Mckee v Official Assignee

• Jurisdiction: New Zealand
• Judgment Date: 26 February 2013
• Neutral Citation: [2013] NZHC 340
• Date: 26 February 2013
• Docket Number: CIV-2008-404-3442
• Court: High Court

Under the Insolvency Act 2006

In The Matter Of the bankruptcy of DONALD RUSSELL MCKEE

BETWEEN

Donald Russell McKee

Applicant

and

Official Assignee

Respondent

[2013] NZHC 340

CIV-2008-404-3442

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

Application for early discharge under s294 Insolvency Act 2006 (“IA”) (bankrupt may apply for discharge) and for declaration that bankrupt attained automatic discharge under s290 IA (automatic discharge 3 years after bankrupt filed statement of affairs) — applicant adjudicated bankrupt in October 2008 but statement of affairs was not filed until September 2012 — applicant said they signed and posted the statement of affairs within the prescribed time to Official Assignee (“OA”) under s68 (Notice that bankrupt must file statement of affairs) but there was no evidence it was received — OA said there were elements of misconduct precluding discharge — whether the applicant had filed the statement of affairs within the prescribed time — whether contractual postal acceptance rule could be applied — whether the application for discharge should be granted

Appearances:

R S Pidgeon for Applicant

G Neil … R Thomson for Respondent

1 This case concerns Mr McKee's discharge from bankruptcy. He was adjudicated bankrupt on a creditor's application on 23 October 2008. That was after the Insolvency Act 2006 had come into force. If he had been adjudicated bankrupt under the Insolvency Act 1967, he would have been eligible for automatic discharge after three years, unless the Official Assignee or a creditor had objected. 1 However, the automatic discharge provision of the Insolvency Act 2006 is different.

2 Under s 290, a bankrupt is automatically discharged from bankruptcy three years after the bankrupt files a statement of affairs under s 46 or s 67, but he may apply to be discharged earlier. According to the Official Assignee, Mr McKee did not file his statement of affairs under s 67 of the Insolvency Act 2006 until 24 September 2012, more than three years after his adjudication. Because his statement of affairs was not filed until 24 September 2012, Mr McKee would have to wait until 24 September 2015 to be eligible for automatic discharge under s 290. That means that he would serve nearly seven years as an undischarged bankrupt. It is already 4 years 4 months since his adjudication.

3 Mr McKee has applied for an early discharge under s 294 of the Insolvency Act. However, in submissions today, Mr Pidgeon said that Mr McKee also sought a declaration that he had already attained an automatic discharge under s 290 because he had filed his statement of affairs under s 67 by 9 December 2008. Mr McKee's application did not expressly seek orders asking for a declaration to that effect. Mr Pidgeon sought leave to amend his application to cover that aspect as well.

4 I am satisfied that there is no prejudice to the Official Assignee in allowing that amendment to Mr McKee's application. Mr Neil submitted that there would be prejudice because, if a declaration were made to that effect, the Official Assignee would lose the right to object to Mr McKee's discharge under s 290 as the time for the Official Assignee to lodge any objection to an automatic discharge would have already passed. I am not satisfied that that is a relevant head of prejudice.

If Mr McKee's application had sought the declaration when it was first filed, the Official Assignee would still be out of time to object to an automatic discharge.

5 It will accordingly be necessary to consider:

• (a) When did Mr McKee file his statement of affairs as required by s 67?;and

• (b) Should his application for an early discharge be granted?

When did Mr McKee file a statement of affairs under s 67 of the Insolvency Act?

6 Section 67 of the Insolvency Act requires the bankrupt to file with the Official Assignee a statement of his affairs in the prescribed form unless the bankrupt has already filed such a statement under s 46. The requirement to file under s 46 applies when a bankrupt makes his own application for adjudication.

7 Under s 68 the Official Assignee is required to give a notice in a prescribed form, requiring the bankrupt to file a statement of affairs. Under s 69 the bankrupt must file that statement of affairs within 10 working days after receiving the Official Assignee's notice under s 68. There are associated provisions under the Insolvency (Personal Insolvency) Regulations 2007 as to the form of the statement of affairs and as to how the notice is to be filed. In particular, under reg 72(3) a statement of affairs must be filed by personal delivery, fax or post.

8 The statement of affairs by the bankrupt is a key document in the administration of the bankruptcy. It provides the Official Assignee with important information for the administration of the bankruptcy. Of course it need not be the only information on which the Official Assignee may rely. Creditors may also supply the Official Assignee with other information, but the statement of affairs is still the starting point for the Official Assignee. It can provide the basis for the Official Assignee to make other enquiries, to start proceedings to get assets in for creditors, and to begin examinations of the bankrupt or of other persons under Part 3 of the Insolvency Act.

9 When Parliament provided that the three years before automatic discharge should run from the date of filing the statement of affairs rather than from the date of bankruptcy, it intended to encourage bankrupts to comply with the requirement for the filing of the statement of affairs. 2

10 In this case, two days after he had been adjudicated bankrupt, the Official Assignee's office wrote to Mr McKee at his address on Great North Road, Grey Lynn, Auckland. That letter included the notice required by s 68 of the Insolvency Act 2006 as to filing a statement of affairs. The letter also set out other information relating to bankruptcy.

11 Shortly afterwards, an officer of the Official Assignee spoke by telephone with Mr McKee. She obtained some basic information from him. He told her that he did not have any assets or income. Her note records that the restrictions of bankruptcy were explained to him, and that she would re-send a copy of his statement of affairs to his Post Office box. Mr McKee did not take any steps in response to that.

12 On 2 December 2008 another officer contacted Mr McKee to establish if the statement of affairs had been completed and returned. Her file note of that conversation included the following:

Bankrupt appeared rather upset at the bankruptcy procedure and has refused to complete his SOA even with the assistance of the OA. Stated that he didn't care whether his bankruptcy was discharged after three years or not as he has lost everything. Further indicated that he had nothing in the way of assets and no trust existed as mentioned by him to OA previously, doing odd jobs every now and then, and will apply to WINZ for benefit. While aggressively stating all of the above to me, the bankrupt utilised “abusive language”. The bankrupt then terminated the call.

13 The officer concerned did not follow up the matter further. Mr McKee has seen that file note. He disputes part of it. He has used rather extravagant language, alleging that parts of it are a fabrication. I put the matter into context.

14 The officer made a record of the conversation at the time. Mr McKee has had to try and recall a conversation some four years after the event. It is clear from

statements he made at the time, and also from his evidence today, that he was at a low ebb. He was down because all of his efforts and hard work had come to nothing. He was left with nothing. That makes me cautious about accepting at face value everything he says

15 However, I accept that he met with his accountant shortly afterwards and under the helpful advice of his accountant he completed and signed a statement of affairs. The accountant kept a copy of the statement of affairs. It is that copy that was provided to the Official Assignee in September 2012. Mr McKee says that the statement he signed was posted to the Official Assignee after meeting with his accountant. That would put the date of posting at about 7 to 9 December 2008. He says he posted it, most likely, from the Three Lamps Post Office at Ponsonby, Auckland.

16 The Official Assignee, however, says that the statement of affairs never reached his office. That is confirmed at paragraph 3.6 of the report the Official Assignee filed for this proceeding.

17 Section 67 requires the bankrupt to file a statement of affairs with the Official Assignee. Filing with the Assignee means that the statement of affairs must reach the office of the Assignee. If the document should, for some reason, go astray in transit then the document will not be treated as filed. Mr Pidgeon did suggest that the postal acceptance rule for formation of contracts might apply in this situation, but I do not accept that submission. This is a statutory requirement. It is inappropriate to import rules of contract law for the formation of contracts into this context. The Regulations, particularly reg 72(3), are consistent with the requirement that the documents must reach the office of the Official Assignee.

18 On the evidence, there are two possibilities. One is that the documents were prepared but not sent or, if they were sent, did not reach the office. The second is that they reached the office but were not put on Mr McKee's file. I understand that the Official Assignee adopts a system of electronically recording documents that are submitted. Ultimately, the burden is on Mr McKee to establish that the statement of affairs did reach the office of the Official Assignee.

19 In the face of the evidence from the Official Assignee's report that the statement of affairs was not received until September 2012 I find that Mr...