Williams v Cruden

[2023] NZHC 3234

IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY

I TE KŌTI MATUA O AOTEAROA ŌTAUTAHI ROHE

CIV-2022-409-061

[2023] NZHC 3234

IN THE MATTER

AND

of the Insolvency Act 2006

IN THE MATTER

of the bankruptcy of MATTHEW JOHN CRUDEN

BETWEEN

RONALD DAVID WILLIAMS and TANIA

MARIE McKENZIE practising as WILLIAMS McKENZIE LAWYERS
Judgment Creditor

AND

MATTHEW JOHN CRUDEN

Judgment Debtor

Hearing:	26 October 2023
Appearances:	D M L Dingwall for Official Assignee No appearance for Judgment Debtor
Judgment:	16 November 2023

JUDGMENT OF ASSOCIATE JUDGE PAULSEN

This judgment was delivered by me on 16 November 2023 at 10.30 am pursuant to rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar Date:

WILLIAMS v CRUDEN [2023] NZHC 3234 [16 November 2023]

[1]                 The Official Assignee applies under ss 106 and 147 of the Insolvency Act 2006 for orders requiring the judgment debtor, Matthew John Cruden, to make contributions towards payment of his debts and  requiring  Prince  Brick  and  Blocklaying  Ltd, Mr Cruden’s employer, to make contributions on his behalf.

[2]                 As a result of queries raised by me, the orders the Official Assignee now seeks are on terms more beneficial to Mr Cruden than was originally the case and are as follows:

(a)the judgment debtor must, from the date of this judgment until discharged from bankruptcy, pay $99.00 per week to the Official Assignee (the contributions) as a contribution towards his debts;

(b)the judgment debtor must also pay to the Official Assignee:

(i)in respect of contributions he ought to have made from 3 March 2023 to 18 May 2023, $846.56 ($76.96 per week); and

(ii)in respect of contributions he ought to have made from 19 May 2023 down to the date of this judgment, $99.00 per week

(together “the arrears”);

(c)the judgment debtor must pay the arrears to the Official Assignee by weekly payments of not less than $99.00 from the date of his discharge from bankruptcy to the date the arrears are paid in full;

(d)to the extent there are any monies that are or may have become payable to the judgment debtor by his employer (currently Prince Brick and Blocklaying Ltd), the employer must pay $99.00 per week from those monies to the Official Assignee on behalf of the judgment debtor as a first charge on those monies until:

(i)the judgment debtor has been discharged from bankruptcy; and

(ii)the contributions and the arrears have been recovered in full by the Official Assignee; and

(e)the judgment debtor is to pay the Official Assignee’s costs of this application together with disbursements on the same payment basis.

[3]                 Although both Mr Cruden and his employer have been served with the application, neither has taken any steps in the proceeding. The application came before me on an unopposed basis and Mr Dingwall sought orders in terms of the application.

[4]                 I reserved my decision so that some further evidence could be provided as to the method by which the Official Assignee had calculated the contributions for the purposes of s 147. This information has been provided.

Background

[5]                 On 12 May 2022, Mr Cruden was adjudicated bankrupt by the High Court at Christchurch on the application of Williams McKenzie Lawyers. To date, claims submitted by creditors in Mr Cruden’s estate total approximately $22,000.

[6]                 The Insolvency Officer delegated to administer Mr Cruden’s estate had some correspondence with Mr Cruden but he has not completed a statement of affairs as required by s 67 of the Insolvency Act. He also failed to provide payslips or details of his household income and expenditure.

[7]                 Mr Cruden did advise that he lives with his partner (who is working) and her two children. He also advised that he has a child from a previous relationship who does not live with him, but he pays $170 per week in child support to the mother of that child. Mr Cruden did not disclose his partner’s income.

[8]                 In December 2022, Mr Cruden was summoned to be interviewed on oath and to complete his statement of affairs but Mr Cruden did not attend the examination.

[9]                 The  Insolvency  Officer  obtained  employment  and  income  details  for   Mr Cruden directly from the Inland Revenue Department and learned he was employed, his weekly earnings, and that he had one dependent child.

[10]              The Insolvency Officer proceeded to complete a contributions assessment for Mr Cruden in accordance with s 147 of the Insolvency Act. She states that this required her to estimate what Mr Cruden’s partner might be earning, and for this purpose she relied upon information from Statistics New Zealand as to the median wage after tax for a woman in New Zealand. This figure was used to calculate the household income for Mr Cruden and his partner. In the contribution assessment the sum of $170 for child support was allowed, and allowance was made for two dependent children in the household.

[11]              The Insolvency Officer calculated that Mr Cruden should be expected to pay contributions of $76.96 per week. On 15 February 2023, she wrote to Mr Cruden notifying him of the Assignee’s assessment and requiring him to commence contribution payments at the rate of $76.96 per week from 3 March 2023. The letter invited Mr Cruden to advise if his circumstances changed so his position could be reviewed. There was no response from Mr Cruden, and the contribution payments did not commence.

[12]              On 21 April 2023, the Insolvency Officer sought an update from the Inland Revenue Department as to whether Mr Cruden was still employed and confirmation of his income. The Inland Revenue Department advised that Mr Cruden was now employed by Prince Brick and Blocklaying Ltd, and that his total net income had increased. When Mr Cruden’s updated income was applied with the same details as previously to the contributions calculation, the new contribution calculation came out to $181.65 per week.

[13]              On 5 May 2023, Mr Cruden was notified of the updated contributions requirement due to the change in his circumstances. He was requested to commence contributions payments no later than 19 May 2023. The contribution payments did not commence, and no response was received from Mr Cruden. The Insolvency Officer’s last contact with Mr Cruden was on 22 October 2022.

The law

[14]              Section 106 of the Insolvency Act provides the Court with the power to order that money owed, or to become due or payable to a bankrupt is assigned to the Official Assignee. It provides:

106 Court may order that money due to bankrupt is assigned to Assignee

(1)The court may, on the application of the Assignee, order that any money due to the bankrupt, or any money to become due or payable to the bankrupt, is assigned or charged to, or in favour of, the Assignee.

(2)The assignment or charge is a discharge to the person who pays the Assignee.

[15]Section 147 of the Insolvency Act provides:

147     Bankrupt may be required to contribute to payment of debts

(1)If required by the Assignee, the bankrupt must pay an amount or periodic amounts during the bankruptcy as a contribution towards payment of the bankrupt’s debts.

(2)The Assignee may impose conditions in respect of the payments.

(3)Before the Assignee may require the bankrupt to make the payment or payments, the Assignee must—

(a)have regard to all the circumstances of the bankruptcy and the bankrupt’s conduct, earning power, responsibilities, and prospects; and

(b)make reasonable allowance for the maintenance of the bankrupt and his or her relatives and dependants.

(4)The court may, on the application of the Assignee, order the bankrupt to pay the amount or amounts required by the Assignee.

(5)The court may, on the application of the Assignee, the bankrupt, or any creditor,—

(a)vary, suspend, or cancel the bankrupt’s obligations to make the payments under this section:

(b)vary, suspend, or discharge any order made under subsection (4):

(c)remit any arrears owing by the bankrupt.

[16]              The relevant principles to be applied to applications under s 147 were set out by Associate Judge Osborne in Official Assignee v van der Walt which I summarise as:1

(a)The s 147 provisions are to be seen against the background of the general rule that the personal earnings of a bankrupt between adjudication and discharge vest in the Official Assignee.

(b)That general rule is to be viewed as subject to the limitation that the bankrupt is entitled to a reasonable allowance for the maintenance of the bankrupt and his or her relatives and dependants.

(c)The relevant considerations include:

(i)the fundamental consideration whether the bankrupt will be able to meet the contributions assessed by the Official Assignee;

(ii)the bankrupt is not to be emotionally and financially crippled by the contributions ordered;

(iii)the contributions should strike a reasonable balance between the public interest and enabling a person, after surrendering all their required assets, to start again with a clean slate, and the private interests of the creditors in the bankrupt estate in receiving some payment when the bankrupt is capable of achieving high earnings; and

(iv)regard must be had to the bankrupt’s occupation and station in life.

(d)The burden of proof of establishing what the reasonable allowance is for the maintenance of the bankrupt and relatives and dependants is upon the bankrupt.

1      Official Assignee v van der Walt [2017] NZHC 1664 at [8]–[13].

(e)The Court’s power in this jurisdiction to order payment involves the exercise of a discretion, unfettered by rules as to its exercise in particular fact situations.

My assessment

[17]              Mr Cruden has failed to cooperate with the Official Assignee since he was adjudicated bankrupt. He has failed to complete his statement of affairs or attend for examination. He has advised the Official Assignee that he lives with his partner but pays child support of $170 per week in respect one child.

[18]              Consistent with its obligations under s 147(3), the Official Assignee has had regard to Mr Cruden’s circumstances to the extent they have been made known and has obtained confirmation of his employment status and earnings.

[19]              It has then made an assessment of the reasonable allowance that should be made for the maintenance of Mr Cruden and his relatives and dependants applying the Insolvency Income Contribution Calculator. The process was described by the Insolvency Officer as follows:

6.… The calculator is based on an overall assessment of reasonable living costs arrived at by reference to average expenditure figures published by Statistics New Zealand and the Working for Families thresholds used by the Inland Revenue Department to calculate tax credits, both of which take into account the number of dependents in the family. The overall effect is that costs are initially moderated on an overall basis, rather than line-by-line.

7.The calculator is intended to establish a consistent and objective formula by which a bankrupt’s reasonable living costs and ability to make contributions can be initially assessed. The resulting figure is then considered in relation to the bankrupt’s actual circumstances, which may disclose costs that are unavoidably higher than usual or may be lower than usual, for example where no rent or mortgage costs need to be paid. The Assignee must ensure that the contributions requirement will not leave the bankrupt or his or her family unable to meet their reasonable expenses and that he or she is left with some discretionary income to spend or save as they see fit.

[20]             The Official Assignee’s method of calculating contributions, described above, was considered and accepted by both Associate Judge Matthews in Official Assignee v van Heerden (bankrupt) and by Associate Judge Osborne in Official Assignee v van

der Walt.2 Importantly, Mr Cruden has not objected to the contribution assessments. However, as I noted earlier, the Official Assignee has reduced the contributions sought from Mr Cruden as a result of matters raised by the Court.

[21]              Mr Cruden has also not raised any other matters with the Official Assignee or the Court that would weigh against me making the orders sought in the exercise of my discretion. I note, however, that the Official Assignee acknowledges it will respond to any change in Mr Cruden’s circumstances if notified of it by Mr Cruden.

[22]I am therefore satisfied the orders sought should be made.

Result

[23]              The Official Assignee’s application is successful. Pending any further order of the Court there shall be orders in terms of [2](a) to (d) (inclusive) above.

[24]              The Official Assignee is entitled to costs and may file a memorandum within 10 working days as to the quantum of such costs if it wishes to have those costs fixed.

[25]              The Official Assignee should provide a copy of these reasons along with the sealed judgment to Mr Cruden at the first opportunity.

O G Paulsen Associate Judge

Solicitors:
Insolvency & Trustee Service, Christchurch

2      Official Assignee v van Heerden (bankrupt) [2016] NZHC 360 at [19]–[22]; Official Assignee v van der Walt, above n 1.