Invercargill city councillor fights against bankruptcy
An Invercargill City councillor says she will lose two thirds of her income if she is made bankrupt.
Karen Arnold appeared in the Invercargill High Court yesterday where she indicated she would be filing a late notice of opposition to bankruptcy, and needed to seek leave to do so.
The bankruptcy proceedings were being brought by media company Stuff, after Arnold failed in her attempt to sue the company for defamation after threeweek trial in the High Court at Invercargill in March.
Arnold sued both Stuff and Invercargill Mayor Tim Shadbolt for defamation over comments made by Shadbolt in four columns published in
The Southland Times in 2014 and 2015.
She was ordered to pay both parties about $185,000 each and had since not been able to do so.
A proposal was submitted to Stuff and Mayor Tim Shadbolt – which included paying about $100,000 over a period of three years from the sale of her house and annual payments, Arnold said. However, the offer was rejected. Both parties served bankruptcy notices on Arnold in July, but it was only Stuff that sought an order of filing bankruptcy.
Appearing before Associate Judge Matthews, who was appearing via AVL from the Dunedin High Court, Arnold was given until December 11 to file the opposition.
Stuff lawyer Max Taylor-Smith said Arnold had not filed a notice of opposition at a hearing in August and had earlier indicated that she would not file any defence to the bankruptcy process.
‘‘If statutory time frames are to have any meaning, then there needs to be a very good reason for a late challenge,’’ he said. ‘‘It cannot be that someone who subsequently changes their mind in relation to bankruptcy proceeding (is) automatically granted more time of leave at the expense of the judgement creditor, in this case Stuff Limited,’’ he said. ‘‘Ms Arnold has not provided any good reason for failing to file a response in time and in fact has indicated she would not be defending out of time previously.
‘‘She simply decided that now she wants to challenge that application out of time with no reason provided.’’
Arnold said she was prepared to be adjudicated bankrupt on October 4.
However, she had asked Associate Judge Osborne at the hearing if it was possible for her to continue to be a director as an undischarged bankrupt. The Associate Judge wanted further submissions from a barrister with expertise in insolvency law and the case was adjourned.
Arnold said she would not be able to continue as a director.
‘‘It’s only now that the notice of opposition has become basically the only option available to me.
‘‘I am a company director on two boards of directors . . . Bankruptcy would cut my income by two-thirds and also prevent my ability to increase it in future directorships which is my main source of income.
‘‘But also bankruptcy would affect my other unsecured creditors who would miss out on any repayment of debt.
‘‘This is due to the fact there is are no assets for me to be realised because my major asset, which is my home, is secured by way of mortgage and is unlikely to be taken over by the official assignee.
‘‘Others ground are that I will no longer be able to represent EIL [Electricity Invercargill Limited] as a trustee of the Southland Warms Homes Trust . . . now it’s possible I could continue as an Invercargill City Council representative however, my public liability insurance cover would be affected so it is unlikely.’’
Arnold said she would be able to remain a city councillor.
The judge said the fact Arnold was a director and trustee were matters of her own personal occupation. ‘‘It seems to me the facts are you have a massive debit which you are unable to pay . . .’’
The judge said it did not appear there was a prospect of the debts being paid in full at any reasonable time.
‘‘It’s a late stage, having found out she cannot continue as a company director if made adjudicated bankrupt, Ms Arnold intends to seek the leave of the court to oppose the bankruptcy on the grounds it would not be just and equitable for her to be adjudicated bankrupt.’’
The judge said in the interest of justice it was necessary to give Arnold one further adjournment.
The matter is expected to be called again in court on December 13.
However, it was likely the application would need to be argued – which would happen in the new year, the judge said.