ABERNETHY AND CONNOR AS THE TRUSTEES OF THE P.M. HUNT FAMILY TRUST AND THE SAID PETER JAMES CONNOR AND PHILLIPA LOUISE ABERNETHY AS THE TRUSTEES OF THE P.M. HUNT (NO. 2) FAMILY TRUST V GRANT THORNTON AND ANOR HC WN CIV-2005-485-2636

ABERNETHY AND CONNOR AS THE TRUSTEES OF THE P.M. HUNT FAMILY TRUST AND THE SAID PETER JAMES CONNOR AND PHILLIPA LOUISE ABERNETHY AS THE TRUSTEES OF THE P.M. HUNT (NO. 2) FAMILY TRUST V GRANT THORNTON AND ANOR HC WN CIV-2005-485-2636 18 September 2006IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY CIV-2005-485-2636BETWEEN PHILIPPA LOUISE ABERNETHY AND PETER JAMES CONNOR AS THE TRUSTEES OF THE P.M. HUNT FAMILY TRUST AND THE SAID PETER JAMES CONNOR AND PHILLIPA LOUISE ABERNETHY AS THE TRUSTEES OF THE P.M. HUNT (NO. 2) FAMILY TRUST Plaintiffs AND GRANT THORNTON First Defendant AND THE OFFICIAL ASSIGNEE FOR NEW ZEALAND Second Defendant Hearing: 15 September 2006 Appearances: S. Kos for Trustees of the P.M. Hunt Family Trust and the P.M. Hunt (No. 2) Family Trust and for Stephen Brown and Alison Hunt M. Reddy for Second Defendant E. Horner for Morrison Kent and Peter Hunt Judgment: 18 September 2006 at 3.00pm In accordance with r540(4) I direct the Registrar to endorse this judgment with a delivery time of 4.30pm on the 18th day of September 2006.JUDGMENT OF ASSOCIATE JUDGE D.I. GENDALL[1] This is a cross-application for directions brought in this proceeding by the Official Assignee pursuant to s85 Insolvency Act 1967.[2] The application is opposed by The P.M. Hunt Family Trust, The P.M. Hunt (No. 2) Family Trust, The P.M. Hunt (Wellington) Trust, Alison Hunt, Stephen Brown Law Office, Morrison Kent and Peter Michael Hunt. [3] It is convenient to refer to those parties as the respondents, and I now do so. The Official Assignee is to be regarded as the applicant.Preliminary Issue[4] A preliminary issue was raised by counsel for the respondents concerning the intituling in this matter. That intituling refers to the trustees of The P.M. Hunt Family Trust and The P.M. Hunt (No. 2) Family Trust as plaintiffs, Grant Thornton as first defendant, and the Official Assignee as second defendant. [5] Notwithstanding that, however, the present application by the Official Assignee is effectively a cross application relating to the two family trusts and the additional third parties named in paragraph [2] above. [6] I am satisfied that it is appropriate for this cross-application to proceed in the present matter CIV-2005-485-2636, although the intituling of that proceeding remains unchanged. [7] I turn now to preliminary jurisdiction issues raised by counsel for the respondents. Two broad questions were asked. [8] The first related to a question concerning my jurisdiction as an Associate Judge to hear this application. [9] The second related to the contention put forward on behalf of the respondents that the application now before the Court is brought in the wrong proceeding, it uses the wrong procedure, and relies upon the wrong statutory provision. [10] I deal first with the issue as to my jurisdiction as an Associate Judge to hear this application.Associate Judge's Jurisdiction[11] Rule 61A states:(1) All Associate Judges of the High Court shall have the jurisdiction and powers (whether conferred by the Act or any other Act or by rules of Court) of a Judge sitting in chambers.[12] The jurisdiction and powers under r.61A and under s26J Judicature Act 1908 are in addition to those conferred on Associate Judges pursuant to s26I Judicature Act 1908 – r.61A(3) and Stubbs Enterprises Limited v Springfield Acres Limited(1992) 6 NZCLC 67, 886. [13] The Laws of New Zealand – Insolvency para 140 states:The jurisdiction vested in Masters to determine bankruptcy petitions, and to adjudicate upon matters relating to the discharge from and annulment of bankruptcies has led to a view that a Master cannot exercise other jurisdiction under the Insolvency Act 1967, with the consequence that such other matters must be dealt with by a Judge of the High Court. However, Masters do have powers to exercise certain specified jurisdiction and powers which may otherwise be exercised by a Judge of the High Court sitting in chambers. It is suggested that, applying this rule to insolvency proceedings, a Master has jurisdiction to hear and determine any matter arising under the Insolvency Act 1967 which is not required to be dealt with in open Court.[14] Public examinations of bankrupts and applications for orders of discharge or annulment are the only matters which are required to be heard and disposed of in open Court – s5(1) Insolvency Act 1967 proviso. [15] Section 5(1) Insolvency Act 1967 states:(1) Every Judge may exercise, either in Chambers or in open Court, all the powers and jurisdiction given to the Court under this Act: provided that the public examination of a bankrupt and an application for an order of discharge or annulment shall be heard and disposed of in open Court.[16] The present application is made under s85 Insolvency Act 1967. This section enables the Official Assignee to seek the Court's assistance by, for example, providing an opinion, advice or direction with respect to questions affecting the administration of the bankrupt's property. Having obtained such opinion, advice ordirection, the assignee is then exempt from claims unless he or she has acted dishonestly – s85(2) Insolvency Act 1967. [17] In terms of s5(1) Insolvency Act 1967, this application for directions can be considered by the Court either in Chambers or in open Court. [18] In Re Oldfield (a bankrupt) (1995) 3 NZLR 100 a similar application by the Official Assignee for directions was considered by a Master (Associate Judge) as a Chambers application. [19] I am satisfied here that the present application under s85 Insolvency Act 1967 is brought as a Chambers application and in terms of s61A(1) I have jurisdiction as an Associate Judge to hear this application. [20] That effectively deals with the first preliminary question. [21] I turn now to consider the second jurisdiction question noted at paragraph [9] above. This is the contention that the applicant's s85 application is brought in the wrong proceeding, it uses the wrong procedure, and it relies upon the wrong statutory provision.Wrong Proceeding[22] The respondents note that the present proceeding CIV-2005-485-2636 is not brought in bankruptcy, but instead is a civil proceeding brought by the trustees of two trusts against the former accountants (Grant Thornton) for breach of contract and confidence, and against the Official Assignee for breach of confidence. The respondents point to the fact that the parties are the trustees of the two family trusts, Grant Thornton and the Official Assignee. [23] The respondents contend that orders associated with requests for information under s68A Insolvency Act 1967 have no place in the present civil proceeding. Their place is in the earlier bankruptcy proceeding (CIV-2003-485-2585). That wasa proceeding brought by Mr Peter Michael Hunt, the bankrupt, and involves the Official Assignee and a Mr and Mrs Muollo as creditors of the bankrupt's estate. [24] The respondents contend that orders associated with requests for information under s68A Insolvency Act 1967 should be brought afresh in this bankruptcy proceeding. [25] Having considered this submission by the respondents, I must reject it. The present application is brought by the Official Assignee as second defendant in CIV- 2005-485-2636. In terms of s85 Insolvency Act 1967, as I have noted, the application seeks an opinion or directions from the Court on certain matters. Although on its face, the application in part appears to seek an order for production of documents from a range of parties, that is only one of the orders sought. The plaintiffs in the present proceeding, The P.M. Hunt Family Trust and The P.M. Hunt (No. 2) Family Trust are said to be involved in a range of transactions for which some advice or directions are sought. The fact that these directions may relate also to third parties, in my view, does not alter the position under s85 if the Court ultimately decides to provide advice or direction to the Official Assignee. [26] I am satisfied, too, that the discretion of the Court here is sufficiently wide to allow it to accept the present s85 application in the current proceeding. That is the appropriate course. In my view it is unnecessary to require the applicant to re-file its present application in other proceedings. That would simply and needlessly delay matters. [27] I reject, therefore, the contention from the respondents that this application has been brought in the wrong proceeding.Wrong Procedure/Provision[28] In submissions before me the respondents contend that the present application in effect seeks an order for discovery against parties and non-parties. They argue that it is brought wrongly under s85 Insolvency Act 1967. It should have been brought under the rules relating to discovery.[29] Section 85(1) is a wide provision. Specifically it provides:(1) The Assignee may apply to the Court for its opinion, advice or direction on any question respecting the administration of the property of the bankrupt or its distribution among his creditors or respecting the powers, duties and discretions of the Assignee.[30] The respondents argue that this provision has nothing to do with compelling third parties to provide information. The function of s85 is purely to enable the Official Assignee to seek the Court's assistance on matters which may be causing the Assignee some difficulty. [31] Before me, counsel for the respondents provided a range of examples of cases where s85 or equivalent provisions have been used. These included: a) Re McDonald (HC WN, B54/94 and B55/94, 27 March 1995). This was an application for directions relating to the procedure the Official Assignee should follow in respect of a claim by the daughter of the bankrupt who filed a proof of debt claiming that she was a secured creditor. b) Re The Sinking Fund of the City of Dunedin (1885) 4 NZLR 225. This was a request for directions under s77 Trustee Act 1883 which provided for trustee applications for directions "on any question respecting the management or administration of the trust property or the assets of any testator or intestate". Directions were sought concerning money paid to trustees for one trust that had been mingled with money in another trust and for which the Dunedin City Corporation claimed a refund. c) Ex parte The Official Assignee of Pearson (1895) 13 NZLR 338. This was an application for directions where a solicitor obtained a disputed assignment of the bankrupt's interest under the will of his father along with possession of a sum of money remitted by the trustees of the father's estate.d) Re Roberts (a bankrupt) (1997) 3 NZ Conv. Cases 192,615. This was an application by the Official Assignee seeking directions on the current status of a matrimonial property settlement. e) Re Hughes (a bankrupt) (HC AK, B2632/92, Paterson J, 20 June 1997). This was an application to determine whether a commercial settlement agreement and payments due under it were valid. f) Creser v Official Assignee (HC WN, CIV-2005-485-1371, 17 August 2005). This was an application under s85 for approval of the Official Assignee's actions in entering into a proposed settlement of a family protection claim. g) Re Nanden (HC WN, CIV-2001-485-441, 15 December 2004). This application by the Official Assignee sought directions as to the proper disposal of $40,000 that a deceased bankrupt had paid into Court before his death to pay the victims of his criminal offending before he was adjudged bankrupt. h) Warman v Official Assignee (HC AK, B1146/94, 25 November 2004). This was an application by the Official Assignee seeking directions as to the disposal of funds remaining to the credit of the bankrupt estate, the funds not having been disclosed at the time of bankruptcy. i) Re Oldfield [1995] 3 NZLR 100. This application sought directions as to whether the Official Assignee could appoint himself as administrator of a deceased estate where adjudication had been made three months after the bankrupt's death. j) Re Vuletic (HC AK, B387/92, 28 March 1994). This was an application by the Official Assignee seeking directions as to the disposal of the bankrupt's 50% interest in a property owned beneficially by two brothers and subject to a life interest in favour of their mother.k) Re Noonen (1988) 2NZBLC 103, 221. This was an application by the Official Assignee seeking guidance from the Court as to whether the Assignee could require a bankrupt to surrender funds retained by the bankrupt out of the proceeds of sale of a joint family home where the property was sold prior to the bankruptcy and the funds were not reinvested in another joint family home. [32] These authorities illustrate the wide range of situations in which an application under s85 is appropriate. [33] In the present case I need to say at the outset that in terms of the jurisdiction question, in my view, the s85 application is properly brought. [34] If in time a Court is to conclude that the wide range of orders sought by the applicant in this application does go too far, then the Court in considering the substantive application will presumably dismiss those aspects of the application. In my view, however, the application in seeking opinion, advice or directions on a wide range of issues does fall within the provisions of s85. As to this, I have in mind particularly the provisions of paragraph 8 of the application which seek:8. A direction from this honourable Court that the second defendant is not restricted by the Court of Appeal case of Hunt v Muollo [2003] 2 NZLR 322 and that he is entitled to require production of the documents described in paragraph 6 above from the parties referred to in paragraph 7 above pursuant to ss68 and 68A of the Insolvency Act 1967.[35] A major component of the respondents' objection to the current application is their contention that the power to require third parties to produce documents to the Official Assignee lies not in s85 but in ss68 and 68A Insolvency Act 1967. [36] Section 68A states:The Assignee may by notice in writing require the bankrupt, the bankrupt's spouse, or any other person to deliver to the Assignee any book, paper, or document relating to the dealings or property of the bankrupt in that person's possession or under that person's control as the Assignee requires.[37] Some suggestion is made by the respondents that insufficient requests for information have been made here by the Official Assignee. [38] The Official Assignee strongly disputes this. His position is that proper requests for information have been made on a repeated basis, but that these have been ignored. [39] The respondents' argument continues, however, that, if indeed requests have been made and ignored, then the proper sanction for non-compliance with s68A requests is not a direction under s85, but rather a summons under s68 with the reserve sanction provided for in s68(4). [40] Section 68 provides:68. Assignee may examine persons respecting bankrupt or his property(1) The Assignee may, at any time before or after the making of the order of discharge, summon to appear before him and examine on oath – (a) The bankrupt; or (b) The wife or husband of the bankrupt; or (c) Any other person known or suspected to have in his possession any of the property, or any book, paper, or document relating to the affairs or property, of the bankrupt, or supposed to be indebted to the bankrupt, or whom he thinks capable of giving any information respecting the bankrupt, his trade, dealings, or property, or concerning his income from any source, or his expenditure – And may require the person so summoned to produce and surrender to the Assignee any book, paper, or document in his custody or power relating to the dealings or property of the bankrupt. (2) The Assignee may, instead of summoning before himself and examining the bankrupt or such other person as aforesaid, summon him to appear before [District Court Judge] or another Assignee at an appointed time and place, and the [District Court Judge] or other Assignee is hereby empowered to administer the oath and conduct the examination.(3) The examination of the bankrupt and every such person shall be committed to writing, and the bankrupt or other person, on being required to do so, shall sign the same. (4) If the bankrupt or any other person so summoned fails without reasonable excuse to come before the Assignee or [District Court Judge] at the time appointed, then the [District Court Judge] or the Court may, on the application of that Assignee, by warrant, cause the bankrupt or any such person to be apprehended and brought up for examination before the Court. [41] The respondents contend that s85 here is the wrong provision as, when one looks at ss68A and 68(1)(c), it is readily apparent that the applicants' present application is simply superfluous. The respondents say that if a s68A request is not met satisfactorily, the remedy lies in the Insolvency Act 1967 itself – that is a summons under s68. [42] Further, the respondents note that if there is no compliance with the summons, the sanction lies in s164 Insolvency Act 1967 which states:164. False or misleading statements and refusal to answer questions:Every person commits an offence and is liable on summary conviction to a fine not exceeding $200 or to imprisonment for a term not exceeding 3 months who makes to any Assignee or person concerned in the administration of this Act any statement knowing it to be false in any material particular, or who wilfully misleads or attempts to mislead any such Assignee or person, or who (without lawful justification) fails or refuses to answer any question put to him by the Assignee.(emphasis added) [43] In conclusion, the respondents contend that s85 is the wrong provision, it does not provide for compulsory production of documentary information, and the correct provisions to be applied here are ss68 and 68A, which are self-sanctioning. [44] As I have noted above, it is not necessary for me here to determine these substantive issues raised by counsel for the respondents. Whether there may be substance in the contention that the s85 procedure is not appropriate for the orders for production of documents sought in paragraphs 6 and 7 of the applicants' application is a matter to be determined when a substantive consideration of thepresent application is undertaken. Those same jurisdiction considerations do not apply, however, to the direction sought at paragraph 8 of the application. [45] It follows, therefore, that in my view, the application especially in so far as the direction sought at paragraph 8 is concerned, is properly brought, and jurisdiction exists for the Court to consider that substantive application. [46] The respondents' contention that no jurisdiction exists to hear the present application on the basis that the wrong procedure or wrong provision has been used, is rejected.Conclusion[47] For the reasons outlined above, I find that jurisdiction exists for the Court to hear the present s85 application. Whether or not the orders sought in this application, and in particular the orders for production of documents are appropriate, given the provisions of ss68 and 68A Insolvency Act 1967, is a matter for determination when the substantive application is considered. [48] The respondents' objections to the present s85 application based on jurisdiction grounds are dismissed. [49] As I have noted in a Minute in this matter dated 15 September 2006, hearing of the substantive aspects of the present application is to take place at 2.15pm on 10 November 2006 (1/2 a day is allowed). [50] Costs are reserved. __________________________Associate Judge D.I. GendallSolicitors:Stephen Brown Law Office, Wellington for Applicants Morrison Kent, Wellington for Morrison Kent Gibson Sheat, Wellington for Official Assignee