TERRY WAYNE W GRANT v DEREK PHILIP APLIN [2000] NZCA 241 (27 September 2000)

IN THE court of appeal of new zealand

ca178/99

	between	david dawson bruns & Others
		Appellants

	AND	wadsworth norton & others
		Respondents

ca291/98

	between	david dawson bruns & Others
		Appellants

	AND	wadsworth norton & others
		Respondents

ca281/98

	between	property restoration limited
		First Appellant

	AND	david dawson bruns
		Second Appellant
	AND	OFFICIAL ASSIGNEE
		Respondent

ca255/99

	between	david dawson bruns
		First Appellant

	AND	patricia elizabeth bruns
		Second Appellant
	AND	OFFICIAL ASSIGNEE
		Respondent

Hearing:	21 August 2000
Coram:	Blanchard J Tipping J McGrath J
Appearances:	Appellant DD Bruns in person G C Everard & J R Mulligan for Wadsworth Norton H B Rennie QC & G S Caro for Official Assignee
Judgment:	28 August 2000

judgment of the court delivered by blanchard j

[1] Mr D Bruns, a litigant in person, brings these four appeals.Although they are intituled by him as if there were other appellants, he is in fact the only person who has given a notice of appeal in any of the proceedings.

[2] The genesis of the proceedings is certain property transactions in the mid-1980s between Mr Bruns and associated parties, on the one hand, and Mr D Farquhar and associated parties on the other.There was unresolved litigation between them, instituted by Mr Bruns, when on 4 September 1992 Mr Bruns was made bankrupt.Mr Farquhar also became bankrupt, on 13 May 1993.Both were discharged from bankruptcy after three years under s107 of the Insolvency Act 1967.

[3] Mr Bruns says that the negligence of his former solicitors, Wadsworth Norton, contributed to his financial failure.He says they were negligent both in the way in which they acted in relation to his properties, in particular in the conduct of mortgagee sales by their nominee company, and in relation to the litigation against Mr Farquhar.

[4] The proceedings giving rise to these appeals are attempts by Mr Bruns to sue Mr Farquhar and the solicitors notwithstanding the intervening bankruptcies and discharges and notwithstanding certain actions taken or omitted by the Official Assignee in relation to the estates of Mr Bruns and Mr Farquhar.

CA178/99

[5] In this appeal it is sought to overturn a decision of Thomas J in the High Court at Auckland as long ago as 28 April 1992, prior to the bankruptcy of Mr Bruns, in which the Judge refused to make an interim injunction restraining Wadsworth Norton and its nominee company from proceeding with mortgagee sales.In the course of argument in this Court Mr Bruns accepted that, quite apart from the staleness of the appeal and the intervening events, to be mentioned in the next part of this judgment, there could now be no utility in reversing the Judge and making an order preventing the sale of the properties as they have long since been disposed of.

[6] Mr Bruns appears to have hoped, in pursuing the appeal, that we would nonetheless enter upon the matter and give what would amount to an advisory opinion about the conduct of the solicitors.It would obviously be quite inappropriate for us to do so.

[7] The appeal is dismissed.

CA291/98

[8] This appeal relates to the same proceeding against Wadsworth Norton.It is against a judgment of Randerson J on 10 November 1998 in which he refused to make:

[a] an order under r486 of the High Court rules setting aside an order of Thorp J made on 28 February 1994 striking out the proceeding, on the application of Wadsworth Norton, against all defendants; and

[b] an order made under s86 of the Insolvency Act 1967 extending time to appeal against the decision of the Official Assignee not to oppose that striking out. (The Official Assignee's decision was made in August 1993.Section 86 allows only 21 days for an appeal by a "person aggrieved" but the Court has power to extend the period.Mr Bruns did not bring his application until 1998.)

[9] Mr Bruns complains that he was never served with Wadsworth Norton's application to strike out or notified of the hearing.But Randerson J was satisfied that he had been told about it."I accept Mr Ramsay's evidence that Mr Bruns was almost certainly made aware of the decision not to proceed further against Wadsworth Norton during 1993 in view of his close interest in all the matters to do with his affairs".We have seen nothing which suggests that this was a view which was not open to the Judge.An internal memorandum of the Assignee's office to which Mr Bruns referred the Court relates to the undesirability of disclosing an opinion of counsel (to which reference will be made in a moment) and is not directed at any intended concealment of the decision or of Wadsworth Norton's application.

[10] As Randerson J pointed out, Mr Bruns faces in any event an insuperable difficulty when he attempts to rely upon r486:

486. Judgment following non-appearance may be set aside--

Any verdict or judgment obtained where one party does not appear at the trial may be set aside or varied by the Court on such terms as may seem just if it appears to the Court that there has, or may have been, a miscarriage of justice.

[11] After his adjudication Mr Bruns was no longer a party to the proceeding and was not entitled to be served with the application or to appear on it. Along with his other assets, his rights against the defendants, such as they might be, had vested in his Assignee (s42(1)).Mr Bruns' argument is that he retained an interest pursuant to s104, which governs distribution of the property of a bankrupt.Subsection (1)(j) provides, as a tenth and final priority, that any surplus is to be paid to the bankrupt.He argues, very optimistically it would seem, that if he is able to pursue the claims which have given rise to these appeals and, as we understand it, certain other claims which, following disclaimer by the Assignee, were re-vested in him pursuant to s75 by order of the High Court made on 11 March 1996 by Morris J, there will eventually be a surplus.

[12] Mr Bruns accepted that, if his argument is correct, all his creditors had party status and the right to appear at the hearing of Wadsworth Norton's application to have the proceedings stuck-out.This is a novel proposition and one which would, if upheld, be productive of great delay in the administration of bankrupt estates.However, Mr Bruns was unable to point to any authority for it and it is plainly wrong.The only parties to the litigation were those named in the statement of claim.The Official Assignee had become the first plaintiff in the place of Mr Bruns by virtue of s42.Though having a contingent interest in the rights against the defendants, if established, Mr Bruns himself was no longer a party.

[13] There are some short answers to the complaint about the Official Assignee's decision not to oppose the striking out application.They are that the setting aside of the decision would be of no avail because the Court's order striking out the proceeding would still stand, and that, in any event, the application for extension of time was rightly rejected by Randerson J, having been brought far too late.Even if it is accepted that Mr Bruns had some excuse for failing at first to bring an appeal under s86, there is a delay for a period of at least two years which is not satisfactorily explained. There is no basis for disturbing Randerson J's exercise of discretion not to extend time.

[14] In fairness to Mr Bruns, we have also examined the Official Assignee's decision in order to see whether it would in fact have been impeachable if challenged in good time.We are satisfied that is not the case.A "person aggrieved" by an act or decision of the Official Assignee has to show that the decision was made fraudulently or in bad faith or was one not open to a reasonable Assignee (Re Callis: Callis v Pardington (1996) 7 NZCLC 261,211).

[15] In this case the Official Assignee took advice from a barrister and acted on the basis of his written opinion on the prospects of the litigation instituted against Wadsworth Norton by Mr Bruns.We have not seen that opinion - privilege was claimed in respect of it - but it is plain from the contemporary documentation that the Official Assignee was advised against pursuing the litigation.

[16] Mr Bruns directed our attention to various matters which he said made the decision erroneous.These included a failure to hold a further creditors' meeting following some criticisms at an earlier meeting, said to be exemplified by the position then taken by the Bank of New Zealand in certain letters. Unfortunately, some of the materials put forward by Mr Bruns are incomplete (for example, the record of the creditors' meeting breaks off before the end). We did not find in the materials anything providing any support for the view he takes.Significantly, the bank's concern appears to have been with a settlement relating to company called Landbase.If the bank had earlier been concerned about the Wadsworth Norton matter, it certainly did not think it worthwhile taking it further.Vague and unsupported criticisms of the barrister are no basis for saying that the Official Assignee's decision, made consistently with the barrister's advice, was unreasonable.Mr Bruns did not suggest it was made in bad faith.

[17] Mr Bruns says also that the Official Assignee did not adequately consider his pleaded claim against Wadsworth Norton relating to its handling of an appeal to this Court in the Farquhar litigation.But it does not appear that the Assignee was made aware by him of the substance of the claim, which had been pleaded with a considerable degree of vagueness.Mr Bruns was at that time, as the documents show, focused on overturning this Court's decision by taking the matter to the Privy Council where he hoped to achieve a victory which would provide funds which could be used to further pursue his other litigation.

[18] It is true that in 1996 the then counsel for the Official Assignee appears to have mistakenly informed Morris J that no decision had yet been taken by the Official Assignee about the proceeding, but that mistake cannot be relevant to the validity of the decision actually taken by the Assignee three years earlier and cannot affect Thorp J's order.Morris J was not called upon to consider the matter.

[19] This appeal fails and is dismissed.

CA281/98

[20] As has been mentioned, Morris J made an order in 1996 pursuant to s75 re-vesting in Mr Bruns all personal rights of action.This appeal concerns the appellant's attempt to continue to pursue Mr Farquhar under a proceeding commenced in 1987, despite the latter's discharge from bankruptcy in 1996.It is Mr Bruns' belief that the Official Assignee, who is respondent to the appeal qua Mr Farquhar's bankrupt estate, has not located and brought in all the available assets.In particular, he says there were assets transferred by Mr Farquhar to his wife with the purpose of avoiding creditors.Mr Bruns stresses that his claim, if allowed to be continued, would be directed to assets existing at the time of Mr Farquhar's bankruptcy, not to anything acquired by Mr Farquhar after his discharge.(We were told that Mr Farquhar is now living in Western Australia and has not been notified of Mr Bruns' effort to revive the 1987 litigation.)

[21] In 1998 Mr Bruns applied to the High Court for an order that he be granted leave under s32 of the Insolvency Act to proceed with his claim.He also sought leave under r426A of the High Court Rules, which he needed because no step had been taken in the proceeding for many years.

[22] Section 32 is the provision which stays all proceedings against a bankrupt to recover any debt provable in the bankruptcy.The Court has power to allow a proceeding to be continued on such terms and conditions as it thinks just.

[23] Somewhat confusingly, Mr Bruns also sought an order that judgment be entered against Mr Farquhar (on the basis of an amended statement of claim filed in 1990 before their bankruptcies intervened) for a specified sum and interest thereon.

[24] By the time Mr Farquhar was adjudicated, Mr Bruns was already bankrupt.A proof of debt in the Mr Farquhar estate could therefore be lodged only by the Official Assignee in respect of the Bruns estate.Randerson J was told from the Bar, as we were by Mr Rennie QC that, after investigation, the Official Assignee considered that this would be a fruitless exercise, there being no funds available in either insolvent estate and both men having considerable debts.

[25] Randerson J referred to s114:

114 Debts from which discharge releases bankrupt-

A discharge shall release the bankrupt from all debts provable in the bankruptcy except the following:

(a) Any debt or liability incurred by means of any fraud or fraudulent breach of trust to which he was a party:

(b) Any debt or liability whereof he has obtained forbearance by any fraud to which he was a party:

(c) Any judgment debt or any amount payable under any order for which he is liable under section 45 or section 110 of this Act:

(d) Any amount payable under a maintenance order under the Family Proceedings Act 1980:

(e) Any amount payable under the Child Support Act 1991.

[26] The Judge said that it was not suggested that any of the exceptions applied (but in this Court Mr Bruns said that there had been fraud by Mr Farquhar - without referring us to any evidence other than his own prior unsupported assertions).The alleged liability of Mr Farquhar was "provable in bankruptcy" in terms of ss87 and 114.The Judge said that a debt does not have to be proved before s114 can have the effect of releasing it."All that is required is that it be provable", citing Perrott v Newton King Ltd [1933] NZLR 1131.

[27] The order of discharge not only bars the remedy against the bankrupt, the Judge said, but it also extinguishes the debt.He was therefore of the clear view that there was no basis on which Mr Bruns' claim could succeed.

[28] Randerson J accepted that to a limited extent the Official Assignee continues to have certain powers and duties even after the discharge of a bankrupt.There had been no application under s133 for a release of the Official Assignee from administration of the Farquhar estate.(Nor has this occurred in relation to the Bruns estate.)The Judge drew attention to subs(7), which provides that if further property of the bankrupt comes to the hands of the Assignee after an order of release, the Assignee, after realising or otherwise dealing with that property, is obliged to apply for a further order of release in respect of the administration of that further property.

[29] Mr Bruns had submitted to the Judge that he was not pursuing Mr Farquhar but, rather, his bankrupt estate.Randerson J said that this was misconceived. He accepted a submission from counsel for the Official Assignee that the only way in which a claim can be established against a bankrupt estate is by establishing a debt or a liability for which the bankrupt is responsible.

[30] Mr Bruns also submitted that he ought to be permitted to file a proof of debt in Mr Farquhar's bankruptcy against the possibility that there might be further funds coming into the estate.Randerson J said, however, that the scheme of the Act does not permit this after discharge of the bankrupt.He saw this as being implicit in s114.There would be no point in permitting proofs of debt to be lodged after discharge because they could never have validity except where paras (a) to (e) applied.

[31] Leave was declined under both s32 and r426A as the claim could not succeed in law.

[32] We agree with Randerson J that the discharge from bankruptcy of Mr Farquhar in 1996 released him from any claim by Mr Bruns except such as might fall within the exceptions stated in s114.Mr Bruns asserts fraudulent conduct by Mr Farquhar in making away with assets, but that would not be something coming within exceptions (a) or (b) because such conduct would not be the means of incurring, or obtaining forbearance in relation to, any debt or liability.If we assume that Mr Farquhar may have retained assets which should have been made available to the Assignee (there being in fact no evidence of this before the Court), then it would be the duty of the Assignee to take any steps which might be practicable and reasonable (i.e. cost effective) to recover them.But the pursuit of recovery would be a matter between Mr Farquhar and his Assignee.

[33] The remedy of someone claiming a liquidated or unliquidated sum against a bankrupt is to prove in the bankruptcy.The right to do so in respect of the Farquhar estate was not available to Mr Bruns himself while he remained bankrupt.A proof not having been lodged by his Assignee, the right to do so may possibly have been within the wide terms of the vesting order made by Morris J on 11 March 1996.(But see Auckland City Council v Glucina [1997] 2 NZLR 1 in which this Court has subsequently held that a bankrupt has no standing to bring an application, as Mr Bruns did, to have disclaimed property vested in him.The Official Assignee was, however, a party to Morris J's decision and there was no appeal from it.)The order was made some two months before Mr Farquhar's discharge.As well it was Mr Rennie QC's submission that a proof can be lodged against the estate of a former bankrupt, i.e. against the assets available to the creditors, notwithstanding that a discharge has occurred.That view appears to be supported by In re Campbell [1927] GLR 516.Mr Bruns drew attention to a statement in Perrott at p1137 that Campbell indicated that debts still subsist after discharge.He was, however, referring to a passage from the argument of counsel for the unsuccessful plaintiffs.In fact the Court held that a bankrupt's debts do not subsist after discharge.We see nothing in Campbell to the contrary and it would, in any event, have been overruled by Perrott if there were.

[34] It is clear therefore that, on the assumption that Mr Bruns may now be seised of the right to lodge a proof of debt against the Farquhar estate, he is confined to that right and cannot pursue his proceeding against Mr Farquhar. If the Official Assignee were to reject a proof of debt from Mr Bruns he could, again on the same assumption, apply to the court for an order under s89(4) or s99(1) reversing or modifying that decision.But Mr Bruns should appreciate that, even if he were to establish his proof, that would give him no more than a right to share pro rata with other creditors of Mr Farquhar in such assets as may be vested in the Official Assignee in respect of the Farquhar estate.The Assignee takes the view that there are no such assets and says that he has investigated the matters raised by Mr Bruns concerning Mr Farquhar's alleged actions in relation to concealing of assets and that he has been unable to locate any.It would be only in the event that Mr Bruns could first establish both his claim against the Farquhar estate and that the Assignee had improperly failed to recover assets, that he would have any prospect at all of receiving any benefit.

[35] Randerson J was plainly correct in dismissing the applications.This appeal is also dismissed.

CA255/99

[36] The last of the appeals is from yet another decision of Randerson J, this time on 17 September 1999, in which he struck out a paragraph in a statement of claim against the Official Assignee.The statement of claim makes a number of allegations of misconduct or negligence in the handling of the Bruns estate. The appeal is concerned only with the striking out of paragraph 24 which contained an allegation that the Official Assignee had

failed or refused to make applications under the Companies Act to disclaim all rights, title, interest and benefit of any kind in property or rights of companies formerly controlled by [Mr Bruns] (as distinct from his shares in those companies).

[37] The Judge also struck out prayers for relief consequential upon that paragraph.

[38] Randerson J said that there were several difficulties in the way of this claim by Mr Bruns:

First a liquidator is not obliged to disclaim onerous property and clearly has a discretion in that respect by virtue of s269(1).I am not aware of any authority for the proposition that the Court could order or direct a liquidator to disclaim onerous property.Second, there is nothing in the pleading to identify the relevant property and there is no assertion that it is "onerous property".Third, there is no power under s269 to vest any such disclaimed property in Mr Bruns.In terms of s269(5) where a person suffers loss or damage as a result of a disclaimer, that person may claim as a creditor of the company for the amount of any such loss of damage and may apply to the Court for an order that the disclaimed property be delivered to, or vested in that person.Mr Bruns is not a person suffering loss or damage as a result of a disclaimer.His claim is that there has not been a disclaimer and there ought to have been.I know of no basis on which a Court could make the orders sought.

[39] Section 269 of the Companies Act 1993 reads:

269 Power to disclaim onerous property -

(1) Subject to section 270 of this Act, a liquidator may disclaim onerous property even though the liquidator has taken possession of it, tried to sell it, or otherwise exercised rights of ownership in relation to it.

(2) For the purposes of this section, "onerous property"-

(a) Means-

(i) An unprofitable contract; or

(ii) Property of the company that is unsaleable, or not readily saleable, or which may give rise to a liability to pay money or perform an onerous act; but

(b) Does not include-

(i) A netting agreement to which sections 310A to 310O apply; or

(ii) Any contract of the company that constitutes a transaction under a netting agreement.

(3) A disclaimer under this section-

(a) Brings to an end on and from the date of the disclaimer the rights, interests, and liabilities of the company in relation to the property disclaimed:

(b) Does not, except so far as necessary to release the company from a liability, affect the rights or liabilities of any other person.

(4) A liquidator who disclaims onerous property must, within 10 working days of the disclaimer, give notice in writing of the disclaimer to every person whose rights are, to the knowledge of the liquidator, affected by the disclaimer.

(5) A person suffering loss or damage as a result of a disclaimer under this section may-

(a) Claim as a creditor of the company for the amount of the loss or damage, taking account of the effect of an order made by the Court under paragraph (b) of this subsection:

(b) Apply to the Court for an order that the disclaimed property be delivered to or vested in that person.

(6) The Court may make an order under subsection (5)(b) of this section if it is satisfied that it is just that the property should be vested in the applicant.

[40] Paragraph 24 of the statement of claim is not happily worded but our understanding is that the assets in question are the entire assets of three companies now in liquidation and previously under the control of Mr Bruns before his bankruptcy, namely Camello Investments Ltd, Florida Investments Ltd and Property Restoration Ltd.It would appear that those assets may well fall within the definition of "onerous property" as property that is unsaleable or not readily saleable.

[41] We agree with the Judge that a liquidator is not obliged to disclaim onerous property and has a discretion whether to do so.In this case Mr Bruns contends that the Assignee entered into a binding agreement with him that he would "provide disclaimers" for the assets of the companies.In our view it is not within the powers of an Official Assignee to fetter by such an agreement the discretion given under s269.Furthermore, Mr Bruns is not a person who could say, if there were to be a valid disclaimer, that he has suffered loss or damage as a result.He is not a creditor of the company.We do not read subs(5)(a) as intended to confer a right to claim as a creditor of the company on someone, like a shareholder, who is not a creditor or able to advance a claim through a creditor.Nor should the Court in the exercise of its discretion under subs(5)(b) contemplate vesting such disclaimed assets in a shareholder to enable him to pursue old and speculative claims as Mr Bruns wishes to do.In this connection we note the observation in this Court in Edmonds Judd v Official Assignee [2000] 2 NZLR 135, 146 (at para [38]) that the Assignee should not traffic in frivolous and vexations proceedings, including allowing a former bankrupt to bring proceedings of that kind.

[42] This appeal also fails and it must be dismissed.

Result

[43] All four appeals are dismissed.Mr Bruns must pay $3,500 to each of Wadsworth Norton and the Official Assignee in respect of their costs on the appeals together, in each case, with their reasonable disbursements, including travel and accommodation costs of one counsel in the case of Wadsworth Norton, such disbursements to be fixed by the Registrar of this Court.

Solicitors

KPMG Legal, Auckland for Wadsworth Norton

G S Caro, Auckland for Official Assignee