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Miah v Official Assignee [2013] NZHC 2726 (21 October 2013)

Last Updated: 18 November 2013

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV 2013-404-003111 [2013] NZHC 2726

BETWEEN ABDUR MIAH Appellant

AND OFFICIAL ASSIGNEE Respondent

Hearing: 16 October 2013

Appearances: R J Hooker for the Appellant

G Neil/M Hmmer for the Respondent

Judgment: 21 October 2013

_{JUDGMENT OF ASSOCIATE JUDGE CHRISTIANSEN}

This judgment was delivered by me on

21.10.13 at 4:30pm, pursuant to

Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar

_{Date...............}

ABDUR MIAH v OFFICIAL ASSIGNEE [2013] NZHC 2726 [21 October 2013]

Background

[1] The appellant, Mr Miah, was adjudicated bankrupt on 4 May 2007. At that time he was the owner of a life insurance policy on the death of his wife. Mrs Miah died on 22 May 2007. The life policy value was $2M plus accumulated interest.

[2] Upon his bankruptcy all of Mr Miah’s property including the life insurance

policy in question vested in the Official Assignee (the Assignee).

[3] The insurer (AXA) declined to pay out to the Official Assignee the sum due under the life policy. AXA claims the life policy application contained a number of material misstatements or non disclosures regarding Mr and Mrs Miah’s financial position and occupation; that AXA was induced to enter into the contract of insurance due to those statements; and that the misstatements were material to the risk insured under the policy.

[4] The Assignee considered and determined that AXA was correct to decline to payout on the policy and treated the property in the policy as abandoned.

[5] Mr Miah wishes to test before the Court the claim on the AXA policy and seeks an assignment of the policy on terms and conditions.

[6] Those terms and conditions have been the subject of extensive correspondence and communication between the Assignee and his lawyers Meredith Connell, and Mr Miah and his lawyer, Mr Hooker.

[7] It is claimed on behalf of Mr Miah that the creditors in his bankrupt estate totalled $900,000 and that the value of the life policy was more than $2M; therefore at all material times he had an interest in the surplus of his bankrupt estate.

[8] On 16 and 17 May 2013 Mr Miah proposed to the Assignee that the policy be assigned to him. On 20 May 2013 the Assignee declined to assign the policy to Mr Miah on the terms proposed on behalf of Mr Miah.

[9] It is the case for Mr Miah that the Assignee is wrong in law and/or fact and his decision is unreasonable and that the Assignee failed to take into account relevant considerations.

[10] Although Mr Miah’s application calls in aid s 226 of the Insolvency Act 2006 it now appears to be accepted that the appropriate provision for consideration is s 86 of the Insolvency Act 1967 because the 2006 Act came into force after the date of Mr Miah’s bankruptcy.

[11] Issues in this case focus upon the principles the Court should use upon appeal. Case authority tends to indicate that the Court’s have taken a more restrictive approach towards its use of its appeal authority under s 86, than is now available under s 226 of the 2007 Insolvency Act 2006.

[12] Some enquiry is required to consider the correct approach to be taken under s

86.

[13] The Court will then detail the evidence before considering the position of the parties with respect to that evidence.

Insolvency Act 1967

[14] Section 42 provides that any beneficial interest that the bankrupt had in property at the time of bankruptcy vested in the Assignee; that the Assignee is entitled to all the rights of the bankrupt to recover the bankrupt’s property including taking proceedings to claim property to which the bankrupt was entitled.

[15] It does not appear to be in dispute that if Mr Miah had not been bankrupt and if AXA had paid out on the life policy, that those proceeds would have become the property of Mr Miah.

[16] An Assignee has an ability to prosecute a claim on behalf of the bankrupt.

[17] Section 84 sets out the basis upon which the discretion of the Assignee and

the management of the bankrupt’s estate are to be exercised. Subject to the

provisions of the Insolvency Act 1967 the Assignee shall use his own discretion in the management of the estate. In Callis¹ it was held that provided the Assignee acts in good faith and not fraudulently or unreasonably, the Court will not interfere with the exercise of his or her discretion.

[18] Section 86 provides:

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 may make such order as it thinks fit.

The evidence

[19] No affidavit evidence has been filed on behalf of Mr Miah.

From Mr Viljoen

[20] Mr C J Viljoen, deputy Assignee in Auckland has sworn an affidavit. He exhibits a copy of the financial statement that accompanied the life insurance applications of Mr and Mrs Miah. It showed significant value in a family home and in real estate investments and indicated an asset surplus of $680,000.

[21] The insurance application form warned of a duty to disclose all information relevant for an assessment of the policy application. Mrs Miah’s policy covered life insurance only. Mr Miah’s policy covered life and income protection.

[22] Mrs Miah died on 22 May 2007 while in Bangladesh. A post mortem report indicated strangulation which was homicidal in nature. Mr Miah was charged in relation to the murder of Mrs Miah and was acquitted of any involvement.

[23] To assist AXA in its assessment of the life policy claim the Assignee provided relevant documents to it. In October 2010 AXA informed Mr Miah of the discrepancies they found concerning the personal details and Financial Needs

_{Analysis completed for the life policy applications.}

¹ Re Callis, (a bankrupt); Callis v Pardington (1996) 7 NZ CLC 261, 211.

[24] In response and on behalf of Mr Miah an accountant wrote to AXA and essentially confirmed the financial details given by Mr Miah in support of the life policy applications.

[25] Mr Viljoen deposes that over the course of the next 11 months correspondence occurred between AXA, Mr Miah and the Assignee. Then AXA requested that Deloittes independently assess the accuracy of the financial information disclosed by Mr Miah in his application. In a lengthy report Deloittes concluded that the total assets and total liabilities disclosed in the financial needs analysis were materially misrepresented.

[26] On 19 March 2012 AXA declined the claim. On 16 May 2012 the Assignee sought legal advice from Meredith Connell as to the Assignee’s rights and remedies. By its report dated 25 July 2012 Meredith Connell provided a legal opinion to the Assignee. It concluded:

(a) AXA had a strong case to avoid Mrs Miah’s policy.

(b) It appears there were misstatements as to Mr and Mrs Miah’s financial

position in the policy application.

(c) Given the extent of the misstatements, there was likely to be a strong claim for materiality.

(d) It is likely inducement followed from the material misstatement.

(e) AXA was likely to prove it was induced based on material nondisclosure.

[27] On 30 January 2013 Mr Hooker advised the Assignee he was acting for Mr Miah and had instructions to issue proceedings against AXA. Mr Hooker advised that Mr Miah wished to enter an arrangement that he would take the proceedings and indemnify the Assignee against any costs, and then account to the Assignee for the proceeds.

[28] The following day the Assignee responded to Mr Hooker and advised he was not going to advance proceedings against AXA on the basis the litigation did not have sufficient merit. He said he was not prepared to receive further comment on the legal advice he received given Mr Miah’s previous opportunity to make submissions to the Assignee on his position.

[29] With regard to an assignment of the policy the Assignee advised that an indemnity of substance would be required. The Assignee questioned how, in light of Mr Miah’s impecuniosity, the indemnity could have any substance and he invited comment on the point.

[30] The Assignee advised he would defer making any decision on the matter of assignment until Mr Hooker’s response was received. A copy of the report of Meredith Connell dated 25 July 2012 was offered on the basis of an undertaking of confidentiality.

[31] By letter dated 8 February 2013 the Assignee advised that if an assignment was to occur, Mr Miah would be required to fully indemnify the Assignee against any costs, expenses, damages etc. that may arise as a result of Mr Miah taking proceedings. The Assignee warned it was imperative he not be exposed to any risk from the assignment and advised that indemnities were taken by the Assignee as a matter of course, except in very limited and exceptional circumstances.

[32] By letter dated 11 May the Assignee wrote to Mr Miah regarding the requirement of an indemnity:

The indemnity is to fully indemnify me against any costs, expenses, loss, damages, etcetera that I may incur as a result of granting an assignment and you taking legal proceedings against AXA. I accept that you will have responsibility for paying the cost of advancing any assigned claim against ACA and that you will also have responsibility for any adverse costs order that may be made by the Court.

I may though also incur cost or loss as a result of granting any assignment. For example, AXA may “appeal” to the High Court against any decision that I make to assign the claim to you. In that event, I will be required to engage solicitors and pay them to advance my position through Court. If AXA were to succeed with any such “appeal” I may have costs awarded against me. This is a foreseeable cost and loss that I may be put to as a result of making an assignment. It is a cost that I require indemnification against. There are

other presently unforeseeable costs and losses that I may be put to as a direct or indirect result of making an assignment. This is why the indemnity I require is unlimited and wide ranging.

Mr Hooker advised in his email to me on 30 January 2013 (2:16pm) that you were willing to indemnify the Official Assignee and that you will account to the Official Assignee for the proceeds of the claim against AXA. If you remain willing to provide the indemnity, it must have substance. I need total comfort that if I am required to enforce the indemnity that I will obtain payment from you. To obtain such comfort, I usually required security to support the indemnity.

[33] The Assignee then requested Mr Miah to provide an outline of his financial position and particulars of any property he would be willing to offer as security to support an indemnity.

[34] On 12 February 2013 Mr Miah telephoned the Assignee and enquired what amount would be sought as security for the indemnity. The following day the Assignee responded and said he would require a bond or security worth at least

$200,000 which would need to remain in place until the final resolution of any claim against AXA.

[35] On 26 February 2013 Mr Hooker requested the Assignee provide him with a copy of the Assignee’s standard assignment agreement. On 11 March 2013 the Assignee provided the wording of a standard operative indemnity clause, and indicated supplementary terms and conditions would be required.

[36] On 8 April 2013 Mr Hooker responded and attached a draft bond from Trade Indemnity and Assurety Limited (Trade Indemnity) which acknowledged an obligation to pay the Assignee’s reasonable legal costs only if the decision to assign the policy was appealed to the High Court and the Assignee, as a non party to the proceedings, was ordered to pay costs to AXA as a result of the proceeding being brought by Mr Miah against AXA. The bond was limited to $150,000 and could only be called upon and be enforceable if Mr Miah failed to first pay any costs order.

[37] On 22 April 2013 Meredith Connell responded to Mr Hooker on behalf of the Assignee and advised the Assignee did not accept the bond in that form. The Assignee proposed various amendments and variations to the bond. Those included:

(a) A requirement for the Assignee to be paid witness costs. (b) The bond required was $200,000 not $150,000.

(c) Mr Miah would have 10 working days from the date of demand under the indemnity to pay the Assignee.

(d) Given that nothing was known about the financial position of Trade Indemnity, the Assignee sought inclusion of a clause requiring the full sum of the bond to be deposited into a separate standalone bank account to be held by Trade Indemnity on trust for the Assignee, until the Assignee released Trade Indemnity from the bond.

[38] Mr Hooker’s response dated 2 May 2013 advised:

(a) A quantum of $150,000 for the bond was considered reasonably realistic, as estimated costs exposure for the Assignee was $122,000.

(b) It was unreasonable and unrealistic to expect the bond to be lodged into a bank account; that Trade Indemnity had sufficient assets to provide the bond including capital resources of $500,000 represented by cash in the bank, with no external borrowings and only current debts and trade accounts.

(c) The bond holder need not provide a cash security, but only establish that they were worth the amount of the bond.

[39] Meredith Connell’s response dated 13 May 2013 was to advise the Assignee

did not agree because:

(a) Mr Hooker’s estimate of Assignee costs exposure was underestimated.

(b) The Assignee required the bond to be held on trust in a separate bank account because ordinarily the Assignee seeks security from an

indemnity in the form of a mortgage over real property or a charge over other assets having acquired evidence of the value of those.

(c) The bond offered only entitled the Assignee to lodge a claim as an unsecured creditor if Trade Indemnity was unable to satisfy any claim.

[40] The following day Mr Hooker responded with advice:

(a) The proceedings against AXA were subject to limitation period considerations.

(b) The Assignee was not being realistic regarding its requirement for funds to be lodged into a bank account.

(c) A full sum of $200,000 should not be required at the commencement of the litigation.

(d) The Assignee’s estimates of the duration of the hearing and expert

evidence was speculative.

[41] After a meeting of lawyers and the Assignee on 15 May 2013 Mr Hooker the following day wrote to Meredith Connell proposing:

(a) An assignment on a conditional basis; that a bond of $200,000 would be provided by Trade Indemnity together with a bank’s security or other form of acceptable security to be provided by a due date and failure to provide such would result in revocation of the assignment.

(b) Should AXA appeal against the assignment, then Trade Indemnity should provide a bank security or alternative security in the sum of

$50,000 within 14 days of the appeal being brought.

(c) Once the proceedings are set down for hearing, then a security in the sum of $75,000 be provided either by way of bank security or alternative security.

[42] Meredith Connell’s immediate response on behalf of the Assignee advised the assignment must be completed before Mr Miah could commence the proceedings; that any conditional assignment would not enable Mr Miah to validly commence the proceedings. The letter indicated the Assignee proposed two options:

(a) A statement of claim would be filed in the Assignee’s name.

(b) Mr Miah would have up to the time of the first case management conference to agree to the Assignee’s conditions of assignment and if at that time no assignment took place the Assignee would discontinue the proceeding.

(c) The Assignee’s conditions for assignment remained, namely $200,000

to be deposited into a bank account.

(d) The Assignee would require $16,169 to be paid to Meredith Connell to cover the costs of preparation of filing a statement of claim and for attendances to the date of the first case management conference.

[43] Alternatively it was indicated the Assignee would accept a personal guarantee from the sole director of Trade Indemnity, supported by a mortgage over real property owned by that director.

[44] On 17 May 2013 Mr Hooker responded with counterproposals including:

(a) That the property in the life insurance was to be formally assigned signed to Mr Miah.

(b) Mr Miah will personally indemnify the Assignee from any costs arising from the formal assignment or from the Court case up to a sum of $200,000.

(c) Trade Indemnity would provide a bond in the sum of $200,000 which may be called upon at any time if Mr Miah failed to make payment in accordance with his indemnity.

(d) Mr Miah or Trade Indemnity would provide the sum of $50,000 to be

retained in the trust account of Mr Miah’s solicitors.

(e) If the claim against AXA results in payment to Mr Miah then the Official Assignee has to be paid by Mr Miah from the net proceeds of that payment.

[45] Mr Hooker noted that that proposal was a formal request for assignment and if it was declined, then Mr Miah would appeal. The Assignee’s response through his lawyer’s letter dated 20 May 2013 indicated the Assignee was not prepared to assign the policy on the basis suggested.

From Mr Harte

[46] Mr Harte, the Assignee has filed an affidavit in which he summarises the approach he generally takes to assignments, and the approach he has taken in this case.

[47] He says pursuant to regulation 63 of the Insolvency Regulations 1970 and regulation 17 of the Insolvency (Personal Insolvency) Regulations 2007, he is not required to incur any expense in relation to a bankrupt estate without a guarantee from the creditors, or some of them. Therefore he has a discretion whether or not to incur any expense in the absence of the guarantee.

[48] As a matter of policy he does not incur expenses in a bankrupt estate without the guarantee from creditors. Limited funding is available in situations involving a matter of public interest. The Assignee’s budget does not include any provision for incurring expenses or providing funding for pursuing legal recovery proceedings that arise from bankrupt estates.

[49] Mr Harte says that where an assignment involves pursuit of proceedings against a third party then as a matter of policy he would require an indemnity for costs/expenses and security as a condition of the assignment, from the parties

seeking the assignment. These requirements are, he says, aimed at ensuring he is adequately protected from the risk of consequent costs.

[50] With respect to the form of the indemnity Mr Harte says he has operative standard terms and conditions which are used; that at times supplementary terms and conditions are required that are adapted to fit the circumstances of each particular case.

[51] Mr Harte deposes he regularly enters into indemnities with funders of litigation which has given him a good appreciation of the consequences that may flow if no security is obtained to support and give substance to the indemnity. He requires risk and consequent costs implications to be borne by the party who has requested the assignment.

[52] As a statutory officer of the Court and as a holder of public office there is, Mr Harte says, imposed on him “duties and accountabilities for the manner in which public funds are expended”. He endeavours to be even handed across all requests and did not consider there to be any exceptional circumstances in Mr Miah’s case.

[53] In this case and having taken legal advice on the matter he considered that security to a value of $200,000 was required.

[54] Mr Harte confirms that he instructed Meredith Connell regarding the existence of a legal recovery in the proceedings against AXA and that advice concluded AXA had a strong claim for avoiding the policy.

[55] However, as the claim against AXA was arguable at the very least, he considered whether he should assign the policy to Mr Miah in order for him to pursue the proceedings against AXA. However, Mr Miah’s bankrupt estate has no available assets. Nor did Mr Harte wish his office to be placed in a position whereby it would be required to incur any expense.

[56] Mr Harte had concerns about the ability of Trade Indemnity to satisfy the bond when called upon. He had no knowledge of Trade Indemnity nor has he

received any information about that company save as was reported to him by Mr

Hooker.

[57] Mr Harte considers he would not be acting prudently if he agreed to Mr Miah’s proposals in the knowledge that he was putting himself and public funds at risk.

The case for Mr Miah

The requirement for security

[58] Mr Hooker submits it is unlikely AXA would bring any costs application against the Assignee or that any cost application would succeed. He submits the Assignee does not benefit from the litigation, has no control over it nor is the Assignee driving it or directing it or taking it for his benefit. Instead by his own assessment the Assignee regards the claim as valueless. Therefore Mr Hooker submits the risk of exposure to costs is insignificant and “not real”; that a bond should not be imposed.

[59] Mr Hooker submits that because the risk is so small the bond offered of

$50,000 is adequate for it would allow Mr Miah to pursue the claim as to his interest at his cost and with no risk to the Assignee; that if a claim was made against the Assignee the sum of $50,000 would more than adequately cover that. Mr Hooker’s submissions contend that the level of bond should not be such as to deny Mr Miah’s access to his “surplus”; nor should there be a requirement of payment of a bond into a bank account. Mr Hooker submits “it is not commercially realistic for the Rolls Royce defence by the OA to be paid up front to secure an assignment of “property” when the risk of costs being payable by the OA is very small and no person would be willing to tie up $200,000 of capital in order to allow the formal assignment to take place. The affect of the requirement is to deny the assignment.

[60] The Assignee knows Mr Miah has no assets and therefore the Assignee is demanding a $200,000 capital fund on the risk of exposure that will probably not materialise but which ties up the capital for the duration of the litigation and any

appeal time. That he submits could be five years and much more if there becomes an issue of costs against the Assignee.

[61] If AXA brought an appeal against the assignment of the policy to Mr Miah Mr Hooker asks why the total indemnity should be paid and remain in place for the full period of the litigation. If an appeal against the assignment fails then there is no risk he says of a non party costs order against the Assignee.

[62] Mr Hooker also questions whether in fact the Assignee has made a decision declining to assign the policy on the terms proposed by Mr Miah or indeed in correspondence at all. In the circumstances the Court is invited to put the views of the Assignee to one side and to make a decision itself regarding what is reasonable in the circumstances. That decision, Mr Hooker submits, ought to take into account:

(a) That the policy proceeds would exceed the total debts of the bankrupted estate by more than $1M.

(b) In the interest of justice Mr Miah should be able to pursue his claim for the surplus.

(c) It can’t be said his claim on the policy is hopeless.

(d) The OA has decided not to pursue a claim on the policy.

(e) By assigning the policy to Mr Miah the OA does not seek to benefit from that assignment and will not benefit by it.

(f) The possibility of the Assignee being exposed to a costs order as a non party is remote.

[63] It is now submitted on behalf of Mr Miah that the assignment should be on terms:

(a) Mr Miah will personally indemnify the Assignee for any costs order up to $150,000.

(b) Trade Indemnity will provide a bond to the Assignee for up to

$150,000 if Mr Miah fails to honour his promise.

(c) Mr Miah and/or Trade Indemnity will provide the sum of $50,000 to be retained in the trust account of the solicitors for Mr Miah which may be used to make any payment due to the Assignee under the indemnity or the bond and in the event AXA do not appeal against the assignment or the appeal is dismissed, the sum shall be released.

(d) In the event a claim against AXA is successful then the Assignee shall be paid 5 per cent of the net proceeds by Mr Miah.

Regarding the Assignee’s actions

[64] This case concerns Mr Miah’s request for an assignment of the policy, the

Assignee having determined to not make a claim upon it.

[65] The respective positions of the parties regarding the requirement of an indemnity have already been covered. Mr Hooker questions the Assignee’s claims of protection needs. He criticises Mr Harte’s failure to produce any documents or not identifying his “then reasons” for imposing his security requirements against a cost exposure.

[66] Mr Hooker considers the Assignee’s position to be misconceived because if the policy is assigned to Mr Miah then the Assignee will not be a party to proceedings and therefore any claim against the Assignee for costs would need to be a claim against the OA as a non party. Mr Hooker submits there appears to be no reported or unreported case where costs have been sought or granted against the Assignee where there has been an assignment of property in a bankrupt estate and an unsuccessful claim made in Court; that although awards of cost may be made against liquidators he submits the actual risk of costs being ordered against the Assignee to be negligible.

[67] Mr Hooker refers to the judgment of the Privy Council in Dymocks Franchise Systems (NSW) Pty Ltd v Todd (No.2)². In that case a Court considered costs against non parties were to be regarded as exceptional; that the question was whether in all the circumstances it was fair to make such an order; and that the discretion would not usually be exercised against a “pure funded” i.e. a party that had no personal interest in the litigation, did not stand to benefit from it and was not funding it as a matter of

business. However if the non party also substantially controlled or at least stood to benefit from the litigation then the position might be different.

Discussion

[68] As noted earlier, the case falls for consideration under s 86 of the 1967

Insolvency Act. Mr Neil for the Assignee has helpfully reviewed a number of case authorities regarding the development of the Court’s approach to these kinds of appeals in recent years. It seems clear from the decisions of the High Court in Rao v Official Assignee³, Haines House Removals Ltd v Jamieson⁴, and Gollan v Official Assignee⁵ that the proper approach to be taken by the Court is that the Court should hear all of the material de novo, but be careful not to interfere with the Assignee’s

discretion too readily; and in that event an appellant may bear a responsibility to prove to the Court there should be an assignment of the claim, rather than the Assignee justifying reasons for refusing it.

[69] In Gollan the Court held it was incumbent on a bankrupt seeking an assignment to establish that they are detrimentally affected by the decision of the Assignee to refuse to assign, by showing that from consideration provided for the assignment there is sufficient money to enable a surplus to be paid to the bankrupt after the Official Assignee has taken his remuneration and all creditors are paid in full, or at least to a level they would agree.

[70] It would appear from the Court’s review of correspondence between the

_{Official Assignee and Mr Miah including the correspondence of their legal}

² _{[2005] 1 NZLR 145.}

³ _{High Court, Wellington, CIV 2006-485-004, 17 October 2007, Clifford J.}

⁴ _{[2013] NZHC 653, Duffy J.}

⁵ [2013] NZHC 2094, Associate Judge Christiansen.

representatives that Mr Miah has at no time confirmed that the proceeds of the litigation will be provided to the Assignee if an assignment is conferred and the litigation is successful. Therefore the sum to be returned to the Assignee remains to be settled. The latest proposal, provided by Mr Hooker’s submissions, was that the Assignee receive 5 per cent of the net proceeds.

[71] Rather it seems the parties’ primary focus has been to resolve the Assignee’s requirements for a suitable indemnity. It appears throughout that the Assignee has proceeded on the basis that if an assignment is granted then the proceeds of the litigation would be paid to him. It is now clear that Mr Miah proposes a return much less than that, in a proposal that does not seem to consider what expenses might be incurred by the Assignee in consequence of receiving any payment at all e.g. legal or administrative expenses.

[72] Upon bankruptcy a bankrupt’s property is vested in the Official Assignee. Neither the 1967 nor the 2006 Insolvency Act expressly deals with the assignment of property. Therefore in determining whether to assign the property the Assignee exercises a general discretion conferred on him to administer the estate. Moreover Courts have endorsed the action of an Assignee not to pursue a disputed claim when the likely cost is disproportionate to the possibility of benefit to creditors. In those cases it may be appropriate for the Assignee to assign the cause of action to a party willing to take the risk at that party’s own expense while undertaking to account for part of the proceeds if successful.

[73] In Callis (supra) the Court of Appeal stated:

We do not see how the Official Assignee can properly make such decisions without first evaluating both the strength of the claim and its likely result. That evaluation must be undertaken with such advice as the Official Assignee requires, and incurring such expenses as the Official Assignee feels justified. The Court is not going to reverse the decision merely because it disagrees with it. A decision made without any attempt at evaluation and without advice, however, is likely to be unreasonable...

[74] In this Court’s view there is no obligation upon an Assignee to decide whether to assign the property in any proceeding which the bankrupt has or wishes to pursue where the clear evidence suggests the proceeding cannot succeed. On the

other hand and provided the Assignee should bear no risk in the process the Assignee may, but not necessarily must be prepared to effect an assignment.

[75] It appears from the evidence of the Assignee that where an assignment will involve pursuit of proceedings against a third party then as a matter of policy the Assignee requires an indemnity for costs/expenses and supporting security. The purpose is to require that any risk and cost implications are born by or on behalf of the Assignee. As Mr Neil submits this place duties and accountabilities on the Assignee for the manner in which public funds are expended. Regulation 63 of the Insolvency regulations 1970 (although now replaced) required that where a bankrupt has no available assets, the Assignee shall not be required to incur any expense in relation to his estate without a guarantee from creditors, or some of them.

[76] In this case the Assignee was prepared to consider assigning the cause of action to Mr Miah.

[77] It is to be inferred from the evidence for and on behalf of the Assignee that it is policy to seek an indemnity in such cases against all costs, expenses and/or loss that may be occasioned as a result of conferring the assignment. The purpose is to ensure there is no fiscal disadvantage to the Assignee. In such cases the Assignee uses a standard term operative indemnity clause in his funding agreements and deeds of assignment.

[78] The Assignee considers he is entitled to be satisfied that his requirements for an indemnity and security were able to be met by Mr Miah before agreeing to an assignment. In this case also the Assignee requires a bond and/or security in support of the indemnity to ensure that the indemnity has substance and that it will be honoured. In response Mr Miah proposed that Trade Indemnity provided that bond. Because the Assignee had no knowledge of Trade Indemnity or of its ability to satisfy bonds the Assignee required the bond to be held on trust and deposited in a separate bank account.

[79] In this case Mr Miah’s bond would only entitle the Assignee to lodge a claim

as an unsecured creditor if Trade Indemnity was unable to satisfy any claim or was

placed into liquidation. The Assignee complains and the Court agrees that only scant information as to Trade Indemnity’s financial provision was provided. No information or representation has been provided by Trade Indemnity. Nor are there any warranties as to the state of its financial position.

[80] Throughout the Assignee was in receipt of legal advice. That advice indicates a risk that AXA would seek to review the Assignee’s decision to assign the policy and claim to Mr Miah. In that event the Assignee would likely be required to give evidence. In the outcome third or non party costs from the Assignee might be sought if Mr Miah did not succeed with his claim particularly if it had been agreed between the Assignee and Mr Miah that the proceeds of the litigation were to be accounted to the Assignee. AXA could apply for security for costs if Mr Miah was to bring a claim against it. The Assignee would not be prepared to give surety for those. Nor would the Assignee be prepared to risk any claim against him if the Court ordered security was less than the extent of costs awarded.

[81] The Assignee’s clear legal advice is that AXA has a strong claim for avoiding the policy. Further and although it has not been mentioned in the submissions of counsel, it appears any claim brought against AXA might be time barred.⁶

[82] Mr Neil submitted that Mr Miah was not an aggrieved person because he cannot show that a surplus in his estate would have arisen save for the conduct or omissions of the Assignee. The Assignee has made proper enquiry and obtained legal advice that indicates the prospects of success in challenging AXA’s actions refusing to pay out on the policy, would probably fail.

[83] Therefore in all probability there would not be a surplus available to Mr

Miah.

[84] For Mr Miah it is submitted that the value in the policy considerably exceeds the value of creditor’s claims in his bankrupt estate. Mr Hooker submits the prospects of challenging the AXA decision are significantly greater than might

_{otherwise appear. Mr Miah’s life policy was a life policy only. Mr Miah’s policy}

⁶ Lal v Sovereign Assurance Company Limited and Ors [2013] NZHC 2660.

included cover for income protection. Mr Hooker submits that it is in connection with the income protection insurance only that AXA required a Financial Needs Analysis to be provided as part of the policy application process.

[85] Regarding Mr Miah’s transfer proposal he has offered to provide to the Assignee 5 per cent of the proceeds of recovery and any action against AXA, for the benefit of the bankrupt estate.

[86] Mr Neil submits 5 per cent only would not likely reimburse the Assignee’s

costs, much less provide any surplus for distribution to creditors.

[87] Mr Hooker’s response is that the 5 per cent figure is negotiable.

[88] In the Court’s view an assignee should expect a significant percentage of any return bearing in mind his duty to act in the interests of creditors. But, as Mr Hooker submits, this may be a matter of negotiation only.

Conclusions

[89] The Court considers contrary to Mr Hookers submission to the contrary, that the Assignee made a decision to decline Mr Miah’s request for a transfer, as the lawyers correspondence on 17 and 20 May clearly indicates.

[90] If Mr Miah has standing to bring his appeal against the Assignee’s decision he must show he is aggrieved by that decision. In part this would seem to involve some consideration of the prospects of success in a challenge to access the decision. In that regard the Assignee has taken legal advice and has acted on that advice. Moreover it explains the Assignee’s insistence on adequate security. Nothing more should be required of an Assignee in defence of his decision not to assign save for he being satisfied that no risk arises which compromises his duties and obligations as a statutory officer.

[91] The Court does not consider it necessary to review the merits of any claim against AXA but does note, in relation to the matter raised by Mr Hooker concerning the need for a Financial Needs Analysis that the evidence suggests it was required by

AXA not solely for the purposes of Mr Miah’s income protection insurance

application but indeed also for both the life policies then applied for.

[92] Mr Miah claims he has an equitable interest in the AXA life policy and therefore if he is successful in his claim against AXA a profit will be returned.

[93] His argument is predicated on the basis that the bankrupt estate is solvent and that there will be residue for distribution to him. Mr Neil disagrees and calls in aid the judgment of Harrison J in Holdgate v The Official Assignee⁷

[94] In that case the learned Judge noted:

[22] However there is compelling authority to the contrary. There is no doubt that if, following administration, a surplus remained, the Official Assignee would hold it for Mr Holdgate’s benefit. In my view this is an incident of his statutory obligation. If not a resulting trust would arise to the extent of the surplus.

[23] There is no basis, however, for arguing that the Official Assignee holds the property of which he is the sole legal owner subject to a resulting trust before completion of administration of a bankruptcy. Mr Holdgate does not have the ordinary right of a cestui qui trust throughout the intervening period. Only if and when the surplus is determined following sale of the assets would a right of claim exist. Even then it would be restricted to a resulting trust constituted by the net proceeds of sale, not in the property itself.

[95] It is arguable therefore that Mr Miah is not an aggrieved person because he does not have an interest in the policy held by the Assignee. Rather his claim to an equitable interest very much depends on the contingency of a prospective claim that the Assignee believes cannot be proved.

[96] Considerations of standing aside the focus of this judgment falls to a consideration of the reasonableness of the Assignee’s decision not to assign the AXA life policy. The Court should look at this issue afresh and by consideration of the evidence but mindful of the Assignee’s reasons for his decision. In the scope of those considerations a Court believes Mr Miah bears some responsibility to satisfy

_{the Court that the Assignee’s decision was plainly wrong.}

⁷ [2007] NZHC 298; (2007) 8 NZCPR 245 (HC).

[97] On behalf of Mr Miah Mr Hooker submits the Assignee does not in reality face risks of exposure to costs or indemnity. It is likely only upon the assignment that AXA will challenge the fact of the assignment by way of an appeal of the Assignee’s decision. Mr Hooker submits the costs dealing with that challenge would be minimal, that any hearing time would be relatively brief. Hence, the proposal on behalf of Mr Miah that he and/or Trade Indemnity provide the sum of $50,000 to be retained in the trust account for the use of the Assignee if required.

[98] Thereafter, he says any claim against AXA would be brought in the name of Mr Miah and not by or on behalf of the Assignee and that the costs of any such proceeding would not be funded by the Assignee.

[99] Mr Hooker submits that because the Assignee would not be a funder of Mr Miah’s litigation, no risk would be run in respect of costs that might be payable if Mr Miah was to lose his case.

[100] Concerning the terms imposed by the Assignee in consideration of an assignment Mr Hooker submits that the level of any bond required should not be such as to deny Mr Miah access to his surplus. The level of $200,000 for the bond is considered grossly excessive and the requirement in addition for security makes commercial nonsense, submits Mr Hooker; that it would be impossible to find any funder prepared to offer a bond on that on those terms. The proceeding could take years. It is unlikely any funder would be prepared to tie up security for that length of time.

[101] To the contrary Mr Hooker submits the risk is negligible; that it is unlikely any appeal against the assignment will be brought or if it was that it would be successful beyond that challenge; that there is unlikely to be any risk at all for the Assignee; and that a bond should be sufficient without any further security being required.

[102] Mr Hooker submits it would have been reasonable for the Assignee to have taken a staged approach regarding the requirement for an indemnity. He says a bond

of itself and without security ought to be sufficient in respect of any potential liability for non party costs once the named proceeding against AXA has been filed.

Conclusions

[103] Although it may be that any claim that Mr Miah has is contingent upon a successful claim against AXA the Court is uncertain about ruling out the prospect of a contingent bankrupt estate surplus to which he is entitled albeit that the Assignee does not consider Mr Miah has any prospects with that claim.

[104] Mr Miah’s ultimate interest may not be immediate. It may only be prospective but if it was successful, despite strong views to the contrary, then indeed it may provide a surplus to the estate after reasonable provision had been made for creditors. It is difficult to conclude in those circumstances that Mr Miah is without standing as an aggrieved person.

[105] More importantly, this case is about a review of the terms the Assignee set for his agreement to the assignment to Mr Miah of the life policy of Mrs Miah.

[106] Increasingly, it seems Assignees are being requested to assign rights in property. In this case, not unusually, the Assignee had made his own enquiry of AXA regarding the value in the policy. The Assignee was initially sceptical of AXA’s claims of good reason to dishonour the policy. It required the advice of lawyers to satisfy the Assignee that there remained no value in the policy.

[107] Almost always the Assignee only considers the possibility of assignment of an interest in a life insurance policy when a direct approach is made to him by the bankrupt or by another on the bankrupt’s behalf. At that time the Assignee will consider whether in exchange for the Assignment there is to be some benefit for the bankrupt estate. In that regard he will approach the matter in the same way he would regarding any other asset of the bankrupt estate by turning his/her mind to whether or not value could be derived from an assignment.

[108] This case is about whether or not the Assignee’s decision not to assign was

reasonable.

[109] Reference has already been made to the policy considerations dictating or

influencing the Assignee’s consideration of a request from assignment.

[110] The Assignee had insisted on the use of a standard indemnity clause. Indeed, no issue was taken with the terms of that. Rather the issue concerns a requirement for security.

[111] This decision has reviewed the exchange of lawyers’ views regarding the

appropriateness of a requirement of security in support of the posting of a bond.

[112] Each counsel has his own estimate of potential cost consequences. It is this Court’s view that those consequences for the Assignee may be considerable and are not as remote as Mr Hooker claims. The fact is, the Assignee, in the interests of the bankrupt estate, has a duty to regard the interests of unpaid creditors of the bankrupt estate. Those creditors should not be forgotten because the Assignee considers the assets of the bankrupt estate have been exhausted. Nor should those be forgotten because the Assignee has traded upon a bankrupt’s claim that an estate asset has much more value than the Assignee considers it has.

[113] In those circumstances it is appropriate the Assignee proceeds cautiously and for the purpose of ensuring there is a minimum of exposure of adverse consequences in the event an asset of the bankrupt estate is assigned.

[114] The process of this appeal should not focus upon a calculation of the risks of exposure or an assessment in detail regarding respective positions. It is hardly likely any such outcome was envisaged by the 1967 Act, or indeed by the 2006 Act. Likely, the obligations of an Assignee were intended to be confined by considerations of policy and statutory obligation much more than by relegation to discretion.

[115] In the past⁸ Courts have been content to measure an Assignee’s decision by

reference to reasonable care being taken and appropriate advice being consulted. [116] In this case in either respect no complaint can be drawn.

[117] Also, that legal advice obtained by the Assignee discredits claims of a lack of risk for the Assignee and the lack of financial consequences if the assignment to Mr Miah was agreed.

[118] It may well be beyond the Assignee’s position to agree to assign without adequately considering the potential for the bankrupt estate’s creditors to benefit. No purpose at all could be served by an assignment unless the creditors were to agree; otherwise an assignment would only involve the potential for risk to the Assignee.

[119] Therefore, to avoid the potential for risk to the Assignee it is appropriate to insist upon guarantee conditions which will ensure the least possible risk to the Assignee. In this case it might at first view appear the Assignee’s conditions of assignment are more than what could reasonably be required.

[120] In this Court’s view that is not the case. Mr Miah’s challenge of AXA’s refusal to indemnity, faces significant risks. It seems to this Court that those risks do not necessarily devolve upon a consideration of AXA’s right to appeal the Assignee’s decision to assign. Also, a responsible Assignee would not assign without ensuring some benefit for the bankrupt estate’s creditors. In that event a successful outcome on the proceeding against AXA would provide a benefit to creditors. It is that benefit that might encourage consideration for an indemnity for costs incurred by AXA in defending the claim.

[121] Respective counsel have made submissions about the prospect of costs and the measure of those that might in the end become the responsibility of the Assignee.

⁸ Callis (supra)

[122] In this Court’s point of view it is not a matter of precise calculation. The Court does not believe it is beyond consideration that the Assignee’s risk is as great as the Assignee’s counsel estimates.

[123] The Assignee holds statutory office. Necessarily he/she ought to adopt a safe and conservative approach rather than one that might border on risk. Often, as in this case, questions of an estimate of costs and Court process are uncertain. In this case the Assignee’s premium of security is understandable when the identity or viability of a bond holder was not verified.

[124] In this case the Court considers the Assignee has proceeded with caution; he recognised the potential of the bankrupt’s claim, but, appropriately, insisted on conditions for the prerequisite assignment of an asset. These are reinforced not only by statutory obligation but by perceptions of reasonableness.

[125] In the Court’s view Mr Miah has not provided evidence or submissions to suggest the Assignee acted inappropriately or unreasonably in rejecting Mr Miah’s claim for an assignment of the life insurance policy, the property of his bankrupt estate.

Judgment

[126] Mr Miah’s appeal of the Assignee’s decision to refuse to assign the bankrupt estate’s interest in the life policy of Mr Miah’s widow, is dismissed.

[127] Costs are awarded to the Assignee on a 2B basis together with disbursements as approved.

Associate Judge Christiansen