IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY

I TE KŌTI MATUA O AOTEAROA ŌTAUTAHI ROHE	
CIV-2016-409-439
[2019] NZHC 1324	

UNDER	the Insolvency Act 2006	
IN THE MATTER OF	the bankruptcy of Gary Owen Burgess	
BETWEEN	GARY OWEN BURGESS
Applicant	
AND	THE OFFICIAL ASSIGNEE
Respondent	

Hearing:	27 May 2019	
Appearances:	G O Burgess in person Applicant
D M L Dingwall for the Respondent	
Judgment:	12 June 2019	

JUDGMENT OF ASSOCIATE JUDGE LESTER

Background

[1]	Mr Burgess who was bankrupted on 24 October 2017, wishes to appeal pursuant to s 226 of the Insolvency Act 2006 a decision of the Official Assignee to disclaim a litigation right asserted by Mr Burgess. The litigation right is represented by a proceeding CIV-2018-409-549, being a proceeding commenced by Mr Burgess after his adjudication. That proceeding was struck out by Associate Judge Osborne (as he then was) in a judgment of 29 October 2018.1

1	Burgess v Beaven [2018] NZHC 2793.

BURGESS v THE OFFICIAL ASSIGNEE [2019] NZHC 1324 [12 June 2019].

[2]	That judgment records that the Official Assignee through counsel notified the Court that the Official Assignee had disclaimed her interest in any litigation rights asserted by Mr Burgess in that proceeding.

Preliminary issue – standing

[3]	The Official  Assignee  in  her  notice  of  opposition  to  this  appeal,  raises  a threshold issue as to whether Mr Burgess has standing to appeal the Official Assignee’s decision. The issue of standing was following a telephone conference set down for hearing. In a Minute following the telephone conference, I described standing as “a threshold issue that Mr Burgess’ application must confront”.

[4]	At  the  hearing,  Mr Burgess  was  critical  of  what  he  said  amounted  to    a strike-out application  by the Official Assignee  being advanced  by memorandum. I recognise that determination of the preliminary issue against Mr Burgess will have the effect of bringing Mr Burgess’ appeal to an end, and so I approach the issue of standing keeping in mind the need for caution that applies in what is in a practical sense, a strike-out application based on a absence of standing.

[5]	Section 226 of the Insolvency Act 2006 (“the Act”) provides:

226	Appeal from Assignee’s decision

(1)	A person (including the bankrupt or a creditor) whose interests, monetary or otherwise, are detrimentally affected by an act or decision to which this section applies may apply to the court to reverse or modify the act or decision.

(2)	This section applies to –

(a)	an act or decision of the Assignee; or

(b)	a decision of a District Court Judge in carrying out an examination under section 165.

(3)	The application must be made –

(a)	within 15 working days of the act or decision; or

(b)	within the additional time that the court allows.

(4)	The court may confirm, reverse, or modify the action or decision.

(5)	A creditor who is aggrieved by a decision of the Assignee rejecting the creditor’s claim may make an application under section 239.

[6]	The authors of Law of Insolvency in New Zealand, at [10.10] discuss standing to appeal under s 226 of the Act.2 Under the Insolvency Act 1967 standing to appeal was described as follows:

86	Appeal from decision of Assignee

If the bankrupt or any creditor or any other person is aggrieved by an act or decision of the Assignee, he may, within 21 days from the date of that act or decision or within such further period as the Court allows, apply to the Court, and the Court may confirm, reverse, or modify the act or decision complained of, and make such order as it thinks fit.

[7]	In Law of Insolvency in New Zealand, the authors discuss the history of the meaning of a person aggrieved and note that under s 226(1) the wording has changed from “a personal aggrieved” to “a person whose interests, monetary or otherwise, are detrimentally affected by the decision sought to be appealed”.

[8]	The authors give their view as follows:3

The re-wording of the test to its current form in s 226 of the Act was apparently not intended to change the substantive law, so authorities under earlier bankruptcy legislation are of continuing relevance.

[9]	The authors refer to the Insolvency Law Reform Bill 2005 (14-1 Explanatory Note).

Were Mr Burgess’ monetary interests detrimentally affected by the decision to disclaim?

[10]	As will be seen from s 226(1) set out at [5] above, if Mr Burgess’ monetary interests are detrimentally affected by the disclaimer decision then he will have addressed the first requirement to have standing to appeal.

2	Grant Slevin and Lynne Taylor Law of Insolvency in New Zealand (loose-leaf ed, Thomson Reuters) at [10.10].
3	At [10.10] (footnote omitted).

[11]	That assessment involves a consideration of what Mr Burgess’ monetary interests were prior to the decision he seeks to challenge and comparing that to the position he was in after or as a result of the Official Assignee’s disclaimer.

[12]	The Official Assignee submits that the litigation rights represented by the proceeding CIV-2018-409-549 vested in the Official Assignee on the applicant’s bankruptcy under s 101 of the Insolvency Act 2006. I accept that submission.

[13]	As a result of Mr Burgess’ adjudication, any rights he had in the litigation rights were extinguished, that being the effect of s 101(1)(a) of the Act which provides that:

On adjudication, -

(a)	all property …. belonging to the bankrupt or vested in the bankrupt vests in the Assignee without the Assignee having to intervene or take any other step in relation to the property, and any rights of the bankrupt in the property are extinguished.

Was Mr Burgess’ pre-disclaimer position detrimentally affected by the disclaimer?

[14]	The answer to the above question must be ‘no’. Mr Burgess had no rights in the cause of action prior to the disclaimer – his rights having been extinguished. That position was not changed by the disclaimer.

[15]	Mr Dingwall in submissions for the Official Assignee, goes further and submits that the merits of the cause of action were also unaffected by the Official Assignee’s disclaimer.

[16]	Mr Dingwall argues by analogy with the position in Gay v Burns,4 where it was held that the Official Assignee’s vesting of litigation rights in a discharged bankrupt did not of itself render that chose in action any weaker or stronger. I agree that just as the vesting of a litigation right in someone does not alter the merits of the rights disclaimer of a chose is also neutral as to its merits.

4	Gay v Burns CA193/98, 17 June 1999.

[17]	As noted by Mr Dingwall, if anything the disclaimer removed a procedural barrier to the bankrupt seeking to take control of the cause of action as the applicant is now able to apply for an order vesting the disclaimed litigation rights in him under s 119(2) of the Act. As I accept that disclaimer of itself does not alter the merits of the cause of action, I do not accept Mr Burgess’ interests in the cause of action (leaving aside that his interests were extinguished) were affected by the decision to disclaim.

[18]	A bankrupt will not have standing in relation to an appeal concerning property if unable to show a reasonable likelihood that the estate will return a surplus and the decision in question will affect its amount.5 As the present application has proceeded as a preliminary point in relation to standing, there has not been evidence about whether there is a reasonable likelihood that Mr Burgess’ estate will return a surplus, but there is the further requirement that the decision in question must, if overturned, impact on the value of the surplus.

[19]	The Official Assignee has said that she does not consider the causes of action Mr Burgess wishes to pursue to have any value. I prefer to approach that question by asking what affect a successful appeal by Mr Burgess would have on his estate. Again, the decision Mr Burgess wishes to appeal is the Official Assignee’s decision to disclaim the litigation right. A finding that the Official Assignee in reaching that decision had (for example) failed to take into account relevant considerations or taken into account irrelevant considerations would not prevent a further disclaimer by the Official Assignee if the decision-maker was tasked following the appeal with the need to approach the decision on a correct basis.

[20]	Further, and of more substance, a successful appeal by Mr Burgess would not oblige the Official Assignee to pursue the litigation rights. A successful appeal would only result in the litigation rights being again vested in the Official Assignee but no more. The Official Assignee would be under no obligation to pursue the litigation rights. On that basis, the restoration of the litigation rights to the Official Assignee upon a successful challenge to the disclaimer would not of itself affect any possible surplus (assuming such is available) in Mr Burgess’ bankrupt estate.

5	Slevin and Taylor, above n2, 10.10.1 referring to Gollan v Official Assignee [2013] NZHC 2094 at [43].

[21]	I mention here Mu v Official Assignee, where Ms Mu appealed under s 226 of the Insolvency Act 2006 against the determination of the Assignee not to continue with a proceeding that she had commenced on the same day as she was adjudicated bankrupt. In that case, the Assignee’s  approach  was  described  by  Associate  Judge Doogue as follows:6
The Assignee’s approach has been to accept that Ms Mu is a person whose interests are detrimentally affected by the decision because, if the proceedings were advanced and succeeded, in the sense that judgment was given for the sums claimed, and recovered, the surplus would be returned to Ms Mu.

[22]	The appeal in that case was dismissed on the basis of the Court’s assessments of the merits of the cause of action. I do not read Associate Judge Doogue’s decision as confirming that a bankrupt has standing to challenge the Official Assignee’s decision not to pursue litigation rights. I read the decision as the Assignee choosing not to argue standing (the decision records no submissions on standing) but challenging the merits of the cause of action. The Official Assignee in the present case challenges the merits of the cause of action but this hearing was focused on standing alone.

Mr Burgess’ interests “or otherwise”

[23]	Mr Burgess refers to s 226 permitting an appeal where a bankrupt’s interests, monetary or otherwise, are detrimentally affected.

[24]	Mr Burgess in his written submissions, said:

“Otherwise” includes reputational matters, which must also be taken into account, and the size of the bankrupt estate is irrelevant.

[25]	In the Law of Insolvency in New Zealand, the authors note:7

The affected interest need not be one in relation to property but ordinarily will be where creditors or others are concerned. Bankrupt’s, however, are affected by decisions in relation to attendances for interview, the lifting of travel and employment restrictions and their general obligations to assist the Assignee. If the subject matter of the appeal was restricted to decisions affecting the administration of a he bankrupt’s property, such decisions would be beyond scrutiny….

6	Mu v Official Assignee [2015] NZHC 3108 at [19].
7	Slevin and Taylor, above n2 at [10.10.1].

[26]	With reference to Gay v Burns, the authors quote the following passage from the case:8

The intending appellant must show that his or her rights, whether substantial or procedural, had been adversely affected by the decision.

[27]	Mr Burgess’ desire to be vindicated through the successful pursuit of litigation rights is not a sufficient interest to give him standing. If it were, then every bankrupt would be able to establish standing in relation to litigation rights through asserting    a desire to be vindicated. This is consistent with the old case of Ex Parties Side Botham9 (1880) 14Ch D458CA at 465, where James LJ said:
The words “person aggrieved” do not really mean a man who is disappointed of a benefit which he might have received if some other order had been made. A “person aggrieved” must be a man who has suffered a legal grievance, a man against whom a decision has been pronounced which has wrongfully deprived him of something, or wrongfully refused him something, or wrongfully affected his title to something.

[28]	As the Court said in Gollan v Official Assignee:10

It is not enough that the Gollans should be disappointed because the Assignee’s decision does not provide them with their long awaited day in court.

[29]	I conclude that Mr Burgess is not a person whose interests, monetary or otherwise, were adversely affected by the decision to disclaim. It follows that he lacks standing to bring the present appeal and the appeal should be struck out. The appeal also seeks to pursue the assignment of the litigation rights to Mr Burgess. The assignment of the rights will not assist Mr Burgess as such assigned rights become after acquired property under s 102 of the Act with the effect that the litigation rights would again vest in the Official Assignee.

[30]	Section 102 does not apply if the litigation rights are vested in Mr Burgess under s 119(3).11 If Mr Burgess wishes to request an order under s 119(3) he will need to amend his application. Consistent with the principle that a pleading will not be

8	Slevin and Taylor, above n2, at [10.10.1] citing Gay v Burns, above n4 at [5].
9	Ex Parties Side Botham (1880) 14Ch D458CA at 465.
10	Gollan v Official Assignee, above n 5, at [40].
11	Section 102(3).

struck out if it can be saved by amendment there is an order striking out para 1 of  Mr Burgess’ appeal dated 29 October 2018.

[31]	Paragraph 2 of the appeal referring to assignment (if it is to be pursued), is to be amended to an application under s 139(3). If an amended application is not filed within 15 working days, then paragraph 2 should also be struck out.

Costs

[32]	Costs are reserved.

Abandonment

[33]	Mr Burgess developed an alternative argument that his circumstances disclosed that the Official Assignee had not completed disclaimer of the litigation rights and in the circumstances had abandoned the litigation rights.

[34]	That submission was in part based on the fact that while the Official Assignee notified the Court on 7 October 2018 that the litigation rights had been disclaimed, Mr Burgess maintained that he had made Privacy Act and Official Information Act requests of the Official Assignee requesting documentation recording the decision to disclaim. Mr Burgess said he had had no response from the Official Assignee and so the Court should infer that no decision was made.

[35]	From that foundation, Mr Burgess said that the Official Assignee’s stated decision not to pursue the litigation rights should be construed as an abandonment of the litigation rights.

[36]	In relation to abandonment, Mr Burgess relied on [4.40] of Heath & Whale Insolvency   Law   in New  Zealand.12	Mr Burgess emphasised that the law of abandonment was a developing area and thus the issue was unsuitable for what amounted to a strike-out process.

12	Mike Whale and Paul Heath, Heath and Whale Insolvency Law in New Zealand (3rd ed, Lexis Nexis, Wellington, 2058) at [4.40].

[37]	During the course of the hearing, a Deputy Official Assignee who was present, raised through counsel that there was a written memorandum recording the decision but that it had been withheld for reasons of privilege. Given Mr Burgess had raised this issue at para 6 of his memorandum of 21 February 2019, the Official Assignee should have disclosed even in redacted form the document said to record the disclaimer decision.

[38]	Mr Dingwall for the Official Assignee, has provided a copy of a file note dated 3 October 2018 and I am satisfied that it records that a decision to disclaim was made. I put to Mr Burgess that a letter notifying that the litigation rights had been disclaimed was of itself sufficient evidence that a decision to disclaim had been made. I asked why else such a letter would be written but given the production of the decision there is no real basis for saying that disclaimer has not occurred.

[39]	The proceeding filed by Mr Burgess which asserted the litigation rights was filed by him on 6 August 2018. The decision to disclaim was made on 3 October 2018 and the notice of disclaimer sent to Mr Burgess as required by s 117(3) is dated      10 October 2018, that is within 10 working days after the disclaimer.

[40]	Heath and Whale provides:13

Abandonment occurs when the Official Assignee takes no steps in respect of the property, so it remains at the end of the bankruptcy unadministered.

[41]	The Official Assignee has taken steps in respect of the property by formally disclaiming the litigation rights. Mr Burgess said the Official Assignee never intended to pursue the litigation rights and thus in reality there was an abandonment. I do not accept this.

13	Heath and Whale, above n 12, at [4.40].

[42]	I do not consider the issue of abandonment takes the issue of standing any further.

Associate Judge Lester

Solicitors:
D M L Dingwall – solicitor for Official Assignee Insolvency & Trustee Service, Christchurch Mr G Burgess – in person litigant