OFFICIAL ASSIGNEE IN BANKRUPTCY OF PROPERTY OF BJ KELLY V BJ KELLY (BANKRUPT) HC WN CIV 2005-485-2174

OFFICIAL ASSIGNEE IN BANKRUPTCY OF PROPERTY OF BJ KELLY V BJ KELLY (BANKRUPT) HC WN CIV 2005-485-2174 17 December 2008IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY CIV 2005-485-2174UNDER Section 45 and 45A Insolvency Act 1967 IN THE MATTER OF the bankruptcy of BRIAN JAMES KELLY BETWEEN OFFICIAL ASSIGNEE IN BANKRUPTCY OF PROPERTY OF BRIAN JAMES KELLY Applicant AND BRIAN JAMES KELLY (BANKRUPT) Respondent Hearing: 17 December 2008 Judgment: 17 December 2008ORAL JUDGMENT OF ASSOCIATE JUDGE D.I. GENDALLSolicitors: Langford Law, Solicitors, PO Box 344, Wellington Gibson Sheat, Lawyers, PO Box 2966, Wellington[1] Before the Court is an application by the Official Assignee which is stated to be pursuant to ss 45 and 45A Insolvency Act 1967. The orders sought in the application are: a) An order assigning and/or charging to the Official Assignee out of income due to the bankrupt from his employer, Impala Corporation Limited, for the time being at the rate of $300.00 per week or such other rate as the Court deems just. b) Directing that the proceeds of two Bank of New Zealand bank cheques dated 12 March 2008 (cheque numbers 088977 and 088979 be vested in the applicant Official Assignee pursuant to s. 42Insolvency Act 1967. c) Directing that the respondent pay to the applicant any additional funds which came to the applicant's attention as a result of this application and are surplus to the reasonable needs of the bankrupt and any legal dependents. [2] Before me, Ms. Reddy for the Official Assignee conceded that the order sought under para. 3 above has now fallen away and the application relating to that matter need proceed no further. [3] Nevertheless orders are sought by the Official Assignee as noted in paras. [1] (a) and (b) above. [4] Before me Mr. Langford for the respondent argued initially that the Court does not have jurisdiction to hear the Official Assignee's application which is before it. That application itself referred to ss 45 and 45A Insolvency Act 1967. [5] Section 45, as I understand it, deals with the situation where the Official Assignee may require a bankrupt by notice to contribute towards payment of his or her debts by requiring the bankrupt to pay any amount or make periodic payments tothe Official Assignee as he requires. [6] In terms of s. 45, before the Official Assignee can require a bankrupt to make those payments, he is required to have regard to all the circumstances of the bankruptcy and the bankrupt's conduct, earning power, responsibilities and prospects and to make reasonable allowance for the maintenance of the bankrupt, the bankrupt's spouse and his or her family. [7] Section 45(4) goes on to provide:"The Court may, on the application of the bankrupt or any creditor: a) vary, suspend or cancel the bankrupt's obligation to make the payments under this section; and b) remit any arrears owing by the bankrupt.[8] Section 45A Insolvency Act states:"(1) The Court may, on the application of the Assignee make, an order assigning or charging to or in favour of the Assignee any money due to the bankrupt or to become due or payable to the bankrupt. (2) That assignment or charge operates as a discharge to the person who pays the Assignee."[9] As I understand Mr. Langford's jurisdiction argument it is that in this case it was for the Official Assignee to impose a requirement upon the respondent bankrupt under s. 45 to make periodic payments from his income and/or to pay the proceeds of the two BNZ cheques to the Official Assignee. Mr. Langford notes and I understand it is not disputed that the Official Assignee has not imposed a requirement to this effect on the respondent under s. 45. Mr. Langford's argument proceeds that therefore, the bankrupt having had no requirement imposed upon him, is in breach of nothing. It follows that it is not appropriate for the Court to consider the present application made by the Official Assignee. In effect Mr. Langford's argument as Iunderstand it is that the first requirement here must be for the Official Assignee to impose a requirement on the bankrupt pursuant to s. 45 before an application such as the present can be made. [10] With respect, in my view, this argument is flawed. [11] As I read s. 45A Insolvency Act, this enables the Official Assignee to apply to the Court for an order assigning or charging in favour of the Assignee any money which is either due or which may become due or payable to the bankrupt. This section goes on to state that such an assignment or charge is to operate as a discharge to the third person who makes payment to the Official Assignee. [12] Whether or not any notice or requirement to a bankrupt is imposed by the Official Assignee under s. 45 (and this would be a requirement on the bankrupt himself or herself to make a payment) in my view the Official Assignee is clearly entitled to seek an order under s. 45A for an assignment or charge of monies due to that bankrupt from a third party. [13] In the present case the first order sought by the Official Assignee is for an assignment or charge to him out of income due to the bankrupt from his employer, Impala Corporation, of the sum of $300.00 per week. As I see it this would amount to an order effectively assigning or charging income due to the bankrupt to be paid by a third party, Impala Corporation Limited. In my view the Court clearly has jurisdiction to hear an application for such an order. [14] The second order sought here is for a direction that the proceeds of the two BNZ cheques which I understand amount to about $23,000.00 are to be assigned or vested in the Official Assignee. [15] Mr. Langford for the respondent bankrupt confirmed that the proceeds of these two BNZ cheques are now held in his trust account. In effect therefore, in my view, the application by the Official Assignee before the Court seeks an order for these funds held by Mr. Langford in his trust account to be paid and vested in the Official Assignee.[16] Again, as I see the position the Court has jurisdiction under s. 45A to make such an order. [17] Therefore, I reject Mr. Langford's suggestion that the Court does not have jurisdiction to hear the current application before it. [18] Turning now to the substance of that application, Mr. Langford confirmed to me that on earlier occasions the bankrupt had consented to a requirement that $300.00 per week be paid from his wages or salary due from Impala Corporation Limited to the Official Assignee. This had been accepted by the bankrupt first as reasonable in all the circumstances and secondly as properly leaving from the balance of his income a reasonable allowance for his maintenance and the maintenance of his spouse and family. [19] That said, then effectively there is no opposition to the order sought in para. [1] (a) above regarding the $300.00 per week charge on the bankrupt's wages from Impala Corporation Limited. [20] In so far as the order sought in para. [1] (b) above is concerned, as I understand the arguments raised before me, Mr. Langford essentially suggested that if the Court was to make an order for the $23,000.00 (approximately) proceeds of these two cheques to be paid now to the Official Assignee, the Court would be in effect quantifying an ongoing contribution which the Official Assignee was requiring the bankrupt to make. Mr. Langford's argument as I saw it went on to suggest that the proceeds of these cheques may well have related to pre-bankruptcy dealings between the bankrupt and the Inland Revenue Department with regard to taxation matters. His suggestion, as I understand it, was that if these funds are required by the Official Assignee then effectively that will prevent the bankrupt from meeting his proper obligations to the Commissioner of Inland Revenue. [21] With regard to that argument, Ms. Reddy for the Official Assignee noted s. 45B Insolvency Act 1967. This requires the Official Assignee to apply any amounts paid to him under any order made under s. 45A Insolvency Act 1967 in accordance with s. 104 Insolvency Act 1967. S. 104 deals with the statutory priorities requiredfor payment of the bankrupt's debts. Ms. Reddy noted, in my view quite properly, that if the Commissioner of Inland Revenue holds a priority with regard to any taxation debt due from the bankrupt, in terms of s. 104 the Official Assignee would be required to make those payments on a priority basis. That said, I accept that there would be no prejudice to the bankrupt here if the Official Assignee is to receive the $23,000.00 cheque proceeds. [22] In conclusion, in my view there is no effective defence to the application by the Official Assignee with regard to the order sought at para. [1] (b) above. [23] An order with respect to that matter is to follow.Conclusion[24] The Official Assignee's amended application for orders for contributions from the bankrupt and third parties filed 12 November 2008 succeeds in the main. [25] Orders are now made pursuant to s. 45A Insolvency Act 1967 as follows: a) An order is made assigning and/or charging to the Official Assignee out of income due to the bankrupt from his employer, Impala Corporation Limited, for the time being at the rate of $300.00 per week. b) A further order is made directing that the proceeds of the two Bank of New Zealand bank cheques dated 12 March 2008 (which I understand to be approximately $23,000.00 such proceeds being held in the trust account of Mr. John Langford) are to be vested in and paid to the Official Assignee. [26] As to costs, the Official Assignee has been successful in bringing his present application, and I see no reason why he should not be entitled to costs in the normal way. Costs are therefore awarded to the Official Assignee applicant on a Category 2B basis together with disbursements, if any, as fixed by the Registrar following to the orders.[27] Leave is reserved for either party to approach the Court further on 48 hours notice if additional directions or clarification regarding the terms of this order may be required.'Associate Judge D.I. Gendall'