Finlayson Christopher: Insolvency Law Reform Bill — In Committee 
Finlayson Christopher: Insolvency Law Reform Bill — In Committee 
[Volume:634;Page:6050] 
CHRISTOPHER FINLAYSON (National) 
: 
 I want to take a very brief call on Part 5. I certainly do not intend to speak about subparts 1 to 3 which as Mr Tremain said largely re-enact equivalent provisions in the 1967 Insolvency Act. But I do raise a couple of questions about the no-asset procedure in subpart 4 and I would be most grateful if the Minister in the chair the Hon Pete Hodgson could condescend to answer them. They are not so much on the morality of the no-asset procedure but on the necessity for it. 
Let me explain it this way from the point of view of the debtor. The debtor finds himself or herself in trouble and prima facie would appear to qualify for entry into the no-asset procedure. Clause 358 states: “(1) A debtor who meets the criteria set out in section 359 may apply to the Assignee for entry …” and the assignee as other speakers have said may admit that debtor to the no-asset procedure if the assignee is satisfied on reasonable grounds as to the criteria set out in clause 359(1). So it is very much at the discretion of the assignee. 
The Minister Lianne Dalziel said when she was in the chair that this procedure is an alternative to bankruptcy. But I wonder whether that is right—for the reasons that Mr Fairbrother explained when he gave his speech—because under clause 11 adjudication by the court is discretionary and the court may refuse to adjudicate in the circumstances set out in clause 37 which largely re-enacts section 26(2) of the Insolvency Act. The four criteria in clause 37 are: “… if—(a) the applicant creditor has not established the requirements set out in section 13; or (b) the debtor is able to pay his or her debts; or (c) it is just and equitable that the Court does not make an order of adjudication; or (d) for any other reason an order of adjudication should not be made.” 
There are numerous examples where the court has declined to exercise its discretion under the existing section 26(2). One of the principles that is set out is that a lack of assets is no bar. A lack of assets is a factor that the court should take into account in the exercise of its discretion but it is not a bar to the making of an order that is otherwise appropriate. As the commentaries have said a lack of assets is not to be found lightly. At the time of the hearing of the petition—or of what will become an application under the new legislation—the court would generally not have sufficient material before it to decide the question and the public examination of the debtor may have the effect of bringing assets to light. 
The point I am making—from the debtor’s point of view—is that rather than bother to go into the no-asset procedure set out in Part 5 he or she may decide simply to oppose the application for bankruptcy on the grounds that to bankrupt that person would be largely a pointless exercise. So there is the discretionary element in the clause that re-enacts section 26(2) of the Insolvency Act. If that is the case then I fail to see why the no-asset procedure provision is really necessary. It seems to me that there are sufficient tools under Part 5 to enable compositions with creditors or summary instalment orders or compositions during bankruptcy. If one adds to that the ability to oppose an application for bankruptcy which as I have said is a discretionary remedy for the court then one wonders where the no-asset procedure really takes us. 
So for those reasons quite apart from the business morality reasons that my friends on this side of the Committee have mentioned I really doubt the usefulness of this provision. I think that the way I have approached it either by opposing the application for bankruptcy on the grounds set out in the clause that now replaces section 26(2) of the Insolvency Act or by relying on the other tools set out in Part 5 would tend to render the no-asset procedure superfluous. 
The question was put that the amendments set out on Supplementary Order Paper 62 in the name of the Hon Lianne Dalziel to Part 5 be agreed to. 
Amendments agreed to.