WILLIAMS v CRUDEN [2023] NZHC 3234

WILLIAMS v CRUDEN [2023] NZHC 3234 [16 November 2023]IN THE HIGH COURT OF NEW ZEALANDCHRISTCHURCH REGISTRYI TE KŌTI MATUA O AOTEAROAŌTAUTAHI ROHECIV-2022-409-061[2023] NZHC 3234IN THE MATTERANDof the Insolvency Act 2006IN THE MATTER of the bankruptcy of MATTHEW JOHNCRUDENBETWEEN RONALD DAVID WILLIAMS and TANIAMARIE McKENZIE practising asWILLIAMS McKENZIE LAWYERSJudgment CreditorAND MATTHEW JOHN CRUDENJudgment DebtorHearing: 26 October 2023Appearances: D M L Dingwall for Official AssigneeNo appearance for Judgment DebtorJudgment: 16 November 2023JUDGMENT OF ASSOCIATE JUDGE PAULSENThis judgment was delivered by me on 16 November 2023 at 10.30 ampursuant to rule 11.5 of the High Court Rules.Registrar/Deputy RegistrarDate:[1] The Official Assignee applies under ss 106 and 147 of the Insolvency Act 2006for orders requiring the judgment debtor, Matthew John Cruden, to make contributionstowards payment of his debts and requiring Prince Brick and Blocklaying Ltd,Mr Cruden's employer, to make contributions on his behalf.[2] As a result of queries raised by me, the orders the Official Assignee now seeksare on terms more beneficial to Mr Cruden than was originally the case and are asfollows:(a) the judgment debtor must, from the date of this judgment untildischarged from bankruptcy, pay $99.00 per week to the OfficialAssignee (the contributions) as a contribution towards his debts;(b) the judgment debtor must also pay to the Official Assignee:(i) in respect of contributions he ought to have made from 3 March2023 to 18 May 2023, $846.56 ($76.96 per week); and(ii) in respect of contributions he ought to have made from 19 May2023 down to the date of this judgment, $99.00 per week(together "the arrears");(c) the judgment debtor must pay the arrears to the Official Assignee byweekly payments of not less than $99.00 from the date of his dischargefrom bankruptcy to the date the arrears are paid in full;(d) to the extent there are any monies that are or may have become payableto the judgment debtor by his employer (currently Prince Brick andBlocklaying Ltd), the employer must pay $99.00 per week from thosemonies to the Official Assignee on behalf of the judgment debtor as afirst charge on those monies until:(i) the judgment debtor has been discharged from bankruptcy; and(ii) the contributions and the arrears have been recovered in full bythe Official Assignee; and(e) the judgment debtor is to pay the Official Assignee's costs of thisapplication together with disbursements on the same payment basis.[3] Although both Mr Cruden and his employer have been served with theapplication, neither has taken any steps in the proceeding. The application camebefore me on an unopposed basis and Mr Dingwall sought orders in terms of theapplication.[4] I reserved my decision so that some further evidence could be provided as tothe method by which the Official Assignee had calculated the contributions for thepurposes of s 147. This information has been provided.Background[5] On 12 May 2022, Mr Cruden was adjudicated bankrupt by the High Court atChristchurch on the application of Williams McKenzie Lawyers. To date, claimssubmitted by creditors in Mr Cruden's estate total approximately $22,000.[6] The Insolvency Officer delegated to administer Mr Cruden's estate had somecorrespondence with Mr Cruden but he has not completed a statement of affairs asrequired by s 67 of the Insolvency Act. He also failed to provide payslips or details ofhis household income and expenditure.[7] Mr Cruden did advise that he lives with his partner (who is working) and hertwo children. He also advised that he has a child from a previous relationship whodoes not live with him, but he pays $170 per week in child support to the mother ofthat child. Mr Cruden did not disclose his partner's income.[8] In December 2022, Mr Cruden was summoned to be interviewed on oath andto complete his statement of affairs but Mr Cruden did not attend the examination.[9] The Insolvency Officer obtained employment and income details forMr Cruden directly from the Inland Revenue Department and learned he wasemployed, his weekly earnings, and that he had one dependent child.[10] The Insolvency Officer proceeded to complete a contributions assessment forMr Cruden in accordance with s 147 of the Insolvency Act. She states that thisrequired her to estimate what Mr Cruden's partner might be earning, and for thispurpose she relied upon information from Statistics New Zealand as to the medianwage after tax for a woman in New Zealand. This figure was used to calculate thehousehold income for Mr Cruden and his partner. In the contribution assessment thesum of $170 for child support was allowed, and allowance was made for twodependent children in the household.[11] The Insolvency Officer calculated that Mr Cruden should be expected to paycontributions of $76.96 per week. On 15 February 2023, she wrote to Mr Crudennotifying him of the Assignee's assessment and requiring him to commencecontribution payments at the rate of $76.96 per week from 3 March 2023. The letterinvited Mr Cruden to advise if his circumstances changed so his position could bereviewed. There was no response from Mr Cruden, and the contribution payments didnot commence.[12] On 21 April 2023, the Insolvency Officer sought an update from the InlandRevenue Department as to whether Mr Cruden was still employed and confirmationof his income. The Inland Revenue Department advised that Mr Cruden was nowemployed by Prince Brick and Blocklaying Ltd, and that his total net income hadincreased. When Mr Cruden's updated income was applied with the same details aspreviously to the contributions calculation, the new contribution calculation came outto $181.65 per week.[13] On 5 May 2023, Mr Cruden was notified of the updated contributionsrequirement due to the change in his circumstances. He was requested to commencecontributions payments no later than 19 May 2023. The contribution payments didnot commence, and no response was received from Mr Cruden. The InsolvencyOfficer's last contact with Mr Cruden was on 22 October 2022.The law[14] Section 106 of the Insolvency Act provides the Court with the power to orderthat money owed, or to become due or payable to a bankrupt is assigned to the OfficialAssignee. It provides:106 Court may order that money due to bankrupt is assigned toAssignee(1) The court may, on the application of the Assignee, order that anymoney due to the bankrupt, or any money to become due or payableto the bankrupt, is assigned or charged to, or in favour of, theAssignee.(2) The assignment or charge is a discharge to the person who pays theAssignee.[15] Section 147 of the Insolvency Act provides:147 Bankrupt may be required to contribute to payment of debts(1) If required by the Assignee, the bankrupt must pay an amount orperiodic amounts during the bankruptcy as a contribution towardspayment of the bankrupt's debts.(2) The Assignee may impose conditions in respect of the payments.(3) Before the Assignee may require the bankrupt to make the payment orpayments, the Assignee must—(a) have regard to all the circumstances of the bankruptcy and thebankrupt's conduct, earning power, responsibilities, andprospects; and(b) make reasonable allowance for the maintenance of thebankrupt and his or her relatives and dependants.(4) The court may, on the application of the Assignee, order the bankruptto pay the amount or amounts required by the Assignee.(5) The court may, on the application of the Assignee, the bankrupt, orany creditor,—(a) vary, suspend, or cancel the bankrupt's obligations to makethe payments under this section:(b) vary, suspend, or discharge any order made under subsection(4):(c) remit any arrears owing by the bankrupt.[16] The relevant principles to be applied to applications under s 147 were set outby Associate Judge Osborne in Official Assignee v van der Walt which I summariseas:1(a) The s 147 provisions are to be seen against the background of thegeneral rule that the personal earnings of a bankrupt betweenadjudication and discharge vest in the Official Assignee.(b) That general rule is to be viewed as subject to the limitation that thebankrupt is entitled to a reasonable allowance for the maintenance ofthe bankrupt and his or her relatives and dependants.(c) The relevant considerations include:(i) the fundamental consideration whether the bankrupt will be ableto meet the contributions assessed by the Official Assignee;(ii) the bankrupt is not to be emotionally and financially crippled bythe contributions ordered;(iii) the contributions should strike a reasonable balance between thepublic interest and enabling a person, after surrendering all theirrequired assets, to start again with a clean slate, and the privateinterests of the creditors in the bankrupt estate in receiving somepayment when the bankrupt is capable of achieving highearnings; and(iv) regard must be had to the bankrupt's occupation and station inlife.(d) The burden of proof of establishing what the reasonable allowance isfor the maintenance of the bankrupt and relatives and dependants isupon the bankrupt.1 Official Assignee v van der Walt [2017] NZHC 1664 at [8]–[13].(e) The Court's power in this jurisdiction to order payment involves theexercise of a discretion, unfettered by rules as to its exercise inparticular fact situations.My assessment[17] Mr Cruden has failed to cooperate with the Official Assignee since he wasadjudicated bankrupt. He has failed to complete his statement of affairs or attend forexamination. He has advised the Official Assignee that he lives with his partner butpays child support of $170 per week in respect one child.[18] Consistent with its obligations under s 147(3), the Official Assignee has hadregard to Mr Cruden's circumstances to the extent they have been made known andhas obtained confirmation of his employment status and earnings.[19] It has then made an assessment of the reasonable allowance that should bemade for the maintenance of Mr Cruden and his relatives and dependants applying theInsolvency Income Contribution Calculator. The process was described by theInsolvency Officer as follows:6. The calculator is based on an overall assessment of reasonableliving costs arrived at by reference to average expenditure figurespublished by Statistics New Zealand and the Working for Familiesthresholds used by the Inland Revenue Department to calculate taxcredits, both of which take into account the number of dependents inthe family. The overall effect is that costs are initially moderated onan overall basis, rather than line-by-line.7. The calculator is intended to establish a consistent and objectiveformula by which a bankrupt's reasonable living costs and ability tomake contributions can be initially assessed. The resulting figure isthen considered in relation to the bankrupt's actual circumstances,which may disclose costs that are unavoidably higher than usual ormay be lower than usual, for example where no rent or mortgage costsneed to be paid. The Assignee must ensure that the contributionsrequirement will not leave the bankrupt or his or her family unable tomeet their reasonable expenses and that he or she is left with somediscretionary income to spend or save as they see fit.[20] The Official Assignee's method of calculating contributions, described above,was considered and accepted by both Associate Judge Matthews in Official Assigneev van Heerden (bankrupt) and by Associate Judge Osborne in Official Assignee v vander Walt.2 Importantly, Mr Cruden has not objected to the contribution assessments.However, as I noted earlier, the Official Assignee has reduced the contributions soughtfrom Mr Cruden as a result of matters raised by the Court.[21] Mr Cruden has also not raised any other matters with the Official Assignee orthe Court that would weigh against me making the orders sought in the exercise of mydiscretion. I note, however, that the Official Assignee acknowledges it will respondto any change in Mr Cruden's circumstances if notified of it by Mr Cruden.[22] I am therefore satisfied the orders sought should be made.Result[23] The Official Assignee's application is successful. Pending any further order ofthe Court there shall be orders in terms of [2](a) to (d) (inclusive) above.[24] The Official Assignee is entitled to costs and may file a memorandum within10 working days as to the quantum of such costs if it wishes to have those costs fixed.[25] The Official Assignee should provide a copy of these reasons along with thesealed judgment to Mr Cruden at the first opportunity._______________________O G PaulsenAssociate JudgeSolicitors:Insolvency & Trustee Service, Christchurch2 Official Assignee v van Heerden (bankrupt) [2016] NZHC 360 at [19]–[22]; Official Assignee vvan der Walt, above n 1.