IN THE BANKRUPTCY OF FAVA HC AK CIV 2006-404-5233

IN THE BANKRUPTCY OF FAVA HC AK CIV 2006-404-5233

The Court declined to approve the composition because its terms were not reasonable nor calculated to benefit the general body of creditors: the proposal produced only a minimal immediate dividend, relied on speculative and inadequately documented recovery from separate litigation (the Churchill proceedings) with no credible, independent assessment of prospects or assured funding for promised dividends, and was supported largely by related/'friendly' creditors, so the necessary protection for the general body of creditors was absent.

Citation
openlaw-f6dd1281_8237_43d6_a317_7c6050c6deb2.pdf
Parties
Applicant/bankrupt: Philip Joseph Fava; Creditor/petitioner: Ekhlas Zaghloul; Creditor: ASB Bank Limited; Creditor: Bank of New Zealand; Creditor: Lion Finance Limited; Assignee/neutral Party: Official Assignee
Court
Unknown Court
Jurisdiction
New Zealand
Judgment Date
30 August 2007
Procedural Posture
Bankruptcy Approval of Composition With Creditors / Application to Approve Composition Heard 30 July 2007; Judgment 30 August 2007
Outcome
Application to approve the composition with creditors is declined; time for approval extended under s10 of the Insolvency Act 1967
Legal Topics
Composition With Creditors, Approval Under S122 Insolvency Act 1967, Annulment of Bankruptcy, Director Disqualification, High Court Rules R485 R486
Insolvency Bankruptcy Company Law Civil Procedure Composition With Creditors Approval Under S122 Insolvency Act 1967 Annulment of Bankruptcy Director Disqualification +1 more

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Parties

Philip Joseph Fava

Applicant/bankrupt

Ekhlas Zaghloul

Creditor/petitioner

ASB Bank Limited

Creditor

Bank of New Zealand

Creditor

Lion Finance Limited

Creditor

Official Assignee

Assignee/neutral Party

Procedural Posture

Bankruptcy Approval of Composition With Creditors / Application to Approve Composition Heard 30 July 2007; Judgment 30 August 2007

Legal Issues

  1. 1 Whether the terms of the composition are reasonable or calculated to benefit the general body of creditors under s122(3)(b)
  2. 2 Whether the bankrupt has committed misconduct justifying refusal, qualification or suspension of discharge under s122(3)(c)
  3. 3 Whether it is expedient to approve the composition under s122(3)(d)

Ratio Decidendi

The Court declined to approve the composition because its terms were not reasonable nor calculated to benefit the general body of creditors: the proposal produced only a minimal immediate dividend, relied on speculative and inadequately documented recovery from separate litigation (the Churchill proceedings) with no credible, independent assessment of prospects or assured funding for promised dividends, and was supported largely by related/'friendly' creditors, so the necessary protection for the general body of creditors was absent.

Court Disposition

Application to approve the composition with creditors is declined; time for approval extended under s10 of the Insolvency Act 1967

Orders

  • Application dated 3 July 2007 for approval of the composition with creditors is declined
  • Time for the composition to be approved is extended pursuant to s10 of the Insolvency Act 1967