OFFICIAL ASSIGNEE V KENNEDY HC NAP CIV-2008-441-000751

OFFICIAL ASSIGNEE V KENNEDY HC NAP CIV-2008-441-000751 21 November 2008IN THE HIGH COURT OF NEW ZEALAND NAPIER REGISTRY CIV-2008-441-000751UNDER An application under s 374 of the Insolvency Act 2006 pursuant to Part 4 of the High Court Rules BETWEEN OFFICIAL ASSIGNEE Plaintiff AND TERRELAINE FAY KENNEDY Defendant Hearing: 19 November 2008 Appearances: N M Graham for Plaintiff Defendant in person Judgment: 21 November 2008 at 4:00 pmRESERVED JUDGMENT OF COURTNEY JThis judgment was delivered by Justice Courtney on 21 November 2008 at 4:00 pm pursuant to r 540(4) of the High Court Rules Registrar / Deputy Registrar Date.. Solicitors: Elvidge & Partners, P O Box 609, Napier 4015 Fax: (06) 835-0557 – N GrahamCopy to: T F Kennedy, 26/55 Coventry Avenue, Tamatea, Napier 4112[1] The defendant, Mrs Kennedy, was accepted into the "no asset procedure" under the Insolvency Act 2006. 1 This procedure provides an alternative to bankruptcy for an insolvent debtor who has no realisable assets. However, the Assignee can terminate participation in the no asset procedure if the debtor was wrongly admitted into it because he or she concealed assets or misled the Assignee. 2The Assignee terminated Mrs Kennedy's participation in the no asset procedure on these grounds upon learning that there are funds held on trust for her from her late mother's estate. The Assignee has applied under s 374 for a preservation order in relation to the funds and an interim order pending determination of that application. On 19 November 2008 I made an interim order that the funds currently held on the defendant's behalf by Purnell Creighton be held for a further four months. My reasons were to follow. [2] Admission into the no asset procedure requires an application to the Official Assignee and completion of a statement of affairs. On the basis of her statement of affairs Mrs Kennedy had debts of $36,858.91 and no realisable assets. In her statement of affairs Mrs Kennedy answered "No" to the question "Do you have an interest in any deceased estate?". In fact, Mrs Kennedy is a residuary beneficiary of her late mother's estate and the solicitors acting for the estate hold $33,750 on trust for her, being her share in the estate. [3] Under s 374(1) the Court may make a preservation order in relation to a debtor's assets pending an application being made for his or her adjudication:If the assignee terminates a debtor's participation in the no asset procedure on the ground that the debtor has concealed assets or misled the Official Assignee, the Court on application of the Assignee may make an order for the preservation of the debtor's assets pending an application for the debtor's adjudication.[4] On the basis of the information provided it appears that, contrary to her statement of affairs, Mrs Kennedy does have assets. The money has been held by the estate's solicitors for some time and she has clearly known about it. The Official Assignee does not know what, if any, steps Mrs Kennedy's creditors will wish to take; it appears that Mrs Kennedy sought to be admitted to the no asset procedure of1 sub-part 4 of Part 52 s 373her own accord rather than as a result of any step being taken against her by her creditors. However, she has several creditors and it must be possible that one or more will wish to take steps. For these reasons I considered interim relief to be justified. [5] Mrs Kennedy appeared in person and did not object to an interim order being made. She had not received any legal advice on the application and did not appear to have much understanding of the legal process, but she intends to seek advice as soon as possible. I was satisfied that an interim preservation order for a relatively short period would not prejudice her because it appears from the solicitor's correspondence that she has previously declined to accept payment of the funds in any event. [6] In addition to the interim order I reserved costs and made the following timetable: a) Mrs Kennedy is to file a statement of defence and any affidavit in reply by 17 December 2008; b) The Official Assignee is to file any affidavit in response to Mrs Kennedy's affidavit by 19 January 2009; c) A date for the substantive application is to be allocated as soon as possible after 19 January 2009. [7] There is one observation that I wish to make. On the face of it, Mrs Kennedy has misled the Assignee. However, she wishes to raise in her defence the fact that she did not understand the question about an interest in any deceased estate as meaning some right or title to property but rather of a feeling of personal concern. There has not been any previous judicial consideration of s 374. Therefore the question will arise whether the acts of concealing assets and misleading the Assignee under in s 374(1) are to be judged objectively by reference to the effect on the Official Assignee or subjectively by reference to the debtor's intentions. ____________________ P Courtney J