Johnston v Official Assignee - [2025] NZHC 118

IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY

I TE KŌTI MATUA O AOTEAROA ŌTAUTAHI ROHE

CIV-2012-409-2386

[2025] NZHC 118

UNDER section 294 of the Insolvency Act 2006

IN THE MATTER

of the bankruptcy of Nicola Jane Johnston

BETWEEN

NICOLA JANE JOHNSTON

Applicant

AND

OFFICIAL ASSIGNEE

Respondent

Hearing: On the papers

Appearances:

C D Pinkney for Applicant

A McAvoy for Commissioner of Inland Revenue

Judgment:

11 February 2025

JUDGMENT OF ASSOCIATE JUDGE PAULSEN

This judgment was delivered by me on 11 February 2025 at 2.45 pm pursuant to r 11.5 of the High Court Rules.

Registrar/Deputy Registrar Date:

JOHNSTON v OFFICIAL ASSIGNEE [2025] NZHC 118 [11 February 2025]

[1] The applicant, Nicola Johnston (Ms Johnston), applies for an order under s 294 of the Insolvency Act 2006 for a discharge from bankruptcy.

[2] The Official Assignee has no objection to Ms Johnston’s application and will abide the decision of the Court.

[3] The Commissioner of the Inland Revenue, being the only creditor in Ms Johnston’s bankruptcy, similarly does not oppose the application.

[4] The circumstances that led to Ms Johnston’s bankruptcy are set out in an affidavit she has filed in support of the application.

[5] Ms Johnston says that in 1996 her husband went into business and incorporated a company for that purpose. Ms Johnston was made a director of the company for tax purposes on the advice of an accountant. It appears as a result of her involvement in that company Ms Johnston incurred tax liabilities which ultimately resulted in an order for her adjudication in bankruptcy on 12 March 2013. An order adjudicating her husband bankrupt was made on the same day.

[6] In April 2013 Mr Johnston provided a statement of affairs to the Official Assignee and he was subsequently discharged from bankruptcy on 4 April 2016. Ms Johnston says she did not understand that the statement of affairs related just to her husband and understood that one statement of affairs was sufficient for both her and her husband.

[7] Ms Johnston was not discharged from bankruptcy on the same date as her husband due to the operation of s 290(1) of the Insolvency Act which provides that bankrupts are generally discharged three years after they file a statement of affairs, not from the date they are adjudicated bankrupt.

[8] Ultimately Ms Johnston did file a statement of affairs with the Official Assignee on 22 March 2024. That means that in the ordinary course she will be

eligible for automatic discharge on 22 March 2027, almost 14 years following her adjudication.

[9] The Official Assignee has filed a report under s 294 of the Act in relation to Ms Johnston’s bankruptcy. In summary, the Official Assignee advises:

(a)The only creditor in the bankruptcy was the Commissioner of Inland Revenue, who filed claims totalling $104,336.47.

(b)There are no other known potential creditors.

(c)The Official Assignee has investigated Ms Johnston’s affairs and has no interest in any assets that have remained with Ms Johnston.

(d)Apart from the…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2025] NZHC 118
Decision Date: 11 February 2025

CaseChat Overview and Summary

Nicola Jane Johnston, an individual who was adjudged bankrupt, applied for discharge from bankruptcy under section 294 of the Insolvency Act 2006. The Official Assignee and the Commissioner of Inland Revenue, the only creditor in the bankruptcy, did not oppose the application. The crux of the dispute was whether Ms Johnston should be granted an earlier discharge from bankruptcy than the statutory three-year period, which she would otherwise become eligible for in March 2027.

The primary legal issue the Court needed to decide was whether the circumstances of Ms Johnston’s case warranted an earlier discharge from bankruptcy. The Court had to consider the interests of Ms Johnston, her creditors, and the public, as well as commercial morality. The Court's discretion in such matters is broad, guided by the scheme and purpose of the legislation, which recognises that indefinite bankruptcy is not in the public interest.

The Court found that Ms Johnston’s failure to file a statement of affairs earlier was due to a misunderstanding, not any deliberate or egregious conduct. The creditor had written off the debt, and the Official Assignee had no interest in any of Ms Johnston’s remaining assets. There was no indication that the public interest would be served by continuing the bankruptcy. The Court concluded that the public interest was better served by discharging Ms Johnston from bankruptcy sooner.

Accordingly, the Court granted Ms Johnston’s application for discharge from bankruptcy. The Official Assignee was directed to retain any amounts held in Ms Johnston’s bankrupt estate up to $3,353.15 to cover its fees and disbursements.

Orders