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

• Jurisdiction: New Zealand
• Judge: White J
• Judgment Date: 02 July 2012
• Neutral Citation: [2012] NZCA 289
• Docket Number: CA759/2011
• Court: Court of Appeal
• Date: 02 July 2012

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

[2012] NZCA 289

Court:

Stevens, Wild and White JJ

CA759/2011

IN THE COURT OF APPEAL OF NEW ZEALAND

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.

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

• 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.

JUDGMENT OF THE COURT

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 Dunedin in August 2009 (the main proceeding) 3 based on the causes of action which, at that time, were still vested in the Official Assignee.

3 When the appellants challenged Dean's standing to issue the main proceeding, his lawyers obtained two assignments of the causes of action from the Official Assignee. The first assignment was given without consideration by letter dated 18 January 2010. The second assignment was given for consideration by deed dated 22 August 2011.

4 In September 2011 the appellants appealed to the High Court challenging the two assignment decisions of the Official Assignee (the challenge proceeding). The appeal was brought principally on the ground that the Official Assignee had no power to assign the causes of action to Dean because under s 72(4) of the Insolvency Act 1967 (the Act) the Official Assignee's power of sale could not be exercised “until after the date fixed for the first meeting of creditors” and there had been no meeting of creditors in Dean's bankruptcy. The appellants argued that the assignments were therefore void from the outset. They also argued that the first assignment was void because there was no consideration. They sought orders under s 86 of the Act reversing or modifying the two assignment decisions of the Official Assignee and both the 18 January 2010 letter and the 2011 Deed.

5 In the High Court, however, Fogarty J, applying the provisions of the Insolvency Act 1967 rather than the Insolvency Act 2006, 4 and accepting that on appeal he was entitled to examine the decisions of the Official Assignee to determine whether they were wrong, 5 decided that:

• (a) the appellants had no standing to appeal to the High Court under s 86 of the Act because they were not persons “aggrieved” by the assignment decisions of the Official Assignee and they were not able to challenge the assignments under s 72(5), which required an allegation of fraud; 6

• (b) the Official Assignee was entitled to exercise the power of sale under s 72(4) of the Act without first calling a creditors' meeting; 7 and

• (c) the Official Assignee was entitled on the merits to assign the causes of action to Dean in 2011. 8

6 Fogarty J also indicated that he would have granted leave to extend the time for the appellants to appeal against the Official Assignee's first assignment decision, but that it was unnecessary to do so in view of his decision as to the merits of the second assignment decision. 9

7 On appeal to this Court, the appellants challenge all aspects of Fogarty J's judgment apart from his decisions to apply the provisions of the Insolvency Act 1967 and not to grant leave to extend the time for the appellants to appeal against the Official Assignee's first assignment decision. Accordingly, we proceed on the basis that there is no challenge to the validity of the first assignment on the ground that there was no consideration for it. Only the validity of the 2011 deed is in issue. The following issues therefore require determination:

• (a) Did the Official Assignee have power under s 72(4) of the Act to assign the causes of action to Dean without first holding a creditors' meeting?

• (b) Did Dean acquire an unimpeachable title to the causes of action by virtue of s 72(5) of the Act?

• (c) Was a right of appeal available to the appellants under s 86 of the Act?

• (d) Did the appellants have standing to appeal under s 86?

• (e) What was the correct standard of review of the Official Assignee's decision?

• (f) Was there any good reason to review the Official Assignee's decisions on the merits?

8 Before addressing these issues and the submissions for the parties we describe the factual background in more detail.

Background

9 Dean Lawrence is the son of Alfred and Beverly Lawrence and the brother of Craig. In the mid-1990s Dean, Alfred, Beverly and Craig formed a partnership to run the family farm, Clydevale farm. Clydevale farm was owned by the ANW Lawrence Family Trust (“the Trust”), Alfred and Beverly. Dean and his family were among the beneficiaries of the Trust.

10 In January 2001, after a falling out between Dean and the rest of the family, Alfred, Beverly and Craig sought to dissolve the partnership. The family then had discussions about how to move forward. Two companies, Glynbrook 2001 Ltd (Glynbrook) and Craigadean Dairy Farm Ltd (Craigadean), were incorporated in 2001. A deed of family arrangement was also prepared to give effect to thediscussions. The deed was signed by Alfred, Beverly and Craig in 2002. There is a dispute over when Dean signed the deed.

11 During the discussions in 2001 it was envisaged that all of the family would continue to farm in central Otago. By late 2003, however, the family's relationship with Dean had broken down and he moved to the West Coast.

12 Dean was adjudicated bankrupt on 16 May 2005. He filed his statement of assets and liabilities with the Official Assignee on 20 June 2005.

13 No meeting of Dean's creditors was held. In an affidavit dated 3 April 2012 Ms Robyn Cox, the Official Assignee for the South Island, provided further evidence about the reason why there was no creditors' meeting. By consent we granted leave for her affidavit to be adduced in evidence on appeal. Correspondence from the office of the Official Assignee attached to the affidavit established that:

The Official Assignee has considered the option of holding a creditors' meeting but has concluded that it is not required pursuant to section 34A of the Insolvency Act 1967 as it will not benefit the administration of the bankruptcy.

Any creditor who considers that a meeting would benefit the administration of this estate should contact me in writing, within fourteen 14 days of the date of this letter. Your reasons for requesting a meeting must be clearly stated.

• (a) There was a policy in place not to hold a first meeting of creditors unless a creditor requested one or there was some reason to believe that holding one would be beneficial to the administration of the estate.

• (b) By letter dated 23 June 2005 Dean's creditors were sent a copy of the report of the Official Assignee under s 35 of the Act and invited to file a claim in the estate. Under the heading “Meeting of Creditors” the letter stated:

14 As no meeting of creditors was in fact held, we infer that no creditor requested one. The appellants did not seek leave to adduce evidence to suggest...