Foss flip flops over insolvency policy

Last month, the Minister for Commerce, the Hon Craig Foss answered a Parliamentary Question about the powers of the Official Assignee in New Zealand and advised that the OA had no power to override a statute. The question resulted from an unusual situation where an executor of a deceased estate was able to bankrupt a beneficiary of the estate, despite the latter's ultimate entitlement being significantly greater than the debt.

However, after it was pointed out that it was Insolvency Service policy to consider debts between parties to a mutual estate provable in bankruptcy the Minister stated that; You will note from the answers above that while the Set-off Act 1735 does still apply in New Zealand the specific provisions in the Insolvency Act 1967 override the Set-off Act. Accordingly, l am advised that the Official Assignee did not need to consider the provisions of the Set-Off Act"

There is a specific statutory mandate in the Insolvent Debtors Relief Act 1729, currently in force in New Zealand, that requires debt between parties to a mutual estate be set-off against each other. However the current policy implemented by the Insolvency Service is to allow someone who is effectively a secured creditor, to take bankruptcy proceedings against someone they owe money to.

There is no direct reference in the Insolvency Act 1967 to the acts of set-off other than to confirm that rights and powers under other acts are not affected. The Minister and the OA now claim that a perpetual equitable right guaranteed by the statutes of set-off to be void and subservient to the Insolvency Act, despite the lack of any reference in the legislation that it has this effect.

Although the Insolvency Act 1967 contains provisions to deal with set off , it does so in general terms at section 83, but it does not deal with a specific class of people; ie executors & legatees of mutual estates.

Consequently the Minister has now been asked to reconsider the advice given by Insolvency Service and propose an amendment to the insolvency legislation to incorporate the perpetual provisions of the Insolvent Debtors Relief Act, which excludes debts between parties to a mutual estate being provable in bankruptcy.