Official Assignee v Andrews [2013] NZHC 3494 (19 December 2013)

Last Updated: 27 March 2014

IN THE HIGH COURT OF NEW ZEALAND TAURANGA REGISTRY

CIV-2007-470-492 [2013] NZHC 3494

IN THE MATTER of the bankruptcy of Raymond Anthony

Andrews

BETWEEN OFFICIAL ASSIGNEE Plaintiff

AND RAYMOND ANTHONY ANDREWS Defendant

Hearing: 5 December 2013

Appearances: Ms S Cameron for Official Assignee

Mr W Nabney for Defendant

Judgment: 19 December 2013

_{JUDGMENT OF ASSOCIATE JUDGE J P DOOGUE}

This judgment was delivered by me on

19.12.13 at 4 pm, pursuant to

Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar

_{Date...............}

OFFICIAL ASSIGNEE v ANDREWS [2013] NZHC 3494 [19 December 2013]

Background

[1] Mr Andrews was adjudicated bankrupt on 21 April 2008. He has been an undischarged bankrupt now for a period of approximately 5 1/2 years. The Official Assignee opposes his discharge from bankruptcy. Foremost amongst the reasons for that opposition is the fact that Mr Andrews has acted in an unsatisfactory manner in response to his bankruptcy and he did not cooperate with the Official Assignee and, far more seriously, he breached the statutory requirements relating to duties of bankrupts. In fact he was sentenced to a term of imprisonment for that as I will shortly describe.

[2] Mr Andrews had been involved in the sale of laser machines with medical/cosmetic applications. He ascribes his adjudication to the fact that he was persuaded to sign a guarantee of another person/company’s obligations which resulted in judgment eventually being entered against him which he was unable to satisfy and therefore an order of adjudication followed.

[3] Shortly after he was adjudicated bankrupt the Official Assignee began making attempts to meet with Mr Andrews and to obtain from him a statement of affairs. Evidence was placed before the Court of a string of emails covering the period from his adjudication on 21 April 2008 through the month of May 2008 which can only be interpreted as Mr Andrews passively resisting the attempts of the Official Assignee to get him to take the first steps in discharging his obligations under the Act. There were still difficulties being experienced in February 2009 and a meeting still had not taken place until that month. Mr Andrews then came to see the Official Assignee but not before attempts had been made to summons him to appear for such an interview.

[4] A file note which Ms King made on 21 November 2008 when she spoke to Mr Andrews on the phone following the attempted service of a summons on him records that she asked him why he had ignored the process server she had sent. He stated that at the time he was not ready to face his bankruptcy but he was now ready to and that he was looking to get an annulment.

[5] Fourteen creditors in all filed proofs in bankruptcy totalling in value

$680,757.40.

[6] The bankrupt was found guilty of eleven breaches of the Insolvency Act following a jury trial in the District Court in February 2013. There were three alternative charges but convictions were not entered on those as Mr Andrews had been found guilty on the greater offences charged in the alternative. Seven of the charges involved being an undischarged bankrupt. Mr Andrews had been involved in carrying on or taking part in the management or control of a business without reasonable cause and without the authority of the Court or the consent of the Official Assignee. These charges spanned the period 29 July 2008 to 1 May 2011. There is an additional charge of obtaining credit of $100 or more without disclosing he was an undischarged bankrupt, one of obtaining property on credit by false representation without paying and two charges of concealing property from the Official Assignee.

[7] In 2011 Mr Andrews also appeared in Court following his failing to comply with an instruction by the Official Assignee to attend to the execution of an affidavit for grant of probate in his late mother’s estate. Venning J in the High Court at Hamilton made an order excluding Mr Andrews from being an executor of the will and made orders granting probate of the will and directed the costs of the application before him were to be paid by Mr Andrews out of his share of the estate. As counsel for the Official Assignee, Ms Cameron pointed out, this had the consequence of ensuring that there were less funds available to satisfy the creditors of the bankrupt estate.

[8] In due course the sum of $100,000 was paid to the Official Assignee out of Mr Andrews’ share in his late mother’s estate and this was applied to repayment of the creditors.

[9] In addition on 7 June 2013 he entered a plea of guilty and was sentenced on one charge of obtaining by deception under the Crimes Act. He was sentenced to 15 months imprisonment on the former group of charges and a concurrent term of six

months on the later charge. He filed an appeal against a sentence but this was dismissed. The reasons for declining the appeal were the serious nature of the offending, the period of time over which the offending occurred, the losses to innocent third parties and the concealment of $100,000 in income from the Official Assignee, the bankrupt’s lack of remorse and the view of the presiding Judge that the bankrupt was unlikely to change. The sentencing Judge took the view that the losses which he caused other persons exceeded $50,000. While that conclusion is not legally binding on me, it seems that having regard to the fact that the Judge heard the evidence at trial and the absence of any evidence which Mr Andrews has produced to the contrary that that figure ought to be accepted as constituting the approximate extent of the loss.

[10] Another feature of the offending which I must refer to is the fact that Mr Andrews during the course of his bankruptcy opened an account which he concealed from the Official Assignee and which some $100,000 was channelled through.

Official Assignee’s view

[11] The Official Assignee has opposed Mr Andrews being discharged from bankruptcy on the following grounds:

(a) The bankrupt’s failure to co-operate with the OA during the terms of the bankruptcy and comply with his lawful obligations;

(b) The interests of the creditors;

(c) The bankrupt’s ongoing dishonesty with the OA and those he undertook business with during the course of his bankruptcy – as reflected by the series of insolvency offences and the criminal offence that the bankrupt is convicted of;

(d) The harm and losses caused by those the bankrupt undertook business with;

(e) The bankrupt’s present business proposals and further prosecution

since being released from custody; and

(f) The prospect of further dishonesty offending by the bankrupt.

[12] The Official Assignee, in my view, has grounds for all the points of opposition which he has specified in this case as being reason for why Mr Andrews should be refused a discharge.

[13] The Official Assignee takes the view that a discharge should be refused because overall the public interest requires that there be further oversight of the bankrupt. There is a need to emphasize that the conduct of the bankrupt violates basic norms of commercial morality, because of the disregard by the bankrupt for his obligations as such, his dishonesty and lack of ethics and the losses that he caused to others and the risk that he poses in the future. The Official Assignee summarised by saying that it is not in the public interest for the bankrupt to continue to be involved in managing or controlling business at the present time.

Applicable law

[14] The Insolvency Act 1967 applies. The relevant section of the Insolvency Act

1967 provides as follows:

110 Court may grant or refuse discharge

(1) At the hearing of any application for an order of discharge under section 108 of this Act, or at any examination under section 109 of this Act, the Court, having regard to all the circumstances of the case, may:

(a) Grant an immediate order of discharge:

(b) Grant an order of discharge subject to such conditions (including consenting to any judgment or order for the payment of any sum of money) as it thinks fit, or suspend an order for discharge for such time as it thinks fit:

(c) Grant an order of discharge with or without such conditions as it thinks fit to take effect at a specified future date:

Refuse an order of discharge, in which case the Court may specify the earliest date on which the bankrupt may apply again to the Court for an order of discharge.

(2) Section 107 of this Act shall be read subject to any order of the Court under this section.

(3) Where the Court has granted an order of discharge subject to the bankrupt consenting to any judgment and the bankrupt consents, the Court may from time to time vary the judgment as it thinks fit.

Authorities

[15] The principles which the courts are to apply when considering whether or not to grant or decline an application for discharge from bankruptcy where there has been an objection filed by the Official Assignee are generally taken to have been settled by the decision of the Court of Appeal in ASB Bank v Hogg.¹

[16] While that case was concerned with an application for early discharge, the matters that the Court t identified are also relevant to a case such as the present where s 110 applies. I accept that the matter is accurately summarised in the following extract from Brookers Insolvency Law:²

There have been a number of decisions regarding the principles relating to the exercise of the Court's discretion under this section. For an authoritative general statement by the Court of Appeal, see ASB Bank v Hogg [1993] 3

NZLR 156 (CA), where the Court stated:

“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, s 108 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. In that regard, guidance is provided by s 109(2) which lists matters on which the assignee is to report to the High Court in such a case. The Court is to consider the assignee's report as to the affairs of the bankrupt, the causes of the bankruptcy, the manner in which the bankrupt has performed the duties imposed on him or her under the Act and his or her conduct both before and after the bankruptcy, and also any other fact, matter or circumstance that would assist the Court in making its decision. Clearly the Court apprised of the matter will consider the legitimate interests of the bankrupt, the creditors, and wider public concerns, but it is neither required nor entitled to impose threshold requirements in the exercise of the discretion so as to derogate from

¹ _{ASB Bank v Hogg [1993] 3 NZLR 156 (CA).}

² Brookers Insolvency Law & Practice (online looseleaf ed, Thomson Reuters) at IA110.01(1).

the breadth of the powers conferred under s 110. The applicant has the onus, in the sense of adducing evidence, to show good cause for ordering an early discharge, but his obligation goes no further than that.”

[17] A further factor to be taken into account in relevant cases is the age of the bankrupt and what prospects of employment he/she might have if he or she is not to be permitted to go into business on his or her own account - an outcome which of course is not readily achievable.³

Assessment of Mr Andrews

[18] The Official Assignee paints Mr Andrews in the light of being dishonest, unscrupulous and unreliable. A number of occurrences that the Official Assignee says took place are pointed to in support of that assessment. During the course of his evidence, Mr Andrews offered explanations about his conduct. Whether or not Mr Andrews is to be regarded as a believable witness is therefore one of the matters that the Court has to consider.

[19] Unfortunately Mr Andrews did not present himself in a good light when he was giving evidence. Two examples will suffice. It was put to him that he was generally uncooperative with the Official Assignee from the point where he was first adjudicated bankrupt. Ms Cameron for the Official Assignee examined him concerning the difficulties that had been experienced in making an appointment for Mr Andrews to come in and visit MED staff. His initial response was to try and explain that he could not understand what the problem was because he was always present at a physical address which he had provided to the Official Assignee which was in Auckland. It was then established that he had in fact provided an address in Tauranga. He also said that there were difficulties between himself and the officer at the Official Assignee’s office. He did not spell the matter out but it was clear that this was intended to provide an explanation as to why the Official Assignee had been unable to make satisfactory arrangements to meet with him and obtain a statement of affairs. The difficulties that Mr Andrews was talking about, he later explained, arose because the officer concerned, Ms King, had, he alleged, made available the entire

_{file of the Official Assignee’s office to his estranged wife and she had used it against}

³ Re Donovan, ex parte Commissioner of Inland Revenue [2013] NZHC 2936 at [22].

Mr Andrews in the course of matrimonial litigation. When I asked him when this occurred, he was unable to tell me the date. However, it seems most unlikely that at the point where the Official Assignee was attempting to make preliminary contact with Mr Andrews there would have been any file which would have been of much use to anyone that the Official Assignee might have sent to Mr Andrews’ estranged wife.

[20] As well, there was evidence that he failed to meet with an alternative officer of the Official Assignee who was covering for Ms King when she was unavailable. No explanation was forthcoming as to why it would not have been satisfactory from Mr Andrews’ point of view for him to meet with that particular individual.

[21] The impression that I was left with was that the position was just as the Official Assignee submitted. Mr Andrews was determinedly obstructive even to the point of declining to accept a summons from a process server whose help was enlisted when the efforts of the Official Assignee to get Mr Andrews to come and voluntarily meet with staff had proved to be unsuccessful.

[22] A further example concerned questions that he was asked about opening a bank account which he did not disclose to the Official Assignee during the currency of his bankruptcy. Rather than simply accept that he had done so, Mr Andrews offered the following explanation. He said that when he had opened the account (at the ANZ) he had written on the account application form that his current status was that of undischarged bankrupt. He said that the person that he dealt with said that it would be necessary to obtain clearance from someone else in the organisation before the account could be opened. Because the bank eventually said that it would open the account, Mr Andrew said that he assumed that everything was in order and that the bank would have told the Official Assignee about the account. I regard such an assertion as being inherently unbelievable. I note as well that Mr Andrews also thought it was to his credit that he had not used a false name to open the account.

[23] Throughout the course of giving evidence, Mr Andrews repeated that he accepted responsibility for his own actions but in nearly every case he would then follow that with complaints about other persons who had contributed to the problems

that he faced. He alleged amongst other things that of the nearly $800,000 worth of proofs of debt which the Official Assignee had admitted, less than half were bona fides claims. While purporting to accept the finality of the convictions that had been entered against him, he nonetheless sought to put forward material which would minimise the seriousness of what he had done. He said for example the fact that he had opened a supplier account with the electricity company in a false name was because his son had told him not to use his name. He said in relation to a charge of fraudulent dealing with a laser machine that the amount of the machine which was the subject of the proceedings was of trivial value. I have already mentioned that he sought to blame the delays in making contact with the Official Assignee to complete the required statement of affairs as being due to failings on the part of the Official Assignee’s office.

[24] That is not to say that everything that Mr Andrews said about his responsibility was completely irrelevant. So far as the opening of the bank account was concerned and the channelling of business proceeds through it, he pointed out that given that the total amounts involved over a period of about three years amounted to $100,000, the annual amount received of $30,000 did not greatly exceed what would be a reasonable amount by way of his living costs. I understand the point was being made that he was not using the account to secrete business profits that might more properly have been used to pay compensation to the complainants in the criminal proceedings. This was a legitimate point to make. However, it does not neutralise the criticisms which the Official Assignee has made of his conduct. The whole point of requiring bankrupts to disclose their affairs and respond to the directions given to them by the Official Assignee is to ensure that the Official Assignee is able to carry out the statutory obligations. It is not the prerogative of bankrupt persons to circumvent such requirements on the basis that they believe that they have a good reason for doing so or because they believe no overall harm will be caused by them ignoring the requirements of the legislation.

[25] When he was asked about pending charges against him, Mr Andrews followed a similar pattern. In relation to the assault, he essentially attributed the blame to his ex-wife and her associates. As to the further dishonesty charge which have been brought against him, his counsel, Mr Nabney, advised me that this was to

be withdrawn assuming that Mr Andrews repaid or compensated the complainant for the amount which was the subject of the charge. I accept that this latter material was properly put before me by Mr Nabney. The point is that effectively what is intended, if Mr Andrews finds himself in a position where he is able to raise the funds, is that a charge for which he is admittedly responsible will be withdrawn. The fact that he accepts a need to repay the complainant or otherwise compensate the complainant effectively amounts to an acceptance that he is in the wrong. Given that the charges post-date Mr Andrews’ release from prison where he was serving a sentence based upon dishonesty charges, it must unfortunately be accepted that Mr Andrews has either chosen not to or found it beyond his ability to change his ways.

[26] To summarise, Mr Andrews did not impress me as a credible witness. I am also of the view that the correct assessment of Mr Andrews is that he is a person who will still not accept responsibility for his actions and who is not prepared to accept obligations that are incumbent upon him. Further, when he breaches his obligations, rather than accept that he has done so he puts forward a version of events which implausibly attempts to explain away failings on his part.

Prospects of employment

[27] An offer of employment was produced at the hearing which Mr Andrews said had been forthcoming from a Mr McKenzie who apparently operates a company that imports motor vehicles from Australia. The email which was attended to me from Mr McKenzie was short on specifics but apparently offered to provide Mr Andrews with employment on the basis of a retainer and commissions. No figures were given. There was no description of the work that Mr Andrews would be required to undertake. He told me that he expected that the retainer would be approximately

$800 per week. Depending upon the number of cars sold per month on which he might get a commission of $1000 each, he considered that he would be able to earn a reasonable income.

[28] The question of his proposed employment has close bearing on the form of the order which the Court ought rightly to make. Were Mr Andrews to obtain employment by Mr McKenzie it would involve, he told me, selling cars which had been imported into the country to automobile retailers. Those cars would be vehicles

which had been purchased in Australia and which had been the subject of “lost or stolen” insurance as Mr Andrews described it. Such cars, which insurance companies have paid out on, he told me, cannot be offered for resale in Australia. Mr McKenzie apparently intends to acquire a stock of these vehicles and bring them to New Zealand for sale. It was Mr Andrews’ understanding that Mr McKenzie would purchase the vehicles at auction in Australia. At no point in describing the process did Mr Andrews suggest that he would be required to go to Australia and take part in the auction. That process can be managed online although it may be necessary to have someone on the ground in Australia to actually check the cars. There is no apparent reason why Mr Andrews would need to be involved in that part of the process. That being so, I am unable to accept that even if the employment with Mr McKenzie was to be accepted, Mr Andrews would be inhibited in carrying out his obligations because of the fact that he cannot travel to Australia. Further, even if occasional travel to Australia was to be contemplated I cannot see why there would be any problem with the Official Assignee granting the necessary permission, if satisfied that Mr Andrews was conscientiously complying with his obligations and that there was a genuine need for him to travel to Australia in the course of his employment. Mr Nabney said that given the past unfortunate relationships between Mr Andrews and the Official Assignee, that assumption might not be borne out. I do not accept that submission. The Official Assignee has an interest in ensuring that persons in the position of Mr Andrews can earn income because that brings with it

the possibility that he may contribute towards payment of his debts if so required.⁴

Reasons for decision

[29] The options which are available to the Court are to discharge Mr Andrews now, discharge him with conditions attached, or decline to discharge him and give directions as to when Mr Andrews should be able to make the next application for discharge from bankruptcy.

[30] I am firmly of the view that it would not be a proper exercise of my discretion to discharge Mr Andrews. He has offended at a serious level during the

_{course of his bankruptcy. He has demonstrated an overall indifference to his}

⁴ Insolvency Act 1967, s 45.

obligations under the Insolvency Act 1967. He has, further, shown at least in the initial stages of his bankruptcy that he was obstinate in his refusal to cooperate with the Official Assignee. The fact that he still characterises the difficulties that he had as being the result of a personal dispute between himself and Ms King suggests that he saw the issue in terms of himself being right and the Official Assignee being wrong. The fact is that irrespective of what Mr Andrews thought of the person looking after his affairs, he had an obligation to comply with the law which was quite separate from the state of his personal relationship with the individual officer concerned.

[31] Mr Andrews is also to be criticised for his inability to accept head-on responsibility for his conduct and to acknowledge that he alone is accountable for breaking the law as extensively as he did. It gives rise to doubt that in the future he will accept and conform to his obligations rather than finding excuses for why he ought not to have to meet those obligations.

[32] I agree that Mr Andrews continues to represent a risk to the public and in particular to those who are engaged in business.

[33] Mr Andrews has been punished for his infractions of the criminal law and it is not a purpose of the present proceedings to impose additional penalties on him. The legislation that applies to his discharge from bankruptcy has different objectives from the criminal law. Punishment and deterrence are not part of the present enquiry. The present enquiry does however overlap with the criminal law in one respect and that is protection of those who are engaged in business.

[34] Having regard to his conduct overall and in particular to the matters on which he was convicted in his criminal trial relatively recently, and in the light of the fact that there has been no evidence to suggest that Mr Andrews is a changed man, a discharge should be declined. That is because there is serious risk that if Mr Andrews were granted a discharge and went back into business further dishonest and unethical commercial practices would again occur.

[35] The protection of the community is the dominant consideration when balancing the various factors that the Court needs to take into account. I have considered whether, in the absence of a discharge, it might be feasible to grant Mr Andrews a conditional discharge that would provide reasonable protection for the commercial community. I do not consider that it is feasible because Mr Andrews has demonstrated by his past conduct an attitude close to contempt for the supervisory functions of the Official Assignee and has exhibited a lack of cooperation in his dealings with the Official Assignee. Conditional discharge in those circumstances would be meaningless.

[36] I agree that it is important that no obstacle should be placed in the way of Mr Andrews improving his position. Having regard to what I said above about his employment prospects, I do not consider that declining a discharge at this point would have that result.

[37] I do not overlook the fact that Mr Andrews has now been bankrupt for approximately 5 1/2 years. I order that he is not to make a further application for discharge before August 2014. The reason for doing so is that if Mr Andrews wishes to make an application it could be considered towards the end of 2014. I consider that an order in that form is preferable to continuing his bankruptcy indefinitely. If Mr Andrews considers matters intelligently, he will understand that the form of the order I make gives him an incentive to comply with the legislation and with the directions of the Official Assignee. If he does so there should be no reason why the Official Assignee would not be persuaded that future opposition to his discharge from bankruptcy is not required.

[38] The order I make is that Mr Andrews is not to be discharged from bankruptcy and is not to make a further application for discharge before 1 August 2014. The fact that I am permitting him to bring an application at this time next year does not of course carry with it any assurance that that application, if brought, will succeed. It will all depend upon the circumstances then established.

J.P. Doogue

Associate Judge