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Edwards v The Official Assignee [2004] NZCA 44 (1 April 2004)

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Edwards v The Official Assignee [2004] NZCA 44 (1 April 2004)

Last Updated: 6 April 2004

IN THE COURT OF APPEAL OF NEW ZEALAND

CA236/03

IN THE MATTER OF the Insolvency Act 1967

AND IN THE MATTER OF Roy William Edwards (a bankrupt)

BETWEEN ROY WILLIAM EDWARDS
Appellant

AND THE OFFICIAL ASSIGNEE
Respondent

Hearing: 8 March 2004

Coram: William Young J
Goddard J
Gendall J

Appearances: R B Hucker for Appellant
B H Dickey and B O Tantrum for Respondent

Judgment: 1 April 2004

JUDGMENT OF THE COURT DELIVERED BY GODDARD J

[1] This is an appeal from the exercise of a discretion by Salmon J in upholding a refusal by Master Lang to grant the appellant a discharge from bankruptcy.

Background facts

[2] The appellant has been adjudicated bankrupt on two occasions. On the first occasion he was bankrupted by order of 22 August 1986 as a result of a debtors petition. Shortly after he involved himself in a company called Jackabee Services Limited, incorporated on 30 September 1986. That company went into receivership on 13 July 1992. The directors were the teenage daughters of the appellant but it was he who undertook the day-to-day operation of the company until its receivership. According to the statement of affairs filed by the receiver, that company went into receivership with secured and unsecured creditors amounting to more than $2.2 million.
[3] The Official Assignee had filed an objection to the appellant’s discharge from bankruptcy on 8 August 1989 but withdrew the objection after the appellant was convicted on 12 August 1991 on a number of charges of fraud and theft by failing to account. He was sentenced to two years imprisonment for that offending on 31 January 1992. The Official Assignee withdrew his objection on the basis of s382(1)(b) Companies Act 1993, pursuant to which the appellant was prohibited from being a director of or taking part in the management of a company for a period of five years from the date of conviction.
[4] However, in breach of that five year prohibition, the appellant incorporated a company called NZ Beer and Food Fest Limited: this on 4 September 1995. The shares in that company were held by an agent on his behalf. NZ Beer and Food Fest Limited subsequently went into liquidation with reported debts amounting to $437,031.23 and on 26 August 1997 a company entitled Global Beer Club Limited was incorporated which had the appellant and Ms Dench as its directors. Global Beer Club Limited went into liquidation, in June 1998, with reported debts amounting to $16,255.05. Immediately thereafter (on 26 June 1998) the appellant set up another company called the Worldwide Beer Club Limited, and this company essentially carried on the business formerly conducted by the Global Beer Club Limited.
[5] A few months later, on 12 August 1998, the appellant was adjudicated bankrupt for the second time. He signed a "Notice to Bankrupt" on 24 August 1998, acknowledging the prohibition from directly or indirectly taking part in the management of any company or business. The affairs of the Worldwide Beer Club were then so organised as to enable Ms Dench to assume directorship, with the appellant’s role described as sales representative.
[6] On 17 February 1999 the appellant was convicted and sentenced to six months periodic detention on a raft of charges under the Securities Act 1978 for offences relating to Global Beer Club Limited and NZ Beer and Food Fest Limited and for being involved in the management of NZ Beer and Food Fest Limited within five years of his previous convictions.
[7] At the time of his second bankruptcy adjudication the appellant had accumulated personal debts reported as amounting to $120,261.95 with no realisable land, property or personal assets. By mid 2000 the Worldwide Beer Club Limited had substantial debt and the appellant began advertising in various newspapers for franchisees. Between October 2000 and February 2001 eight franchisees signed up and deposited a total of approximately $400,000 to secure their franchises. These franchisees were only able to operate for a few months before being advised that the Worldwide Beer Club Limited was to be liquidated. All of the franchisees were adamant that their dealings in setting up and operating the franchises had been with the appellant and they had minimal contact with Ms Dench, who in reality was little more than an administrative clerk. In essence it was the appellant who was running the company, whilst passing himself off as a mere representative of the company. As the Official Assignee had never granted him leave to enter into any business dealings he was in breach of s62 of the Insolvency Act 1967 ("the Act") in doing so.
[8] Immediately following the liquidation of the Worldwide Beer Club Limited the appellant set up a new business called Flick Life Protection Installers and contracted with another company to supply fire products. He set about selling these products on a door-to-door sales basis using his wife’s bank account to receive payments and pay invoices. Once again he did not have the permission of the Official Assignee to embark upon this enterprise.
[9] On 28 February 2002 a warrant was executed at the appellant’s home and various documentation seized, which included "business plans" for a new venture entitled "Cup Fever".
[10] In March 2003 the appellant was convicted in the High Court at Auckland on a number of charges, including taking part in the management or control of the Worldwide Beer Club Limited whilst an undischarged bankrupt and 11 charges of using a document with intent to defraud. In addition, he was awaiting sentence in the District Court having pleaded guilty to taking part in the management or control of another business (Flick Life Protection Installers) whilst an undischarged bankrupt. He was sentenced to a total of 51/2 years imprisonment on all charges relating to Worldwide Beer Club Limited and to a further cumulative term of six months imprisonment on the charge relating to Flick Life Protection Installers.
[11] In passing sentence Rodney Hansen J noted a number of aggravating features which he found placed the appellant’s offending into one of the most serious categories of its kind. Amongst those aggravating features he listed the "blatant dishonesty" of the means by which the appellant had extracted money from his victims; the devastating effect of his frauds on the victims; his previous convictions for the same or similar sorts of offending, demonstrating "utter contempt for the law" to the extent of running the Worldwide Beer Club Limited while serving periodic detention for previous offending.
[12] The Worldwide Beer Club convictions and the sentence passed on the appellant by Rodney Hansen J in the High Court were upheld by this Court on 3 March 2003 (R v Edwards (CA152/03, 3 March 2004)).

Master Lang’s judgment

[13] On 24 May 2001 the Official Assignee gave notice of objection to the appellant’s discharge from his second bankruptcy on 12 August 1998. The appellant then applied for an order pursuant to s108 of the Act that he be discharged. The application was advertised in the required manner and served upon the appellant’s creditors. One creditor, Vodafone, supported the Official Assignee’s objection. The appellant came before Master Lang for public examination on 19 December 2002. At that time he was yet to face trial in the High Court on the charges arising from his Worldwide Beer Club Limited activities and involvement in the "Cup Fever" business. He was also awaiting sentence in the District Court on his guilty plea relating to Flick Life Protection Installers.
[14] Notwithstanding the nature of the charges pending against the appellant at the time, Mr Hucker urged Master Lang to proceed immediately to discharge the appellant from bankruptcy, accepting that any such discharge would properly be subject to strict conditions designed to protect the commercial community from any further loss it might suffer at the appellant’s hands. Mr Hucker’s submission was that the circumstances of the appellant’s case were no worse than others that had come before the Court in which conditional orders for discharge had been made. Whilst accepting that the Court was entitled to extend the period of adjudication as a matter of public policy for penal reasons, Mr Hucker submitted that the duration of the bankruptcy (four years and four months at that time) was sufficient to meet those policy requirements and that the commercial community could be properly protected from future harm by the imposition of appropriate conditions.
[15] In the event, Master Lang determined that it was premature to consider the question of discharge until the outstanding criminal charges were determined. He expressly reasoned as follows:

Mr Hucker contends that I am entitled to deal with this case on the basis that, even if the charges are treated for present purposes as having been proved, nevertheless an order for immediate discharge is appropriate. That submission carries weight so far as it relates to the penal aspect of the discretion. When compared with other broadly similar cases, the bankrupt has probably already been subject to an order of adjudication which is of sufficient duration to satisfy the penal element of the Court’s discretion. However, that is not the end of the matter.
Before the Court could countenance making an order for discharge in the present case it would have to be satisfied that sufficiently stringent conditions could be imposed so as to safeguard the commercial community against the risk of further harm from the bankrupt. There is, however, no point in imposing conditions if the Court does not have confidence that they will be adhered to by the bankrupt. Normally the Court would be entitled to rely on a bankrupt’s assurance that he will abide by any such conditions. In the present case, however, the bankrupt already has a significant history of non-compliance with conditions imposed both by the Court and by statute. That history leaves the Court with little confidence that the bankrupt’s response will be different in the future.
That confidence is further eroded by the evidence which it has heard regarding the bankrupt’s future intentions. During this examination the bankrupt confirmed that he wished to continue in his employment with a company which operates a form of barter card. The bankrupt’s role is to approach potential members and to persuade them to join up. This type of activity bears a distinct resemblance to that which led to the losses associated with the operation of the Global Beer Club and WBC. The bankrupt’s continued involvement in this type of activity is of itself a cause for some concern.
I consider that the matters to be canvassed in the trial to be held in February 2003 are likely to be highly relevant to any assessment of the conditions which might be appropriate and to the likelihood of the bankrupt abiding by any conditions which the Court might impose. In those circumstances I consider that it would be inappropriate to make final orders either way at the present time. I am of the view that the present application can only properly be determined once the outcome of the February trial is known.

[16] The matter came back before Master Lang on 17 April 2003, after the appellant had been convicted and sentenced in relation to the Worldwide Beer Club and Flick Life Protection Installers charges. The appellant had by then commenced serving his total sentence of six years imprisonment. Master Lang noted the following: that the appellant had operated the Worldwide Beer Club whilst an undischarged bankrupt; that a number of people had lost a significant amount of money as a result of his activities; and that he had necessarily concealed from his victims the fact of his bankruptcies and his prior involvement in insolvent companies. Master Lang made it clear that he referred to these factual matters, not to indicate that any further penalty should be visited on the appellant in relation to his activities, but to demonstrate:

... that in his particular case the protection of the public was paramount. It is absolutely vital that the Court should use whatever means are at its disposal to ensure that other persons do not suffer loss at the hands of Mr Edwards.

[17] Master Lang then referred to the applicable principles in considering an application for discharge. These require the balancing of the interests of the bankrupt in resuming normal life against the public interest in discouraging further fraudulent conduct and the protection of the public from such conduct.
[18] Whilst accepting as valid a submission that the effective period of bankruptcy was now some four years and eight months in the appellant’s case and that the penal aspects of the bankruptcy legislation must therefore be seen as satisfied, Master Lang found that:

... such a finding is tempered by the fact that in reality Mr Edwards has proceeded over the last five years as if the order for adjudication did not exist. The fact that he has been bankrupt has made Mr Edwards not only steadfastly resolute to continue in business activities but it has also led him to take significant and detailed steps to conceal the fact of his bankruptcy from those with whom he has dealt. He has shown no hesitation in using other persons as a front for his activities. When viewed objectively, he has not permitted the restrictions imposed by his adjudication to limit his business activities in any meaningful way. In those circumstances one could be forgiven for thinking that the penal aspects of the bankruptcy legislation have not troubled Mr Edwards unduly.

[19] Weighing these matters Master Lang declined to grant a discharge, even on strict conditions, stating:

I have reached the conclusion that in the present case the application for discharge should be refused. I have reached the conclusion also that Mr Edwards should be permitted to apply again to be discharged from his bankruptcy no earlier than two months prior to the date upon which he is due to be released from prison. I have reached this conclusion for a number of reasons.
First, I would find it very difficult to impose appropriate conditions for a person who is serving a term of imprisonment. Indeed the conditions which were put forward by Mr Hucker bore no relationship to the circumstances of a person serving a term of imprisonment. I have endeavoured myself to formulate conditions which would both be appropriate and also easily enforced and monitored in the present circumstances. I have been unable to do so.
The ability of the appropriate authorities to monitor conditions which are imposed upon a person serving a term of imprisonment is also a matter of concern. I do not consider that I have any power to impose conditions which would affect the way in which a prisoner serves his or her term of imprisonment. Even if I did, I would be most reluctant to impose such conditions without hearing from the prison authorities as to the practical effect which the imposition of such conditions would have.
In the present case therefore I do not see how either the Official Assignee or any other appropriate government agency could properly monitor the compliance by Mr Edwards with any conditions which the Court might impose. In most cases that would not pose a difficulty, because the Court would usually feel confident that persons who seek an order for discharge subject to conditions will in fact comply with any conditions which are imposed. In the present case the Court can have no such confidence. Mr Edwards has shown time and again in the past that he is prepared to resort to deception in order to be able to continue with his business activities. The Court can have no confidence that he will not do so in the future. As a result, the Court would only impose conditions which it could confidently expect to be capable of being monitored. In the present case it cannot do so.

[20] In dismissing the application for discharge, Master Lang also made an order pursuant s110(1)(d) of the Act that the earliest date upon which the appellant could again apply to the Court for an order of discharge would be two months prior to the date upon which he was due to be released from prison.

Salmon J ’s judgment

[21] In exercising his discretion to dismiss the appellant’s application for review of Master Lang’s decision, Salmon J noted this was not the appellant’s first bankruptcy and then traversed the events relevant to his first bankruptcy, his second bankruptcy and his operation of the Worldwide Beer Club whilst an undischarged bankrupt. He also noted that the franchisees had recovered nothing from the liquidation of Worldwide Beer Club and referred to Rodney Hansen J’s sentencing remarks in which he had referred to the effect on the victims as follows:

Your heartless deception has pulled the lives of many good people apart. It has affected their children also, as you will have seen. Ripples of your offending have spread to engulf whole families.

[22] In the event, Salmon J was satisfied that Master Lang had taken all relevant matters into account and been mindful of the interests of the public and of commercial morality, as well as of the interests of the appellant and his creditors.
[23] Turning to the relevant authorities, Salmon J adopted the approach highlighted in the following statement of principle from Re Hogg [1993] 3 NZLR 156 where Richardson J said at 157:

In conferring a discretion expressed in the broadest terms the legislation recognises that each case will be different, that the relevant factors may vary from case to case and that the exercise of the discretion must be governed by the circumstances of the particular case having regard to the guidance provided by a consideration of the scheme and purpose of the legislation. In providing for automatic discharge after three years, the legislation recognises that it is not in the public interest that the bankruptcy should endure indefinitely. In providing for earlier discharge, s108 recognises that continuing the bankruptcy to the end of the three years may not be in the public interest. Whether or not it is will be a matter for decision on the particular facts.

[24] Salmon J referred also to the decision of Penlington J in Re Anderson (B213/89, HC Hamilton, 14 April 1992), in which Penlington J quoted the following passage from Re Reilly ex parte Debtor [1979] FCA 2; [1979] 36 FLR 268 at 278, [1979] FCA 2; 23 ALR 357 at 365-66 per Lockhart J:

In considering whether a bankrupt should receive a discharge it has been laid down repeatedly that the court must have regard not only to the interests of the bankrupt and his creditors but also to the interests of the public and of commercial morality. In the exercise of its discretion the court must also consider the conduct of the bankrupt relevant to his bankruptcy. See Re Prince ex parte the Bankrupt (1961) 19 ABC 39, Re Grey (1960) 19 ABC 29, Re Mallan [1975] 6 ALR, 161, 25 FLR 20.

[25] Applying the relevant principles as expounded in the above authorities, Salmon J concluded that the appellant’s conduct during his bankruptcy was highly relevant and that the public interest overrode the interest of the appellant:

I accept that it may be possible to overcome some of the difficulties which the Master identified in the way of formulating and monitoring appropriate conditions. Certainly, more information was given to me on this aspect of the matter than was before Master Lang. However, like Master Lang, I have concluded that it is not appropriate at this stage to grant the application. The applicant is after all serving a sentence of imprisonment for serious offences relating to the very bankruptcy from which he seeks a discharge. It would, in my view, be entirely inappropriate for him to conduct any form of business whilst he is in prison. I accept that monitoring of conditions could present difficulties of a logistical nature. But most importantly in my view, this applicant’s approach to matters of commercial morality is so deficient as to justify a considerably longer period of time as an undischarged bankrupt than would generally be the case. He is obviously a person from whom the public needs to be protected in a commercial sense. His conduct during this bankruptcy is highly relevant. Public interest overrides the interests of the applicant.

The appeal

[26] Mr Hucker argued that an effective term of bankruptcy of just under seven years was excessive and against the policy behind the Insolvency Act to enable a bankrupt to be rehabilitated into the community. He submitted that the approach adopted by Master Lang and Salmon J was in error because neither recognised that there could or should be a maximum period of time that a person remain bankrupt (irrespective of past conduct), or that the period imposed should be proportionate to the three years prescribed by the Legislative for automatic discharge in the generality of cases.
[27] He pointed out that where the penal aspects of the discretion have been met (as in the appellant’s case) the enquiry ought to focus solely on the extent to which conditions, such as those provided for in s111 of the Act, are sufficient and/or required for the protection of the public. Such conditions could be directed towards any conduct the Court sought to prevent. Any other approach was effectively to place the bankrupt on probation.
[28] Mr Hucker’s submission was that protection of the public could adequately be catered for by the imposition of s111 conditions in the appellant’s case; that the extent to which his prior conduct required denunciation was a matter for the criminal jurisdiction and the term of imprisonment imposed; and that the Court was effectively seeking to punish the appellant twice for the offending of which he had been convicted. He further submitted that there was no foundation for the view that the prison authorities could not ensure that the appellant complied with any conditions imposed or that his conduct could not be adequately monitored to ensure compliance and that he did not engage in business. He said that "to suggest otherwise ... is to suggest that the prison authorities are unable to carry out their responsibilities under the Penal Institutions Act 1954 and to otherwise monitor the conduct of inmates". He further submitted that the breach of any condition imposed by the Court could be dealt with by way of further prosecution and possible incarceration. The essence of his submissions was contained in the following passage:

... where the penal aspect of the discretion has been met an order for discharge ought to result. Upon a finding that the penal aspect of the jurisdiction grant a discharge has been met the only question that ought properly be addressed in the exercise of the discretion is whether the discharge ought to be an unconditional or a conditional discharge or whether the timing that the discharge is to take effect from is to be suspended and set for some future date.

Discussion

[29] One of the troubling aspects of this case is the lack of cogent explanation as to why it is necessary for the appellant to be discharged from bankruptcy whilst he remains in custody. Although the onus is on the Official Assignee as objector to establish why any period of bankruptcy ought to be extended beyond the usual three years, the grounds upon which the objection is advanced must be measured against plans for the bankrupt’s rehabilitation into the community. At his public examination prior to incarceration, the appellant advised Master Lang that his future intention was to work as an employee for a company entitled SSR Limited, collecting monies from members of the public. Master Lang noted (see para [15] above), that this contemplated activity bore "a distinct resemblance to that which led to the losses associated with the operation of the Global Beer Club and WBC". Master Lang was also impressed by the fact that the appellant saw it as "totally unworkable" to disclose to the public the extent of his criminal convictions, the fact of his previous bankruptcies or the fact of his having continued to offend whilst bankrupt, and that when questioned as to why he required to be discharged from bankruptcy simply to work as an employee, his response was simply "I don’t see why I should be bankrupt for the rest of my life".
[30] These statements by the appellant provide the only indication of his plans and likely attitude to future commercial dealings and it is these that must be measured against the grounds of objection advanced by the Official Assignee. At the least, the appellant’s statements demonstrate a lack of insight and raise concern that his pattern of past conduct is likely to be repeated, notwithstanding his serious history of bankruptcy and prosecution.
[31] Although it is difficult to envisage that a discharge from bankruptcy (with or without conditions) could have any practical effect in the appellant’s present situation of incarceration (unless his intention is to continue directing others in business activities during the period of that incarceration) his anxiety to be discharged from bankruptcy is a further concern given his pattern of past conduct and his expressed attitude about the future.
[32] In addition, as Salmon J said, it would "be entirely inappropriate for the appellant to conduct any form of business whilst he is in prison". It is both impractical and inappropriate to require the Department for Corrections to ensure that the appellant comply with his continuing obligations under the Insolvency Act and Companies Act if discharged, or with any special conditions of discharge from bankruptcy, whilst he remains an inmate in a prison. Contrary to Mr Hucker’s submission, the monitoring of the conduct of an inmate subject to such conditions would be a difficult, if not impossible, task for prison authorities. In any case, as Master Lang said, it is doubtful that the Court has the power to order prison authorities to ensure compliance with conditions imposed under s111 of the Act. Master Lang himself endeavoured to formulate conditions which would be both appropriate and easily enforced and monitored in a custodial situation and was unable to do so. As Master Lang also noted, "... the conditions which were put forward by Mr Hucker bore no relationship to the circumstances of a person serving a term of imprisonment".
[33] On a practical level, Mr Hucker accepted that the only real restriction on the appellant currently imposed by the bankruptcy is his inability to travel overseas and this is of no present effect.
[34] Nor does the indefinite nature of the appellant’s bankruptcy have any practical consequence for his present circumstances. As his plans for future activities on release can only realistically be assessed at the time he is due for release appropriate conditions cannot be framed and practical arrangements made for monitoring and supervising his activities outside of the prison environment until that time. When his release is imminent it will be for him to provide cogent information as to his future plans and a proposal for appropriate monitoring. Any professional person appointed to supervise his business activities following his release will need to have expressly consented to such an appointment.
[35] Insofar as the issue of proportionality from case to case is concerned, the appellant’s case is justly categorised as in the most serious category, given the historical facts and the continuous nature of his offending. His proclivity to re-offend in like manner in the future was apparent at his public examination before Master Lang. In the words of Richardson J in Re Hogg, whether or not a bankruptcy should be continued will be "a matter for decision on the particular facts". The circumstances of the appellant’s case demonstrate a clear need for extreme caution in the public interest.
[36] In terms of relativity of the length of any bankruptcy to the presumptive three year period, the circumstances of the appellant’s case include the unusual circumstance of a lengthy incarceration. The continuation of his bankruptcy until near the end of that incarceration does not create a situation of double jeopardy but is essentially a matter of practical effect. Again, the seriousness and recidivist nature of his past misconduct in business affairs singles his case out from any general class of case against which relativity might ordinarily be measured. The three year period at which an automatic discharge is granted cannot therefore have any relevance in the appellant’s case, insofar as the proportionate exercise of the discretion to discharge is concerned.
[37] Although Mr Hucker submitted that there must come a point in time at which a bankrupt is discharged irrespective of his or her conduct and/or past performance, and that in cases of serious misconduct a four year period is generally accepted as being a sufficient period, the length of any bankruptcy and whether or not a finite term is envisaged will depend upon the degree of commercial immorality in any given case and demonstrable need to protect the public in the future. In cases of extreme seriousness, the interests of the bankrupt will necessarily pale into insignificance and an indefinite bankruptcy may not be ruled out.

Conclusion

[38] We are satisfied that neither Master Lang nor Salmon J erred in any respect in their approach or application of principle in the circumstances of the appellant’s case. Accordingly the appeal from Salmon J’s dismissal of the appellant’s application for review of Master Lang’s refusal to grant him a discharge from bankruptcy is dismissed.

Solicitors:
Hucker & Associates, Auckland for Appellant
Crown Solicitor, Auckland for Respondent

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[2]	The appellant has been adjudicated bankrupt on two occasions. On the first occasion he was bankrupted by order of 22 August 1986 as a result of a debtors petition. Shortly after he involved himself in a company called Jackabee Services Limited, incorporated on 30 September 1986. That company went into receivership on 13 July 1992. The directors were the teenage daughters of the appellant but it was he who undertook the day-to-day operation of the company until its receivership. According to the statement of affairs filed by the receiver, that company went into receivership with secured and unsecured creditors amounting to more than $2.2 million.
[3]	The Official Assignee had filed an objection to the appellant’s discharge from bankruptcy on 8 August 1989 but withdrew the objection after the appellant was convicted on 12 August 1991 on a number of charges of fraud and theft by failing to account. He was sentenced to two years imprisonment for that offending on 31 January 1992. The Official Assignee withdrew his objection on the basis of s382(1)(b) Companies Act 1993, pursuant to which the appellant was prohibited from being a director of or taking part in the management of a company for a period of five years from the date of conviction.
[4]	However, in breach of that five year prohibition, the appellant incorporated a company called NZ Beer and Food Fest Limited: this on 4 September 1995. The shares in that company were held by an agent on his behalf. NZ Beer and Food Fest Limited subsequently went into liquidation with reported debts amounting to $437,031.23 and on 26 August 1997 a company entitled Global Beer Club Limited was incorporated which had the appellant and Ms Dench as its directors. Global Beer Club Limited went into liquidation, in June 1998, with reported debts amounting to $16,255.05. Immediately thereafter (on 26 June 1998) the appellant set up another company called the Worldwide Beer Club Limited, and this company essentially carried on the business formerly conducted by the Global Beer Club Limited.
[5]	A few months later, on 12 August 1998, the appellant was adjudicated bankrupt for the second time. He signed a "Notice to Bankrupt" on 24 August 1998, acknowledging the prohibition from directly or indirectly taking part in the management of any company or business. The affairs of the Worldwide Beer Club were then so organised as to enable Ms Dench to assume directorship, with the appellant’s role described as sales representative.
[6]	On 17 February 1999 the appellant was convicted and sentenced to six months periodic detention on a raft of charges under the Securities Act 1978 for offences relating to Global Beer Club Limited and NZ Beer and Food Fest Limited and for being involved in the management of NZ Beer and Food Fest Limited within five years of his previous convictions.
[7]	At the time of his second bankruptcy adjudication the appellant had accumulated personal debts reported as amounting to $120,261.95 with no realisable land, property or personal assets. By mid 2000 the Worldwide Beer Club Limited had substantial debt and the appellant began advertising in various newspapers for franchisees. Between October 2000 and February 2001 eight franchisees signed up and deposited a total of approximately $400,000 to secure their franchises. These franchisees were only able to operate for a few months before being advised that the Worldwide Beer Club Limited was to be liquidated. All of the franchisees were adamant that their dealings in setting up and operating the franchises had been with the appellant and they had minimal contact with Ms Dench, who in reality was little more than an administrative clerk. In essence it was the appellant who was running the company, whilst passing himself off as a mere representative of the company. As the Official Assignee had never granted him leave to enter into any business dealings he was in breach of s62 of the Insolvency Act 1967 ("the Act") in doing so.
[8]	Immediately following the liquidation of the Worldwide Beer Club Limited the appellant set up a new business called Flick Life Protection Installers and contracted with another company to supply fire products. He set about selling these products on a door-to-door sales basis using his wife’s bank account to receive payments and pay invoices. Once again he did not have the permission of the Official Assignee to embark upon this enterprise.
[9]	On 28 February 2002 a warrant was executed at the appellant’s home and various documentation seized, which included "business plans" for a new venture entitled "Cup Fever".
[10]	In March 2003 the appellant was convicted in the High Court at Auckland on a number of charges, including taking part in the management or control of the Worldwide Beer Club Limited whilst an undischarged bankrupt and 11 charges of using a document with intent to defraud. In addition, he was awaiting sentence in the District Court having pleaded guilty to taking part in the management or control of another business (Flick Life Protection Installers) whilst an undischarged bankrupt. He was sentenced to a total of 51/2 years imprisonment on all charges relating to Worldwide Beer Club Limited and to a further cumulative term of six months imprisonment on the charge relating to Flick Life Protection Installers.
[11]	In passing sentence Rodney Hansen J noted a number of aggravating features which he found placed the appellant’s offending into one of the most serious categories of its kind. Amongst those aggravating features he listed the "blatant dishonesty" of the means by which the appellant had extracted money from his victims; the devastating effect of his frauds on the victims; his previous convictions for the same or similar sorts of offending, demonstrating "utter contempt for the law" to the extent of running the Worldwide Beer Club Limited while serving periodic detention for previous offending.
[12]	The Worldwide Beer Club convictions and the sentence passed on the appellant by Rodney Hansen J in the High Court were upheld by this Court on 3 March 2003 (R v Edwards (CA152/03, 3 March 2004)).

[13]	On 24 May 2001 the Official Assignee gave notice of objection to the appellant’s discharge from his second bankruptcy on 12 August 1998. The appellant then applied for an order pursuant to s108 of the Act that he be discharged. The application was advertised in the required manner and served upon the appellant’s creditors. One creditor, Vodafone, supported the Official Assignee’s objection. The appellant came before Master Lang for public examination on 19 December 2002. At that time he was yet to face trial in the High Court on the charges arising from his Worldwide Beer Club Limited activities and involvement in the "Cup Fever" business. He was also awaiting sentence in the District Court on his guilty plea relating to Flick Life Protection Installers.
[14]	Notwithstanding the nature of the charges pending against the appellant at the time, Mr Hucker urged Master Lang to proceed immediately to discharge the appellant from bankruptcy, accepting that any such discharge would properly be subject to strict conditions designed to protect the commercial community from any further loss it might suffer at the appellant’s hands. Mr Hucker’s submission was that the circumstances of the appellant’s case were no worse than others that had come before the Court in which conditional orders for discharge had been made. Whilst accepting that the Court was entitled to extend the period of adjudication as a matter of public policy for penal reasons, Mr Hucker submitted that the duration of the bankruptcy (four years and four months at that time) was sufficient to meet those policy requirements and that the commercial community could be properly protected from future harm by the imposition of appropriate conditions.
[15]	In the event, Master Lang determined that it was premature to consider the question of discharge until the outstanding criminal charges were determined. He expressly reasoned as follows:

[17]	Master Lang then referred to the applicable principles in considering an application for discharge. These require the balancing of the interests of the bankrupt in resuming normal life against the public interest in discouraging further fraudulent conduct and the protection of the public from such conduct.
[18]	Whilst accepting as valid a submission that the effective period of bankruptcy was now some four years and eight months in the appellant’s case and that the penal aspects of the bankruptcy legislation must therefore be seen as satisfied, Master Lang found that:

[22]	In the event, Salmon J was satisfied that Master Lang had taken all relevant matters into account and been mindful of the interests of the public and of commercial morality, as well as of the interests of the appellant and his creditors.
[23]	Turning to the relevant authorities, Salmon J adopted the approach highlighted in the following statement of principle from Re Hogg [1993] 3 NZLR 156 where Richardson J said at 157:

[26]	Mr Hucker argued that an effective term of bankruptcy of just under seven years was excessive and against the policy behind the Insolvency Act to enable a bankrupt to be rehabilitated into the community. He submitted that the approach adopted by Master Lang and Salmon J was in error because neither recognised that there could or should be a maximum period of time that a person remain bankrupt (irrespective of past conduct), or that the period imposed should be proportionate to the three years prescribed by the Legislative for automatic discharge in the generality of cases.
[27]	He pointed out that where the penal aspects of the discretion have been met (as in the appellant’s case) the enquiry ought to focus solely on the extent to which conditions, such as those provided for in s111 of the Act, are sufficient and/or required for the protection of the public. Such conditions could be directed towards any conduct the Court sought to prevent. Any other approach was effectively to place the bankrupt on probation.
[28]	Mr Hucker’s submission was that protection of the public could adequately be catered for by the imposition of s111 conditions in the appellant’s case; that the extent to which his prior conduct required denunciation was a matter for the criminal jurisdiction and the term of imprisonment imposed; and that the Court was effectively seeking to punish the appellant twice for the offending of which he had been convicted. He further submitted that there was no foundation for the view that the prison authorities could not ensure that the appellant complied with any conditions imposed or that his conduct could not be adequately monitored to ensure compliance and that he did not engage in business. He said that "to suggest otherwise ... is to suggest that the prison authorities are unable to carry out their responsibilities under the Penal Institutions Act 1954 and to otherwise monitor the conduct of inmates". He further submitted that the breach of any condition imposed by the Court could be dealt with by way of further prosecution and possible incarceration. The essence of his submissions was contained in the following passage:

[29]	One of the troubling aspects of this case is the lack of cogent explanation as to why it is necessary for the appellant to be discharged from bankruptcy whilst he remains in custody. Although the onus is on the Official Assignee as objector to establish why any period of bankruptcy ought to be extended beyond the usual three years, the grounds upon which the objection is advanced must be measured against plans for the bankrupt’s rehabilitation into the community. At his public examination prior to incarceration, the appellant advised Master Lang that his future intention was to work as an employee for a company entitled SSR Limited, collecting monies from members of the public. Master Lang noted (see para [15] above), that this contemplated activity bore "a distinct resemblance to that which led to the losses associated with the operation of the Global Beer Club and WBC". Master Lang was also impressed by the fact that the appellant saw it as "totally unworkable" to disclose to the public the extent of his criminal convictions, the fact of his previous bankruptcies or the fact of his having continued to offend whilst bankrupt, and that when questioned as to why he required to be discharged from bankruptcy simply to work as an employee, his response was simply "I don’t see why I should be bankrupt for the rest of my life".
[30]	These statements by the appellant provide the only indication of his plans and likely attitude to future commercial dealings and it is these that must be measured against the grounds of objection advanced by the Official Assignee. At the least, the appellant’s statements demonstrate a lack of insight and raise concern that his pattern of past conduct is likely to be repeated, notwithstanding his serious history of bankruptcy and prosecution.
[31]	Although it is difficult to envisage that a discharge from bankruptcy (with or without conditions) could have any practical effect in the appellant’s present situation of incarceration (unless his intention is to continue directing others in business activities during the period of that incarceration) his anxiety to be discharged from bankruptcy is a further concern given his pattern of past conduct and his expressed attitude about the future.
[32]	In addition, as Salmon J said, it would "be entirely inappropriate for the appellant to conduct any form of business whilst he is in prison". It is both impractical and inappropriate to require the Department for Corrections to ensure that the appellant comply with his continuing obligations under the Insolvency Act and Companies Act if discharged, or with any special conditions of discharge from bankruptcy, whilst he remains an inmate in a prison. Contrary to Mr Hucker’s submission, the monitoring of the conduct of an inmate subject to such conditions would be a difficult, if not impossible, task for prison authorities. In any case, as Master Lang said, it is doubtful that the Court has the power to order prison authorities to ensure compliance with conditions imposed under s111 of the Act. Master Lang himself endeavoured to formulate conditions which would be both appropriate and easily enforced and monitored in a custodial situation and was unable to do so. As Master Lang also noted, "... the conditions which were put forward by Mr Hucker bore no relationship to the circumstances of a person serving a term of imprisonment".
[33]	On a practical level, Mr Hucker accepted that the only real restriction on the appellant currently imposed by the bankruptcy is his inability to travel overseas and this is of no present effect.
[34]	Nor does the indefinite nature of the appellant’s bankruptcy have any practical consequence for his present circumstances. As his plans for future activities on release can only realistically be assessed at the time he is due for release appropriate conditions cannot be framed and practical arrangements made for monitoring and supervising his activities outside of the prison environment until that time. When his release is imminent it will be for him to provide cogent information as to his future plans and a proposal for appropriate monitoring. Any professional person appointed to supervise his business activities following his release will need to have expressly consented to such an appointment.
[35]	Insofar as the issue of proportionality from case to case is concerned, the appellant’s case is justly categorised as in the most serious category, given the historical facts and the continuous nature of his offending. His proclivity to re-offend in like manner in the future was apparent at his public examination before Master Lang. In the words of Richardson J in Re Hogg, whether or not a bankruptcy should be continued will be "a matter for decision on the particular facts". The circumstances of the appellant’s case demonstrate a clear need for extreme caution in the public interest.
[36]	In terms of relativity of the length of any bankruptcy to the presumptive three year period, the circumstances of the appellant’s case include the unusual circumstance of a lengthy incarceration. The continuation of his bankruptcy until near the end of that incarceration does not create a situation of double jeopardy but is essentially a matter of practical effect. Again, the seriousness and recidivist nature of his past misconduct in business affairs singles his case out from any general class of case against which relativity might ordinarily be measured. The three year period at which an automatic discharge is granted cannot therefore have any relevance in the appellant’s case, insofar as the proportionate exercise of the discretion to discharge is concerned.
[37]	Although Mr Hucker submitted that there must come a point in time at which a bankrupt is discharged irrespective of his or her conduct and/or past performance, and that in cases of serious misconduct a four year period is generally accepted as being a sufficient period, the length of any bankruptcy and whether or not a finite term is envisaged will depend upon the degree of commercial immorality in any given case and demonstrable need to protect the public in the future. In cases of extreme seriousness, the interests of the bankrupt will necessarily pale into insignificance and an indefinite bankruptcy may not be ruled out.