New Zealand Credit Law Bulletin - Vol 3, No 6, August 2002
A free, plain English review of recent law and items of interest for creditors, produced by Hattaway & Associates Ltd, Credit Consultants. To subscribe send a blank email to: nz-bulletin-join@mailman.hattaways.com
Plain language disclaimer:
This bulletin is not legal advice. Do not make decisions on legal matters based on a brief commentary. Instead, get professional legal advice.
In this issue:
- Could the law firm withold information to force payment?
Can you hold on to documents until your client pays? - Is unsolicited information covered by the Privacy Act?
What if someone gives you information that might be a breach of the Act if you went out and looked for it? - Freedom of the press to do credit checks
Do the same rules apply to the media as normal creditors? - Could the debtor go bankrupt in NZ while living in Australia?
1. Could the law firm withold information to force payment?
Privacy Commission: Case Note No. 16579 (November 2001)
A lawyer had acted for a woman in an employment matter. For some reason the woman then instructed a new lawyer who asked the first lawyer for copies of all the information he held about the woman. The first lawyer claimed a lien over the file because the woman had not paid her account.
Essentially, a lien allows a lawyer to retain a client's documents until the bill is paid. The lawyer offered to allow the woman to view the file but would not allow the file to be copied or removed. The woman claimed this conduct was in breach of Principle 6 of the Privacy Act. Principle 6 gives people a right to access personal information held about them by "agencies".
The lawyer argued that Principle 6 did not apply as he was entitled to claim a lien over the file under s. 42(2)(a) of the Privacy Act, 1993. He also claimed that this section superseded Principle 6. Section 42(2)(a) says that the agency (that is, the person holding the information) should make the information available in the way preferred by the person requesting it, unless doing so would 'impair efficient administration'. The lawyer argued that holding on to his copy of the file until the account was settled was an administratively efficient procedure because it assisted debt recovery.
Unfortunately for the lawyer the Privacy Commissioner did not agree with him. The Commissioner explained that the concept of 'efficient administration' referred to in the Privacy Act was not related to the process of debt recovery. Therefore, the woman was entitled to rely on Principle 6 and had a right to access the information. The lawyer duly made copies of the information available to the woman.
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2. Is unsolicited information covered by the Privacy Act?
Privacy Commission: Case Note No. 4784 (November 2001)
A travel agency was given a list of names and addresses of members of an association by a former member of the association who was arranging a package tour for the members. The association complained that the agency had collected the list without the members' permission and that this was a breach of Principle 1 of the Privacy Act 1993. The travel agency said it had not asked for the list.
Principle 1 says that an agency cannot "collect" personal information unless it is for a lawful purpose connected with a function of the agency. The information collected must be necessary for the lawful purpose. Under Section 2 of the Act "collection" of personal information does not include the receipt of unsolicited information. The Commission decided that the information had not been "collected", in terms of the Privacy Act definition. Therefore, the members of the association could not claim the benefit of the privacy principles relating to the collection of information.
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3. Freedom of the press to do credit checks
Privacy Commission: Case Note No. 48423 (May 2002)
Fourth Estate Holdings Limited (FEH), the publishers of the National Business Review, did personal credit checks through Baycorp on a couple who were the shareholders and directors of a small publishing company. The couple complained to the Privacy Commissioner that the credit checks were unauthorised. They also complained that FEH had refused to give them the name of their employee who had conducted the credit checks.
"News media" are excluded from the principles of the Privacy Act in relation to their news activities. Was FEH a "news medium" and was this credit check in relation to news activities? When the credit checks were carried out there had been a great deal of interest in the publishing industry. The National Business Review had published a number of articles on the industry. FEH argued that it was interested in the couple's publishing company because it had secretly heard that the company might be sold. FEH said it conducted personal credit checks on individuals who owned small companies because they were often personally involved in the financial affairs of the company.
The Privacy Commissioner concluded that FEH was a "news medium" and that the credit checks undertaken by FEH were a bona fide 'news activity'. This meant that the provisions of the Privacy Act were not applicable.
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4. Could the debtor go bankrupt in NZ while living in Australia?
Re Kennedy, High Court, Auckland, B922/01 (19 October 2001)
Mr. Marinkovich, was seeking to recover $350,000 from Ms Kennedy and three others. It related to a loan agreement. When living in Auckland, Kennedy had been involved in a company, since liquidated, called Voyage New Zealand Limited. Currently resident in Melbourne, Kennedy posted from there a bankruptcy petition to the Auckland High Court. In making her bankruptcy petition in New Zealand, Kennedy was trying to get the benefit of bankruptcy so that Marinkovich's proceedings against her in New Zealand could not continue. Kennedy later did not comply with requests from the Official Assignee for information. The OA noted that she had not filed a Statement of Affairs detailing her assets and liabilities and that there was a high probability that Ms Kennedy had no assets in New Zealand.
The first question the Court had to consider was whether Ms Kennedy was a debtor, subject to the laws of New Zealand, when her petition for bankruptcy was filed from outside New Zealand. The Court said that where a foreign debtor filed a petition for bankruptcy in New Zealand, it might have the power to judge the debtor bankrupt under New Zealand insolvency law (under section 16 of the Judicature Act, 1908). However, the Court was totally unsatisfied with the form of Kennedy's petition and found it to be invalid as it did not conform with the statutory requirements for filing petitions.
The High Court Rules define the word "filing" as meaning "to lodge the document in the form required by the Rules in the proper office of the Court together with the required fee". Kennedy had not paid any of the necessary fee. Also there were defects in the wording of the petition. Kennedy had not identified with any detail nor accepted liability for the actual debts due and owing by her. She had merely stated that there was "a joint debt with two other parties for $450,000". Kennedy had also made no attempt to explain to the Court why she should be entitled to petition for bankruptcy in New Zealand apart from the fact that she had previously resided in Auckland and that the majority of her creditors were in New Zealand.
The Court struck out Kennedy's petition for bankruptcy on the basis that she had not paid the required fee, the wording of the petition was defective, and that she had failed to comply the OA's request for further information. Therefore, Kennedy's creditors could continue recovery proceedings against her.
