of the bankruptcy order but from the date a full statement of financial affairs is provided to Insolvency Service.  The High Court was told Mr Hewitson received multiple letters and phone messages from Insolvency Service asking him to send in a statement of affairs and warning him that delays would extend his period of bankruptcy.  It has no record of him responding, though Mr Hewitson claims to have provided details in 2014.  He has no copy of the document sent.

In the early stages of Mr Hewitson’s bankruptcy, Insolvency Service was looking to sell his Regent Street home in Invercargill. He was bailed out by his mother who paid $180,000 to Insolvency Service, taking ownership of Regent Street and allowing her son to remain in occupation.  Four years later, she sold Regent Street back to her son for $165,000. Funding came in part from a windfall $250,000 gifted to Mr Hewitson by his father following sale of the father’s poultry farm.

Learning that Mr Hewitson as an undischarged bankrupt had regained ownership of Regent Street, Insolvency Service lodged a caveat against the title looking to force a sale.  In the High Court, Justice Dunningham ruled Insolvency Service was justified in laying claim to Regent Street.  It has a statutory duty to collect in assets in order to pay creditors. The fact Mr Hewitson misunderstood the circumstances in which bankruptcies end was not grounds to stop Insolvency Service claiming Regent Street as an asset acquired after bankruptcy and before discharge. 

The court was told Mr Hewitson did send a completed statement of affairs to Insolvency Service in April 2018 and was automatically discharged from bankruptcy three years later in 2021.  His 2009 bankruptcy followed client losses after he failed to file their tax returns.  Failure to file on time meant clients were forced to pay substantial tax penalties.

Hewitson v. Offical Assignee – High Court (31.01.22)

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Debt: Jones v. Stace Hammond

Barrister Greg Jones was ordered to pay a $14,900 legal bill owed Hamilton solicitors Stace Hammond after the High Court dismissed his allegations that the law firm was in league with the bloodstock industry, conspiring to damage his breeding programme.

In December 2018, Mr Jones hired Stace Hammond to defend a claim against him by Wentworth Grange, a thoroughbred stud farm near Cambridge.  Wentworth was suing for unpaid agistment fees.  Stace Hammond did some preliminary work which was later overtaken by Mr Jones putting forward a draft statement of defence.  Mr Jones was alleging in his defence that Wentworth was party to fraud and dishonesty.  Stace Hammond withdrew, saying it could no longer represent him.  Rules governing operation of law practices prohibit lawyers from raising defences of fraud on behalf of clients unless there is solid evidence to back the allegation.

When Mr Jones refused to pay its bill for the preliminary work done, Stace Hammond proposed writing off the debt but was forced into court when Mr Jones sued them alleging Stace Hammond was also part of a general bloodstock industry conspiracy against him.  Mr Jones said Stace Hammond’s clients included other horse studs in the district.  In agreeing to take him on as a client, Stace Hammond was acting unethically and in breach of obligations of good faith, he alleged.  There was evidence that the issue of potential conflicts of interest had been raised at a preliminary meeting between Mr Jones and Stace Hammond. At that point Mr Jones raised no concerns about Stace Hammond having a number of horse stud owners on its client list. 

The High Court confirmed a District Court ruling that Mr Jones had no tenable defence to Stace Hammond’s invoice for work done. He was ordered to pay the $14,900 bill.

Jones v. Stace Hammond – High Court (27.01.22)

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George Kerr: Jackson v. Kerr

Failing to act promptly on court orders to disclose documents required by receivers of Pyne Holdings, director George Kerr has been ordered to pay receivers $103,300 for their full costs in chasing him along.

In April 2021, Bank of New Zealand put Pyne Holdings Ltd into receivership claiming some $67.7 million.  Mr Kerr is Pyne Holdings’ sole director.  Receivers from insolvency specialists Calibre Partners were refused access to Pyne Holdings records.  It took several contested court hearings to get a court ruling ordering Mr Kerr release the information.  He stalled. Calibre Partners said it was bordering on contempt of court that Mr Kerr failed to respond.  It took nearly six months for Mr Kerr to provide information. He said delay was caused by the size of the task; Pyne Holdings records had to be obtained and collated from multiple sources including lawyers and accountants.

Justice van Bohemen ruled there was no justification for the extended delay.  Receivers were entitled to recover all costs incurred in their multiple applications to court needed to force Mr Kerr’s hand.

Jackson v. Kerr – High Court (19.01.22)

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Receivership: Tellen Systems NZ (2013) Ltd v. Fibre Investments Ltd

An immediate sale of Tellen Systems assets was blocked by the High Court following allegations insolvency practitioner Kevin Davies was in league with a Tellen shareholder in a ploy to spirit assets out of the company following its improvident purchase of competitor Sedco New Zealand.

Tellen Systems NZ (2013) Ltd provided telco services primarily to the health care and aged care sectors.  It is owned by Fibre Investments Ltd which in turn is ultimately controlled by Neil Simmonds.  Tellen’s purchase of a majority stake in Simon William’s Sedco New Zealand Ltd was bad news all round; Tellen alleges Sedco was insolvent. Sedco also provided communication services to the health sector.  Subsequent litigation saw Tellen ordered to pay Mr Williams some $560,000 and also contribute to Sedco debts guaranteed by Mr Williams.

In October 2021, Mr Williams forced Tellen Systems into liquidation following failure to pay the High Court $560,000 judgment. Weeks earlier, Tellen shareholder Fibre Investments put Tellen into receivership claiming to be a secured creditor with the right to seize all Tellen’s assets.

Tellen liquidators allege Fibre Investments is not a creditor to the amount it claims and that it is trying to sell Tellen assets at a knock-down price without following proper receivership procedures.    

Tellen liquidators told the High Court that receiver Kevin Davies has been stalling when asked to prove the existence of Fibre Investment’s claimed secured debt.  Fibre Investments claims to be owed in excess of two million dollars as a secured creditor. Liquidators also allege the receiver is manipulating the sale process.  It is claimed no independent valuation was obtained for Tellen assets, that the proposed sale was poorly marketed with the number of potential bidders limited because of the receiver’s demand intending buyers post a $50,000 bond before getting access to company information, and that a proposed sale of Tellen assets to interests associated with Mr Simmonds at $520,000 is a sale at gross undervalue.  Mr Simmonds made his $520,000 bid under the name Dark Horse Technologies.

Justice Doogue issued an interim injunction blocking any sale until these issues are sorted out.

Tellen Systems NZ (2013) Ltd v. Fibre Investments Ltd – High Court (14.01.22)

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