Goodwin v Copland

• Jurisdiction: New Zealand
• Judge: Gendall J
• Judgment Date: 19 February 2015
• Neutral Citation: [2015] NZHC 213
• Docket Number: CIV-2013-412-000124
• Court: High Court
• Date: 19 February 2015

Between

Wayne Ernest Goodwin

Plaintiff

and

Brian Stewart Copland

Defendant

[2015] NZHC 213

CIV-2013-412-000124

IN THE HIGH COURT OF NEW ZEALAND

DUNEDIN REGISTRY

Application for directions by Official Assignee as to whether a litigation right could be assigned to the bankrupt during his or her term of bankruptcy without it automatically re-vesting under s102 Insolvency Act 2006 (IA) (Status of property acquired during bankruptcy) — bankrupt was challenging his bankruptcy on the basis that there had been a breach of a settlement — claim had vested in Official Assignee who was not pursuing the claim — s102 IA provided that vesting of after-acquired property was immediate and did not require the Official Assignee to take any steps — whether the claim could effectively be assigned to the bankrupt without it re-vesting.

JUDGMENT OF Gendall J

(Dealt with on the papers)

Issue

1 Pursuant to a memorandum dated 19 January 2015 filed in this proceeding, the Official Assignee seeks a direction on the question of:

Whether, in light of s 102 of the [Insolvency] Act [2006], a claim that has vested in the Assignee pursuant to s 101 of the Act (being one that the Assignee could properly pursue for the benefit of creditors) could effectively be assigned to the bankrupt during his or her term of bankruptcy.

Background

2 The facts giving rise to the claim are not important to the question itself but are summarised below to give context.

3 Mr Goodwin, the plaintiff, was adjudicated bankrupt on 28 March 2013. The present question arises as a result of this bankruptcy.

4 The bankruptcy arose, as I understand it, out of a signed memorandum settling a proceeding brought by a Mr Copland against Mr Goodwin. The memorandum required Mr Goodwin to pay Mr Copland two sums of money: US$465,000 due by 29 September 2006 and NZ$30,000, for costs, due by 31 August 2006. Failure to meet these obligations meant that an admission of claim signed by Mr Goodwin would be filed in the High Court. In return, Mr Copland was required to cause a defamatory reference about Mr Goodwin to be removed from the website “fraudandscams.com”.

5 On the 11 October 2006, due to failure on the part of Mr Goodwin to meet these obligations, the Court entered judgement against Mr Goodwin for both sums on the basis of the admission.

6 Mr Copland then applied for the issue of a bankruptcy notice and brought a bankruptcy application. On 15 August, on the basis that Mr Goodwin failed to comply with the requirements of the bankruptcy notice, Mr Copland applied for an order adjudicated Mr Goodwin bankrupt.

7 Mr Goodwin opposed the adjudication of bankruptcy. On 28 March 2013, Associate Judge Matthews declined this opposition and adjudicated Mr Goodwin Bankrupt. 1

8 Mr Goodwin claimed that the defamatory references on the website were only temporarily removed which breached an essential term of the contract or alternatively reduced the effect of the contract substantially. As a result, Mr Goodwin sought to cancel the contract on 30 April 2012, notice of which was given to Mr Copland's solicitors.

9 Mr Goodwin seeks a declaration that the contract was properly cancelled and cannot be enforced, a declaration that Mr Copland is not entitled to pursue this bankruptcy application on the basis of the admission of judgement signed as part of the settlement, and damages under four headings.

10 It is this claim that is the subject of the above question.

Relevant Law

11 The present question primarily deals with the function of s 102 of the Insolvency Act 2006 (the Act) set out below:

102 Status of property acquired during bankruptcy

• (1) Between the commencement of bankruptcy and discharge of the bankrupt,—

  • (a) all property (whether in or outside New Zealand) that the bankrupt acquires or that passes to the bankrupt vests in the Assignee without the Assignee having to intervene or take any other step in relation to the property, and any rights of the bankrupt in the property are extinguished; and

  • (b) the powers that the bankrupt could have exercised in, over, or in respect of that property for the bankrupt's own benefit vest in the Assignee.

• (2) This section is subject to section 104 and section 123.

• (3) This section does not apply to property that is vested in the bankrupt under an order made under section 119(3).

Analysis

Prior Regime

12 Section 102 of the Act replaces s 42(2) of the Insolvency Act 1967. Under the 1967 Act, it was generally considered that a bankrupt was competent to sue in respect of after-acquired property unless and until the Assignee intervened. 2 Section 102 expressly changes this position making it clear that vesting of after-acquired property is immediate and does not require the Official Assignee to take any steps.

13 The question of whether property can be effectively assigned to the bankrupt by the Assignee without it automatically re-vesting in the Assignee pursuant to s 102 as I understand it may not yet have arisen before the courts in New Zealand.

Reasons why an assignment should not be effective

(a) Exemptions provided to the automatic vesting rule

14 Section 102 provides exemptions to the automatic vesting rules. The most relevant exemption for the issue at hand is the exemption to property that is vested in the bankrupt under an order made pursuant to s 119(3) of the Act.

15 Sections 117 – 119 of the Act consider the disclaimer of onerous property. Under the Act, the Assignee has the power to disclaim onerous property. 3 The definition of onerous property provided by the Act includes, “a litigation right that, in the opinion of the Assignee, has no reasonable...