Creditors short-changed after debtor Warren Fenning set up an Insolvency Act part-payment scheme to avoid bankruptcy, then lost out again when a lawyer stole the money set aside for payment.
Back in 2019, Mr Fenning was being harried by creditors following collapse of his then print business. Creditors were not impressed by his living the high life at a time when payments were in arrears.
He owed some $1.8 million. Heartland Bank was his major creditor.
By now working as a real estate agent, he was concerned to avoid bankruptcy
A majority of creditors approved his Insolvency Act proposal promising each would be paid ten cents in the dollar, spread over three years, in full satisfaction of debts owed.
Funds were promised from Mr Fenning’s future real estate income, plus $50,000 coming from a family trust.
High Court approval was given, making the part-payment proposal binding on all creditors, preventing them suing for unpaid balances.
Payments to creditors were to be actioned through the trust account of Auckland lawyer Aaron Rodney Nicholls. A total of $180,000 was paid into his trust account over a four year period.
Those setting up the part-payment scheme learnt later that Nicholls had been misappropriating client money for years. He was struck off in 2024.
A Law Society audit found he had misappropriated at least $700,000 of trust funds, including money held for payment to Mr Fenning’s creditors.
The Law Society fidelity fund limits compensation for any one claim to $100,000.
It said no compensation would be paid Mr Fenning’s creditors until the part-payment scheme was reworked in the High Court. It was difficult to identify exactly how much had been already paid to which of Mr Fenning’s creditors.
Mr Fenning’s creditors were asked to now agree that a pro-rata distribution of the $100,000 compensation, calculated on the original debt each had claimed, would amount to final payment.
Creditors agreed.
Justice Robinson approved the amended Insolvency Act scheme.
Fenning v. Lexus Trustees – High Court (19.11.19) & Noyce v. Lexus Trustees – High Court (10.07.25)
25.156