Glynbrook 2001 Ltd, Craig William Lawrence, Alfred Norman William Lawrence, Beverly Diane Lawrence v The Official Assignee for New Zealand Coa

JurisdictionNew Zealand
CourtCourt of Appeal
JudgeWhite J
Judgment Date02 Jul 2012
Neutral Citation[2012] NZCA 289
Docket NumberCA759/2011

[2012] NZCA 289

IN THE COURT OF APPEAL OF NEW ZEALAND

Court:

Stevens, Wild and White JJ

CA759/2011

Between
Glynbrook 2001 Limited, Craig
William Lawrence, Alfred
Norman William Lawrence,
Beverly Diane Lawrence
Alfred Norman William
Lawrence and Beverly Diane
Lawrence (as trustees of the ANW Lawrence Trust)
Craigadean Dairy Farm Limited

And

Marble Hill Dairy Limited
Appellants
and
The Official Assignee for New Zealand
First Respondent

And

Dean Robert Lawrence
Second Respondent
Counsel:

T J Shiels for Appellants

P R W Chisnall and T G H Smith for First Respondent

S M Bisley and O E Jaques for Second Respondent

Appeal from High Court decision dismissing an appeal against respondent Official Assignee's (“OA”) decisions to assign causes of action under s50 Property Law Act 2007 (how thing in action assigned) to a family member who was a former bankrupt — appellants were family members, their family trust and farming companies — proceedings taken against them by a family member (and discharged bankrupt) for a share of companies which now ran farm business and on basis family had acted oppressively towards him under under s174 Companies Act 1993 (prejudiced shareholders) — OA had policy in place not to hold first meeting of creditors — whether OA's policy fettered its discretion — whether power of sale under s72(4) Insolvency Act 1967 (“IA”) (power of Assignee to sell) could not be exercised until after the date was fixed for the first creditors meeting, which had never occurred — whether family member had an unimpeachable title by virtue of s72(5) IA (title of any person acquiring under section shall not be impeachable except on the ground of fraud) — whether the assignments were void because there was no consideration under s86 IA (appeal from decision of assignee) — whether the appellants were persons under s86 IA to have standing.

The issues were: whether the OA's power to assign under s72(4) Insolvency Act 1967 (“IA”) (power of Assignee to sell) could not be exercised until after the date was fixed for the first creditors meeting; whether L had an unimpeachable title by virtue of s72(5) IA; whether the assignments were void because there was no consideration under s86 IA (appeal from decision of assignee); and whether the appellants were persons under s86 IA to have standing.

Held: Section 34A IA enabled the OA to dispense with the first meeting of creditors. While the OA had a policy in place not to hold a first meeting of creditors, the policy was not set in stone because it recognised the exceptions referred to in s34A, namely, a request from a creditor for a meeting and a decision by the OA that there was some reason to believe that holding a meeting would be beneficial to the administration of the estate. The existence of these exceptions to the policy meant that no question of unlawfully fettering the exercise of the discretion in fact arose.

Parliament, when enacting s34A, would not have intended to prevent the OA from exercising the power of sale under s72 in every case when a decision to dispense with the first meeting of creditors under 34A had been made. Policy and practical reasons supported the view that, when s34A was inserted by amendment to the IA in 1990, Parliament intended the reference in s72(4) to “the date fixed for the first meeting of creditors” to be qualified by the words “unless the OA has dispensed with the meeting under s 34A”. It was necessary to read in these words to make the Act work in a practical and sensible manner. The legislative history also supported that view.

Further the rule of implied repeal provided that if two statutory provisions were totally inconsistent with each other, so that they could not stand together, the latter in time impliedly repealed the earlier. Applying the rule, Parliament would have intended that the introduction of s34A in 1990 would have by implication amended or, if necessary, repealed the requirement in s72(4) for a date to be fixed for the first meeting of creditors before the OA could exercise the power of sale.

The OA therefore had the power to assign the causes of action to L without being required to fix a date for the first creditors' meeting. The power of sale had been executed in compliance with s72(4) IA (none of the property of the bankrupt shall be sold until after the date fixed for the first meeting of creditors unless any property may be prejudiced by the delay).

The purpose of s72(5) IA was to protect the indefeasibility of title of “any person” acquiring property from the OA in the exercise of the s72 IA power of sale unless fraud was established. The protection provided by s72(5) IA was designed to support the OA's administration of the IA by encouraging the efficient and efficacious disposal of a bankrupt's estate. There was no justification for limiting the expression “any person” in s72(5) IA to a bona fide purchaser for value without notice. While most sales would be to third parties and not to the former bankrupt, a former bankrupt should not be excluded as a potential purchaser. The express exclusion for fraud would ensure that the purchase was bona fide, but more than that was not required. Section 72(5) IA precluded any appeal because s72(5) IA stated that a purchaser's title from a sale by the OA was unimpeachable. The HC therefore had no jurisdiction to reverse the assignments.

Even if the appellants did have jurisdiction under s86 IA, the HC would still have been correct not to exercise it powers on the basis that the OA had exercised a discretionary statutory power of sale under s72(1) IA. On appeal the HC would have been reviewing the exercise of that discretionary statutory power. It would not have been reasonable for the HC to set aside the assignments when they were entered into by the OA for the potential benefit of L's creditors. The HC would not have been involved in determining whether the OA's decisions were void or voidable as that distinction was not relevant in this context. Once s72(5) IA applied to protect L's title to the causes of action, there was no right of appeal available to the appellants under s86 IA.

The appellants did not have standing under s86 IA. If defendants to causes of action assigned by the OA could be seen as “aggrieved” persons for the purposes of the Act, that would create a conflict with those creditors who proved in the bankruptcy and who had an interest in the causes of action being assigned for value. The appellants were not “legally worse off in some substantive or procedural way” as a result of the OA's assignment. They still had the opportunity to defend L's claim based on the causes of action in the main proceeding.

An appeal under s86 IA challenging the exercise by the OA of the discretionary power of sale under s72(1) IA was appeal against a decision made in the exercise of discretion, rather than the exercise of a general right of appeal. The appellants had challenged both the legality of the OA's decisions and the merits of them. The legality challenge related to the alleged non-compliance with the creditors' meeting requirements of s34 IA and s72(4) IA and was unsuccessful.

The merits challenge related to the reasonableness of the decisions to enter into the assignments of the causes of action. The appellants needed to show that the OA had taken account of irrelevant considerations, failed to take account of relevant considerations or that the decisions were plainly wrong. The appellant's had failed to show that the HC had erred in refusing to reverse the assignments.

The OA was not obliged to consult with the appellants before entering into the deed of assignment and the principle of finality did not preclude the OA from assigning the causes of action in the circumstances of this case where they provided a possible means of recovery for creditors.

The Official Assignee had power under s 72(4) IA to assign the causes of action to L without first holding a creditors' meeting. In the absence of any allegation of fraud, L had acquired an unimpeachable title to the causes of action by virtue of s72(5) IA, therefore there was no jurisdiction to exercise in this case in an appeal by under s86 IA. The appellants had no standing to appeal under s86 IA and there was no good reason to reverse the OA's decisions on the merits.

Appeal dismissed.

JUDGMENT OF THE COURT
  • A The application by the first respondent to adduce further evidence by way of affidavit from Robyn Anne Cox dated 3 April 2012 is granted.

  • B The 28 day period for the Official Assignee to decide whether to summon the first meeting of creditors is retrospectively extended from 13 June 2005 to the date of the decision by the Official Assignee.

  • C The appeal is dismissed.

  • D The appellants are ordered to pay costs to each of the first and second respondents for a standard appeal on a band B basis together with usual disbursements.

REASONS OF THE COURT

(Given by White J)

Table of Contents

Para No

Introduction

[1]

Background

[9]

High Court judgment

[31]

Power to sell without creditors' meeting?

[36]

Impeachable title?

[53]

Any right of appeal?

[63]

Standing to appeal?

[74]

Standard of review

[82]

The merits of the Official Assignee's decision

[91]

Summary

[100]

Result

[102]

Introduction
1

The appellants, members of the Lawrence family, their family trust and their farming companies, appeal against a High Court decision dismissing an appeal against two decisions of the Official Assignee to assign to Dean Lawrence (Dean), another member of the family and a former bankrupt, certain causes of action which he claimed to have against them. 1

2

The causes of action had vested in the Official Assignee when Dean was adjudicated bankrupt on 16 May 2005. 2 Following Dean's automatic discharge from bankruptcy on 16 May 2008, he issued a proceeding against the appellants in the High Court at...

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