Finlayson Christopher: Insolvency Law Reform Bill — In Committee 
Finlayson Christopher: Insolvency Law Reform Bill — In Committee 
[Volume:634;Page:6039] 
CHRISTOPHER FINLAYSON (National) 
: 
 Part 3 is made up of 10 subparts but really does not contain a great deal that is new to the Insolvency Act 1967 which this bill is designed to replace. If one looks at the various clauses of all 10 subparts one finds that most of those clauses simply re-establish the position that was quite clear under the Insolvency Act. So there is not a great deal that I really want to say about this part and I will just make a couple of brief comments about some of the newer provisions. The first concerns clauses 117 to 121 which provide for various provisions relating to disclaimers of onerous property. I will just pause on those for a couple of minutes and explain what onerous property is about. When an official assignee takes over the affairs of a bankrupt he or she may make a decision to disclaim onerous property. In other words the assignee may decide not to take certain steps in relation to an unprofitable contract or in relation to the property of a bankrupt that is unsaleable if to take on those obligations would create a burden on the official assignee that would be regarded as onerous. 
Those provisions are brought across from certain provisions of the Companies Act 1993 particularly sections 269 and 270 about the power to disclaim onerous property. There are a couple of minor changes to clause 117(4). In particular the definition of onerous property can include: “a litigation right that in the opinion of the Assignee has no reasonable prospect of success or cannot reasonably be funded from the assets of the bankrupt’s estate;”. All that means is that if the bankrupt was party to litigation in which he or she was seeking damages or a declaration or whatever the official assignee could decide that the proceeding did not have a reasonable prospect of success so there was no real point in taking it over. 
That is really the only thing I want to say about the first subpart of Part 3. I think the provisions are brought together reasonably well although for the reasons that my colleagues have advanced because of major flaws that we see in other parts we will not be supporting the bill. 
Subpart 2 sets out the duties of the bankrupt and as I say largely re-enacts what is already in the Insolvency Act 1967. Subpart 3 outlines importantly those provisions that deal with control over the bankrupt during a bankruptcy. There are very real limitations on what the bankrupt can do once he or she becomes bankrupt and those provisions include if necessary prohibiting the bankrupt from entering or continuing on in business and seizing the bankrupt’s property—indeed the bankrupt must vacate land or buildings if required to do so. 
Subpart 4 deals with the provision for the bankrupt during bankruptcy. Obviously the fact that a person is bankrupt does not necessarily mean he or she shall be reduced to being a beggar; the bankrupt may retain certain assets within reason. That is all dealt with perfectly rationally in that subpart. 
Subpart 5—again nothing new here—deals with the powers of the assignee and the court to examine the bankrupt and others. Clause 182 brings across a provision relating to the privilege against self-incrimination that states: “A person is not excused from answering a question because the question may incriminate or tend to incriminate that person.” Subpart 6 is a very important subpart that deals with the status of a bankrupt’s contracts. It re-enacts those provisions reasonably clearly explaining what exactly can happen to contracts that may have been entered into by the bankrupt. 
Subpart 7 “Irregular transactions before adjudication” contains one or two new provisions and the only area I want to pay any attention to is clauses 202 and 203 which deal with insolvent gifts. If a bankrupt gifts something to another person that gift may be cancelled on the assignee’s initiative if the bankrupt made the gift within the 5 years immediately before adjudication and the bankrupt was unable to pay his or her debts immediately after making the gifts. Those are important provisions designed to get around the prospect of gifting in order to avoid the consequences of bankruptcy. 
That is really all I wanted to say. Perhaps I should just briefly say that subpart 8 sets out the very great powers of the assignee once he or she assumes responsibility for the property of a bankrupt. Subpart 9 simply deals with creditors’ claims. I think there is virtually nothing new there; some provisions are brought across from equivalent sections in the Companies Act 1993. Finally perhaps I should refer to subpart 10 of Part 3 which deals with the powers of the court. 
 So really there is nothing very important in this part that has not been brought across either from the Insolvency Act 1967 or the Companies Act 1993. It is all fairly routine stuff. As I said earlier we have major issues of principle with Part 5 and Part 8—which seeks to deal with the new concept of voluntary administration—for reasons that will be developed when we deal with those parts. That is why we are opposing the bill. 
The question was put that the amendments set out on Supplementary Order Paper 62 in the name of the Hon Lianne Dalziel to Part 3 be agreed to. 
Amendments agreed to.