THE OFFICIAL ASSIGNEE v ASB BANK LTD [2019] NZHC 1736

THE OFFICIAL ASSIGNEE v ASB BANK LTD [2019] NZHC 1736 [23 July 2019]IN THE HIGH COURT OF NEW ZEALANDAUCKLAND REGISTRYI TE KŌTI MATUA O AOTEAROATĀMAKI MAKAURAU ROHECIV-2019-404-000274[2019] NZHC 1736UNDER Part 19 of the High Court Rules and s 225 ofInsolvency Act 2006IN THE MATTER OF an application for directionsBETWEEN THE OFFICIAL ASSIGNEEApplicantAND ASB BANK LIMITEDRespondentHearing: 31 May 2019Further submissions by applicant on 21 June 2019Further submissions by respondent on 5 July 2019Appearances: S Symon and N Porter for ApplicantC Vinnell for RespondentJudgment: 23 July 2019JUDGMENT OF WYLIE JThis judgment was delivered by Justice WylieOn 23 July 2019 at 11.00 amPursuant to r 11.5 of the High Court RulesRegistrar/Deputy RegistrarDate:Solicitors/counsel:Crown Solicitor at AucklandAnthony Harper, AucklandIntroduction[1] The applicant – The Official Assignee (the Assignee) – applies to the Court fordirections, pursuant to s 225 of the Insolvency Act 2006 (the Act), as follows:(a) where a bankrupt has deposited money, or directed that money bedeposited, into a bank account in the name of a third party and wherethe bankrupt does not have signing authority on the account, do thetransactions relate to the "bankrupt's property, conduct or dealings" forthe purposes of issuing a notice pursuant to s 171 of the Act; and(b) if so, are:(i) documents establishing the identity and providing personaldetails of the bank account holder;(ii) the bank account statements; and(iii) notes or other documents relating to the accountin the possession or under the control of a bank, documents "relating tothe bankrupt's property, conduct or dealings" which must be deliveredto the Assignee.[2] The application is made against ASB Bank Limited (the ASB) because theAssignee is investigating the affairs of two persons, a Mr Bayne and a Mr Bailey, bothof whom, whilst bankrupt, are alleged to have directed persons with whom they haddone business, to pay monies into accounts held by the ASB. The respective accountswere not in the names of Mr Bayne and Mr Bailey, and they did not have signingauthority on them. Rather, the accounts were in the names of third parties. TheAssignee gave notice to the ASB under s 171 of the Act requiring it to deliver updocumentation in relation to the accounts said to have been nominated by thebankrupts. The ASB refused to deliver the documentation to the Assignee because itdid not consider that the documents sought related to either bankrupt's "property,conduct or dealings", and because complying with the Assignee's notices wouldimpinge the rights of third party customers and cut across duties of confidentiality itowes to those third parties as its customers.[3] Mr Vinnell, appearing for the ASB, emphasised that the bank recognises androutinely complies with notices issued by the Assignee pursuant to s 171 of the Act.Nevertheless, it queried whether the powers available under the section can be invokedin the circumstances that have arisen and it questioned the limits on the Assignee'spowers available under the section.[4] I raised with counsel whether or not other parties/banks should have beenserved and/or had an interest in the application. Mr Symon, for the Assignee, did notconsider that service on other parties was required. Mr Vinnell assured me that otherbanks are aware of the application, and that they are content for the ASB to respondto it.Factual backgroundGeneral[5] The Assignee's office has an Integrity Enforcement Team (IET), responsiblefor investigating, detecting and preventing offending against the Act. Amongst otherthings, the IET is concerned to ensure that bankrupts are not managing businesseswhile bankrupt, or concealing assets from the Assignee, in breach of the variousprohibitions placed on bankrupts during their bankruptcies.[6] On occasion, the IET receives complaints from members of the public, whohave had dealings with bankrupts. A complainant may provide the insolvency officer,or the IET, with bank account details which have been made available by the bankruptin connection with the provision of goods or services by the bankrupt. If this happens,the IET routinely sends out a notice pursuant to s 171 of the Act to the relevant bank,requiring documentation relating to the bank account. The notice explains that theAssignee is investigating an allegation of offending against the Act, gives thebankrupt's details and the relevant authority relied on in making the request and detailsthe documentation sought. In the ordinary course, the bank responds, either advisingthat it does not hold any bank accounts for the bankrupt, or alternatively, providingcopies of relevant bank account statements and any notes relating to the account.[7] Occasionally, bankrupts set up or operate bank accounts in the names ofcompanies or trusts. This usually does not pose a problem as the bankrupts havecontrol over the relevant bank accounts and the banks are aware of this.[8] The IET can however face difficulties where bankrupts use bank accounts inthe names of third parties and where the bankrupts are neither account holders noraccount signatories. This is apparently not uncommon for those bankrupts who havehad multiple bankruptcies and/or who are aware that the Assignee will attempt tolocate assets in their names. Such persons apparently often take steps to try andconceal their business dealings and assets from the Assignee.[9] When a complainant has given the Assignee a bank account number apparentlyused by the bankrupt in the course of operating a business, and into which thecomplainant has been asked to pay money, the Assignee usually does not knowwhether the bank account is in the bankrupt's name. Generally, the Assignee knowsonly that the bankrupt has told his or her alleged customer to deposit money into theaccount, or that the bankrupt has allegedly issued an invoice asking for money to bedeposited into the account. When the account is in the name of a third party, and thebankrupt is not an authorised signatory on the account, on occasion, banks haverefused to comply with notices issued by the Official Assignee under s 171, assertingthat the bank account in question does not concern the bankrupt's property, conductor dealings.[10] Two particular situations have led to the present application. The first situationis referred to in an affidavit from the manager of the IET, Peter Seufatu. It concerns aMr Gordon Bayne. The second is referred to in an affidavit sworn by the head of theASB's payments and currency services department, Briar Couprie. It concerns aMr Paul Bailey.Mr Bayne[11] Mr Bayne was adjudicated bankrupt by this Court on 4 February 2016. It issuspected that he operated a concrete laying business whilst bankrupt. The Assigneereceived a complaint from one of his alleged suppliers who in turn had received acomplaint from an alleged customer. There were also complaints from other allegedcustomers. Mr Bayne is said to have provided an ASB bank account number to oneof the alleged customers. The Assignee issued a notice under s 171 of the Act to theASB. ASB declined to comply with the request, on the basis that the documentationsought did not relate to Mr Bayne's property, conduct or dealings. There weresubsequent complaints regarding Mr Bayne, and again, a complainant was given anASB bank account number. It was the same account number that Mr Bayne hadpreviously provided to one of the earlier complainants. The Assignee issued a secondnotice under s 171 of the Act, and again, the ASB declined to comply with the notice.The Assignee then contacted Mr Bayne in an attempt to get him to comply with whatwere considered to be his obligations as a bankrupt. Mr Bayne responded that he wasto begin work as an employee. The IET considers that Mr Bayne was operating abusiness using a number of aliases and directing payments into bank accounts whichwere not his own, and on which he did not have signing authority.[12] Ms Couprie, in her affidavit, stated that, on 15 November 2018, the Assigneeadvised that Mr Bayne had confirmed at interview that he had directed customers ofhis concrete laying business to make payment for his services into the account, andalso that the account was in the name of a friend. It also seems that additional evidencewas provided suggesting that Mr Bayne had access to a bank card attached to theaccount, and that he therefore had control over the account. Ms Couprie confirmedthat there was a cashflow card issued on the account at all relevant times, and also aVisa debit card, which permitted access to the account as well. The ASB was unableto ascertain whether Mr Bayne had used either card. Ms Couprie acknowledged thatit is possible that one of the cards was held by Mr Bayne, and that two people mayhave been accessing the account. Ms Couprie also advised that there had been adeposit of $7,000 into the account in March 2017, that there were other deposits whichreferred to "concrete" or "driveways", but that there were also a large number ofseemingly ordinary and personal transactions – for example, payments to take-awayshops, supermarkets and the like. Ms Couprie deposed that the ASB has no way ofdiscerning between transactions that may have involved Mr Bayne, and those thatinvolved the account holder, and that it would be a time consuming and costly processfor bank staff to try and trace transactions, determine relevance and redact irrelevantinformation.Mr Bailey[13] Mr Bailey was adjudicated bankrupt in September 2015. On 11 October 2016,a senior investigator with the Assignee's compliance unit emailed eight banks andfinancial institutions, asking them to check their records to see if a then bankrupt,Mr Bailey, had banked with them, and if so, asking for bank statements and bankingrecords. The ASB responded that it had no records for Mr Bailey. On 18 October2016, the Assignee advised the ASB that a complainant, said to have been dealing withMr Bailey, had been instructed to make payments into a specified ASB bank account.The ASB checked and advised that the account was not in Mr Bailey's name. TheAssignee then emailed the ASB, asking it to provide the name of the account holderand the bank statements from the date of Mr Bailey's adjudication as a bankrupt. Theletter asserted that Mr Bailey was self-employed and that he was using the bankaccount to deposit his funds into. The request was made under s171 of the Act. TheASB responded that, as Mr Bailey was not linked to the account, it would not actionthe Assignee's request. The Assignee then provided the ASB with what it consideredwas confirmation that monies payable to Mr Bailey were paid into the account, andagain sought the name of the account holder and statements from the date ofMr Bailey's adjudication. The ASB responded that it was not required to provide theinformation, because Mr Bailey was not named on the account. The bank did notconsider that it had been provided with enough evidence to establish that the accountrelated to Mr Bailey's conduct and dealings. It asserted that the account was a personalaccount and not a company account, and that the ramifications for the privacy of theaccount holder were far reaching.Submissions[14] Mr Symon, for the Assignee, submitted that s 171 is clear in its terms and thatit provides the Assignee with the power to require, by notice in writing, any person todeliver to the Assignee any document relating to the bankrupt's property, conduct ordealing in that person's possession or under that person's control. He put it to me thatit is sufficient that the Assignee considers that the third party bank account relates tothe bankrupt's property, conduct or dealings, and that there is no obligation a bankreceiving notice to satisfy itself that the account relates to the bankrupt's property,conduct or dealings. He argued that the Assignee's investigatory powers are crucialin facilitating any investigation into a bankrupt's conduct and the potential recoveryof assets for the benefit of creditors. He argued that a third party bank account relatesto a bankrupt's property, because the bankrupt has paid, or asked the third partyaccount holder to receive into the account, money which the bankrupt beneficiallyowns. Further he argued that the bank account relates to the bankrupt's conduct ordealings, because the bankrupt has directed the money be deposited into the account,as part of carrying on his or her business. He argued that all information relating tothe account, including the identity of the account holder, relates to the bankrupt'sproperty, conduct or dealings, and that all that is required before a notice is issuedunder s 171, is that the Assignee be satisfied that the documents sought may lead tothe discovery of information which concerns the bankrupt's property, conduct ordealings.[15] Mr Vinnell, for the bank, argued that where the account is in the name of athird party, the bankrupt is not an account signatory and the bankrupt has no mandateto operate the account or to receive information concerning the account, documentsconcerning the account do not relate to the bankrupt's property, conduct or dealings.He argued that banks have contractual, common law and statutory obligations ofprivacy and confidence with their customers, and that if the documents sought by theAssignee are required to be delivered up on a s 171 notice, banks would be requiredto disclose third party account holders' identities, contact details, financial positions,payments and receipts and personal information. He acknowledged that statutorycompulsion is one of the recognised exceptions to a bank's duties of confidentialityand privacy, but expressed concern that if a request made by the Assignee is ultra vires,a bank complying with such request may be in breach of its obligations to itscustomers. He argued that there has to be a clear and objective evidential thresholdbefore a bank can be required to comply with a s 171 notice, and that the Act does notcontemplate that the Assignee's subjective belief is sufficient to require a bank todisclose documents in its possession.Analysis(a) The ASB's obligations[16] Any bank will necessarily have contractual obligations with its customers.Ms Couprie has annexed to her affidavit the personal banking terms and conditionswhich the ASB has with its personal banking customers. Inter alia, the ASB agreesthat it will do all it reasonably can to prevent unauthorised access to the accountholder's accounts, and to make sure that they are secure. The terms and conditionsrecord that the ASB will collect, hold, use and, in certain circumstances, disclosecustomers' personal information. Personal information is defined as information thatcan be used to identify the customer. The terms and conditions record that by usingthe ASB's products and services, the customer permits the bank to collect, hold, useand disclose such personal information. They go on to record that the ASB candisclose personal information to third parties where disclosure is permitted by law, orfor any other purpose mentioned in condition 33.1. Condition 33.1 provides, inter alia,that the ASB can disclose information to comply with its legal obligations. Clause34.4 provides that the ASB can disclose a customer's personal information toregulators and government agencies in New Zealand or overseas in order to complywith any New Zealand or overseas laws, rules or requirements.[17] The bank also owes common law duties of confidentiality. This is an impliedterm of the banker customer contract.1 The duty is however qualified – not absolute.Information can be disclosed where the bank is compelled to do so by law.2 It hasbeen held that in such circumstances, there is no duty to inform the customer that anorder has been made compelling disclosure to the authorities; similarly, there is noduty on the bank to resist the making of such an order.3 I can see no reason why thelaw should be different where the bank has been served with a notice rather than anorder.1 Alan Tyree and others – Tyree's Banking Law in New Zealand (3rd ed, LexisNexis, Wellington,2014) at 127.2 Tournier v National Provincial and Union Bank of England [1924] 1 KB 461 at 471-473; And seein New Zealand R v Harris [2000] 2 NZLR 524 (CA) at [10].3 Barclays Bank plc v Taylor [1989] 3 All ER 563.[18] Banks are also subject to the provisions of the Privacy Act 1993. Relevantly,the Act applies to personal information about an identifiable individual.4 Personalinformation extends to information such as bank statements, transactions, balancesand internal notes about customers and their credit risk assessments.5 Principle 11provides that an agency that holds personal information should not disclose theinformation to a person or body or other agency except in certain defined situations.Personal information can be disclosed if the agency believes on reasonable groundsthat non-compliance is necessary to avoid prejudice to the maintenance of the law byany public sector agency, including the prevention, detection, investigation,prosecution and punishment of offences, or for the enforcement of the law imposing apecuniary penalty, or for the protection of the public revenue, or for the conduct ofproceedings before any court or tribunal, being proceedings that have beencommenced, or are reasonably in contemplation. Section 7(1) provides that nothingin principle 11 derogates from any provision in any enactment that authorises orrequires personal information to be made available.(b) The Insolvency Act – ss 165 and 171[19] The Assignee is appointed under the Act, and the Assignee and DeputyAssignees are officers of the Court.6 The Assignee's powers, duties and functions arederived from the Act and can be exercised only in pursuance and in compliance withthe provisions of the Act.7[20] Upon adjudication, and prior to discharge, the property of a bankrupt vests inthe Assignee,8 and the bankrupt is subject to various prohibitions and obligations.Inter alia, the bankrupt is required to file a statement of affairs with the Assignee within10 working days of his or her adjudication.9 The bankrupt must assist in the realisationof his or her property and in the distribution of the proceeds amongst his or hercreditors. Relevantly, it is an offence for a bankrupt to conceal property from theAssignee,10 and an undischarged bankrupt is prohibited from entering into, carrying4 Privacy Act 1993, s 2.5 Tyree's Banking Law in New Zealand, above n 1, at 131.6 Insolvency Act 2006, s 399.7 Hamilton v Bank of New Zealand (1904) 24 NZLR 109 (CA).8 Insolvency Act 2006, s 101.9 Section 69.10 Section 420.on, or taking part in the management or control of any business without the permissionof the Assignee.11 It is an offence for a bankrupt to fail to comply with this provisionwithout reasonable excuse,12 and such offending is punishable by a maximum sentenceof two years' imprisonment.13[21] The Assignee is given various powers to summon and examine bankrupts andothers and the Assignee can require persons summoned to produce and surrenderdocuments in that person's possession or control relating to the bankrupt's property,conduct or dealings.[22] Relevantly, s 165 of the Act provides as follows:165 Assignee may summon bankrupt and others to be examined(1) The Assignee may at any time, before or after a bankrupt'sdischarge,—(a) summon any of the persons listed in subsection (2) to appearbefore the Assignee, another Assignee, or a District CourtJudge to be examined on oath in relation to the bankrupt'sproperty, conduct, or dealings; and(b) require that person to produce and surrender to the Assigneeor District Court Judge before whom that person appears anydocument in that person's possession or control that relates tothe bankrupt's property, conduct, or dealings.(2) The persons referred to in subsection (1) are—(a) the bankrupt:(c) a person known or suspected to possess any of the bankrupt'sproperty or any document relating to the bankrupt's property,conduct, or dealings:(d) a person believed to owe the bankrupt money:11 Section 149.12 Section 436(1)(b).13 Section 437.(e) a person believed by the Assignee to be able to giveinformation regarding—(i) the bankrupt; or(ii) the bankrupt's property, conduct, or dealings:[23] This section, together with the following sections through to s 186, meets theAssignee's need to be:14 as fully informed as possible in matters relating to the bankrupt's affairs soas to enable the Assignee to carry out any one or more of the functions whicharise under the Act.Exercise of the power to examine permits the Assignee to obtain information regardinga bankrupt's affairs in circumstances where that information cannot be obtained absentcompulsion.15[24] Section 171 is in issue in this case. It provides as follows:171 Assignee may obtain documentsIn addition to the power contained in section 165(1)(b), the Assignee may, bynotice in writing, require the bankrupt, the bankrupt's spouse, or any otherperson to deliver to the Assignee any document relating to the bankrupt'sproperty, conduct, or dealings in that person's possession or under thatperson's control.[25] As can be seen the power conferred by s 171 is expressed to be in addition tothe power conferred by s 165(1)(b). There is no distinction between the documents aperson may be required to deliver pursuant to a s 171 notice and the documents aperson may be summoned to produce under s 165. The word "document" is definedin s 3 of the Act as follows:(a) any writing on any material; and(b) information recorded or stored by means of a tape recorder, computer,or other device; and material subsequently derived from informationso recorded or stored; and14 Re Havenleigh Global Services Ltd, ex parte Henderson [2014] NZHC 499 at [45].15 Re Baird DC New Plymouth MA102/93, 28 May 1993 at [9].(c) a book, graph, or drawing; and(d) a photograph, film, negative, tape, or other device in which 1 or morevisual images are embodied so as to be capable (with or without theaid of equipment) of being reproduced.The scope of s 171 is however wider than the scope of s 165(1)(b), because s 171refers to "any other person", whereas s 165(1)(b) is confined to those persons listed ins 165(2).16 The apparent intention of Parliament was to include "a liberal catch-all,encompassing any person holding [relevant] documents".17[26] The conjoint expression "property, conduct or dealings" used in s 165(1)(a)and (b), in s 171, and elsewhere in the Act, is not defined. Nor are the words "conduct"and "dealings" separately defined. The word "property" is separately defined, asfollows:property means property of every kind, whether tangible or intangible, realor personal, corporeal or incorporeal, and includes rights, interests, and claimsof every kind in relation to property however they arise.[27] It has been noted that the statutory formulation "is a formulation of antiquity,going back in identical terms to the English legislation of the 19th century".18 In thiscountry it has been held that the conduct of a bankrupt extends to all conduct, whetherpersonal, business related or a mixture of the two, and includes conduct in relation toany property, irrespective of who it might belong to.19 It has been said that a broadconstruction of the term is required in light of the purpose of the Act, and in theparticular the provisions dealing with the provision of information and documents.20The Court has observed that the various powers conferred on the Assignee to examineand discover are conceived in the most comprehensive terms and that they entitle theAssignee to make "the most searching inquisition".21[28] Commentators have observed that the powers of examination and discoveryare central to the Assignee's role as an officer of the Court. It has been suggested that16 And see Lynne Taylor and Grant Slevin – The Law of Insolvency in New Zealand (ThompsonReuters, Wellington, 2016) at 237.17 Havenleigh Global Services Ltd v Henderson [2015] NZHC 1761 at [63].18 Re Havenleigh Global Services Ltd, ex parte Henderson, above n 14, at [20].19 At [48].20 At [43]-44].21 In Re Hardy (a bankrupt), ex parte the Official Assignee [1922] NZLR 108 (SC) at 118-119.they are extraordinary powers, because they are inquisitorial in nature, althoughstatutorily created.22 The extent of the powers and their potential for misuse has beencommented on by the Courts. For example, in Re Wright, ex parte Willey, Jessell MR said, of the equivalent powers to those in s 165 which were bestowed on the OfficialAssignee in the United Kingdom by the Bankruptcy Act 1869, as follows:23Now that is a very grave power to entrust to any Court or any man, viz., powerto summon any other man whom you suspect (for mere suspicion will do) tobe capable of giving information, and to get any information from him,although the information may be extremely hostile to the interests of the manhimself. It is a power which, so far as I know, is found nowhere except inbankruptcy and the winding-up of companies (which is a kind of bankruptcy);it is a very extraordinary power indeed, and it ought to be very carefullyexercised.[29] There are other powers in the Act potentially relevant to the obligations ofbanks. First, a bank must notify the Assignee if it ascertains or has reason to believethat a customer of the bank is an undischarged bankrupt. The bank must notify theAssignee of any account that the customer holds, and must not pay any money out ofthe account, except as provided by the statute.24 Secondly, the Assignee by writtennotice can require a bank to search its accounts and records by comparing the namesof its customers with the names, including any aliases, of undischarged bankrupts.25Thirdly, this Court can issue a search warrant to the Assignee or any other person ifthere is cause to believe that any relevant property is concealed in a locality.26 Thewords "relevant property" and "locality" are widely defined.27[30] It is also relevant that a person (including the bankrupt or a creditor), whoseinterests, monetary or otherwise, are detrimentally affected by an act or decision of theAssignee may, within 15 working days of the act or decision, or within such additionaltime as the Court may allow, apply to this Court to reverse or modify the act or22 The Law of Insolvency in New Zealand, above n 17, at 231.23 Re Wright, ex parte Willey (1883) 23 Ch D 118 (CA) at 128; and see Re Rolls Razor Ltd (No 2)[1969] 3 All ER 1386 at 1397.24 Insolvency Act 2006, s 156.25 Section 157.26 Section 150.27 Where the Assignee is seeking documents from a bank which is believed to hold them, the powerto obtain a warrant will not generally assist because there will be no cause to believe that there isany concealment. See Havenleigh Global Services Ltd v Henderson, above n 17 at [15]. It mayhowever assist if the Assignee is seeking the documents direct from the third party account holderor the bankrupt.decision.28 Standing to appeal has generally been liberally accorded; a prospectiveappellant will be allowed to appeal as long as his or her rights, whether substantive orprocedural, are adversely affected.29 While the issue was not argued before me, primafacie it would seem that the right of appeal is open to the bank as the party from whichdelivery is sought,30 and to the third party account holder whose interests arepotentially affected.31 In the United Kingdom, the Courts have been prepared toconsider whether the production of documents imposes an unnecessary andunreasonable burden on the person required to produce them in light of the Assignee'srequirements.32 Although the provisions the Court was there dealing with weredifferent to those that apply to a bankrupt's estate in New Zealand, it has beensuggested that there is no reason to think that this approach would not be followed inthis country.33[31] It is also open to an affected person to seek judicial review of the Assignee'sdecisions and actions.34[32] The Assignee's powers to examine and require the production of documentshave been considered or touched upon in a number of cases in this country.(a) In Re Smith,35 the Court of Appeal was considering s 68 of theInsolvency Act 1967 – which was the predecessor to s 165, although indifferent terms. A summons had been issued to the bankrupt's wiferequiring her to attend for examination. She was seeking to set asidethe summons. The Court of Appeal considered relevant High Court andEnglish authority, noting that care must be taken in considering Englishdecisions because of legislative differences. The Court commented thats 68 enabled the Assignee to obtain information to be as fully informed28 Insolvency Act 2006, s 226.29 Gay v Bruns CA 193/98, 17 June 1999 at [5]; but see Edmonds Judd v Hobbs [2000] 2 NZLR 135(CA); see however Glynbrook 2001 Ltd v Official Assignee [2012] NZCA 289 (following Gay vBruns). And see The Law of Insolvency, above n 17 at 260-263.30 P Heath and M Whale – Insolvency Law in New Zealand (3rd ed, LexisNexis, Wellington, 2018)at 143.31 At 174.32 British and Commonwealth Holdings plc v Spicer & Oppenheim [1992] 4 All ER 876 (HL).33 Insolvency Law in New Zealand, above n 30 at 143.34 Siemer v Official Assignee [2013] NZHC 513.35 Re Smith (a bankrupt) [1992] NZFLR 241 (CA).as possible relating to the property and transactions of the bankrupt. Itwas noted that the section is in part a recognition that in many casesinformation as to the bankrupt's affairs and dealings will beincomplete.36(b) In Re Baird,37 the Assignee sought to examine the bankrupt's formeraccountant in relation to trusts associated with the bankrupt. Theaccountant was reluctant to answer a number of questions put to himby counsel for the Assignee, and to produce minute books and otherdocuments relating to the trusts. The District Court ordered theaccountant to do so. It noted that the bankrupt was a discretionarybeneficiary of the relevant trusts, and that he therefore had a contingentinterest in the trust property and the right to inspect trust documents. Itwas also noted that in respect of one trust, the bankrupt was the settlor,that he has been consulted on matters relating to the trust and was owedmoney by it. The Court formed the clear impression that the bankruptwas running all three trusts as a convenient way of managing his ownfinancial affairs.(c) In R v Russell,38 the Court of Appeal was considering an appeal againstboth conviction and sentence by an appellant for, inter alia, breachingthe Insolvency Act by taking part in the management of the companywhilst bankrupt. One of the grounds for challenging the conviction wasthat the Judge had erroneously admitted into evidence documentsobtained from various banks which had been obtained pursuant tosummons issued by the Assignee under s 68 of the then applicablestatute. The appeal against conviction was dismissed. The Court notedthat s 68(1)(c) (the predecessor to s 165(1)(c)), was "extraordinarilywide in its ambit" and the activities of the company were undoubtedly"capable of giving [the Assignee] information respecting the36 At 8-9.37 Above n 15.38 R v Russell CA 449/96, 26 June 1997.bankrupt".39 It declined to accept arguments that there was ambiguityas to the meaning to be given to the section.(d) In Official Assignee at Hamilton v Scott,40 the bankrupt was arguingthat documents relating to his family trust had been improperlyobtained, and that the Assignee had no right to access them. TheAssignee had sought to exercise the power under s 171 to obtain copiesof the bank accounts in the name of the trust from the bank. The bank– coincidentally the ASB – had advised the Assignee that the bankruptwas maintaining the accounts in his own name and in the name of thetrust. It was held by Lang J that the explanation given by the OfficialAssignee for seeking the documents was sufficient to justify theexercise of the s 171 power, and that the exercise of that power wasnecessary to ascertain whether or not the bankrupt had been divertinghis personal income into the trust's bank account.[33] These various decisions illustrate that the Courts have been prepared tointerpret ss 165 and 171 (and their predecessors) widely, to permit the Assignee tomake enquiries into the property, conduct and dealings of bankrupts, by seekinginformation from third parties where that information is likely to assist the Assigneein carrying out his statutory functions.[34] Counsel addressed detailed submissions to three particular and recentdecisions, all of which have dealt with s 171.[35] The first was the decision of Osborne AJ (as he then was) in Re HavenleighGlobal Services Ltd v Henderson.41 In that case, the Assignee applied for directionsin relation to the bankruptcy of Mr Henderson. The Assignee was seeking documentsin the possession of the liquidator of one of Mr Henderson's companies, PropertyVentures Ltd, and emails in Mr Henderson's possession which had been sent by himto, or received by him from, named addressees and correspondents during hisbankruptcy. The Associate Judge:39 At 4.40 Official Assignee at Hamilton v Scott [2013] NZHC 2904.41 Re Havenleigh Global Services Ltd, ex parte Henderson, above n 14.(a) declined to adopt a restrictive interpretation of the word "conduct" usedin s 171. He considered that the need for a broad interpretation wasreinforced by the purposes of the Act, and in particular the provisionsdealing with information and documents. He noted that thoseprovisions are concerned with the need of the Assignee to be as fullyinformed as possible in matters relating to the bankrupt's affairs so thatthe Assignee can carry out any one or more of the functions which ariseunder the Act;(b) noted that a narrow interpretation of the word "conduct" which wouldput personal communications between the debtor and others beyond thereach of the Assignee, would cut across the legislative purpose ofenabling the Assignee to make a fully informed decision on the matterswhich Parliament has entrusted to the Assignee;(c) referred to the Assignee's entitlement to make a "searchinginquisition";(d) considered that the Court of Appeal's observations in Re Smith mustnow be read, as a result of changes in the legislation, as relating notonly to as relating the property and transactions of the bankrupt, but, asspecified in s 165, to the bankrupt's property, conduct and dealings.Information which the Assignee obtains should be that which fullyinforms the Assignee as to the prescribed matters;(e) noted that it was common ground that in exercising the powers underthe Act, the Assignee is obliged to act fairly and without oppression,and that where the Assignee has failed to do so, the Court can controlthe exercise of the relevant powers. The Associate Judge considered adecision of the Court of Appeal in the United Kingdom – Re a Debtor(No. 12) of 1958, where Stamp J discussed the approach to be taken inconsidering whether there ought to be an examination as follows:4242 Re a Debtor (No. 12) of 1958, ex parte The Trustee of the property v Clegg [1968] 2 All ER 425(Ch) at 434-435. there is no strong evidence of fraud and, of course, counselfor the executors is right when he said that on the facts at presentknown it would be oppressive for the trustee to claim the wholeof the bankrupt's estate. If one accepts the submission, however,that there is solid ground for thinking that the information soughtmay lead to discovery of assets which ought to have beendisclosed, and if the information does in the event disclose suchassets, that will be the moment to decide whether the non-disclosure was fraudulent or not, or whether, in thecircumstances, some further order ought to be made. It is,moreover in my judgment, wrong to pre-judge that question. Itis only at the point of time when the information has beenascertained that the question arises whether it would or would notbe oppressive or unjust to proceed further in the matter. Again itis, in my judgment, quite impossible to say in advance whetherthat will or will not be so. With all respect to counsel's argument,it is putting the cart before the horse to say that an order under s25 should not be made unless the trustee in bankruptcy isprepared to swear that he verily believes the bankrupt in this caseto have fraudulently concealed assets.The Associate Judge considered that this approach is equally applicableto the situation where the Assignee is considering whether the bankruptmay have committed other breaches of the Insolvency Act, such as inrelation to the management of businesses;43(f) went on to apply this test, and was satisfied that in the circumstances ofthe case before him, the test was met, because of the way the bankruptparticipated in the business affairs of the company; and(g) concluded that the term "conduct" used in ss 165 and 171 of the Actincludes conduct in relation to compliance with the duties andrestrictions imposed on bankrupts by the Act.44[36] This same approach was applied again by Associate Judge Osborne in anotherHenderson case.45 In this second case, Mr Henderson was seeking to strike outevidence obtained by the Assignee through s 171 notices. It was argued that thenotices had been issued unlawfully to the relevant entities – Xero and CERA. TheAssociate Judge held that Mr Henderson could not establish a lack of good faith onthe part of the Assignee in issuing the notices, and that the Assignee was justified in43 At [59].44 At [143(d)].45 Re Havenleigh Global Services Ltd v Henderson, above n 17.viewing the recipients of the notices as being able to deliver documents relating toMr Henderson's property, conduct or dealings. He declined to strike out evidenceobtained from the issuance of the notices.[37] The second case discussed by counsel was the decision of Hinton J inHenderson v Attorney-General.46 Mr Henderson was there alleging that a requirementby the Assignee under s 171 for the production of documents breached his rights unders 21 of the New Zealand Bill of Rights Act 1990. Hinton J doubted whether theexercise of the requisition power contained in s 171 would always constitute a searchand seizure for the purposes of s 21. On the facts before her, she held that where theAssignee had requested data on a laptop computer, and where the scope of the datawas unknown and there must have been a reasonable expectation of privacy in at leastsome of the stored data, the exercise of the s 171 power did constitute a search andseizure. The Judge further found that where documents of a personal nature had beendisclosed that were irrelevant to the bankruptcy, the s 171 request was unlawful. Shefurther held that the breach of s 21 was not technical or minor, and that the search wastherefore unreasonable in terms of s 21. She observed that even if the original searchand seizure had been lawful, the Assignee's continued retention of the documents wasunreasonable for the purposes of s 21. She considered that as a matter of generalprinciple, the State should not be holding onto documents that are personal or clearlyirrelevant to the regulator's purpose. In the course of her judgment, Hinton J observedthat s 171 covers all documents, whether of a bankrupt or others, which are or couldbe relevant to the administration of a bankruptcy, but that the section does not extendto personal documents that are clearly irrelevant to the bankruptcy. The Judgecommented as follows:[66] I should add that had the request been within the scope of s 171 andlawful, and documents had been provided that were personal and irrelevant, Iwould not consider that made the seizure of the documents unlawful. Anability to inspect documents to determine their relevance is a necessary aspectof a requisition power. The Official Assignee should not be responsible for thereceipt and initial inspection of documents that are, as a result of inspection,found to be outside the scope of s 171. That is necessary to ensure the OfficialAssignee's power under s 171 is not unjustifiably curtailed.46 Henderson v Attorney-General [2017] NZHC 606.[38] The third case discussed by counsel was a decision of Paul Davison J inMawhinney v Official Assignee.47 In this case, Mr Mawhinney had filed proceedingschallenging the Assignee's exercise of various powers under the Insolvency Act 2006and the Companies Act 1993. He was seeking interim relief preventing the Assigneefrom taking any further action until his proceedings had been further actioned. Interalia, Mr Mawhinney was seeking interim orders to avoid having to disclose and deliverdocumentation to the Assignee which he believed was confidential and irrelevant tothe administration of his bankrupt estate. Davison J observed that the terms "conduct"and "dealing" are broadly construed. He considered that the Assignee was entitled togather information about the property held by Mr Mawhinney in trust, and that thepurpose of the Assignee's "searching inquisition" was not to affect the property heldin trust, but to ensure that the Assignee was as fully informed as possible aboutMr Mawhinney's property, conduct and dealings so as to enable the Assignee to carryout of the functions which arise under the Act. The Judge however entertained thepossibility that confidentiality issues could arise where the Assignee seeks informationfrom a bankrupt about a trust of which he is a trustee. The Judge observed that atrustee in bankruptcy remains a trustee of the trust until new trustees are appointed,and that the Assignee does not step into the shoes of a bankrupt trustee. He recordedMr Mawhinney's submission that his fiduciary obligations prevented him fromdisclosing confidential information to the Assignee, and he commented that, at facevalue, that submission appeared to be correct.48[39] Finally, in this regard, I note that a number of other officials are given similarpowers to requisition documents.49 The s 171 power is in many respects similar to thepower conferred on liquidators by s 261 in the Companies Act 1993.50 A liquidatormay, under s 261(1), require a director or shareholder of a company, or any otherperson, to deliver to the liquidator such books, records or documents of the companyin that person's possession or under that person's control as the liquidator requires.The Court of Appeal has held that a liquidator under the section can take possession47 Mawhinney v Official Assignee [2016] NZHC 2487.48 At [32] and [34].49 See for example, Serious Fraud Office Act 1990, s 9; Tax Administration Act 1994, s 17B.50 The similarity was noted in the Explanatory Note to the Insolvency Amendment Bill 2001, whichintroduced s 68A (now s 171) into the Insolvency Act 1967; And see Brooker's Insolvency Lawand Practice (online ed, Thompson/Brookers) at [IN171.01].of all documents held by the company, not merely documents owned by thecompany.51 On the other hand, it has also been held that a liquidator has no authorityunder s 261 to require the disclosure of documents internal to a third party, even thoughthey relate to the affairs of the company, as these are not "documents of thecompany".52 There is also the recent decision of the Court of Appeal in Finnigan vEllis,53 dealing with ss 261(1) (and also s 266). The issue before the Court was whetheror not the High Court had jurisdiction to order a former director to disclose private andpersonal financial information about his means. The Court held that information abouta former director's financial position cannot be said to relate to the company'sbusiness, accounts or affairs, and that the liquidator's powers are limited toinformation about the company's management, accounts and handling of its businessaffairs. It noted contrary authority in Australia. It held that whatever argument mightbe made for consistency with Australia was displaced by countervailing privacyconcerns in this country, referring to the Privacy Act and the New Zealand Bill ofRights Act, including the right to protection from unreasonable search and seizureunder s 21.The application for directions[40] Against this background, I turn to consider the Assignee's application fordirections. I have set out above at [1] the directions which are sought in this case.[41] In my judgment, where a bankrupt has deposited money or directed that moneybe deposited into a bank account in the name of a third party and where the bankruptdoes not have signing authority on the account, the resulting transaction relates to thebankrupt's "property, conduct or dealings".(a) I agree with the submission made by Mr Symon that, in such situations,the bankrupt is dealing with his or her property. The bankrupt hasdirected a person who owes him or her money, to pay that money intothe third party account holder's account, and the third party accountholder has done nothing entitling him or her to the payment. It is the51 Buddle Findlay v Isaac (1996) 7 NZCLC 261,132.52 ANZ National Bank Ltd v Sheahan [2012] NZHC 3037, [2013] 1 NZLR 674.53 Finnigan v Ellis [2017] NZCA 488, [2018] 2 NZLR 123.bankrupt who has provided the goods or services in respect of whichthe payment is sought, and the money owing is property to which thebankrupt is beneficially entitled.(b) Further, the bankrupt's actions in seeking to direct the debtor to pay themoney into the third party account holder's account, are conduct ordealings by the bankrupt, because the bankrupt is giving the directionand requiring that the money be deposited into the third party's accountholder's account. The direction given is in the course of the businessthat the bankrupt is carrying on.[42] There can be no doubt about Mr Bayne's situation. As noted above at [12], hehas accepted that he directed that monies owed to him be paid into a third party accountholder's account. It also seems that he had access to the account. In my view, thetransactions resulting from Mr Bayne's actions in directing that money owed to himbe paid into the third party account holder's account, are transactions relating toMr Bayne's property, conduct or dealings. Mr Bailey's situation is not so obvious,but it does appear that from the limited materials available that he also directed hisalleged "customers" to make payment into a nominated account. Again, in myjudgment, the transactions resulting from Mr Bailey's actions in directing that thepayments be made into the nominated account are transactions relating to Mr Bailey'sproperty, conduct or dealings. Documents recording the transaction fall within thereach of s 171.[43] The Assignee cannot exercise his power to require the production of documentsunder s 171 arbitrarily and without good cause. The exercise of the power must be forthe purposes of the Insolvency Act – see above at [19]. To use the wording in the caselaw, there must be "solid grounds", for the exercise of the power – see above at [35].The Assignee is seeking to require the bank as recipient of the notice to disclosepersonal information it holds about its third party account holder. Under principle 11– set out in s 6 of the Privacy Act – see above at [18] – the recipient bank cannot doso unless it believes on reasonable grounds that non-compliance with principle 11 isnecessary for one of the specified purposes. This implies that the Assignee, as therequesting agent, must provide the recipient bank as the holding agency, withsufficient information to enable the recipient bank to reach a reasonably based viewabout whether or not the information is required for an authorised purpose. It wouldnot be sufficient for the Assignee simply to request information without giving anyindication of why it is sought.54 In my judgment, a notice given under s 171 shouldset out, albeit succinctly, the grounds on which the notice is given. It could includethe name of the person making the payment into the nominated third party account,the amount of the payment made and the date of the payment. It should also detailany offence believed to have been committed.[44] As noted, it is the receiving bank holding the personal information that has tobelieve on reasonable grounds that non-compliance with the principle ofconfidentiality is required on maintenance of the law grounds. If, despite the detailgiven in the notice, the receiving bank does not accept that the Assignee has solidground for making the request, it can appeal the issuance of the notice under s 226 ofthe Act, or seek judicial review of the Assignee's actions in issuing the notice – seeabove at [30]-[31].[45] Further, I can see no reason why the bank should not inform the third partyaccount holder of the notice, so that the third party account holder can challenge theAssignee's notice if he or she wishes to do so. This should operate as a check againstmistakes, for example, the Assignee inadvertently giving the wrong account numberin a notice, and against the improper or malicious exercise of the s 171 power by aperson within the Assignee's office. The Assignee protested that giving notice to thethird party account holder may serve to alert the bankrupt and the third party accountholder (who may also be committing an offence) to try and take action to cover upwhat has occurred or to put in place an alternative arrangement. There is always a riskof that, and the bank's records of the earlier transactions cannot be altered by thebankrupt or the third party account holder. I discount this concern.[46] I now turn to the second issue raised – namely, whether or not documents:(a) identifying and providing personal details of the bank account holder;54 R v Alsford [2017] NZSC 32, [2017] 1 NZLR 710 at [33], [42]-[44].(b) the bank account statements; and(c) notes or other documents relating to that account;must be disclosed by the bank receiving the s 171 notice.[47] I cannot see that the bank's duties of confidentiality owed to its customerseither in contract, at common law or under the Privacy Act, assist in answering thisquestion. Each of those obligations yields to what might be broadly described as amaintenance of the law exception – see above at [16] to [18].[48] Rather, in my judgment, the issue falls to be determined primarily by thewording of the section. In this regard, s 171 has three requirements:(a) notice may be given to the bankrupt, to the bankrupt's spouse or to anyother person. A bank clearly falls within the words "any other person"notwithstanding that it is a corporate entity;55(b) the notice must seek a document in the recipient's possession or underthe person's control. Again, there is no difficulty in this regard.Personal information identifying the account holder, the relevant bankaccount statements and any notes kept by the bank in relation to theaccount will all be in documentary form and in the bank's possessionor under its control; and(c) the documents must relate to the bankrupt's property, conduct ordealings. The key question is whether each of the types of documentsset out in para [46] come within this description.[49] Documents establishing the identity and providing personal details of the thirdparty account holder do not relate to the bankrupt's property, conduct or dealings.Such material is irrelevant to the bankruptcy. It is not the bankrupt's property and ithas nothing to do with the bankrupt's conduct or dealings.55 Interpretation Act 1999, s 29.[50] Bank account statements disclosing the payment(s) that the bankrupt hasdirected be made into the third party account holder's account relate to the bankrupt'sproperty, conduct or dealings, because the bankrupt's property – the money – iscoming into the account. So do subsequent statements for periods post the payment(s)in, until the payment(s) has been disbursed either to the bankrupt or to other persons.However, statements which relate to other periods, when no payment(s) into theaccount has been made at the bankrupt's direction, and/or after any payment(s) madeat the bankrupt's direction has been disbursed, cannot be said to relate to thebankrupt's property, conduct or dealings. The bankrupt's property – the money – hasgone out of the account. I acknowledge that there may be practical difficulties in somecases in ascertaining when the bankrupt's money has gone out of the account. Thoseproblems may be able to be resolved if the bank approaches the third party accountholder. In any event, I do not consider that any practical difficulties overcome therestriction inherent in the wording of s 171.[51] Notes or other documents relating to the third party account may or may notrelate to the bankrupt's property, conduct or dealings. They may so relate, forexample, if the account holder has directed the bank to allow the bankrupt to haveaccess to the account, and the bank has noted this. However, other notes relating onlyto the bank's dealings with the third party account holder do not, in my judgment,relate to the bankrupt's property, conduct and dealings. They are personal to the thirdparty account holder, and the bank is under no obligation to disclose the same.[52] I acknowledge that a number of the authorities which I have noted aboveemphasise that a broad interpretation should be given to the s 171 power to requisitiondocuments. While I agree with that view, in the situation of payments into third partyaccounts, at the bankrupt's direction, there are competing interests. The third partyaccount holder has rights to privacy, protected in part by the Privacy Act. The thirdparty account holder has a right to be secure against unreasonable search or seizure,whether of the person, property, correspondence or otherwise. That right is affordedby s 21 of the New Zealand Bill of Rights Act. I agree with Hinton J in Henderson vOfficial Assignee – see above at [37] – that the power to requisition documents caninvoke the s 21 rights. Here, the Assignee is asserting an entitlement to third partypersonal information pursuant to a notice given under s 171. I do not consider that thesearch and seizure of third party personal information is implicit from the statutorylanguage. It has been observed that, in our constitutional model, police powers ofsearch and seizure are conferred expressly and specifically.56 The same must apply topowers of search and seizure conferred on officials. Encroachment on rights requiresclear legislative authority.57 In my judgment, there is no such clear authority in s 171,and where the rights of third party account holders are in issue, the section should beinterpreted strictly and in accordance with its terms. The Assignee's power to seek thedelivery of documents by notice under s 171 is limited to documents that relate to thebankrupt's property, conduct or dealings. It does not extend to the property, conductor dealings of third parties.Result[53] For these various reasons, I direct as follows:(a) Where a bankrupt has deposited money or directed that money bedeposited into a bank account in the name of a third party and wherethe bankrupt does not have signing authority on the account, theresulting transaction(s) does relate to the bankrupt's property, conductor dealings, for the purposes of issuing a notice pursuant to s 171 of theAct.(b) Documents establishing the identity, and providing personal details, ofthe third party account holder, and notes or other documents relating tothe account unrelated to the bankrupt, and relating rather to the thirdparty account holder, are not documents relating to the bankrupt'sproperty, conduct or dealings, and they are not required to be deliveredto the Assignee pursuant to a notice given under s 171 of the Act.(c) A bank account statement(s) recording a payment(s) made into a thirdparty account at the bankrupt's direction, is a document relating to thebankrupt's property, conduct or dealings, and it must be delivered to56 Hamed v R [2011] NZSC 101 at [20], [2012] 2 NZLR 305.57 New Health New Zealand Inc v South Taranaki District Council [2018] NZSC 59, [2018] 1 NZLR948 at [292]; Cropp v Judicial Committee [2008] NZSC 46, [2008] 3 NZLR 774 at [26]-[27].the Assignee pursuant to a notice given under s 171 of the Act. So musta bank account statement(s) for periods post the payment(s) in, until thepayment(s) in has been disbursed out of the account.(d) Other statements relating to the bank account which do not record apayment(s) made into a third party's account at the bankrupt'sdirection, and/or are for periods post disbursement of any payment(s)in, do not relate to the bankrupt's property, conduct or dealings, andthey are not required to be delivered to the Assignee pursuant to a noticegiven under s 171 of the Act.Costs[54] The parties agreed that costs were to lie where they fall. Accordingly, there isno order as to costs._____________________________Wylie J