Chauvel Charles: Insolvency Amendment Bill — First Reading 
Chauvel Charles: Insolvency Amendment Bill — First Reading 
[Volume:652;Page:1959] 
CHARLES CHAUVEL (Labour) 
: 
 I would like to make a brief contribution to the debate in the time that remains this evening. As has been said the legislation makes a number of changes to insolvency law. 
First in relation to insolvent gifts the rules have changed. There are four sets of rules that entitle the official assignee to cancel certain things done by a debtor before bankruptcy that reduce the assets available to creditors—for example giving money to a spouse or a family trust. This is what we might refer to these days as the Madoff exception. 
The Insolvency Act 1967 stated that gifts given within 2 years before the adjudication of bankruptcy were voidable—as was said in those days—against the official assignee. This meant that the assignee could cancel the debts if the assignee wished to do so without having to prove whether the debtor could pay them at the time. And gifts within 2 to 5 years before the adjudication were voidable unless the party claiming under the gift proved that the donor was able to pay all his or her debts without the aid of the property comprised in the gift. This meant that the onus of proving that the debtor was solvent when he or she made the gift fell on the recipient of the gift. 
Now the law in section 204 of the Insolvency Act passed in 2006 is that the gift by a bankrupt to another person may be cancelled by the assignee if the bankrupt made the gift within 5 years immediately before adjudication and the bankrupt was unable to pay his or her due debts immediately after making the gift. But the effect of section 205 is that the onus of proving that the debtor was solvent when the gift was made falls on the recipient of the gift if the gift was made within 2 years of the adjudication and on the assignee if the gift was made between 2 and 5 years before it. 
This Insolvency Amendment Bill provides a new set of rules so that gifts made within 2 years of the adjudication may again be cancelled entirely at the assignee’s discretion. For gifts made between 2 and 5 years before adjudication the onus of proof will no longer lie with the assignee; it will shift to the recipient of the gift. The time at which the debtor must be proven to be able to satisfy the solvency test will shift. Instead of being immediately after making the gift it becomes either then or at any time up to the adjudication. For example if the debtor wins Lotto between making an insolvent gift and becoming bankrupt the debtor may be able to avoid the gift being cancelled—and that is obviously a sensible provision. 
When proving solvency account is to be taken again of debts that have not yet fallen due—for example contingent liabilities. The 2006 Act would have provided on that point that the solvency test would look only at due debts. So as Lianne Dalziel said the first part of the legislation—as far as changing the insolvent gifting regime—makes a lot of sense as do most of the changes mooted to the no-asset procedure which speakers including the previous speaker have detailed and which I will not repeat. 
Clearly we are in a position in our history where insolvencies are on the rise. I refer to an article that appeared in the  
New Zealand Herald  
in November last year in which comparison was made between the 3938 insolvencies in the 10 months to October that year and the 2963 insolvencies in the same period the year before. So we saw a 33 percent rise in insolvencies and in the 4 months prior to that article there had been a 46 percent rise. 
Clearly as we head into more difficult times we will be facing further insolvencies. Anything this Parliament does to strengthen the alternatives—like the no-asset procedure so that it is a proper avenue for people who really need that relief—is a good thing. As Lianne Dalziel said we will support that. 
We have a real concern however about the provisions relating to the retention of information on the register. We need to take proper account of what the Privacy Commissioner said about this area. In fact the whole area of information around insolvencies needs a proper look. Veda Advantage wrote to me some time ago and made the point that at the moment it is very easy to obtain someone’s negative credit-rating in New Zealand but it is an expensive and cumbersome process to get information on whether that person has a positive credit-rating. 
I urge the Commerce Committee when it looks at the information provisions in this legislation to take a proper look in the round at those requirements to look at the Privacy Commissioner’s concerns about the 4-year requirement in this particular case and to also look at the wider issues about whether for example it would be a good thing to be able to get positive credit-ratings on people rather than just the negative ones that exist at the moment. 
So with those words I repeat that Labour supports the bill’s going to a select committee but in respect of the information provisions we have serious reservations and would like to see a proper consideration of them.