OFFICIAL ASSIGNEE v GALVIN AND GOLLAN [2016] NZHC 2145

OFFICIAL ASSIGNEE v GALVIN AND GOLLAN [2016] NZHC 2145 [9 September 2016]IN THE HIGH COURT OF NEW ZEALANDHAMILTON REGISTRYCIV 2015-419-388[2016] NZHC 2145BETWEEN THE OFFICIAL ASSIGNEE INBANKRUPTCY OF THE PROPERTY OFJAMES PATRICK GOLLANPlaintiffAND FRANCES MARGARET GALVIN ANDALLAN PAUL GOLLAN AS TRUSTEESAND EXECUTORS OF THEDECEASED ESTATE OF PHILLIPFRANK GOLLANFirst DefendantsFRANCES MARGARET GALVIN ANDALLAN PAUL GOLLAN AS TRUSTEESAND EXECUTORS OF THEDECEASED ESTATE OF CORALROSEMARY GOLLANSecond DefendantsHearing: 1 September 2016Counsel: G Caro for the PlaintiffR P Sutton for the First & Second DefendantsJudgment: 9 September 2016JUDGMENT OF DUFFY JThis judgment was delivered by me on 9 September 2016 at 3.00 pm pursuant toRule 11.5 of the High Court Rules.Registrar/ Deputy RegistrarSolicitors / Counsel:Cooney Law, CambridgeMinistry of Business, Innovation & Employment, AucklandR P Sutton, Barrister, Hamilton[1] The Official Assignee (the Assignee) seeks orders of the Court by way of formal proof. At the formal proof hearing, counsel for the first and second defendants appeared before the Court as a matter of courtesy.[2] The proceeding was commenced by the Assignee in two separate bankruptcies against the executors of two separate deceased estates, namely the deceased estate of Phillip Frank Gollan who died in October 1999 (the first defendant) and the deceased estate of Coral Rosemary Gollan (the second defendant) who died in June 2006. The deceased were husband and wife. One of their children is James Patrick Gollan. He has been adjudicated bankrupt on a number of occasions. Two such occasions coincide with Mr Gollan having acquired rightsunder his father's deceased estate and his mother's deceased estate. The Assignee claims that those rights vested in the Assignee on the occasions of Mr Gollan'sbankruptcy.[3] The Assignee has reached a measure of agreement with the first and second defendants. The defendants have paid monies from the respective deceased estates to the Assignee. The Assignee is presently holding those funds undispersed pending orders from this Court declaring that the interest of Mr Gollan in the two deceased estates has vested in the Assignee. If the orders are made, the defendants will alsopay any balance of Mr Gollan's interest in the respective deceased estates to theAssignee in the respective bankruptcies no later than 31 January 2017.[4] The orders as sought by the Assignee do not form part of the prayer for relief in the statement of claim. At the formal proof hearing I allowed the amendment of the prayer for relief in the statement of claim to include the following:The Assignee seeks the following declarations:1. The interest of James Patrick Gollan in the deceased estate of Phillip Frank Gollan vests in the Official Assignee in the bankruptcy of James Patrick Gollan that commenced on 4 December 2000.2. The interest of James Patrick Gollan in the deceased estate of Coral Rosemary Gollan vests in the Official Assignee in the bankruptcy of James Patrick Gollan that commenced on 9 March 2012.[5] The remainder of the relief sought in the prayer for relief in the statement of claim is no longer pursued.[6] Counsel for the first and second defendants did not oppose the prayer for relief in the statement of claim being amended in the way that I have outlined.[7] The trustees of the Gollan Family Trust, a family trust connected to Mr Gollan, were directed to be served with the proceeding. This was because Mr Gollan had advised the Assignee at one point that he had transferred his interest in the respective deceased estates to the Gollan Family Trust. The Assignee does not accept that such transfer occurred. Nonetheless, in accordance with the directions made by this Court, the trustees of the Gollan Family Trust were served with the proceeding in December 2015.[8] An affidavit on the Court file from Stephen Anthony West, process server, deposes that on 18 December 2015 he served the following documents on Mr Gollan and his wife, Veronica Patricia Gollan, as trustees of the Gollan Family Trust:(a) the statement of claim;(b) the notice of proceeding;(c) the affidavits of Charles Tatham Jones, Leslie Graham Alexander Currie (the Assignee) and Marie Joy King;(d) the without notice application for directions as to service;(e) the memorandum of counsel for the Assignee in support of the without notice application for directions as to service; and(f) a copy of the interlocutory order directing service on the Gollan family trustees.[9] Since being served with copies of the proceeding, the trustees of the Gollan Family Trust have taken no steps in this proceeding.[10] In view of the stance taken by counsel for the first and second defendants and the absence of any action by the trustees of the Gollan Family Trust, I consider it appropriate that the proceeding be dealt with by way of formal proof.[11] The affidavit of the Assignee confirms that Mr Gollan's father (Phillip FrankGollan) died on or about 3 October 1999. Further, that Mr Gollan was adjudicated bankrupt on 4 December 2000. The will of Phillip Frank Gollan provided for allocation of a one tenth share of the residuary of the testator's residuary estate toMr Gollan after $25,000 of that share was paid to Ian Robert Gollan.[12] The bankruptcy that commenced on 4 December 2000 was under the Insolvency Act 1967 (the 1967 Act). Subject to certain limited exceptions (none of which are relevant to this proceeding) on adjudication, all of a bankrupt's propertypasses to the Assignee. Section 42(2) of the 1967 Act provides: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;(b) The capacity to exercise and to take proceedings for exercising all such powers in or over or in respect of any property whatsoever and wheresoever situated as might have been exercised by the bankrupt for his own benefit at the commencement of the bankruptcy or before his discharge.[13] Property is defined in the 1967 Act to include things in action.1[14] An interest that a testator or testatrix intends to give by will does not come into existence until the death of that person. On that event, the estate of a deceased person vests in the administrator to whom the administration is granted. Beneficiaries under the will acquire no property interest in the estate until the administration is complete. Pending completion of the administration, a beneficiary acquires a thing in action to compel due administration of the estate.1 See s 2 of the Insolvency Act 1967.[15] At the time of Mr Gollan's adjudication, the administration of his father'sestate was not complete. It follows that at the time of adjudication Mr Gollan possessed an interest in the form of a thing in action, namely the right as abeneficiary of his father's estate to require the estate to be duly administered, whichon adjudication vested in the Assignee.2[16] Mr Gollan's subsequent discharge from this bankruptcy did not have theeffect of re-vesting in him the thing in action.3[17] Therefore, the Assignee is the person in whom the interest of Mr Gollan in the deceased estate of Phillip Frank Gollan is vested.[18] The affidavit of the Assignee confirms that Mr Gollan's mother died on orabout 24 June 2006. Her last will and testament was dated 17 May 2006. Probate was granted on 24 July 2006. Mr Gollan was adjudicated bankrupt on 19 March 2012. The bankruptcy was under the Insolvency Act 2006 (the 2006 Act). The will of the late Coral Rosemary Gollan provided for allocation of a one tenth share of the residuary estate to Mr Gollan. Under the 2006 Act, property has a broad definitionwhich includes "rights, interests, and claims of every kind in relation to propertyhowever they arise."4[19] Section 101 of the 2006 Act has substantially the same effect as s 42(2) of the1967 Act. Thus, on adjudication under the 2006 Act, all of the bankrupt's propertypasses to the Assignee. Section 101 (equivalent of s 42(2)) provides:101 Status of bankrupt's property on adjudication(1) On adjudication,—(a) all property (whether in or outside New Zealand) belonging to the bankrupt or vested in 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; and2 See Re Cameron (1987) 9 NZTC 6,187.3 See Official Assignee v 15 Insoll Avenue Ltd [2001] 2 NZLR 492 (HC) at [500]. Mr Gollan was discharged from his December 2000 bankruptcy on December 2006.4 See s 3 of the Insolvency Act 2006.(b) the powers that the bankrupt could have exercised in, over, or in respect of any property (whether in or outside NewZealand) for the bankrupt's own benefit vest in theAssignee.[20] In Official Assignee v Trustees Executors Ltd Ronald Young J discussed thedifferences in the wording of the definitions of "property" under the 1967 Act and the 2006 Act.5 He said:[34] The definitions of "property" in the two enactments do use different words but both define "property" in the broadest possible way. ...[37] The different definitions primarily illustrate the differences in drafting styles between 1967 and 2006. The 1967 definition relied partly onan attempt to specify what constituted "property" for example, land, money,goods and things in action.[38] The 2006 definition relies upon the phrase "property" means "property of very kind". The rest of the 2006 definition retains that broadflavour. In contrast with the 1967 definition, the 2006 definition does notspecifically mention "things in action" as property. Yet there can be no doubt that "things in action" comes within the 2006 definition of "property of every kind". Finally, as the Assignee pointed out in its submissions, ifParliament had intended to significantly change the definition of property (a matter of considerable importance in the Insolvency Act 2006) then some comment in the Parliament debate would be expected. There was no such comment in the debates.[21] Ronald Young J's decision in Official Assignee v Trustees Executors Ltd was overruled on appeal, but not in relation to the finding that the definition of property in the 2006 Act was a broad definition that encompassed things in action.[22] I accept the Assignee's submission that, in substance, the meaning of "property" has not changed from the 1967 Act to the 2006 Act. Under the 2006 Act,on his adjudication all of Mr Gollan's property vested in the Assignee. Thus, theinterest Mr Gollan was left under the will of Coral Rosemary Gollan has now vested in the Assignee following the bankruptcy that commenced on 19 March 2012. Therefore, the interest Mr Gollan once had in the deceased estate of Coral Rosemary Gollan is now vested in the Assignee.5 Official Assignee v Trustees Executors Ltd [2014] NZHC 345.[23] I am satisfied therefore that I should make the declarations the Assignee seeks. I declare that:1. The interest of James Patrick Gollan in the deceased estate of Phillip Frank Gollan vests in the Official Assignee in the bankruptcy of James Patrick Gollan that commenced on 4 December 2000 and remains vested in the Official Assignee.2. The interest of James Patrick Gollan in the deceased estate of Coral Rosemary Gollan vested in the Official Assignee in the bankruptcy of James Patrick Gollan that commenced on 19 March 2012 and remains so vested.Duffy J