TRUSTEES EXECUTORS LTD V BRUCE RENNICK LAYBOURN HC AK CIV-2010-404-001994

TRUSTEES EXECUTORS LTD V BRUCE RENNICK LAYBOURN HC AK CIV-2010-404-001994 6 May 2011IN THE HIGH COURT OF NEW ZEALANDAUCKLAND REGISTRYCIV-2010-404-001994IN THE MATTER OF the Insolvency Act 2006AND IN THE MATTER OF the bankruptcy of BRUCE RENNICKLAYBOURNBETWEEN TRUSTEES EXECUTORS LTDJudgment CreditorAND BRUCE RENNICK LAYBOURNJudgment DebtorHearing: 6 May 2011Appearances: R Gordon and J D Hughes for CreditorA Witten-Hannah for DebtorJudgment: 6 May 2011ORAL JUDGMENT OF ASSOCIATE JUDGE BELLSolicitors:Buddle Findlay, PO Box 2694, WellingtonWitten-Hannah Howard, 187 Hurstmere Road, Takapuna, North Shore City[1] Trustees Executors Ltd applies for an order that Bruce Rennick Laybourn be adjudicated bankrupt. Mr Laybourn has cross-applied for an order under s 38 of the Insolvency Act halting the application. The case has largely been argued on the exercise of the Court's discretion under ss 36 and 37 of the Insolvency Act to make an order for adjudication. Section 38 is of secondary importance in this case.[2] Trustees Executors Ltd is a creditor of Mr Laybourn for $1,169,608.04, as at 31 January 2011. Today, I was also provided with a certificate of unpaid debt. That certificate refers to the original judgment debt of $1,127.351.73, plus interest and costs. I am satisfied that there is a debt for at least $1,000.[3] On 3 September 2009, Trustees Executors Ltd obtained summary judgment against Mr Laybourn for the amount of $1,127,351.60. Judgment is running on that debt at the maximum rate under the High Court Rules, 8.4 per cent per annum. Trustees Executors Ltd has been receiving some income off a Wanaka property, which I will refer to later. That income has been applied towards interest under the judgment. Trustees Executors Ltd served a bankruptcy notice on Mr Laybourn in April 2010. Mr Laybourn applied to set aside the notice. In May 2010, Associate Judge Sargisson recorded that that application was withdrawn and the present application for adjudication was filed in early August 2010. It was to be heard in February 2011, but was adjourned on Mr Laybourn's application.[4] The requirements of s 13 of the Insolvency Act are satisfied, that is:(a) Mr Laybourn owes Trustees Executors Ltd a sum in excess of $1,000;(b) Mr Laybourn has committed an act of bankruptcy – that act of bankruptcy was non-compliance with a bankruptcy notice served on him under s 17 of the Insolvency Act;(c) Trustees Executors Ltd has filed the present application within three months of that act of bankruptcy;(d) The debt is a certain amount. The certain amount is established by the judgment; and(e) The debt is payable immediately.[5] The grounds in Mr Laybourn's notice of opposition are:(a) That Trustees Executors Ltd holds security that may equal or exceed the value of the debt owed by Mr Laybourn debtor;(b) It is just and equitable that the Court should not make an order for adjudication.[6] The question of security is no longer being run as a substantive defence under s 14 of the Act. Instead, Mr Laybourn relies on the question of security as a factor in the exercise of the discretion.The debt[7] Mr Laybourn established a company, Forest Property Ltd, of which he is director and shareholder. In July 2006, Forest Property Ltd entered into an agreement with a developer, Alpine Village Stage 2 Ltd to buy a five bed-roomed apartment, unit 4,/146 Anderson Road, Wanaka. The purchase price was $795,000. It was a purchase "off the plan" with settlement to take place once title became available. Mr Laybourn has described his circumstances at the time of the purchase. He was recently married, his wife was pregnant with their first child. Through a trust and a company he owned a property at 74 Jervois Road, Ponsonby, Auckland, where he operated a publishing business. He also owned a house property at Laxon Terrace, Newmarket, and had sold another investment apartment in Wanaka. He had sold the investment apartment in Wanaka at a substantial profit and he was looking for a new investment opportunity. He says that at the time he had significant equity in both the Jervois Road and Newmarket properties and the publishing business was quite profitable. He says the property market was buoyant and he had every reasonto believe that the property would increase in value or, at the very least, hold its value.[8] In June 2007, Forest Property Ltd, through a broker, borrowed $950,000 from Trustees Executors Ltd. This loan was to pay for the purchase of a property in Wanaka and a furniture package. In addition, the loan covered an establishment feeand the first year's interest on the loan. The loan was for one year only. Trustees Executors Ltd arranged for the property to be valued by a registered valuer in Christchurch, Burnett & Associates. The report provided by Burnett & Associates said that the property had a market value of $1,225,000, inclusive of GST. Trustees Executors Ltd approved the application. The loan was granted. The interest rate was 9.15 per cent, with a default rate of an additional 4 per cent. The security for the loan was a first mortgage over the property and a guarantee given by Mr Laybourn. The loan agreement was in the standard form for a loan agreement by Trustees Executors Ltd.[9] It is, of course, easy to look back in hindsight and say that the good times were not destined to last, but I take into account that many other people in New Zealand at the time made similar decisions. Trustees Executors Ltd has tried to develop an argument that Mr Laybourn is to be criticised. I do not approach the matter in terms of criticising Mr Laybourn for the decision he made then. It was a risk he took, but many other people took similar risks. It is still a question of assessing what the consequences of the risks are, but the fact that he took the risk does not mean that any moral censure should be directed at him.[10] When the year for the term loan expired, Mr Laybourn found himself unable to service the loan and unable to refinance it. His evidence is that the global depression had started. This caused the income from his publishing business to drop considerably. His business issues publications for the tourism and travel industry andthat had a decline with the drop in people's discretionary spending. He says that the Wanaka property was to be used for the short term tourist market and that market fell away with the downfall as well. He says that property values plummeted, and he says this was particularly acute in destinations such as Wanaka.[11] For a period, he made sporadic payments of interest but he has made no payments of interest under the term loan since August 2009. Trustees Executors Ltd took steps to enforce their rights under the loan. They served a notice under the Property Law Act. Mr Laybourn did not oppose the steps that Trustees Executors Ltd was taking by way of enforcement. In particular, Trustees Executors Ltd issued proceedings for summary judgment against Mr Laybourn. Mr Laybourn instructed his accountant, Mr Goodall, and some of the correspondence that has passed between Mr Goodall and Trustees Executors Ltd has been put in evidence. That evidence shows constructive efforts made in good faith to try and resolve matters between the parties although they did not result in any agreed resolution. Trustees Executors Ltd obtained judgment by default without any opposition from Mr Laybourn.[12] Under powers in its mortgage, Trustees Executors Ltd has appointed a receiver of income. As the apartment has been let out, income has been paid to Trustees Executors Ltd since June 2009 with those payments being applied against interest falling due under the judgment.Value of Wanaka apartment[13] There is conflicting information in the evidence as to the value of the five bed-roomed apartment at Wanaka. There are four valuation reports by Burnett & Associates that have been included in the evidence . As already mentioned, the first report made in 2007 when the loan was submitted for approval, said that the apartment had a market value of $1,225,000, inclusive of GST. The report of May 2008 says that the apartment has a market value of $1,350,000, including GST. The July 2009 report says that the property is worth $1,100,000, inclusive of GST. The report of December 2010 says that the property is worth $1,200,000, inclusive of GST. Mr Laybourn relies on these reports, particularly the latest, to suggest that Trustees Executors Ltd could be paid out of the proceeds of sale of the property, or if the proceeds of sale do not cover the debt entirely, the shortfall would still be manageable enough for him to service it or cover it himself.[14] On the other hand, there is other information suggesting that the property is worth considerably less than the figures given in reports by Burnett & Associates. There are two appraisals by land agents. In saying that they are appraisals, I acknowledge that land agents are not registered valuers and any appraisals they make have to be read with that qualification. Noel Williams Realty Ltd, a Ray White franchisee, provided an appraisal in November 2010, giving a recommended listing price for the property of $470,000, including furniture, plus GST, if any. Attached to that appraisal is a document headed "Comparative market analysis" by TerralinkInternational. I do not read that as purporting to be a report by a registered valuer. Nevertheless, it does contain information of interest in trying to gauge what this property would sell for if put on the market at that time. The report gives a recommended selling range of $450,000-$500,000, confirms a recommended list price of $470,000 and recommends sale by auction. It also records that the current rating valuation for the property is $720,000, comprising $160,000 for land value and $560,000 for improvements. The comparative market analysis report lists some comparable sales in the area. The one of most interest is another apartment in the same development at 144 Anderson Road. That apartment, which had a rating valuation of $710,000, sold for $450,000 in April 2010. From what I can gather from the information, that apartment appears to be slightly smaller than the apartment owned by Forest Property Ltd.[15] In November 2010 another Wanaka land agent, Villa Real Estate Ltd, the ReMax franchisee, gave an appraisal of a fair price for sale, including furnishings, of $500,000-$530,000, inclusive of GST. Its appraisal records that units 2 and 13 in the same complex sold for $450,000. It says one unit was priced, by which I understand that it was sold by ordinary negotiations by a land agent, and the other was said to have been auctioned. Trustees Executors Ltd has also put in evidence a report by Central Property Wanaka, Wanaka registered valuers. Their valuation was carried out in December 2010. That report gives a total market value, land and improvements, but excluding fixed chattels, of some $466,000, exclusive of GST. The report also addresses the question of forced sale. The valuer was requested to advise what the property would sell for under forced sale circumstances. The valuer considered that that meant assessing what would happen if there were an anxious seller, instead ofthe normal willing buyer, willing seller scenario. The valuer suggested that any prices over $450,000, exclusive of GST, should be seriously considered.[16] The Burnett reports all give GST inclusive values, as does the Remax appraisal. The others give information exclusive of GST. Even if I make adjustments for GST, it is still clear that there is a dramatic contrast between the values given in the Burnett reports and the information given by other people.[17] The lawyers for Trustees Executors Ltd have made a complaint about the latest Burnett valuation to the Valuers Registration Board and that complaint was put in evidence. The complaint lists a number of concerns about the methodology. Mr Witten-Hannah invited me to disregard that evidence. I have not ruled that the evidence is inadmissible, but I put little weight on it. I am wary of embarking on a critique of valuation methodology. I disclaim any expertise in that myself. It is not for me to assess the correctness of the methodology of Mr Burnett.[18] Mr Burnett came to Court to make himself available to give evidence, ifcalled upon. He did so at the request of Mr Laybourn's lawyers. It occurred to me that Mr Burnett could be at a significant disadvantage if he were to give evidence. He is not legally represented. The matter he would give evidence to the Court about is his 2010 report, which is the subject of a complaint to the Valuers Registration Board. It appeared to me that there was a risk to Mr Burnett that his answers to questions in evidence, possibly even comments I might make, could be used against him in subsequent disciplinary proceedings before the Valuers Registration Board. I considered that he would be at a disadvantage if he were to give his evidence without legal representation. I voiced my concerns and gave Mr Burnett and the parties the opportunity to consider the matter. After the parties had considered the matter, I was advised that Mr Burnett had chosen not to make himself available to give evidence. It was then open to me to have required him to give evidence, but as I had been concerned at the potential unfairness to him of his giving evidence, I did not require him to do so.[19] I assess the matter instead on the basis of the written materials that have been put in evidence. I also disregard the complaint made to the Valuers RegistrationBoard. Limiting what I take into account to those matters, I still have a very clear view that the information provided by Trustees Executors Ltd, that is the appraisals by the land agents, and the report by Central Property Wanaka give a far more realistic reflection of the current market value than the reports by Mr Burnett.[20] It is common ground that the property market in Wanaka, especially for apartments such as the one in this case, has fallen dramatically. The valuation that Mr Burnett gave in June 2007 of $1,225,000, is not much different from his market valuation in December 2010 for $1,200,000. That consistency in value belies what everyone recognises as having been a dramatic drop in values in the meantime. Even Mr Laybourn acknowledged in his affidavit that values of properties in Wanaka had plummeted. His accountant, Mr Goodall, records conversations with land agents in Wanaka that values had fallen. The Central Property valuation report noted that all speculative interest had fallen away.[21] The sales of other apartments in the same development appear to be the best guide in terms of comparable sales. They seem to be a safer indicator of value than some of the comparisons Mr Burnett had made with other kinds of properties and in other locations.[22] Moreover, the parties have not conducted themselves on the basis that the Burnett valuations can be relied upon. If Trustees Executors Ltd had any confidence in the Burnett valuations, I am sure that Trustees Executors Ltd would have been keen to market the apartment at the Burnett values, confident that any shortfall following a sale would be relatively insignificant.[23] Similarly, if Mr Laybourn had any confidence in the Burnett valuations, I am sure Mr Laybourn himself would have made arrangements to market the apartments. Admittedly, he would not be able to sell the apartment without the consent of Trustees Executors Ltd, because Trustees Executors Ltd would have to give a discharge of its mortgage. Nevertheless, Mr Laybourn would appreciate that if he were able to negotiate a sale at a price close to the values given by the Burnett reports, it would not be difficult to persuade Trustees Executors Ltd to give a discharge, on the basis that any shortfall could then be addressed. In other words, Isee some significance in the absence of any marketing effort by Mr Laybourn himself. If neither of the parties has the confidence in the Burnett valuations to market the properties at the values suggested by Mr Burnett, I do not see why I should accept those valuation reports. Instead, I take as an indicative valuation that as at the end of 2010, the property was likely to have been worth about $480,000, exclusive of GST, or perhaps $550,000 inclusive of GST. If the property were sold now for, say $480,000 exclusive of GST, and allowance were made for $30,000 for other costs, the shortfall for Trustees Executors Ltd under the mortgage is still going to be in the order of $660,000.[24] I note also that Mr Laybourn says that he did list the property with a Wanaka real estate agent in 2009 but was not able to find a buyer. He does not say in his evidence what asking price he wanted for the property.Mr Laybourn's current circumstances[25] The evidence includes a statement of financial position made by Mr Laybourn in July 2010. In it he says that his estimated annual income is $75,000 from his company, Destinations Global Ltd. He put his annual living expenses at $26,400, but he also has travel commitments to see his son in Turkey twice a year. He says that will cost him $28,000 a year. He pays maintenance for his son at $250 week. He has contingent liabilities under personal guarantees to printing companies. He has credit card debts of about $15,000 and hire purchase loans of about $12,000, but apart from that, no other creditors. He gave away his 1982 Mercedes motor vehicle to his daughter on her 21st birthday. He uses a motorbike for transport now. In all other respects, he has modest personal assets. He lives at 74 Jervois Road, Auckland. That property is owned by his company, Destinations Global Ltd. The shares in that company are held by Laybourn Trustees Ltd, which is a corporate trustee of the Bruce Laybourn Trust. That trust was established in 1998. A copy of the trust deed was put in evidence. Mr Laybourn is one of the discretionary beneficiaries. His statement of financial position is not all that forthcoming about the state of accounts between Mr Laybourn as beneficiary or as settlor, on the one hand, and the trust, on the other. I have not been told what, if any, advances Mr Laybourn has made to the trust and whether he is a creditor of the trust.[26] Mr Laybourn says that the property at 74 Jervois Road is worth $1.1 million and is subject to a mortgage to the National Bank of $735,000. That leaves an equity of approximately $365,000. Even if the trust were to put all the value from its assets towards clearing Mr Laybourn's personal liabilities, that would not be enough to clear his indebtedness to Trustees Executors Ltd, even after a sale of the Wanaka property.[27] Since 2007, Mr Laybourn's marriage has broken down. His wife is from Turkey and she went back to Turkey on a "holiday" with their son, but did not return.Mr Laybourn has found out to his dismay that he has not been able to use the Hague Convention to have his son returned to New Zealand. He has taken his own legal proceedings in Turkey, at quite some expense. The result of that is that he has contact with his son for two months in the year, February and August. As I read his evidence, the contact is on a use it or lose it basis. He has to make sure that he does exercise his rights to contact and he has been advised by his lawyer that if he were not to do so, he risks losing contact with his son.Exercise of the discretion[28] The exercise of the discretion has to be considered against the basic purpose of the bankruptcy legislation. Bankruptcy is the law's response to insolvency.Insolvency arises when someone is unable to pay their debts as they fall due. Thelaw's response is particularly called for when credit has been extended and people are not able to honour credit that has been extended to them. Under the Insolvency Act, their state of insolvency, that is inability to pay debts as they fall due, is established by proving an act of bankruptcy. When people are adjudicated bankrupt, in effect the law is holding that they should not be allowed to manage their affairs. Their property passes into the control of the Official Assignee. The Official Assignee realises assets, and distributes what is available to creditors. After a period of time, there is a discharge. Generally, that discharge releases the bankrupt from all prior debts and the bankrupt is entitled to return to commercial life again.[29] In Eide v Colonial Mutual Life Assurance Society Ltd, 1 Associate Judge Faire listed the principles that apply to the exercise of the discretion. That case was under the Insolvency Act 1967, but the principles for the exercise of the discretion under that Act are the same as under ss 36 and 37 of the 2006 Act. Associate Judge Faire listed the guiding principles, as follows:(a) A creditor who establishes the jurisdictional facts is not automatically entitled to an order. On the other hand, it is for an opposing debtor to show why an order should not be made.(b) In the exercise of the discretion, it is proper for the Court to consider not only the interests of those directly concerned – the petitioner, the debtor and other creditors – but also the wider public interest.(c) In determining whether an order should be made, the wider public interest must be taken into account to determine whether adjudication is conducive or detrimental to commercial morality and the interests of the general public.(d) On a bankruptcy petition, the Court must have regard to public interests in a way which transcends the interests of the immediate parties to the proceeding. The public interest in exposing and controlling an insolvent debtor is one which exists independently of the separate question of debt collection by his immediate creditors.(e) Absence of assets is a factor but even the undoubted absence of assets will not necessarily preclude an order, for the circumstances may be such that the debtor ought, in the public interest, to be visited with the disqualifications that go with bankruptcy.(f) Another matter is the potential for further investigation. A bankruptcy makes available to creditors an array of procedures for investigating the financial circumstances of the debtor. Those procedures are likely1 Eide v Colonial Muutal Life Assurance Society Limited [1988] 3 NZLR 632.to prove more effective than an investigation conducted by other means.(g) There is a need for the Court to balance the various considerations relevant to the exercise and to determine whether, in the end, the debtor has succeeded in showing that an order ought not to be made.[30] Before I go to the particular discretionary matters which Mr Laybourn has raised, I outline some of the consequences of an adjudication in bankruptcy.[31] If Mr Laybourn is adjudicated bankrupt, all his property and powers in respect of property pass to the Official Assignee.2 Property that Mr Laybourn holds in trust is not affected by that. There is a family trust. Mr Laybourn was one of the initial trustees but there is now a corporate trustee instead. When the trust was established in 1998, Mr Laybourn says that was in a period when he did not suffer any insolvency. If the trust owes Mr Laybourn any money under loans and advances he has made, those will be assets that will pass to the Official Assignee. At this stage, there is not enough information before the Court to determine exactly whateffect the bankruptcy would have in respect of Mr Laybourn's family trust. Unders 149 of the Insolvency Act, Mr Laybourn would be prohibited from being involved in the management or control of any business without the consent of the Official Assignee or the Court. He would be prevented from being employed by a relative and he could not be employed by a company or trust or incorporated society that is owned, managed or controlled by a relative.[32] Under s 151 of the Companies Act, he would be disqualified from being a director of a company. Under s 433 of the Insolvency Act, he would not be able to travel abroad without the consent of the Official Assignee. Generally, he has a duty to assist the Official Assignee in the realisation of his property and the distribution of the proceeds to creditors. Normally, a bankrupt has an automatic discharge three years after he files his statement of affairs. A bankrupt is entitled to apply for an earlier discharge, which is then in the discretion of the Court. Sometimes, there may be objections from creditors to the discharge, and the discharge may not take place2 Insolvency Act 2006 s 101.on the expiry of three years. Whether the bankruptcy is extended or shortened, can be a matter for assessment by the Court. I mention those as the salient effects of bankruptcy. They need to be taken into account in exercising the discretion.[33] Mr Laybourn says that there are a number of factors requiring the discretion to be exercised in his favour:(a) He develops arguments based on the security that Trustees Executors Ltd holds;(b) there is only one creditor who is seriously affected;(c) he has no history of prior business failure;(d) while he accepts personal responsibility for his indebtedness, he says that Trustees Executors Ltd must also accept that it played a part in his becoming insolvent;(e) he points to his personal difficulties and the failure of his marriage; and(f) he has rationalised his affairs and has been upfront with Trustees Executors Ltd.Security[34] Mr Laybourn does not raise the security issue as a substantive ground of defence under s 14 of the Act. On that point, Trustees Executors Ltd says that its security is over an asset that belongs to Forest Property Ltd, not an asset of Mr Laybourn, and its mortgage does not count as a security under the Insolvency Act. Here, Trustees Executors Ltd refers to the judgment of Heath J in Bridgecorp Ltd v Neilsen3. So far as Mr Laybourn is concerned, Trustees Executors Ltd is wholly unsecured. Mr Witten-Hannah accepts that that is the correct position.3Bridgecorp Ltd v Neilsen [2010] 1 NZLR 820 [22] – [32][35] Instead, Mr Laybourn's discretionary argument is that it would not be justand equitable for him to be adjudicated bankrupt when Trustees Executors Ltd can recover its debt out of the property. In assessing how realistic that argument is, I have regard to the value of the security. I have held that the current market value of the property is somewhere in the region of $480,000, exclusive of GST. That still leaves a very substantial shortfall.[36] Mr Laybourn is aggrieved that Trustees Executors Ltd has not marketed the property. Instead, Trustees Executors Ltd seems to be content to receive income from the property by way of the receivership. Given the current information as to the value of the property, its wariness about selling is understandable. Nevertheless, that is a matter for its own commercial decision. It is not something the Court can dictate to Trustees Executors Ltd. In Bridgecorp Ltd v Neilson, Heath J did not regard this factor as a relevant issue. He said at [62] in respect of the creditor there:It is entirely understandable that it would not want to undertake a "fire sale".It is biding its time to see whether better recovery might be made. It is for the creditor to choose the course of action which suits it best. Mr Neilsen'searlier obligation, as a debtor, was to seek out his creditor and pay. He cannot complain if, having done that, Bridgecorp has made commercial decisions which he regards as contrary to his own interests.[37] That approach is applicable here.[38] The security Trustees Executors Ltd had for the loan was both the mortgage over the property and the guarantee given by Mr Laybourn. Trustees Executors Ltd is entitled to look to either or both for its security. Mr Laybourn cannot complain if Trustees Executors Ltd looks to its guarantee first ahead of exercising its security over the property by way of a sale. For this reason I do not accede to Mr Laybourn'srequest to halt the application while Trustees Executors Ltd sells the property.No history of prior failure[39] Mr Laybourn's argument based on the absence of any prior failure suggests that a businessman is entitled to one business failure before he should be adjudicated bankrupt. This is somewhat reminiscent of the old scienter rule for liability for damage done by dogs. But there is no such principle in insolvency law.Lending decision by Trustees Executors Ltd[40] Mr Laybourn says that Trustees Executors Ltd must accept some of the responsibility for his present position. He acknowledges his own responsibility, but he also says that Trustees Executors Ltd made a poor lending decision. He says that it was wrong for Trustees Executors Ltd to lend more than the purchase price of the property. Trustees Executors Ltd defends its lending practices by saying that on the information presented with the application, the amount advanced under the loan was less than 80 per cent of the value of the property and that was within lending criteria. Here, it refers to the Burnett valuation report. I am not going to comment whether the lending decision was sound or not. My reason for refraining from commenting on that is because the soundness of the lending decision could be in issue in other proceedings. It would not be correct for me to make comments now about that issue.[41] Whatever the merits of the lending decision by Trustees Executors Ltd, it has been made to suffer for it. It has received a relatively modest return by way of income under the receivership. But that modest income is not enough even to meet the interest liability on the judgment. Whether or not Mr Laybourn is adjudicated bankrupt, Trustees Executors Ltd is going to take a very significant loss. When creditors have suffered a loss because the risk they took in extending credit to the debtor turns out to have been mistaken, it lies ill in the mouth of the debtor to say that the creditor ought not to have extended credit. I do not regard this point as relevant to the exercise of the discretion in this case.Personal difficulties arising out of failure of marriage[42] Normally, personal difficulties such as marriage failure, are not relevant tothe exercise of the discretion. However, there are two relevant features in this case.Mr Laybourn has an ongoing maintenance liability to his son. He will need tocontinue to provide for his son whether he is adjudicated bankrupt or not. It issignificant that on his discharge, he would not be released from child maintenanceresponsibilities which have accrued during his bankruptcy. The other factor is that,if he wishes to travel to Turkey to have contact with his son in the future, he willneed the consent of the Official Assignee.Claim to have acted responsibly in relation to matters[43] Mr Laybourn says that he has been upfront with Trustees Executors Ltd about his affairs. He has rationalised affairs by quitting assets and reducing debt.[44] I note from the correspondence put in evidence that Mr Laybourn used his accountant, Mr Goodall, to try and negotiate a resolution of matters with Trustees Executors Ltd. He did provide a statement of financial means which Trustees Executors Ltd does not appear to have queried. He has reduced his property and quit debt. I acknowledge the point he makes about being upfront. There is a residual concern whether adequate information has been given about the affairs of his trust.[45] I also acknowledge that an adjudication of bankruptcy may have very severe effects on Mr Laybourn. He is effectively self-employed, although he uses structures of a trust and a company to carry on his business. While the Official Assignee can give consent to him carrying on business in his own name, the disqualification from being a director in a company cannot be waived. On the other hand, I accept that there are still likely to be some assets in his trust which have been put there long before there was any risk of insolvency and which are likely to be immune from attack by the Official Assignee.[46] There are further relevant factors.[47] Mr Laybourn has a very substantial debt to Trustees Executors Ltd which he has no hope of being able to pay off. Effectively, making an allowance for the value of the Wanaka property, Trustees Executors Ltd is still unsecured for the sum of about $650,000. Mr Laybourn's financial position does not give him the means to pay that off. I have seen no evidence that since August 2009 Mr Laybourn himself has made any payments to service the loan. Mr Laybourn cannot continue with a debt for about $650,000 unresolved. Something needs to be done to get the matter cleared up one way or the other.[48] Mr Laybourn seems to hope that Trustees Executors Ltd would simply write the debt off. Clearly, Trustees Executors Ltd has not taken that attitude. It has takenthe position that if Mr Laybourn gives a guarantee of a company of which he is director and shareholder, then he should be held to account under that guarantee. That position is one that the law recognises and accepts. It is part of the commercial morality principle referred to by Associate Judge Faire in the Eide case. Someone giving a personal covenant under a mortgage, or alternatively giving a guarantee ofsome other person's obligations under a mortgage, must expect the obligation theyhave undertaken to be enforced. One way of holding them to account is that, if they have failed to do so, they may be made bankrupt.[49] Associate Judge Faire also referred in the Eide case to the need forinvestigation. There is one relevant part of Mr Laybourn's affairs which might meritinvestigation. That is his family trust. Mr Laybourn and his accountant have not gone into detail about trust transactions between Mr Laybourn and his family trust. There may be transactions that can be set aside under the Insolvency Act. Only an investigation can show that.[50] Mr Laybourn has alleged that Trustees Executors Ltd has been acting oppressively. In my judgment, it has not been. It has simply been enforcing the rights available to it under its mortgage and under the guarantee that Mr Laybourn gave it. Mr Laybourn first defaulted under the mortgage in 2008. Since then, there has been plenty of time for the parties to explore options and to negotiate matters. There has not been any resolution. Trustees Executors Ltd is entitled to ask for a resolution of matters. That is not oppressive.[51] I appreciate that an adjudication will cause hardship to Mr Laybourn. Nevertheless, he has to face the fact that he cannot avoid this liability. Bankruptcy offers him a means of getting rid of the liability by undergoing the bankruptcy process. That would be preferable to him having to endure the debt when he has no realistic prospect of being able to pay it off.[52] In conclusion, I am not satisfied that the hardship which Mr Laybourn will suffer is sufficiently strong to count against the factors favouring adjudication: his insolvency, the need for him to be held to account under his guarantee, and thepossibility of being able to investigate his affairs to see whether further funds can be made available for creditors.[53] Accordingly I make an order adjudicating Bruce Rennick Laybourn bankrupt. The time of the order is 3:32pm.[54] I award Trustees Executors Ltd costs on a 2B basis, plus disbursements as approved by the Registrar. I record that the hearing today began at 10:00am and concluded at 3:30pm.__________________________R M BellAssociate Judge