Burchell v Commissioner of Inland Revenue
[2021] NZHC 1136
•21 May 2021
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2011-404-3464
[2021] NZHC 1136
UNDER the Insolvency Act 2006, section 294 IN THE MATTER OF
an application for discharge from bankruptcy of LLEWELLYN WILLIAM BURCHELL
BETWEEN
LLEWELLYN WILLIAM BURCHELL
Applicant
AND
COMMISSIONER OF INLAND REVENUE
First Respondent
OFFICIAL ASSIGNEE
Second Respondent
Hearing: 18 May 2021 Appearances:
Applicant is self-represented
N Malarao for the First Respondent C Jones for the Second Respondent
Judgment:
21 May 2021
JUDGMENT OF ASSOCIATE JUDGE R M BELL
This judgment was delivered by me on 21 May 2021 at 11:00am
pursuant to Rule 11.5 of the High Court Rules
………………………….
Registrar/Deputy Registrar
Solicitors:
Meredith Connell (Nick Malarao), Auckland, for the First Respondent Official Assignee’s Office (C Jones), Auckland, for the Second Respondent
Copy for:
L W Burchell, Auckland, the Applicant
BURCHELL v COMMISSIONER OF INLAND REVENUE [2021] NZHC 1136 [21 May 2021]
[1] Mr Burchell applied under s 294 of the Insolvency Act 2006 to be discharged from his bankruptcy. At the end of the hearing I said that he was discharged. I now give my reasons.
[2] He was adjudicated bankrupt on 16 December 2011. Under s 290 of the Insolvency Act, a bankrupt is automatically discharged three years after they file a statement of affairs under s 46 or s 67 of the Insolvency Act. The Official Assignee says that Mr Burchell has not filed a proper statement of affairs and he therefore remains bankrupt. Accordingly, the questions are:
(a)Has Mr Burchell has already been automatically discharged under s 290 of the Insolvency Act? and
(b)If not, should he be discharged now?
[3] Mr Burchell applied for other orders against the Commissioner of Inland Revenue and the Police (who were not served and are not a party). I am dealing with this matter under the Insolvency Act. The other orders Mr Burchell seeks are outside the Insolvency Act and I do not have the jurisdiction to decide them.
[4] While providing a report and helpful submissions, the Official Assignee did not oppose Mr Burchell’s application. The Official Assignee’s position was that while Mr Burchell was not entitled to an automatic discharge under s 290, there was no reason why the court could not order a discharge on Mr Burchell’s application.
[5] The Commissioner of Inland Revenue is the only creditor who claimed in Mr Burchell’s bankruptcy. While the Commissioner remains unpaid, she abided the decision of the court. Mr Malarao appeared on instructions to address Mr Burchell’s allegations against the Inland Revenue, but not to oppose the discharge application.
[6] Unfortunately Mr Burchell was slow to understand that if he played his cards right, he would have an easy run. Instead he took a combative attitude towards the
Assignee and the Commissioner. The hearing did not go smoothly. He made it hard for himself.
[7] The Commissioner of Inland Revenue obtained judgment against Mr Burchell in the District Court at North Shore in December 2010 for some $34,000. She served Mr Burchell with a bankruptcy notice based on the District Court judgment. The Commissioner applied for Mr Burchell’s adjudication in bankruptcy in July 2011, relying on Mr Burchell”s non-compliance with the bankruptcy notice. Mr Burchell opposed the bankruptcy application and appeared at the hearing on 16 December 2011 but the judgment records that Mr Burchell left the court as the judge was about to give his judgment.
[8] In September 2018, Mr Burchell applied under s 309(1)(a) of the Insolvency Act to have his bankruptcy annulled on the ground that he should not have been adjudicated bankrupt. Associate Judge Smith carefully reviewed how the Commissioner obtained judgment against Mr Burchell. The judge was satisfied that Mr Burchell was properly adjudicated bankrupt. He dismissed the annulment application.1
Two procedural matters, advertising and the public examination
[9] Under r 24.37(b) of the High Court Rules 2016, a bankrupt applying for a discharge must advertise the application and the hearing date. In a minute of 4 March 2021, Associate Judge Andrew directed Mr Burchell to have an advertisement published before 1 May 2021. Mr Burchell did not advertise as directed. His explanation was that the Official Assignee had thwarted his attempts to advertise by instructing the media not to allow his application to be advertised. He offered no evidence to support this extraordinary allegation. This is an example of far-fetched matters that Mr Burchell raises. More about that below.
[10] Notwithstanding Mr Burchell’s refusal to follow the rules and to comply with Associate Judge Andrew’s direction, the lack of advertising should not stand in the way of his discharge application. For the Official Assignee, Mr Jones pointed out that
1 Burchell v Commissioner of Inland Revenue [2019] NZHC 2173.
advertising has an important role in most bankrupts’ applications for discharge under s 294 of the Insolvency Act. Under s 290 of the Insolvency Act there is an automatic discharge three years after the bankrupt files their statement of affairs. An automatic discharge is not advertised, although the fact of the discharge will be shown in public registers under the Insolvency Act. On the other hand, in the general run of cases bankrupts apply for discharge under s 294 before the three years under s 290 has run out or where there is an objection to the automatic discharge. Advertising is appropriate in those cases because the bankrupt is seeking some departure from the three year rule under s 290. Creditors should be given the opportunity to take part.
[11] In Mr Burchell’s case, close to 10 years have passed since his adjudication. His only known creditor, the Commissioner of Inland Revenue, has taken part in the application. The Official Assignee is not concerned that other creditors may wish to be heard on his discharge application. It is unrealistic to expect anyone to respond to an advertisement of the discharge application.
[12] Under s 418 of the Insolvency Act, a proceeding must not be invalidated or set aside for a defect (which includes an omission) in a step that must be taken as part of, or in connection with the proceeding, unless a person is prejudiced by the defect. As no one has been prejudiced by the absence of advertising, the discharge application is not invalid. Ordering Mr Burchell to advertise the application and adjourning in the meantime would be pointless. It is safe for the application to continue without advertising. Accordingly, I dispense with advertising.
[13] As for an examination, under s 294(3) of the Insolvency Act the hearing of a bankrupt’s application for discharge must be in accordance with s 177, which provides for an examination of the bankrupt in court. Mr Jones for the Official Assignee did not wish to examine Mr Burchell – nor did counsel for the Commissioner. While an examination may be important when a bankrupt is applying for an early discharge, or where there are objections to an automatic discharge, those considerations do not apply in this case where the only issue is Mr Burchell’s alleged delay in filing a statement of affairs. Accordingly, I did not require Mr Burchell to be examined.
[14] The dispensations from advertising and from an examination under s 177 reflect the Official Assignee’s position not to object to Mr Burchell’s discharge application.
Mr Burchell’s complaints
[15] In his discharge application, Mr Burchell says that the Official Assignee has no reason to keep him bankrupt for over nine years for no legal reason and the Inland Revenue has no reason to keep him bankrupt either. The Official Assignee and the Inland Revenue have an agenda to harass him and keep him bankrupt. The Inland Revenue Department is only malicious and instructed its staff to assault Mr Burchell when Mr Burchell wants to resolve matters. The Official Assignee has phoned Mr Burchell and claimed that he will keep Mr Burchell bankrupt forever and will get the police to charge Mr Burchell if Mr Burchell were to attempt to get this matter before the courts. The Official Assignee has assaulted Mr Burchell. When Mr Burchell brought papers in to the Official Assignee the Official Assignee “dumped the papers in the bin” saying he refused to accept any paperwork from Mr Burchell. This was a way to keep Mr Burchell bankrupt as a favour to his friend, Mr Bruce Urlich. The application also complains about the police, but that is not relevant to this case.
[16] In his affidavit in support of his application Mr Burchell says that he handed the documents, fully completed, to the Official Assignee, but the documents were thrown away and the Official Assignee assaulted him violently and punched Mr Burchell without any legal reason. The police refused to investigate when Mr Burchell complained. His affidavit suggests that the Official Assignee is following instructions from Mr Bruce Urlich, with whom Mr Burchell has had a long- running dispute. He complains about the police seizing his motorbikes on instructions from the Official Assignee, and being assaulted by the police. He also alleges that he tried to file documents in court but the court staff refused to accept the documents. He alleges that the Inland Revenue created false information which led to him being locked up, and the Inland Revenue lied to the court to have him made bankrupt. He alleges that an Inland Revenue officer admitted giving false information to the court in order to bankrupt Mr Burchell. He alleges that Associate Judge Smith deliberately abused him and was involved in protecting criminal activity against Mr Burchell by
the Inland Revenue and by the Official Assignee. He alleges that the Official Assignee plans to keep Mr Burchell bankrupt as a way to get Mr Burchell to commit suicide. When he served documents on the Inland Revenue, he alleges that an Inland Revenue staff member physically assaulted him – under instructions from another Inland Revenue officer. His affidavit concludes:
This statement is true. And this has all happened. Mr Burchell gets bullied and abused without any legal reason, and is constantly being assaulted by police who follow instructions from the IRD as well as Dave Hart (the Assignee) who all refuse to communicate with Mr Burchell. They refuse to supply any legal reason to keep Mr Burchell bankrupt.
[17] Mr Burchell has made similar allegations in the past. In opposing the Commissioner’s bankruptcy application, he maintained that the Inland Revenue is guilty of fraud, extortion, perjury, double jeopardy, contempt of court and defamation, as well as complaining that the Inland Revenue refused to discuss matters with him and it had applied for his adjudication without any evidence. In adjudicating Mr Burchell bankrupt, Associate Judge Faire obviously saw no merit in Mr Burchell’s complaints.
[18] In 2016, Mr Burchell began a proceeding against the Official Assignee and an Inland Revenue officer. Whata J struck out the statement of claim, holding that the allegations of deceit and misfeasance in public office were baseless. 2
[19] In his application to have his adjudication annulled Mr Burchell alleged, amongst other things, that officers of the Inland Revenue had provided false information and altered official documents to mislead the court. He says he was not indebted to the Commissioner and there had been an abuse of process, misfeasance and criminal activity in charging him for money he did not owe.3 Associate Judge Smith said:4
The allegations of fraud/corruption against the IRD officers were dismissed as baseless by Whata J, and Mr Burchell’s allegation of harassment, threats or assault by the police and various individuals are outside the scope of the matters I am required to consider. Any suggestion that all of these alleged incidents formed elements of a conspiracy to bankrupt Mr Burchell, which
2 Burchell v Official Assignee [2017] NZHC 1508 at [22] and [47].
3 Burchell v Commissioner of Inland Revenue [2019] NZHC 2173 at [26].
4 Burchell v Commissioner of Inland Revenue [2019] NZHC 2173 at [93].
would have to have involved the IRD and its staff do not, in my view, rise above the level of speculation on Mr Burchell’s part.
[20] In the hearing, Mr Burchell made wide-ranging attacks against the Official Assignee and his staff, counsel for the Official Assignee, officers of the Inland Revenue and the police. He saw them all as linked in a conspiracy associated with Mr Bruce Urlich to make life miserable for Mr Burchell. He also suggested that I was a part of the conspiracy.
[21] Like other judges, I cannot take Mr Burchell’s allegations seriously. There is no substance in his allegations of serious misconduct by the Inland Revenue and the Official Assignee. Mr Burchell has a personality disorder. He is misanthropic and short on basic social skills. He is aggressive and very rude. His shouting could be heard outside the courtroom. He harbours groundless conspiracy theories. He does not seem aware how other people see him. He turns to anger very quickly, often within seconds of standing to address the court. He takes exception to harmless incidents and puts the worst slant he can on anything that he considers goes against him. During the hearing, a court security officer touched Mr Burchell lightly on the back, to get his attention. Mr Burchell immediately complained that he had been “punched”. He makes unfounded allegations. He alleged that counsel for the Official Assignee lied, when he did nothing of the sort. Mr Burchell’s complaints are not credible. They are in any event irrelevant and I have disregarded them.
[22] Mr Burchell also objected to my hearing his application. He did not like the way I had case-managed five of his proceedings in 2010. None of those proceedings had any connection with his bankruptcy and I have not dealt with Mr Burchell since. That past contact with Mr Burchell does not provide good reason for me to get out of hearing his discharge application.
Mr Burchell’s statement of affairs
[23] The Official Assignee provided a report under s 296 of the Insolvency Act. That requires the Assignee to report as to the bankrupt’s affairs, the cause of the bankruptcy, the bankrupt’s performance of his or her duties under the Act, the manner in which the bankrupt has obeyed orders of the court and the bankrupt’s conduct before
and after adjudication, and any other matter which would assist the court in making a decision as to the bankrupt’s discharge. The report is information available to the court when considering the discharge application. The court is entitled to adopt conclusions of the Official Assignee where they are undisputed or where there is evidence establishing factual matters to the satisfaction of the court.5 Matters in the Official Assignee’s report may be contradicted by other evidence, but in this case there is little significant evidence to contradict the report. The Official Assignee’s report has been helpful.
[24] The Official Assignee says that in May 2017 his office received a statement of affairs signed by Mr Burchell. If that statement of affairs is in order, the three years under s 290 of the Insolvency Act began. As the three years are now up, Mr Burchell would be automatically discharged without requiring an order on his application under s 294.
[25]In McKee v Official Assignee, I said:6
The statement of affairs by the bankrupt is a key document in the administration of the bankruptcy. It provides the Official Assignee with important information for the administration of the bankruptcy. Of course it need not be the only information on which the Official Assignee may rely. Creditors may also supply the Official Assignee with other information, but the statement of affairs is still the starting point for the Official Assignee. It can provide the basis for the Official Assignee to make other enquiries, to start proceedings to get assets in for creditors, and to begin examinations of the bankrupt or of other persons under Part 3 of the Insolvency Act.
A statement of affairs is less useful if it is filed late, if it is incomplete, and if it is inaccurate. In Official Assignee v Cameron, I said that so long as there is substantial compliance, it is enough for time to start running under s 290.7
[26] Section 67 of the Insolvency Act requires the bankrupt to file with the Assignee a statement of affairs in the prescribed form. Section 67(2) provides that the Assignee may reject a statement of facts that in the Assignee’s opinion is incorrect or incomplete. That subsection has been in force only since 13 January 2020, under s 54
5 Havenleigh Global Services Ltd v Henderson [2015] NZHC 1762 at [54].
6 McKee v Official Assignee [2013] NZHC 340 at [8].
7 Official Assignee v Cameron [2014] NZHC 2820.
of the Regulatory Systems (Economic Development) Amendment Act 2019. Accordingly, the Official Assignee does not have sole say whether Mr Burchell’s statement of affairs of May 2017 is incorrect or incomplete.
[27] The forms for statements of affairs are prescribed in the Insolvency (Personal Insolvency) Regulations 2007, regs 6 and 8. The requirements for a statement of affairs have changed since Mr Burchell’s adjudication. Regulation 6(2) originally required 15 categories of information. Now, the list is much longer. Mr Burchell was required to provide a statement of affairs under the regulations in force at the time of his adjudication, but no more than that. The form of the statement of affairs filled in by Mr Burchell was drawn up in 2016. It requires more information than under reg 6(2) as it stood in 2011. Accordingly, Mr Burchell cannot be taken to task for not providing information that was not required in 2011.
[28]Regulation 6(2) includes these requirements:
(l)a statement of the debtor’s current assets, including the description, value, and location of those assets:
…
(n)a statement of the debtor’s liabilities, including any contingent liabilities, with the following details for each liability:
(i)the amount:
(ii)whether it includes goods and services tax:
(iii)how it was incurred:
(iv)whether it is secured:
(v)if it is secured, a description of the security:
(vi)whether it is a preferential debt:
[29] The Official Assignee’s form asks the debtor to say whether they have specific sorts of property – for example, bank accounts, tax refunds, debts, interest in real estate, interest in deceased estates, motor vehicles and other assets. Similarly, it asks the bankrupt to state whether they have various kinds of liabilities. I accept that the questions directed at particular categories of assets and liabilities are appropriate and are within the regulations. They provide a convenient checklist.
[30] Mr Burchell confirmed that the handwriting on the document is his. He had signed it. I found it difficult to read the handwriting and I asked him to explain it to me. That was so that I could establish whether his statement of affairs complied.
[31] Mr Burchell has not given his IRD number (reg 6(2)(f)). He has not given his current address (reg 6(2)(b)), but he has given a fax number, a mobile phone number and a post office box number. The form requires Mr Burchell to give an itemised statement of his expenses including a statement of his partner’s income (reg 6(2)(j)), where he has claimed for her expenses. Mr Burchell has, however, refused to give his wife’s income, writing “none of your business”.
[32] Mr Burchell’s answers to questions about real estate are inadequate. In answer to the question whether he owns or is buying any land or buildings, he has circled both “no” and “yes” and in response to the question: “What type of property?” he has circled “residential”, “commercial” and “other”. He has given an estimated market value of $4 million. He has answered “No” to whether there are mortgages against the property and he has ticked “Yes” to whether the property is insured. He has answered to ‘No” to whether it is rented out. He has answered “No” to whether it is Māori land. These answers would suggest that he has some property but he will not say where it is or what it is.
[33] In response to a question whether he has any interest in deceased estates he has indicated that he has an interest in the estate of his late father. But he has not provided any of the other information required, including the name and contact details of the organisation administering the estate. He has shown that he owns life insurance policies, but he has not given details of them. His statement also has complaints about the Official Assignee and the police having taken records and other assets.
[34] Some of his answers suggest wishful thinking. When asked if there are any contracts requiring completion, he has written that there are over 4,500 contracts with a value of $1,000 each, but that goes back to the period before his first bankruptcy, not this one.
[35] Usually a debtor gives their statement of affairs when they are applying to be made bankrupt or a bankrupt makes theirs shortly after adjudication. Accordingly, they will give information at the time of their bankruptcy. Here, Mr Burchell gave information about five-and-a half years after his adjudication. By then the Official Assignee will have taken control of many of his assets and they were no longer in the control of Mr Burchell. All the same, a statement of affairs is important.
[36] It would be unrealistic to expect perfection. People often become bankrupt because they have not been able to manage their financial affairs successfully. They are often poor record-keepers. They often lose track of who they owe money to. Even so, at a minimum, the bankrupt must address each question in the form and give an answer to the best of their knowledge, information and belief. Even if that involves saying that they do not know or cannot find their records.
[37] In this case, Mr Burchell did know some of the information asked for (his Inland Revenue number, his current address, whether he owned any real estate, and the details of the people administering his father’s estate) but still chose not to give it. In my judgment, that is less than substantial compliance. He has accordingly not given a statement of affairs under s 69 and time did not start to run under s 290.
Should Mr Burchell be discharged?
[38] In ASB Bank Ltd v Hogg,8 the Court of Appeal stated the principles for applications for early discharge under the Insolvency Act 1967. They are equally applicable to the 2006 Act:
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 [now s 294 of the Act] 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) [now s 296 of the Act] which lists matters on which the assignee is to report to the
8 ASB Bank Ltd v Hogg [1993] 3 NZLR 156 (CA) at 157–158.
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 as to 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 the breadth of the powers conferred under s 110 [now s 298 of the Act]. 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.
[39] Mr Burchell has been subject to the obligations and disabilities of an undischarged bankrupt ever since his adjudication in December 2011, including:
(a)Under s 138 of the Insolvency Act — assisting the Assignee in the realisation of the bankrupt’s assets and distributing the proceeds among creditors.
(b)Under s 149 — not to carry on business without the consent of the Official Assignee and not to work in the business of a relative.
(c)Under s 433(1)(f) — not to leave New Zealand without the consent of the Assignee.
(d)Under s 433A — not to incur credit for more than $1,000.
(e)Under ss 142-146 — duties to give the Assignee information.
(f)Under s 147 — contributing to payment of debts.
(g)Under s 151 of the Companies Act 1993 — he cannot be a director of a company.
(h)Restrictions under other statutes.9
9 Paul Heath and Michael Whale Heath & Whale on Insolvency (3rd ed, LexisNexis, Wellington, 2018) at [5.17] and [5.21]–[5.22].
[40] Mr Burchell’s bankruptcy has continued only because he did not provide a proper statement of affairs. He could have got a discharge much earlier if he had filed a statement of affairs soon after his adjudication. The provision for time to start running under s 290 only if a statement of affairs is filed, was introduced to incentivise bankrupts to provide information promptly to the Official Assignee. Sometimes, bankrupts do not file their statements of affairs promptly, but if they file their statements of affairs later and there is nothing counting against their discharge, there may be good grounds for the court to grant an early discharge, that is, within three years of their statement of affairs.10
[41]Bankruptcy has these features:
(a)The estate of the bankrupt is administered in the interests of the bankrupt’s creditors, with assets realised and distributed;
(b)The bankrupt is made accountable for his insolvency: leaving creditors unpaid has consequences;
(c)Occasionally bankruptcy operates as punishment showing society’s disapproval of the bankrupt’s recklessness in incurring debts;
(d)The community is protected from the risks of the insolvent debtor incurring debts without being able to repay;
(e)Discharge to allow the bankrupt to resume commercial activity free from the liabilities on which he was adjudicated bankrupt.
[42] These matters do not require Mr Burchell to stay bankrupt. The only matter against him is his failure to file a proper statement of affairs. The Official Assignee accepts that if Mr Burchell had filed a proper statement of affairs there would be no reason to oppose Mr Burchell’s discharge. The failure should not count against Mr Burchell in the circumstances of this case. There was only one claim in his bankruptcy and that was not for a large sum. While his statement of affairs was
10 For example, McKee v Official Assignee [2013] NZHC 340.
inadequate, the Official Assignee apparently did not consider it necessary to carry out more widespread investigations, such as examinations under Part 3 subpart 5 of the Insolvency Act to establish whether Mr Burchell had more assets than he had disclosed. Mr Burchell had been discharged from his earlier bankruptcy only in 2009. It was unlikely that he had accumulated much in the way of assets between the end of his first bankruptcy and the start of his second. Mr Burchell did not fail totally to make a statement of affairs. He made an attempt – even though it was not good enough.
[43] I doubt that Mr Burchell is much of a credit risk. His unpleasant personality makes it unlikely that he would be given much credit. In insolvency law, the risk comes from beguiling rogues. Mr Burchell is not one of them.
[44] It has been a long time since Mr Burchell was adjudicated bankrupt. There is now no good reason why he should be subject to the disabilities of bankruptcy. Accordingly, he is discharged from bankruptcy.
[45] Mr Burchell also asked for a suppression order. Bankruptcy is public. Insolvency law works properly under the public gaze. Under Part 7 subpart 5 of the Insolvency Act, there are public registers with information as to bankrupts. Section 449 of the Act lists information which must be held in public registers. It is inconsistent with the requirement for that information to be held in a public register that the same information should be suppressed in this judgment. I decline Mr Burchell’s suppression application.
[46] Accordingly, I ordered Mr Burchell’s discharge from bankruptcy but dismissed his applications for all other orders. The discharge took effect from Tuesday 18 May 2021.
…………………………………….
Associate Judge R M Bell
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