Havenleigh Global Services Ltd v Henderson
[2015] NZHC 1762
•29 July 2015
IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY
CIV 2010-409-000559 [2015] NZHC 1762
IN THE MATTER OF of the Insolvency Act 2006 and
IN THE MATTER OF
the bankruptcy of
DAVID IAN HENDERSONBETWEEN
HAVENLEIGH GLOBAL SERVICES LIMITED AND FM CUSTODIANS LIMITED
Judgment Creditors (Substituted
Creditors)AND
DAVID IAN HENDERSON Judgment Debtor
Hearing: 16 and 17 July 2015 Appearances:
M S R Palmer, QC and P V Cornegé for Official Assignee
D I Henderson (Bankrupt) in PersonT Cooley as counsel assisting the Court (excused from the hearing)
Ruling:
29 July 2015
PRE-EXAMINATION RULING (NO. 2) OF ASSOCIATE JUDGE OSBORNE
as to cross-examination and discovery
Introduction
[1] David Ian Henderson (Mr Henderson) was adjudicated bankrupt on
29 November 2010.
HAVENLEIGH GLOBAL SERVICES LIMITED v HENDERSON [2015] NZHC 1762 [29 July 2015]
[2] He was to have been automatically discharged from bankruptcy in January
2014.
[3] The Assignee, in November 2013, filed a Notice of Objection to
Mr Henderson’s discharge, pursuant to s 292 Insolvency Act 2006.
[4] The Court has allocated 10.00 am, 3 August 2015 as the commencement of the public examination of Mr Henderson as required by s 295 of the Act, and Mr Henderson has been summoned accordingly.
[5] On 19 June 2015, the Assignee filed her report as required by s 296(1) of the
Act.
Mr Henderson’s interlocutory applications
[6] This judgment is in relation to that part of a notice of interlocutory application by Mr Henderson in which he seeks two sets of orders in relation to the conduct of the public examination. Mr Henderson seeks orders:
(a) allowing him to cross-examine a finite list of witnesses relevant to the determination of the proceeding; and
(b)requiring that the Assignee provide to Mr Henderson certain categories of documents as specified in his application being:
(i) copies of all s 165 notices issued in respect of the bankruptcy;
(ii)copies of all transcripts of interviews conducted or purportedly conducted under s 165;
(iii) copies of all s 171 notices issued in respect of the bankruptcy;
and
(iv)copies of any reports, memoranda, diary notes, inter-office memos and e-mails, between office and/or employees of the Insolvency and Trustee Service.
[7] This judgment also formally relates to a final part of Mr Henderson’s notice of interlocutory application being a request for an order that Mr Henderson be permitted to inspect documents pursuant to s 153 of the Act. In the course of argument, that application fell away. The Assignee’s position has been that all relevant documents have been made available for inspection. If issues remain they are for resolution pursuant to Mr Henderson’s appeal rights and not as an interlocutory issue relating to the public examination. For that reason, this aspect of Mr Henderson’s interlocutory applications will be formally dismissed at the conclusion of this judgment.
[8] The Assignee opposes the remaining applications. Through Mr Palmer QC, she asserts that the calling of witnesses (employees of the Ministry for Business Innovation and Enterprise (MBIE)) for cross-examination would be contrary to the scheme, purpose and text of the Act and of the High Court Rules. She says, in relation to disclosure of documents, that her report contains all information relied upon by the Assignee and that there is no good reason to require disclosure of further information.
The statutory regime – examination concerning discharge from bankruptcy
Introduction
[9] The Act provides that a bankrupt is automatically discharged from
bankruptcy three years after filing the bankrupt’s statement of affairs.1
[10] The Assignee, or with the Court’s permission, a creditor, may object to the bankrupt’s automatic discharge.2
1 Insolvency Act 2006, s 290(i).
2 Section 292(i).
[11] Sections 295 to 299 of the Act, under a heading “Examination concerning discharge from bankruptcy”, establish a regime of public examination of a bankrupt when, as in this case, the Assignee or a creditor has objected to the bankrupt’s automatic discharge.3
The context – automatic discharge after three years
[12] Section 298 of the Act invests the Court when conducting a public examination with discretion to make one of a number of orders, including immediate discharge from bankruptcy. The leading authority on the principles relating to the exercise of the Court’s discretion is the judgment of the Court of Appeal in ASB Bank v Hogg.4 That case involved an application for early discharge,5 but the Court of Appeal has subsequently applied the principles from ASB Bank v Hogg to a case in which the bankrupt was otherwise eligible for automatic discharge (after three years).6
[13] In ASB Bank v Hogg, the Court spoke of the breadth of the discretion under s
110 of the 1967 Act (now s 298):7
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 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
3 Pursuant to s 295(1)(a) Insolvency Act 2006 – s 295(1)(b) and (c) also providing for other events which trigger a public examination. By s 295(3), ss 173 – 181 of the Act apply to a public examination under s 295 so far as they are applicable and with the necessary modifications.
4 ASB Bank v Hogg [1993] 3 NZLR 156 (CA).
5 Pursuant to s 108 Insolvency Act 1967, the predecessor of s 294 Insolvency Act 2006.
6 See Armitage v Established Investments Ltd (In Liq) [2012] NZCA 439 at [21].
7 ASB Bank v Hogg, above n 4, at 157–158.
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. 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.
The purpose of the public examination
[14] The central purpose of the public examination required under s 295(1) is explained in s 295(1) itself, through the requirement that the bankrupt is to be publicly examined “concerning his or her discharge”. That breadth of purpose goes beyond the investigative purpose of the private examination conducted under s 165 of the Act (which I have considered in a separate judgment delivered at the same time as this).8 As the passage I have cited from the Court of Appeal’s judgment in ASB Bank v Hogg indicates, the material put before the Court at a public examination is provided to “assist the Court in making its decision”, that is to say its
decision as to whether to immediately discharge the bankrupt or make one of the other orders under s 298(1) of the Act.
The nature of an examination under s 295 of the Act
[15] Mr Palmer and Mr Henderson advance competing submissions as to the nature of the examination under s 295 of the Act. The Court accordingly retained as counsel to assist the Court, Mr Cooley, who provided written submissions on these applications.
[16] As there are competing views as to the nature of the public examination, I
will, for present purposes, use the neutral term “process”.
[17] Counsel and Mr Henderson recognise that the accurate identification of the nature of the process should inform the Court’s determination of Mr Henderson’s applications in relation to cross-examination and discovery.
[18] I will, therefore, summarise my conclusions as to the nature of the process before setting out my more detailed reasoning.
8 Re Henderson, Havenleigh Global Services Ltd v Henderson (No 1 Ruling) [2015] NZHC 1761.
The nature of the public examination and discharge process – a summary
[19] The process in which the Court is here involved is the public examination and discharge process under ss 295–298 of the Act.9 Mr Henderson has not made an application for discharge. This case is not one in which two processes are in play, namely the public examination and the bankrupt’s application.
[20] The public examination and discharge process involves the following elements.
A The purpose of summoning the bankrupt
[21] The following inform the purpose of summoning the bankrupt:
(a) The bankrupt is summoned for inquisitorial and investigative purposes (examination concerning his/her discharge) and not as part of ordinary civil litigation between litigant parties.
(b)The Court examination is to remain on foot until the Court is satisfied that the bankrupt’s conduct, dealings, and property (the examination’s subject-matter) have been sufficiently investigated and that the investigation is finished.10
B The Assignee’s report
[22] The following apply to the Assignee’s report:
(a) The Assignee’s report must contain a report as to the matters identified in s 296(2) of the Act.11
(b) The function of the Assignee’s report is to provide information to the
Court to assist the Court in making a decision as to discharge. It also
serves as something in the nature of an agenda of the Assignee’s
9 As supplemented by ss 173–181 Insolvency Act 2006: see s 295(3).
10 Insolvency Act 2006, s 179(2).
11 Section 296(1)(b) and (2).
concerns (leading to her objection to discharge) on which the bankrupt may be examined.
(c) The Assignee is not required in her report to provide material which qualifies as admissible evidence in terms of the Evidence Act 2006 but the Assignee may do so as she sees fit.
(d)The report, in terms of both its narrative and its attachments, is information available to the Court for the purposes of its decision making under s 298 of the Act.
C The Court’s conduct of the public examination
[23] The following apply to the conduct of the examination:
(a) The Court holds and conducts the public examination in terms of the statutory jurisdiction.
(b)Parliament is taken to have at the same time granted the Court, in relation to the conduct of the examination, such ancillary powers as enable the Court to effectively regulate the process, to ensure fairness in the investigative procedures, and to prevent abuse of the process.
D Rights in relation to the public examination process
[24] The following rights arise in relation to the public examination:
(a) The bankrupt upon the examination commencing is “detained” in terms of s 23(1) New Zealand Bill of Rights Act (NZBORA) and has the right to consult a solicitor.
(b)The Court will confine the examination to its subject-matter and will prevent its oppressive use, thus requiring the Court:
(i) to confine the bankrupt’s examination to responsive answers;
and
(ii)to prohibit conduct amounting to oppression and/or exclude evidence thereby obtained.
(c) The Assignee may by leave of the Court file a supplementary report including additional information and/or evidence.
(d)The bankrupt may be represented and questioned by his or her lawyer, with any answers forming part of the examination.12
(e) The bankrupt may by leave adduce additional evidence (beyond that provided in answers in the course of examination) on the examination’s subject-matter at a time to be directed by the Court.
(f) The bankrupt is not entitled to require either evidence from, or the attendance for examination of, the Assignee or any employee of MBIE.
(g)The Court in its conduct of the examination may request the Assignee as an officer of the Court to provide further assistance in the form of documents or additional evidence relevant to the subject-matter of the examination. The Court will generally exercise this power only where such documents or evidence are reasonably required to enable the Court reliably to determine an aspect of the examination’s subject- matter.
E The Court’s decision on discharge
[25] The following inform the Court’s discretionary decision on discharge:
(a) The Court is required to reach its decision “when it conducts the examination”.13
12 Section 186.
13 Section 298(1).
(b)The onus is on the Assignee to satisfy the Court that it is in the public interest that the bankruptcy (which would otherwise automatically end) should continue for a further period or be otherwise conditional.14
(c) There are otherwise no threshold requirements in the exercise of the discretion to discharge.15
(d)The Court in reaching the decision may have regard to the “facts, matters or circumstances” of which it is satisfied.16
The purpose of summoning a bankrupt to public examination
A1 An inquisitorial and investigative purpose
[26] The Insolvency Act provides for three types of examination of a bankrupt. First, the bankrupt may be privately examined by an Assignee or a District Court Judge, pursuant to ss 165 to 172 of the Act. Secondly, ss 173 to 181 of the Act provide for a public examination of the bankrupt by the Court during bankruptcy. Thirdly, there is the public examination of the bankrupt concerning discharge (as in this case) which is governed by ss 294 to 298 of the Act.
[27] The process of the public examination has the following aspects:
(a) The examination of the bankrupt occurs under s 177 of the Act. (b) It is conducted by the Court, not a party or parties.17
(c) Parliament requires a report to be filed by the Assignee, but makes no
provision for a reply by the bankrupt (except through examination).18
14 Edwards v Official Assignee CA236/03, 1 April 2004 at [29].
15 ASB Bank v Hogg, above n 4 at 158.
16 At 158.
17 Insolvency Act 2006, s 295(1); see also s 173(1).
18 Section 296; see also s 176.
(d)The examination is intended to be inquisitorial and far reaching (while remaining relevant), the bankrupt having no entitlement to notice beforehand of who will ask questions and what the questions will be.19
(e) The examination of the bankrupt is not a cross-examination in the ordinary sense of civil litigation – it is the Court’s examination.
(f) The bankrupt must answer all questions the Court asks or allows the bankrupt to be asked.20
(g)The bankrupt is not excused from answering a question on the grounds of self-incrimination.21 However, statements made by the bankrupt at his/her examination are inadmissible in criminal proceedings against the bankrupt (except in relation to perjury or when charged with an offence such as wilfully misleading the Official Assignee).22
(h)The Court is precluded from ordering that an examination is ended unless the Court is satisfied that the bankrupt’s conduct, dealings and property have been sufficiently investigated and that the investigation is finished (my emphasis).23
[28] The judgment of (English) Court of Appeal in 1883 in Ex parte Willey; in re Wright provided foundational observations as to examinations conducted in the Court’s bankruptcy jurisdiction.24 Of the power to summon persons capable of giving information, Jessel MR stated:25
It is a power, not to summon a man as a witness, but to summon him for the purpose of discovery, and he is treated in a totally different way from a witness.
19 Section 177(4).
20 Section 177(2).
21 Section 184.
22 Section 185.
23 Section 179(2).
24 Re Scharrer; ex parte Willey; in re Wright (1883) 23 Ch.D.118.
25 At 128.
…
It is framed with a different view from that of compelling a man to give testimony. It is not testimony but discovery emphatically which is its object.
Now that is a very grave power to entrust to any Court or any man, viz., power to summon any other man whom you suspect (for mere suspicion will do) to be capable of giving information, and to get any information from him, although that information may be extremely hostile to the interests of the man himself. It is a power which, so far as I know, is found nowhere except in bankruptcy and the winding-up of companies (which is a kind of bankruptcy); it is a very extraordinary power indeed, and it ought to be very carefully exercised.
[29] The inquisitorial nature of the public examination in insolvency law was well-captured by Fry LJ five years later when his Lordship observed (in 1888) in Re Scharrer; ex parte Tilly:26
… The power of examination is … expressly vested in the Court, and the person summoned is not, therefore, in the ordinary position of a witness called by a litigant party in order that he may be examined by the two litigant parties before the Court, but he is, so to speak, the witness of the Court. No doubt it has been the common practice, and I have no doubt it is a convenient practice, to allow the counsel or other representative of the trustee or the official receiver to put the questions, but still the conduct of the examination rests with the Court. … I entertain no doubt that this power of examination is not a merely formal one, but that it enables the Court to examine the witness usefully and fruitfully – to sift the matter in hand so far as may be necessary for the information of the Court and as the Court may require. I am not disposed to determine now the extent to which the examination might go. For aught I can see, it might go as far as the judge might consider necessary in order to bring out the real facts of the case, so far as the witness is capable of giving the information.
[30] In Re North Australian Territory Company, Bowen LJ described the power to summon persons to attend to give evidence or produce documents as an “extraordinary power of an inquisitorial nature”.27
[31] The scope and nature of the public examination of a bankrupt in Re Paget; ex parte Official Receiver was the subject of Lord Hanworth’s judgment (with which the other members of the Court of Appeal agreed).28 His Lordship’s description of
the nature and purpose of the procedure has been repeatedly adopted in New Zealand
26 Re Scharrer; ex parte Tilly (1888) 20 QBD 518 at 521-522.
27 Re North Australian Territory Company (1890) 45 ChD 87 (CA).
28 Re Paget; ex parte Official Receiver [1927] 2 Ch 85 (CA).
and in other jurisdictions which have a public examination regime. His Lordship stated:29
The debtor in the present case came up for public examination … under the provisions of s 15 of the Bankruptcy Act 1914 which require that a debtor against whom a receiving order has been made shall be publicly examined as to his affairs. I use that word comprehensively, the object of the examination being not merely for the purpose of collecting the debts on behalf of the creditors or of ascertaining simply what sum can be made available for the creditors who are entitled to it, but also for the purpose of the protection of the public in the cases in which the bankruptcy proceedings apply, and that there shall be a full and searching examination as to what has been the conduct of the debtor in order that a full report may be made to the Court by those who are charged to carry out the examination of the debtor. To concentrate attention upon the mere debt collecting and distribution of assets is to fail to appreciate one very important side of bankruptcy proceedings and law.
…
It has been laid down by Phillimore J in Re Atherton … and I agree with his decision, that in the course of the public examination of a debtor the debtor is not entitled to refuse to answer questions put to him on the ground that the answers thereto may incriminate him, the purpose of the Act being to secure a full and complete examination and disclosure of the facts relating to the bankruptcy in the interests of the public and not merely in the interests of those who are the creditors of the debtor.
[32] In the development of insolvency law in the British Commonwealth, there is a long tradition of structural similarities, as for instance between New Zealand, Australia and the United Kingdom, but also Canada. The authors of Heath and Whale on Insolvency in their introduction to the Insolvency Act 2006, refer to the statute as continuing “… the general alignment with the United Kingdom and
Australia”.30
[33] The 2006 Act itself represents a modernisation of the well-understood principles of the 1967 Act. The 1967 Act had in turn introduced the automatic discharge regime and an objection procedure.31
[34] Both the 1967 Act and the 2006 Act incorporated processes of both private and public examinations which have long existed in varying forms through the
29 At 87–89.
30 Heath and Whale on Insolvency (online looseleaf ed, LexisNexis) at [2.3].
31 (20 July 1967) 352 NZPD 2068-2072.
Commonwealth. Under the Bankruptcy Act 1908 (NZ), provision existed for private examinations and public examinations.32
[35] In Re Hardy (a bankrupt), ex parte Official Assignee, Hosking J, speaking of
the Assignee’s powers of private examination said:33
The powers conferred on the Assignee are conceived in the most comprehensive terms – wider in their specific statement than those found in the English Act – entitling him to make the most searching inquisition.
[36] In his 1994 judgment in Re Baird (A Bankrupt), Master Kennedy-Grant had conducted the public examination of a bankrupt following the Assignee’s objection under the 1967 Act to automatic discharge.34 His Honour identified the public examination of the bankrupt, whether under the existing ss 69 or 109, as “an inquisitorial process”.35 He explained that observation by reference to similar features of the process as those I have identified above at [27].
[37] Then in Gray v Legal Services Board, Potter J had to consider whether the bankrupt’s public examination was a “proceeding” and more particularly a “civil proceeding” for the purposes of eligibility for legal aid.36 Potter J followed Re Baird in finding that the public examination was an inquisitorial process and not a civil proceeding. In particular, her Honour found:37
… as analysed by Master Kennedy-Grant in Re Baird (supra), the public examination of a bankrupt under s 109 and s 69 of the IA is an inquisitorial process, an inquiry, an information gathering procedure, which provides to the Official Assignee, and importantly the Court, information concerning the affairs of the bankrupt. In the case of the public examination conducted under s 109 the information made available to the Court through the examination assists the Court in exercising its power under s 110 to discharge, refuse discharge or discharge upon conditions, the bankruptcy order.
[38] The Australian Courts adopted a similar approach to bankruptcy examinations. Clyne J in Re Andrews applied observations of the English Court of
32 Bankruptcy Act 1908, ss 92 and 126.
33 Re Hardy (a bankrupt), ex parte Official Assignee [1922] NZLR 108 (SC) at 118-119.
34 Re Baird (A Bankrupt) [1994] 2 NZLR 463 (HC).
35 At 487, citing what is now Insolvency Act 2006, ss 176 and 296(2).
36 Gray v Legal Services Board (1998) 11 PRNZ 687 (HC).
Appeal in Re Scharrer.38 The Full Court of the Federal Court of Australia in Karounos v Official Trustee followed Re North Australian Territory Co in observing that the power to issue summonses was “an unusual and far-reaching one”.39 In
1965, in dealing with the cognate provisions under the Companies Act 1961, Windeyer J in Rees v Kratzmann cited the English cases down to Re Paget, concluding that:40
… the purpose of the bankruptcy statute [is] to secure a full and complete examination and disclosure of the facts relating to the bankruptcy in the interests of the public.
[39] Subsequently, in R v Zion, Murphy J in the Supreme Court of Victoria had to give a ruling during the course of the trial of the accused on criminal charges.41 His Honour admitted evidence obtained during the compulsory examination of the accused conducted under the Bankruptcy Act 1966 (Cth), holding that s 69(12) of the Bankruptcy Act 1966 abrogated the privilege against self-incrimination. Murphy J observed that the examination is “… inquisitorial and investigatory by nature.”42
[40] Accordingly, the cases demonstrate that the public examination is not a civil trial. In his excellent article entitled “Bankruptcy Examinations under Section 81 of the Bankruptcy Act”, Professor Andrew Keay dealt with the nature of the public examination under a heading “An Inquisitorial Power”.43 Professor Keay analysed the process which exists in the form of the public examination:44
It is unusual to find an inquisitorial power employed in a common law system. It is a power which is essentially foreign to the adversary system where one has two parties opposed to each other and a judge who acts as the umpire. The examinee is in an unusual position in that he or she is not called by a party to a litigious proceeding, as is the usual situation with a witness. He or she is the witness of the Court or registrar on behalf of the Court or registrar.45 Each question is put to the examinee only with the leave of the Court or registrar on the behalf of the Court or registrar and it is only
38 Re Andrews [1958] 18 ABC 181.
39 Karounos v Official Trustee (1988) 80 ALR 626 (FCAFC) at 632.
40 Rees v Kratzmann (1965) 114 CLR 63 at 80.
41 R v Zion [1986] VR 609 (VSC).
42 At 609.
43 Andrew Keay “Bankruptcy Examinations under Section 81 of the Bankruptcy Act” (1992) 17
UQLJ 35-56.
44 At 43.
45 Re Scharrer; ex parte Tilly, above n 24, at 522; Re H J Price (No 3) (1948) 14 ABC 137 at 139;
Re Andrews, above n 36, at 184.
convenience which dictates that the questions are usually asked by counsel for the trustee or Official Receiver.46 Thus, questions are not put in order to make out or strengthen a party’s case. The traditional rules of evidence will not be allowed, necessarily, to limit the examination of the examinee. There is no such thing as examination-in-chief or cross-examination.47 The examinee may be asked questions by the counsel for the trustee or Official Receiver which could not be asked of an ordinary witness summoned to court by a subpoena, and the examinee may be required to give evidence which may be used in later proceedings, even against the examinee.48 The reason for this is that the object of the examination is not to take testimony, but to obtain discovery.49 Questions are not limited to a matter pertinent to some disputed issued, as is the situation with normal litigation; rather, questions can be wide ranging, provided that they are relevant to the bankrupt and his or her examinable affairs. All of this has led judges to refer to the power as extraordinary.50
A2 Examination ongoing until Court order made
[41] The provisions of s 179(2) Insolvency Act 2006 (NZ) (which establish when the Court may bring the public examination to an end) flow from the inquisitorial and investigative nature of the public examination. The subsection provides:
The Court must not make an order that the examination is ended unless it is satisfied that the bankrupt’s conduct, dealings, and property have been sufficiently investigated and that the investigation is finished.
[42] The judgment of Hardie Boys J in In Re Wallace Gunson, Neale and Co, is a powerful reminder of the Court’s responsibility of full investigation and the Court’s duty to be satisfied that all matters relating to a bankrupt’s conduct, dealings and property, have been sufficiently investigated.51 In Wallace Gunson, the bankrupts had been publicly examined over three full days. Counsel applied for an order under s 124(7) of the Bankruptcy Act 1908 (now s 179(2) of the 2006 Act) that the
bankrupt’s examination had finished. Hardie Boys J referred to non-committal answers that had been given to questions put by counsel for the Official Assignee
and counsel for creditors. His Honour concluded:52
46 Re Andrews at 184.
47 Re Greys Brewery Company (1883) 25 ChD 400 at 404.
48 Bankruptcy Act 1966 (Cth), s 81(7).
49 Ex parte Willey; In re Wright (1883) 23 ChD 118 at 128.
50 Re Imperial Continental Water Corporation (1886) 33 ChD 314 at 316; Re North Australian
Territory Company, above n 25, at 93; Re Andrews, above n 36, at 184; Re A Debtor (No 12 of
1958) [1968] 2 All ER 425 (Ch) at 429; Re Csidei (1979) 39 FLR 387 at 392; Re Abrahams; ex parte Thomas (1985) 70 ALR 784 (FCA) at 790; Re Bride [1988] FCA 261.
51 In Re Wallace Gunson, Neale and Co [1960] NZLR 769 (SC).
The order sought is one for the Court to make or to withhold, and involves the Court being satisfied that the bankrupts’ affairs have been sufficiently investigated and that his [sic] examination is finished. I find myself quite unable solemnly to declare by an order under s 124(7) that such is the case at the present time, notwithstanding the absence of objection from those represented at the hearing.
[43] In short, counsel and the parties had ignored the fact that the public examination process was not an inter partes process, but an inquisitorial and investigative process.
The Assignee’s report
B1 Content of report
[44] Section 296(2) of the Act specifically identifies the required contents of the
Assignee’s report:
(a) the bankrupt’s affairs; and
(b) the causes of the bankruptcy; and
(c) the bankrupt’s performance of his or her duties under this Act; and
(d) the manner in which the bankrupt has obeyed orders of the Court; and
(e) the bankrupt’s conduct before and after adjudication; and
(f) any other matter that would assist the Court in making a decision as to
the bankrupt’s discharge.
B2 Function of the Assignee’s report
[45] The function of the Assignee’s report is to provide information to the Court to
assist it in making its decision as to discharge.53
[46] The report will include the Assignee’s conclusions from her own investigations to date. The report will also contain a report as to the facts which underlie the Assignee’s conclusions and may incorporate documents including relevant examination records. The Assignee’s conclusions are entitled to the respect and weight that is appropriate to the Assignee’s public office and standing as an
officer of the Court.54
53 See Insolvency Act 2006, s 296(2)(f).
54 Ian Fletcher Law of Bankruptcy (1st ed, MacDonald & Evans, Plymouth, 1978) at 286; M Murray and J Harris Keay’s Insolvency: Personal and Corporate Law and Practice (8th ed, LawBook Co, Sydney, 2014) at 6.195; Re Csidei, above n 48, at 393.
[47] In Re Baird (A Bankrupt), Master Kennedy-Grant observed of the nature of material contained within the report:55
The evidence obtained from other parties in their private examination is put to the bankrupt in his or her public examination not in order to prove the truth of what was said by the other persons in private examination but to obtain the bankrupt’s response to what was said …
The Master’s observations are apposite not only to the examination records relied on by the Assignee but also to the entire content of the Assignee’s report.
[48] The standing of the Assignee’s report was the subject of challenge in Re
Peters, ex parte Marac Finance Ltd.56
[49] In Peters, the Assignee had filed her report as required pursuant to s 296 of the Act. It was completed by a Deputy Assignee who for a lengthy period overall had responsibility for the day-to-day administration of the estate.57 The Assignee filed an initial report supported by 10 volumes of documentary evidence. It included the record of examinations of the bankrupt and his wife and documents obtained from the bankrupt and associated entities. The Assignee later filed a supplementary report annexing further documents.
[50] Not only did the Court conduct Mr Peters’ public examination pursuant to the Assignee’s objection to automatic discharge, but also considered Mr Peters’ opposed application for discharge. The Court accordingly received evidence also in affidavit form including from a senior insolvency officer who had taken over day-to-day administration of the bankrupt estate, and an accountant employed by the MBIE, who had assisted with investigations. Deponents were cross-examined (a procedure which would not usually occur if the only matter before the Court were the
bankrupt’s public examination).
55 Re Baird, above n 32, at 467.
56 Re Peters, ex parte Marac Finance Ltd [2014] NZHC 1755, [2015] NZCCLR 2 (Reasons Judgment); Re MARAC Finance Ltd, ex parte Peters [2013] NZHC 3568 (Prior Outcome Judgment).
57 At [75].
[51] Associate Judge Abbott was required to rule upon the challenge to the report’s admissibility and any weight to be accorded to its contents. His Honour concluded:
[86] In my opinion the issue with the present case is not whether the report is admissible, but rather what weight is to be attached to it on the important matters of Mr Peters’ conduct and his involvement in business entities post adjudication, given the direct evidence provided by Mr Peters’ witness. Given that it was prepared as part of the Assignee’s statutory function and for the purposes of informing the Court, I consider that it is admissible as sufficient evidence of undisputed matters, or even of matters where the underlying documentary evidence establishes the point clearly. However, its admissibility is subject to the court’s assessment of the weight, if any, is to be given to the affidavit if the evidence is based on hearsay, assumptions or opinions that run counter to direct evidence.
[87] I accept that the Assignee has compiled the report as thoroughly as he could given the size of this estate, the vast amount of documentation within the various entities, and the challenges of extracting relevant information. However, matters of hearsay and conjecture must give way to direct and credible evidence of facts to the contrary, and the weight to be given to assumptions and opinion must also be reviewed where the underlining facts are disputed by cogent and credible evidence.
[52] Some aspects of Associate Judge Abbott’s conclusions cannot be automatically applied in Mr Henderson’s case because I am dealing solely with his public examination under s 295 of the Act. Other aspects do apply and I will adopt them.
[53] First, it is inapt in relation to the Assignee’s report provided pursuant to s 296 of the Act to speak of “admissibility”. Parliament has provided for a report to be prepared and filed and the Court must consider it.
[54] Secondly, since the report is provided as part of the Assignee’s statutory function for the purposes of informing the Court, the Court is entitled to adopt conclusions which the Assignee has reached in her report where they stand undisputed at the conclusion of the public examination or where there is evidence (in the sense of documentary or other admissible evidence) which establishes a factual matter to the satisfaction of the Court. I respectfully adopt the Associate Judge’s conclusion to that effect.
[55] Thirdly, Associate Judge Abbott concluded that when reaching factual conclusions for the purpose of making a s 298 order, the Court may take into account credible evidence of facts which contradict conclusions or evidence of the Assignee. I adopt that conclusion. Such evidence may exist through the bankrupt’s answers on oath or such additional information as is produced, by leave, to the Court.
[56] I therefore conclude that the Assignee’s report, in terms of both its narrative and its attachments, is information available to the Court for the purposes of its decision-making under s 298 of the Act.
The absence of a rule rendering the Assignee’s report admissible
[57] In reaching the conclusions I have set out at [53]–[56], I do not overlook a peculiarity of the New Zealand subsidiary legislation. Until the revocation of the Insolvency Rules 1970,58 a rule (r 35) existed providing that the Assignee’s report was sufficient evidence of matters reported upon in the absence of proof to the contrary.59 Rule 35 was relied upon by Associate Judge Bell in Darby v Official Assignee, a case decided under the 1987 Act and Associated Rules.60 Subsequently, in Peters, Associate Judge Abbott observed that r 35 had been revoked (and not replaced in Part 24 of the (Amended) High Court Rules).61 Counsel have been unable to refer me to any legislative history which explains any conscious decision- making in relation to evidential issues following the revocation of r 35.
[58] I do not view the revocation of the specific rule as altering the weight which the Court is to attach to the contents of the Assignee’s report. The conclusions I have reached at [53]–[56] are driven by the scheme of the Insolvency Act concerning a public examination conducted upon the Assignee’s objection to automatic discharge. While a specific rule may serve to clarify the weight attaching to the contents of the
Assignee’s report, the presence or absence of such a rule does not alter the clear
58 Revoked by r 4 High Court Amendment Rules (No 2) 1999.
59 Similar rules have existed and continue to exist in the United Kingdom (Insolvency Act 1986 (UK), s 289(4)) and Canada (Bankruptcy and Insolvency Act RSC 1985, c B–3 (Canada), s
170(5)).
60 Darby v Official Assignee [2013] NZHC 22 at [33].
61 Peters v Official Assignee, above n 56, at [79], see fn 29.
statutory intent that the content of the Assignee’s report is to be given appropriate weight when the Court comes to make its discharge decision under s 298 of the Act.
The concepts of “evidence” and “proceedings”
[59] My preceding conclusions flow from the nature of the public examination process which Parliament enacted. It is a process in which the Court’s ultimate decision on discharge from bankruptcy is based centrally on the Assignee’s report as augmented by the bankrupt’s public examination. In that inquisitorial and investigative process the Court has (as I will come to) ancillary powers which are
utilised to ensure a fair outcome, but still through an inquisitorial process.62
[60] I have heard detailed submissions as to legislative provisions, particularly in the High Court Rules, which focus on the concept of “proceedings”. The submissions carried the suggestion that in relation to matters such as evidence and discovery at least some aspects of the High Court Rules which apply to civil proceedings might be properly applied to the process of public examination.
[61] I do not find a detailed analysis of High Court Rules as to witnesses’ evidence and documentary evidence to be of particular guidance to the public examination process. Parliament has required the Court to make its decision in relation to the present issue of discharge not in the context of a civil proceeding but “when the
Court conducts the examination of the bankrupt under s 295”.63 In this (for the
common law) highly unusual inquisitorial process, the Court has the ancillary powers necessary to ensure a fair outcome. Nothing in the Insolvency Act 2006 (or its predecessors) suggests a parliamentary intention to impose upon the Court or those affected the procedures of ordinary civil litigation. To introduce such additional procedures would in my judgment be inconsistent with the public examination regime instituted by the Act.
[62] I therefore maintain a focus on the inquisitorial nature of the public examination and reject as inappropriate the invitation to work back from the concept
of “proceedings” in order to identify High Court Rules which might be applied to the
62 Below at [67] and following.
public examination. In this regard, I follow the (obiter) conclusion of Potter J in Gray v Legal Services Board where her Honour adopted the analysis of Master Kennedy-Grant in Re Baird.64 In his encyclopaedic judgment in Griffin v Pantzer, Allsop J similarly rejected a submission that a public examination under s 81
Bankruptcy Act 1966 (Cth) constituted “proceedings” in terms of the Evidence Act
1995 (Cth).65 His Honour found it:66
… not easy to see how an examination under s 81 is such a proceeding. It is not between parties. It is not the resolution or agitation of a lis at which evidence is adduced under the rules of evidence. It does not have parties or witnesses properly so-called. It is an interrogation – a fact-finding exercise of the kind described by Lord Hanworth MR in Re Paget.
[63] His Honour disapproved a contrary conclusion reached in Re Interchase Corporation Ltd where Kiefel J had concluded that an examination under s 596B Corporations Law was a proceeding for the purpose of the Evidence Act.67 Allsop J observed:68
The examination may be a proceeding for the Federal Court of Australia Act. It does not follow that it is a proceeding in which it is intended that evidence be adduced from witnesses.
[64] I, too, cannot view the public examination as a proceeding in which the usual rules applying to civil proceedings generally were intended by Parliament to be applied.
The conduct of the public examination
The statutory regime
[65] The public examination is required to be conducted by the Court.69
[66] Section 177 of the Act provides for the conduct of the examination:
64 Gray v Legal Services Board, above n 38, at 694, citing Re Baird (A Bankrupt), above n 35, at
467.
65 Griffin v Pantzer (2004) FCR 209 [2004] FCAFC 113 (The other members of the Full Court of the Federal Court agreed with reasons and orders which Allsop J proposed, per Ryan J at [1] and
Heerey J at [2].
66 At [202].
67 Re Interchase Corporation Ltd (1996) 68 FCR 481.
68 At [206] (emphasis original).
Conduct of examination
(1) The bankrupt must attend the examination, and may be examined as to
the bankrupt’s conduct, dealings, and property.
(2) The bankrupt must be examined on oath and must answer all questions that the Court asks the bankrupt, or allows the bankrupt to be asked.
(3) The following persons may examine the bankrupt: (a) the Assignee, or counsel for the Assignee:
(b) any creditor who has proved a claim, or counsel for that creditor.
(4) The bankrupt is not entitled to notice beforehand of who will ask the questions or what the questions will be.
Court’s ancillary powers
[67] The Court’s ancillary powers (and the need for them) were recognised by Lord Morris in Connelly v Director of Public Prosecutions, when his Lordship stated:70
… There can be no doubt that a court which is endowed with a particular jurisdiction has powers which are necessary to enable it to act effectively within such jurisdiction. I would regard them as powers which are inherent in its jurisdiction.
[68] Rosara Joseph developed an explanation of the Court’s inherent powers in her informative article “Inherent Jurisdiction and Inherent Powers in New Zealand”. Having quoted Lord Morris’s judgment, Ms Joseph noted:71
All courts possess inherent powers. These powers enable the Court to regulate its own procedures, to ensure fairness in trial and investigative procedures, and to prevent abuse of its processes.
Ms Joseph continued:72
… inherent powers are implied from a court’s substantive jurisdiction. In Zaoui v Attorney-General,73 the Supreme Court explained that inherent powers enable Courts to give effect to their jurisdiction. In McMenamin v Attorney-General,74 the Court of Appeal said that inherent powers conferred
70 Connelly v Director of Public Prosecutions [1964] AC 1254 (UKHL) at 1301.
71 Rosara Joseph “Inherent Jurisdiction and Inherent Powers in New Zealand” (2005) 11 Canta LR
220 at 232.
72 At 233.
73 Zaoui v Attorney-General [2005] 1 NZLR 577 (CA), [2005] 1 NZLR 666 (SC) at [35].
74 McMenamin v Attorney-General [1985] 2 NZLR 274 (CA) at 276.
a right on Courts to do what is necessary to enable an inferior court to exercise the functions conferred on it by statutes. This is implied as a matter of statutory construction. In Department of Social Welfare v Stuart,75 Wylie J confirmed that an “implied power” arises by necessary implication as being ancillary to the performance of functions, powers and duties conferred by the statutes. The statutory function must exist for the necessary power to be implied.
[69] In his judgment in Re H J Price (No 3) ex parte The Commercial Banking Company of Sydney Ltd in the Federal Court of Bankruptcy, Clyne J recognised the existence of inherent powers in relation to the public examination process, observing:76
When the legislature enables something to be done, it gives power at the same time by necessary implication to do everything which is indispensable for the purpose of carrying out the purpose in view …
[70] Under the Insolvency Act 2006 (New Zealand), the public examination of the bankrupt is part of the process which is intended to lead to the Court’s making of an order of discharge or otherwise (under s 298). But, pursuant to s 179(2) of the Act, the Court is not to bring the examination to an end unless it is satisfied that the bankrupt’s conduct, dealings, and property have been sufficiently investigated and that the investigation is finished. By necessary implication Parliament intended the Court to have the power to call for and consider such further information or evidence as will enable the Court to comprehensively and fairly complete the investigation.
[71] When the single process before the Court is the bankrupt’s public examination following an objection to discharge, the mandated procedure is the type of inquisitorial examination which has been in bankruptcy legislation since the
1800s. The central feature of the examination process is the inquisition of the bankrupt conducted by the Court. It is not a process structured on pleadings, evidence and cross-examination to be conducted adversarially by parties to civil litigation.
[72] There is, as Mr Palmer submitted, a further objection to the introduction of general rules of civil procedure into the public examination process prescribed by the
75 Department of Social Welfare v Stuart [1990] 1 NZLR 697 (HC) at 703.
76 Re H J Price (No 3), above n 45, at 140.
statute. While the High Court Rules ordinarily govern the practice and procedure of all civil proceedings and interlocutory applications in the High Court, that is subject to the exception in r 1.4(3)(c) High Court Rules which provides that the Rules are subject to “any statute prescribing practice and procedure of the Court in a proceeding.”
[73] The procedure by which a bankrupt may be discharged following the Assignee’s objection to automatic discharge is that identified in ss 295–299 of the Act. These provisions for a public examination prescribe a procedure other than adversarial civil litigation.
[74] A parallel conclusion may be reached through r 24.3 High Court Rules which provides that the other Parts of the Rules apply when Part 24 applies, unless they are modified or inconsistent with the Insolvency Act 2006 or Part 24, High Court Rules.
Rights in relation to public examination
[75] With very few exceptions, Parliament, in establishing the public examination regime under the Insolvency Act, has not provided the bankrupt with specifically identified rights in relation to the process. But regard must be paid to the long statutory history of public examination, its clear identification from earliest days as an “extraordinary” process of an inquisitorial nature, and Parliament’s vesting conduct of the examination in the Court. The reasonable protection of the bankrupt’s interests has been achieved by the Court’s exercise of its inherent powers to ensure fairness in the investigative process and to prevent abuse of the process. This has not generally been achieved by importing rules which apply to civil litigation generally.
[76] The New Zealand Bill of Rights Act 1990 (NZBORA) affects the public examination process.77 The bankrupt upon the examination commencing is “detained” in terms of s 23(1) NZBORA and has the right to consult a solicitor.
[77] Mr Henderson submitted that in addition to his right of representation under s
23(1) NZBORA, he has on his public examination entitlements flowing from the
77 Official Assignee v Murphy [1993] 3 NZLR 62; (1993) 4 NZBLC 103,077.
protection of natural justice under s 27 NZBORA. In particular, Mr Henderson asserts entitlements in relation to cross-examination and discovery of documents in particular
[78] Mr Henderson has urged me to apply in this case Associate Judge Doogue’s conclusions in Bryers v Official Assignee.78 In particular, Mr Henderson invites me to conclude that by an application of the principles of natural justice arising under s
27 NZBORA, Mr Henderson must have a right of discovery in relation to documents held by the Assignee and a right to have personnel of MBIE made available for cross-examination (as on a subpoena).
[79] Bryers is distinguishable with regard to the proceedings which were before the Court. In Bryers, the Court was dealing not only with the public examination of Mr Bryers but also with Mr Bryers’ application for discharge. The latter process is by its nature adversarial and is a civil proceeding.79 Affidavit evidence was filed as of right both in support of Mr Bryers’ application (by Mr Bryers) and in opposition (by the Assignee). While cross-examination was not available as of right, the High Court Rules applied to provide for cross-examination by leave.80 Similarly, while discovery would not have been available as of right, the High Court Rules provided for its availability by leave.81
[80] That is not to say the Court is devoid of powers to ensure that a bankrupt can fairly answer the conclusions of the Assignee as contained in her report.
[81] In relation to this inquisitorial process, the means by which the Court assures a fair hearing is by use of the ancillary powers to which I have referred.
[82] The required balancing is seen in the control the Court exercises, when conducting the public examination, in relation to the involvement of those who are
part of the process:
78 Bryers v Official Assignee, [2014] NZHC 2920, [2015] 2 NZLR 273.
79 At [48]–[51].
80 High Court Rules, r 7.28.
81 Rules 8.19–8.21.
(a) There are the interests of creditors and the public interest which the Assignee pursues and seeks to promote in her report.82 In a sense, the report sets the agenda for the public examination (subject of course to the Court’s overarching conduct and supervision of the process).
(b)The Court, in the public interest, is entitled to focus the examination on answers and explanations of matters which arise from the Assignee’s report (whether questions are asked by the Court itself or with the Court’s leave by another). The Court may curtail and exclude non-responsive answers. The Court’s responsibility in this regard is illustrated in the judgment of Hardie Boys J in Re Wallis
Gunson Neale & Co.83 His Honour observed of the examination of a
bankrupt:84
… I took the responsibility of discouraging him, in his own interests, from making discursive replies which were not answers to the questions, but rather an endeavour to deal with what he believed to underlie them. My view was then, and is now, that his obligation was to answer questions and not (unless and until asked), to embark upon explanations which were not in themselves any answer to the questions at all.
(c) There is also the bankrupt’s interest. The Court has the power (and duty) to ensure that the examination is not conducted oppressively or in such a way as to otherwise constitute an abuse of the process. The control of oppressive conduct is the Court’s means of ensuring that an extraordinary process is confined to its proper purposes (enabling the Court to identify the factual position relating to the bankrupt’s conduct, dealings and affairs as may inform the Court’s decision under the Act, such as the discharge of the bankrupt or the prosecution of a bankrupt for offences) and not to a matter beyond (such as the
gaining of the tactical advantage in the later prosecution of charges).
82 The Assignee has a positive duty to oppose discharge of a bankrupt if she considers it to be contrary to the public interest: Re Anderson (a bankrupt) HC Hamilton B213/89, 14 April 1992, at 22 and 42 per Penlington J.
83 Re Wallis Gunson Neale & Co, above n 51.
(d)In the commentary in Halsbury’s Laws of Australia on the public examination conducted under s 81(1) Bankruptcy Act 1966 (Cth), the summons to appear for public examination is discussed.85 The authors explain:
It is an inquisitorial power of far reaching breadth and so subject to careful scrutiny by the Courts. … the issue of a summons may constitute an abuse of process, and thus be liable to be set aside, if it is:
(1) sought for a purpose unconnected with the bankruptcy;
(2) sought for reasons which are vexatious or oppressive; or
(3) used in order to obtain an improper advantage for the trustee.
(e) The particular Halsbury commentary is derived from a number of the leading Australian authorities including Karounos v Official Trustee, a decision of the Full Court of the Federal Court on an appeal from the Federal Court’s refusal to set aside summons as issued under s 81 of the Bankruptcy Act (Cth).86 The persons summoned had been officers of a company associated with the bankrupt (rather than the bankrupt himself) but the principles identified by the Full Court are also relevant to the summoning and examination of a bankrupt. The first principle identified by the Full Court was in these terms:87
(1) The power given by s 81 of the Act is an unusual and far- reaching one (Re North Australian Territory Co (1890) 45
Ch D 87 at 93; Ex parte Willey; Re Wright (1883) 23 Ch D
118 at 128, and its use could easily become oppressive and vexatious if it is not approached responsibly by applicants for summonses, and controlled carefully by the Registrar and the court: see Re H J Price (No 3) (1948) 14 ABC 137 at
139–40.
[83] In Bryers, Associate Judge Doogue concluded that in order for Mr Bryers to be given a fair hearing, he needed to have the entitlement to put before the Court
85 Halsbury’s Laws of Australia (2013) vol 3(1) Bankruptcy at [50-1020] (citations omitted).
86 Karounos v Official Trustee, above n 39.
such relevant evidence as he chose by way of affidavit.88 Points leading his Honour to that conclusion were:
· A bankrupt is entitled to the observance of the principles of natural justice in accordance with s 27 NZBORA.89
· The natural justice principles supplemented the procedures (including the public examination) expressly provided in the Insolvency Act 2006.90
· The statutory procedures are not to be supplemented if such involves an amendment of the statute by engrafting onto it what the Court might think more consonant with a complete opportunity for the bankrupt to respond.91
· Allowing a bankrupt to file relevant affidavit evidence (of the bankrupt and/or others) to support his or her case is not procedurally inconsistent with the conduct of the public examination provided in the Act.92
· The fair hearing principles therefore include an obligation upon the Court to receive and consider all relevant evidence which a party wishes to submit.93
[84] As I have noted, the case before Associate Judge Doogue involved not only a public examination pursuant to the Assignee’s objection to automatic discharge but also a hearing of Mr Bryers’ application for discharge. To the extent that there was an adversarial proceeding on foot, there is not a complete relationship between the nature of processes involved in Bryers and in this case.
[85] Where, as here, there is purely a public examination process pursuant to s 295 of the Act, the Court is required to make its decision as to discharge when it conducts
88 Bryers v Official Assignee, above n 78, at [56].
89 At [27].
90 At [32]–[33].
91 At [34].
92 At [44]–[47].
93 At [30] and [56]–[57].
that public examination.94 Before the enactment of NZBORA, the Court’s ancillary powers in relation to the public examination already enabled the Court to regulate the process so as to enable the bankrupt to fairly respond to the issues raised by the Assignee’s report. Parliament has provided a process which involves an examination conducted by the Court. Care must be taken not to engraft onto that public examination process a more wide-ranging opportunity to respond (through a process akin to civil litigation) than Parliament provided.
[86] That said, with one proviso I respectfully adopt the various points reached by Associate Judge Doogue in his conclusion in Bryers. Natural justice principles (whether arrived at under NZBORA or through an application of the Court’s ancillary powers) fall to be recognised in the public examination process by the Court, in conducting the examination, granting leave to the production of relevant material.
[87] As noted above, in Bryers, Associate Judge Doogue was dealing not only with the bankrupt’s public examination following the Assignee’s objection to automatic discharge but also Mr Bryers’ own application for discharge. Nevertheless, I recognise that there are passages in his Honour’s judgment which appear to proceed on the basis that a bankrupt’s procedural rights would be identical to those identified by his Honour even if the public examination were the only
process in play (as in Mr Henderson’s case).95 Associate Judge Doogue’s
conclusions are therefore strictly obiter to the extent they might be taken to apply when the sole process engaged is the public examination.
[88] By reason of the nature of the public examination process as I have examined it, I respectfully decline to apply Bryers to the situation of a stand-alone public examination process. Ultimately, in Bryers, Associate Judge Doogue concluded that:96
… the procedure applicable to discharge applications and accompanying examinations is out of step with the orthodox requirements observed in most other civil litigation in the High Court and elsewhere.
94 Insolvency Act 2006, s 298(1).
95 See particularly Bryers v Official Assignee, above n 78, at [48]–[51].
96 At [51].
[89] If that conclusion were to be read as applying to public examinations which do not accompany discharge applications, such an extension of argument may be met with the response that the public examination (for the reasons I have stated) is not civil litigation and is not subject to the procedures of orthodox civil litigation. In orthodox civil proceedings, the litigants have the conduct of the litigation. In the public examination, Parliament has imposed the conduct of a process which is inquisitorial and investigative on the Court alone.
[90] My analysis recognises that ultimate responsibility for the completion of a fair examination is upon the Court, having regard to the nature of the process which Parliament has established through the Insolvency Act. In a post-NZBORA period which more expansively recognises fair hearing rights, I appreciate that it is at least open to suggestion, that an application of NZBORA principles might provide to the “parties” (including the bankrupt) an ability to decide for themselves how best to conduct the presentation of their “case” in order to protect their interests. I have concluded that such an approach, based on adversarial principles, cannot prevail against the control which Parliament has given to this Court in the form of the Court’s responsibility to conduct the public examination itself. On the alternative scenario, the “parties” (including the bankrupt) would essentially assert rights which they would have in the course of ordinary civil litigation in relation to matters such as discovery and the calling of witnesses to present their “cases”. However, the present statutory structure makes it clear that what is presented in the public examination is not “the case” of any “party”. It is at all times the Court’s investigation, conducted through public examination, but with ancillary powers which ensure a fair process. Similar effect. But different process.
[91] The Court’s ancillary powers in the conduct of a public examination, consistently with the bankrupt’s natural justice rights, may extend to permitting additional steps if the Court considers them necessary to fairly enable the bankrupt to answer the Assignee’s report:
(a) In addition to receiving the bankrupt’s answers to questions which either the Court puts or permits to be put, the Court may permit
bankrupts themselves or on the questioning of their counsel to give
additional evidence in response to the Assignee’s report.
(b)While there is no general right of discovery or right to have a subpoena issued in relation to the public examination, the Court may request the Assignee as an officer of the Court to provide supplementary documents or to attend (or to have an officer attend) to provide such further information and/or evidence as the Court may consider it requires to enable the examination to be completed comprehensively and fairly.
[92] Usually the appropriate time for the Court to consider the exercise of ancillary powers in relation to discovery or further information would be at the conclusion of the public examination of the bankrupt. At that point, and generally not before, the extent to which the bankrupt takes issue with conclusions or information in the Assignee’s report should have become clear to the Court. The Court will be then in a position to determine whether further information is required to bring the examination to a comprehensive and fair conclusion. It will be a case, if further information is to be obtained, not for orders of wide, open-ended ambit, but for orders which are tightly-focused on the issues and which will assist the Court in reaching conclusions as to the bankrupt’s conduct, dealings and property. These conclusions, in turn, will inform the discharge decisions.
[93] In my earlier summary of rights in relation to the public examination process, (at [24] above), I have identified a combination of bankrupt’s rights and judicial discretion as to the conduct of the examination which flows from the inquisitorial and investigative process established under the Act (to be conducted by the Court but supplemented by the Court’s ancillary powers and the bankrupt’s natural justice rights consistent with the statutory scheme).
The Court’s decision on discharge
[94] I have also summarised (at [25] above) the principal matters which inform
the Court’s discretion in the decision whether to grant or refuse discharge under s
298 of the Act.
Discussion – Mr Henderson’s applications
[95] Mr Henderson’s applications (for production of MBIE witnesses for cross- examination and for discovery of documents) are not appropriate subject-matter for orders of this Court before the public examination of the bankrupt himself has taken place. There is nevertheless power in the Court to call for further information (whether through individuals or in the form of documents) if the Court is satisfied that such further information will be relevant to the subject-matter of the examination and will enable the Court to comprehensively and fairly conclude the examination. In this case, the only process before the Court is the bankrupt’s public examination following the Assignee’s objection to automatic discharge. The appropriate time to exercise the Court’s ancillary powers will be when, upon the examination of the bankrupt himself, the scope of any factual issues relating to the subject-matter of the examination has been clarified. It would be contrary to the inquisitorial, investigative scheme of the Act if the Court were to call for additional information from persons and sources other than the bankrupt himself when the extent of any uncertainty in relation to the subject-matter of the examination has yet to be identified.
[96] That said, the interlocutory orders sought by Mr Henderson are not in suitable terms. But it is appropriate that Mr Henderson’s interlocutory applications be adjourned for review at the conclusion of that part of the public examination at which his examination is completed. It is possible that, at that point, the Court in the conduct of the examination might exercise powers to call for additional, relevant information if satisfied that such information exists which, if produced, will enable the Court fairly to bring the examination to an end.
[97] If the Court at the conclusion of the examination is to request any additional documents from the Assignee, it would be on no broader basis than applied to
discovery in proceedings commenced today by originating application or previously by originating summons. I recognise, as Duffy J stated in Katavich v Meltzer, that in such proceedings:97
… there is reluctance to order discovery, except in a narrow band of marginal cases where the Court has genuine difficulty in determining whether a party has made out its case and where there is substantial reason to believe that discovery would or might well assist that determination …
I am likely to apply an approach of that kind, amended to reflect the fact that this is a public examination rather than civil litigation between the parties, if I am satisfied through the public examination that a particular document may assist the factual determination of a matter which is the subject-matter of the examination.
[98] In relation to Mr Henderson’s requested documents in categories (i), (ii) and (iii) (set out at [6](b) above), I accept Mr Palmer’s submission that even were the Court at the examination to request additional documents from the Assignee, any request would not include copies of private examinations other than those incorporated into the Assignee’s report. To the extent that three examination records are already included by the Assignee in her report, those records are appropriately before the Court. But given the prohibition on publication under s 169 of the Act, it would be inappropriate to contemplate provision to Mr Henderson of examination records which have not been incorporated into the report. To the extent that Mr Henderson seeks copies of s 165 summonses and s 171 notices in relation to material or information which has not been included in the Assignee’s report, it would also be inappropriate to require production of that material to Mr Henderson. Mr Palmer referred to the Assignee’s right to withhold information under s 23(1)(c) Privacy Act
1993 and s 6(c) Official Information Act 1982. There is a more fundamental objection to provision of such documents. They simply do not pass a relevance test. If the Assignee does not rely on any information obtained as a result of such notices and summonses, the documents themselves cannot inform the examination’s subject-
matter (the bankrupt’s conduct, dealings and property).
97 Katavich v Meltzer HC Auckland CIV 2006–404-5698, 29 May 2009 at [15]; adopted in Walker v Gibbston Water Services Limited [2014] NZHC 330 at [34].
[99] This leaves Mr Henderson’s final category of documents (iv), (above at [6](b)) which is a catch-all application in the nature of general discovery. In its breadth it is plainly inappropriate. At this point it remains possible that, during Mr Henderson’s examination, a relevant document or documents from within Mr Henderson’s category (iv) will be identified. I recognise the appropriateness of adjourning the application to meet that possible outcome.
[100] In his submissions, Mr Henderson clarified (what was perhaps implicit in his application) that he had a concern that the Assignee may have cherry-picked the contents of her report. More particularly, she may have omitted material which did not support or in fact contradicted conclusions in the report. Although a concern as to such withholding of information is an understandable concern for a layman to have, it is not a concern (in the absence of a specific example of perceived withholding) which can weigh with the Court. The Assignees are officers of the Court. The statutory regime of reporting is predicated on the frankness and integrity of the Assignee in assembling a body of information which is at once comprehensive and reliable. Although such a step was strictly unnecessary, Mr Palmer was able, in the course of his submissions, to proffer to the Court the Assignee’s confirmation that she and her officials have withheld no information which would tend to rebut conclusions stated in her report.
Orders
[101] I order:
(a) Mr Henderson’s interlocutory applications for orders allowing him to cross-examine a finite list of witnesses relevant to the determination of the proceeding and requiring that the Assignee provide to Mr Henderson certain categories of documents as specified in his application are adjourned for review at the public examination to be convened on 3 August 2015.
(b) Mr Henderson’s application for an order that he be permitted to
inspect documents pursuant to s 153 of the Act is dismissed.
(c) The costs of that inspection application are reserved.
Solicitors:
Anthony Harper, Christchurch
Kensington Swan, Auckland
Copy to Mr D I Henderson, Christchurch
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