Palmer and Menzies v The Official Assignee Hc Ak
| Jurisdiction | New Zealand |
| Judge | Woodhouse J |
| Judgment Date | 22 November 2010 |
| Neutral Citation | [2010] NZHC 2093 |
| Docket Number | CIV-2005-404-3288 |
| Court | High Court |
| Date | 22 November 2010 |
IN THE MATTER of the Insolvency Act 1967
[2010] NZHC 2093
CIV-2005-404-3288
CIV-2009-404-3391
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
Application by trustees to strike out the defendant's notice to set aside dispositions made to a trust and a bankrupt's wife under s58 Insolvency Act 1967 (Assignee may recover property or value thereof) — dispositions were made after the bankrupt was discharged from bankruptcy — whether the Official Assignee had the power to issue a notice to set aside dispositions of property when the notice was issued after the bankrupt had been discharged from bankruptcy — whether a notice to set aside a disposition of property pursuant to a property relationship agreement had to be lodged in the Family Court.
K W Fulton for the Respondent in CIV-2005-404-3288 and the Plaintiff in CIV-2009-404-3391
J McCartney SC for the Applicants in CIV-2005-404-3288 and the Defendants in CIV-2009-404-3391
JUDGMENT OF Woodhouse J
Ms Menzies and Mr Palmer, as trustees of the Kahurangi Trust, and Ms Menzies in her personal capacity, have made two applications. One challenges a notice pursuant to s 58 of the Insolvency Act 1967 (the Act) issued by the Official Assignee in bankruptcy of the property of Mr Keith Bainbridge setting aside dispositions in favour of the trustees and Ms Menzies. The second application is to strike out parts of a statement of claim by the Assignee founded on the notice just mentioned.
The main question for determination is whether the Assignee has power to issue a notice seeking to set aside dispositions of property when the notice is issued after the bankrupt has been discharged from bankruptcy. In large measure it is a question of interpretation of the Act.
The Kahurangi Trust was established by Mr Bainbridge on 7 September 1999. Between September 1999 and June 2005 Mr Bainbridge made a number of dispositions which the Assignee now seeks to set aside. On 22 June 2005 Mr Bainbridge was adjudicated bankrupt on his own petition. He was discharged from bankruptcy on 28 May 2010.
On 8 April 2009, and therefore while Mr Bainbridge was still bankrupt, the Assignee issued a notice to the trustees pursuant to s 58 of the Act (the first disposition notice). This is not the notice which is the subject of the present application, but it is relevant as part of the background. By this notice the Assignee, in reliance on s 54 of the Act and s 60 of the Property Law Act 1952, set aside four gifts by Mr Bainbridge of $27,000 in favour of the trustees and provisions in two deeds of acknowledgement of debt by the trustees in favour of Mr Bainbridge. The trustees did not challenge the notice within the prescribed period. The Assignee then issued proceedings against the trustees in reliance on the first disposition notice and also seeking to recover a separate debt claimed to be due from the trustees. Judgment was entered by default. As recorded in the judgment of Wylie J of 2 July 2010, the judgment has now been set aside by consent. The Assignee also did not oppose an application by the trustees for an extension of time to challenge the first disposition notice, subject to acceptance by the trustees of the validity of the notice in respect of two gifts.
The Assignee has not been released from administration of Mr Bainbridge's estate. 1 Following Mr Bainbridge's discharge from bankruptcy on 28 May 2010 and the judgment on 2 July 2010, the Assignee did two things giving rise to the two applications I am now considering.
On 14 July 2010 the Assignee issued another notice under s 58 of the Act (the second disposition notice) seeking to set aside three gifts by Mr Bainbridge to the trustees, two transfers of real estate to the trustees, and a transfer of real estate to Ms Menzies. Ms Menzies and Mr Bainbridge are wife and husband. The transfer to Ms Menzies is said to have been pursuant to a relationship property agreement. Although Ms Menzies is a party to both applications in her personal capacity (at least in substance if not in form), as well as being a party as a trustee, it will be convenient to refer to the applicants as “the trustees” unless a distinction is required.
The transactions sought to be set aside in the second disposition notice are different from those sought to be set aside in the first disposition notice. The second disposition notice is challenged on a number of grounds. The only ground that requires determination at this stage is the preliminary question of jurisdiction noted at [2] above — did the Assignee have power to issue the second disposition notice after Mr Bainbridge had been discharged from bankruptcy?
The second step taken by the Assignee, following Mr Bainbridge's discharge, was to amend the statement of claim that had been issued against the trustees during the bankruptcy based on the first disposition notice. The claim was amended by adding claims based on the second disposition notice. The trustees and Ms Menzies have applied to strike out the added claims. Mr Fulton, for the Assignee, accepts that, if the application to set aside the second disposition notice is successful, it follows that the relevant paragraphs in the amended statement of claim should be
struck out. If the application to set aside the notice is unsuccessful, Ms McCartney SC, for the trustees, submits that the additional claims in the amended statement of claim should nevertheless be struck out. This is one of a number of subsidiary issues for determinationThe application by the trustees to set aside the second disposition notice was said to be made in reliance on, inter alia, High Court rule 15.1 (striking out pleadings) and the Court's inherent jurisdiction to prevent abuse of process. Mr Fulton submitted that neither could be invoked to set aside the notice and further submitted, strongly, that there was no basis for the trustees' contentions that the actions of the Assignee were an abuse of process.
It is unnecessary to consider the issues that arise under r 15.1 or in respect of the Court's inherent jurisdiction. This is because Mr Fulton accepted that the challenge to the Assignee's power to issue the notice, following discharge from bankruptcy, can be determined as a preliminary issue arising under s 86 of the Act, a provision also relied on by the trustees. Section 86 is in the following terms:
86 Appeal from decision of Assignee
If the bankrupt or any creditor or any other person is aggrieved by an act or decision of the Assignee, he may, within 21 days from the date of that act or decision or within such further period as the Court allows, apply to the Court, and the Court may confirm, reverse, or modify the act or decision complained of, and make such order as it thinks fit.
It was possible to proceed in this way because Ms McCartney accepted that, for present purposes, it was unnecessary to refer to the voluminous affidavit evidence, contained in four volumes, much of which is highly contentious. Had this not been the case then the usual procedure on a s 86 application would have had to have been followed, including the likely need for cross-examination of deponents. For present purposes the essential and admitted facts are those recorded above.
Section 42 of the Act is at the heart of the argument for the trustees. Section 42 defines property of the bankrupt which vests in the Assignee (as well as the bankruptcy commencement date). Ms McCartney submitted that the only property that can become available to the Assignee for the benefit of creditors is the property defined in s 42(2). Mr Fulton submitted that s 42(2) property is not the only property which can become available to the Assignee for creditors and that this is made clear by other provisions. In this section I will note relevant provisions of the Act before discussing the submissions for the parties in more detail.
Part 5 of the Act contains ss 42 to 59. It is headed “Property of bankrupt”, although its provisions extend beyond what is indicated by that heading. The structure of Part 5, as well as the content of particular provisions, is relevant to the issue of statutory interpretation. The sections to be considered are in two groups: ss 42 to 53 and ss 54 to 58.
The relevant provisions of s 42 are:
42 Property passing to Assignee and commencement of bankruptcy
(1) All the property and powers of the bankrupt specified in subsection
(2) of this section are hereby vested upon adjudication or as soon thereafter as this section becomes applicable thereto in the Assignee of the bankrupt's property:
…
(2) Subject to the provisions of subsection (3) of this section, and subject to the provisions of sections 47, 48, 49, 50, and 59 of this Act, the property and powers of the bankrupt to vest in the Assignee and be divisible amongst his creditors shall comprise the following:
(a) All property whatsoever and wheresoever situated belonging to or vested in the bankrupt at the commencement of the bankruptcy, or acquired by or devolving upon him before his discharge:
…
Section 42(2)(b) defines powers of the bankrupt which vest in the Assignee and do not require consideration.
Section 43 was repealed in 2002. Sections 44 to 53 in broad measure...
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