Whitelaw, re HC Hamilton CIV 2004-419-1647

[2010] NZHC 1575

IN THE HIGH COURT OF NEW ZEALAND HAMILTON REGISTRY

CIV-2004-419-1647

IN THE MATTER OF     the Insolvency Act 1967

AND

IN THE MATTER OF     BARRY RAYMOND WHITELAW A Bankrupt

Hearings:       4-5 August 2010

10 September 2010

Appearances: J N Foster for the Official Assignee

B R Whitelaw in Person

Judgment:      10 September 2010

ORAL JUDGMENT OF WHITE J

Solicitors:      Almao Douch, PO Box 19-173, Hamilton 3244

Copy To:      B R Whitelaw, 99A Newcastle Road, Hamilton 3204

RE WHITELAW (A BANKRUPT) HC HAM CIV-2004-419-1647  10 September 2010

[1]      At the conclusion of the resumed hearing this morning I indicated that I would deliver this judgment orally in Court at 4 pm today.  Mr Whitelaw advised that he would be present, but he has subsequently told the Registry that he was returning to Hamilton and that the judgment might be delivered in his absence.

[2]      Mr Whitelaw was adjudicated bankrupt for the fourth time on 4 July 2005. The order of adjudication was made in the High Court at Hamilton on the creditor’s petition  of  Thomsons  Timber  Supplies  Limited,  based  on  a  judgment  debt  of

$5,384.95.

[3]     By s 107 of the Insolvency Act 1967, Mr Whitelaw would have been automatically discharged from bankruptcy after three years, that is on 5 July 2008, if the Official Assignee had not entered an objection to his discharge under s 107(3) of the Act.  Although the Insolvency Act 1967 has been repealed by the Insolvency Act

2006, there is no dispute that Mr Whitelaw’s case is to be determined under the provisions of the 1967 Act.

[4]      As required by s 109(1) and (2) of the Insolvency Act 1967, the Official Assignee has called on Mr Whitelaw to appear before the Court to be publicly examined concerning his discharge and has prepared and filed a report as to the affairs of Mr Whitelaw, the causes of his bankruptcy, and the manner in which he has performed the duties imposed on him under this Act or obeyed the orders of the Court and as to his conduct both before and after the bankruptcy, and other facts, matters or circumstances that would assist the Court in making its decision.   No creditor has given notice of intended opposition to the discharge under s 109(4).

[5]      As   required   by   s   109(1),   the   Court   conducted   the   examination   of Mr Whitelaw in Hamilton on 4 August 2010.  At Mr Whitelaw’s request, the hearing was adjourned to today to enable him to obtain legal advice: see my minute of

5 August 2010.   At the resumed hearing today, Mr Whitelaw advised that he had been unable to obtain legal advice and agreed that he would continue to represent himself.

[6]      The powers of the Court when conducting an examination under s 109 are set out in s 110(1) of the Insolvency Act 1967.  Under that provision the Court “having regard to all the circumstances of the case” may:

a)      Grant an immediate order of discharge:

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

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

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

[7]      The Official Assignee objects to Mr Whitelaw’s discharge from bankruptcy on the following public interest grounds:

a)        This is Mr Whitelaw’s fourth term of bankruptcy.

b)Mr Whitelaw’s refusal to abide by the terms of his current bankruptcy and his continued involvement in managing a business has caused further loss to those engaging in business dealings with him.

c)       Mr  Whitelaw’s  dishonest  dealings  with  the  Official  Assignee  and failure to disclose income received during the term of the bankruptcy has prejudiced the interests of the creditors of his bankruptcy.

d)Mr  Whitelaw’s  criminal  history  discloses  that  he  has,  over  a substantial period, engaged in dishonesty related offending causing loss  to  those  dealing  with  him  and  he  displays  no  motivation  to change.

[8]      In support of these grounds the Official Assignee refers in his report dated

5 July 2010 to the background to Mr Whitelaw’s bankruptcy, his conduct during the bankruptcy and his relevant criminal history.  Reference is made first to the fact that prior to 4 July 2005 Mr Whitelaw had been adjudicated bankrupt on three earlier

occasions: 11 October 2979 (Christchurch), 19 March 1986 (Christchurch), and 30

August 2000 (Auckland).  When he was adjudicated bankrupt in July 2005 he was already bankrupt  by reason  of  an  objection  to  discharge  signed  by the  Official Assignee at Auckland on 30 March 2001.

[9]      The report attached a copy of Mr Whitelaw’s statement of affairs completed on 18 August 2005, which showed that Mr Whitelaw disclosed that the primary cause of his bankruptcy was gambling, speculation and extravagance in living.  He identified his lack of skill in a business sense as contributing to his bankruptcy.  He stated that he had been trading as B & W Builder in the fifteen months prior to the bankruptcy, but claimed that there were no business records and that he had only undertaken some eight to ten jobs totalling under $5,000 when that was untrue.  He also falsely represented to the insolvency officer that he had no on-going business as a builder and that his only income was from a Social Welfare benefit and ACC payments.  The assets he identified were a Credit Union account with a balance of

$29.70 and personal affects totalling $465.00.  While he identified nine creditors and debts totally $7,350.00, a Baycorp Consumer credit check disclosed potential creditors listing debts totalling $46,000.  Ultimately five claims were filed with the Official Assignee totalling $28,980.55.   In addition one other creditor had advised that the sum of $9,814.42 remained owing and a petitioning creditor had an order for costs in the sum of $4,290.

[10]     Throughout the course of the bankruptcy the Official Assignee has received a number of complaints from members of the public who had dealt with Mr Whitelaw. The complaints concerned his involvement in the management of a building business trading under various names.   The common complaint was that he had failed to identify his  status  and  had  engaged  in  dishonest  dealings  which  caused  loss  to members of the public.

[11]     In May 2007 a criminal prosecution alleging breach of the Insolvency Act

1967 was commenced.   A further prosecution alleging breach of the Act was subsequently commenced and both were joined and a High Court trial date allocated to commence on 22 June 2009.  On 12 June 2009 Mr Whitelaw pleaded guilty to one charge of failing without reasonable cause to comply with the provisions of s 62 of

the Insolvency Act 1967 in that he directly or indirectly entered into, carried on or took part in the management or control of a business without the consent of the Official  Assignee  between  3  July  2005  and  2  July  2008.    Mr  Whitelaw  was sentenced  to  a  term  of  imprisonment  for  10  months  2  weeks  by Stevens  J  on

1 December 2009:  R v Whitelaw.[1]   The Official Assignee has drawn attention to the

[1] R v Whitelaw HC Hamilton CRI-2008-019-007254, 1 December 2009.

following paragraphs in the sentencing notes of Stevens J:

[16]      You made no application to the Official Assignee to be employed, nor did you ever account to the Official Assignee for the funds received. You advised the Official Assignee that the only income you received during the  relevant  period  was  a  benefit.    It  seems  that  you  just  continued throughout the entire period of the three year bankruptcy blatantly and flagrantly to ignore your obligations.

[17]     I am satisfied that this outline of the facts shows a systematic misrepresentation of your position, not only to the Official Assignee, but also to those with whom you dealt in your building business.  In short, you obtained all the benefits of the bankruptcy and incurred none of the responsibility of the obligations which are designed to assist your creditors. In fact, your dealings led to further harm to creditors who, because you have no assets, were left completely without redress.

...

[20]     In relation to the current offending, you said that you did not think that the prohibition applied to you because you were contracting your labour only and therefore working for yourself rather than for your own business.  I do not accept that.  That is just another example of your dishonest approach to the running of your affairs.  You acknowledge that you understand that what you did was wrong, but claim that there were no victims.   Let me assure you that the creditors who did not get any benefit while you were gaining the protection of the bankruptcy would not see it that way – and neither do I.

[21]      You  have  constantly  tried  to  justify,  defend  and  minimise  your actions.   You are rightly described by the probation officer as a recidivist dishonesty offender whose demeanour at the interview suggested that you were unlikely to change your behaviour.

...

[35]     I am satisfied that you had been made aware of the restrictions of bankruptcy a number of times in the past and you deliberately lied to, and sought to mislead, the Official Assignee when you were first interviewed about  the  offending.     Indeed,  throughout  the  whole  period  of  your bankruptcy you just continued offending regardless.

...

[40]     Although there is only one charge, the summary of facts reveals continual offending throughout the period of your bankruptcy.  This was a sustained and deliberate breach of your obligations.  You were well aware of, but unwilling to be bound by, the restrictions that apply to you under insolvency  and  you  continued  to  offend  even  after  the  charge  was  laid against you.  You deliberately lied to and misled the Official Assignee and you caused considerable loss to creditors.

[12]     The offending is of particular concern to the Official Assignee having regard to his obligations to protect the public interest for the following reasons:

a)       Mr Whitelaw was well familiar with the restrictions imposed on a bankrupt, he having already been adjudicated bankrupt on three previous occasions since 1979.

b)From the outset of the bankruptcy Mr Whitelaw deliberately misled insolvency officers in respect of his ongoing involvement in business as a builder.

c)       Although acutely aware of his obligations, Mr Whitelaw continued trading as a builder on his own account without the consent of the Official Assignee or the High Court.

d)Throughout  the  relevant  period  Mr  Whitelaw  represented  to  the Official  Assignee  that  his  income was  limited to  the  receipt  of  a benefit and ACC payments.  None of the funds received by him as a result  of  the  work  undertaken  by  him  was  ever  disclosed  to  the Official Assignee.

e)       Throughout the course of his bankruptcy, Mr Whitelaw caused further loss to creditors as identified in the summary of facts and reparation schedule.

f)        Mr Whitelaw’s offending continued even in spite of the prosecution commenced in May 2007.

g)	The three year period over which the offending occurred reflects the full length of the usual term of bankruptcy after which an automatic
discharge would generally follow.
h)	The   observations   made   by   the   sentencing   Judge   suggest   that
Mr Whitelaw is habitually dishonest in his business dealings and is unlikely to change his behaviour.
[13]	The	Official    Assignee    has    also    drawn   attention    to    the   fact    that

notwithstanding  Mr  Whitelaw’s  guilty  plea  prior  to  the  sentencing  hearing  on

1 December 2009 he engaged in further conduct of a similar kind.   On or about

31 August 2009 he forwarded to a member of the public an invoice purporting to be for work which he completed as a builder in October 2008. The invoice was the subject of a further complaint to the Official Assignee and related to business dealings undertaken by Mr Whitelaw at a time while he was bankrupt and awaiting trial for managing a business without consent. The invoice is referred to in the sentencing notes of Stevens J at [28].

[14]     The Official  Assignee  has  also  pointed  out  that  Mr  Whitelaw’s  criminal record over the past 25 years shows that he is a recidivist fraud and dishonesty offender.   The pre-sentence report writer in a report completed on 14 July 2009 observed:

It  is  evident  that  despite  the  warnings  of  an  insolvency  officer  he [Mr Whitelaw]  persistently  engaged  in  business  dealings  under  various business headings over a period of three years.   This offending is not inconsistent with his long history of recidivist offending characterised by dishonesty, fraud and false pretences.

[15]     The Official Assignee in his report seeks an order that Mr Whitelaw is an unsuitable person to apply to be discharged from bankruptcy for a further term of three years and an order directing the manner in which Mr Whitelaw’s continuing status is to be advertised in accordance with s 118 of the Insolvency Act 1967. Given the nature of Mr Whitelaw’s offending throughout the course of his bankruptcy, the Official Assignee does not consider that Mr Whitelaw is a suitable person  to  be  discharged  from  bankruptcy on  conditions  that  address  the  public

interest concerns because his past conduct illustrates that he would be unlikely to abide by any conditions imposed.

[16]     During the course of his examination in the High Court at Hamilton on

4 August 2010, Mr Whitelaw took issue with aspects of the background when they were put to him by Ms Foster in cross-examination, but ultimately accepted in response to my questions that the report correctly recorded the position relating to his bankruptcies, the summary of facts to which he pleaded guilty, the sentencing remarks of Stevens J and his criminal record.   He acknowledged that he did not appeal against the sentence imposed by Stevens J.  He took issue with the items in the reparation table attached to the Official Assignee’s report, but produced relevant invoices.

[17]     As required by my minute of 5 August 2010, Crown counsel filed and served written submissions for the Official Assignee on 23 August 2010.

[18]     At the resumed hearing today, Mr Whitelaw submitted that the amounts of money involved in his case were minimal compared to the amounts involved in the cases referred to in the submissions for the Crown.  He also reiterated that he had not heard of several of the creditors in the list attached to the report of the Official Assignee and that he was not aware of the August 2000 bankruptcy in Auckland.  He said that he was aged 53 and married, and had spent 10 months in prison.  He said that he would like to be able to do ‘labour only’ work, but that if he were not discharged he could not go back to work and would have to spend the rest of his life on an invalid’s benefit because he has cancer.  He submitted that after three and a half years he had paid his dues to society.

[19]     In response, Ms Foster pointed out that Mr Whitelaw’s medical condition had been raised before Stevens J, but had not altered his sentence.  She also pointed out that Mr Whitelaw was entitled to obtain work as an employee, but that in terms of s 62  of  the  Insolvency  Act  1967  he  would  require  the  consent  of  the  Official Assignee if he wished to be self-employed or employed by a relative.

[20]     The approach of the Court to consideration of an objection by the Official

Assignee  to  a  discharge  from  bankruptcy is  well  established:  cf  Re  Anderson,[2]

[2] Re Anderson HC Hamilton B213/89, 14 April 1992.

ASB Bank  v  Hogg,[3]   and  Re  Edwards[4]  (upheld  on  appeal:  Edwards  v  Official

[3] ASB v Hogg [1993] 3 NZLR 156 (CA).

[4] re Edwards HC Auckland CIV65/98, 13 May 2003.

Assignee).[5] The approach may be summarised as follows:

[5] Edwards v Official Assignee CA236/03, 1 April 2004.

a)       The onus is on the Official Assignee to satisfy the Court that it is in the public interest that the bankruptcy which would otherwise automatically be discharged after three years should continue for a further period.

b)The Court has a broad discretion to exercise having regard to all the circumstances of the particular case.

c)       In the absence of good reasons, a bankrupt should normally obtain a discharge.

d)Public interest factors may, however, mean that an order of discharge should be refused.

e)       As indicated by the matters on which the Official Assignee is required to report under s 109(2) of the Insolvency Act 1967, the Court should consider the manner in which the bankrupt has performed the duties imposed on him under the Act and his conduct both before and after the bankruptcy and any other matters that may assist the Court in making its decision.

f)        The relevant matters therefore include:  the interests of the bankrupt; the interests of the creditors; the public interest; commercial morality and the conduct of the bankrupt.

[21]    Following this approach in the present case and taking into account the submissions made for the Official Assignee and by Mr Whitelaw, I am satisfied for the following reasons that an order of discharge should be refused:

a)       Mr Whitelaw has demonstrated a singular lack of appreciation of his responsibilities as an undischarged bankrupt.   It is clear that, notwithstanding his previous experiences of bankruptcy, he was adjudicated bankrupt for the fourth time when he had not been discharged from his third bankruptcy and that during the currency of his fourth bankruptcy he committed the offence under the Insolvency Act   1967   which   led   to   the   sentence   of   imprisonment   on

1 December 2009.

b)Mr Whitelaw failed to make full disclosure of his position to the Official Assignee and has continued to disregard the statutory restrictions imposed on an undischarged bankrupt.

c)       Mr  Whitelaw’s  long  background  of  dishonesty,  as  shown  by  his criminal record and dealings with the Official Assignee, provides no confidence that he understands the requirements of commercial morality necessary to justify his discharge from bankruptcy.

d)While recognising the need to avoid punishing Mr Whitelaw twice, it is not in the public interest for him to be discharged from bankruptcy at this time.  It is proper for the Court to have regard to his conviction and his conduct during the course of the bankruptcy when considering the public interest element that the Court must take into account:

Re Caigou.[6]

[6] Re Caigou HC Christchurch N513/92, 30 October 1996.

e)       In reaching this conclusion I have taken into account Mr Whitelaw’s personal  circumstances,  but  they  are  outweighed  by  the  public interest,  the  interests  of  his  creditors  who  remain  unpaid  and  the

commercial morality of the situation, particularly taking into account his conduct of his affairs during the course of his bankruptcy.

f)        Mr Whitelaw    will    have    an    opportunity   to    demonstrate    his rehabilitation and understanding of commercial morality by obtaining employment as an employee or in compliance with s 62 of the Insolvency Act 1967, by co-operating with the Official Assignee and by   showing   his   understanding   of   his   responsibilities   as   an undischarged bankrupt over a further period.

[22]     I agree with the Official Assignee that Mr Whitelaw should not be entitled to apply for a discharge from bankruptcy for a further period of three years, which is until Friday 13 September 2013.

[23]     In terms of s 118 of the Insolvency Act 1967 the fact of the Court’s refusal to grant a discharge or suspend the order of discharge may be published in the prescribed manner.

Result

[24]     For the reasons  given,  I refuse  an order of discharge  and order that the earliest date on which Mr Whitelaw may apply for discharge from bankruptcy is

13 September 2013.

D J White J