An application by New Zealand Life Care Limited (Life Care) for an order reversing the decision of the Official Assignee to reject its claim for $4.9m in the bankruptcy of Mr Harman was dismissed by the High Court in New Zealand Life Care Ltd v Official Assignee  NZHC 17. Life Care said that Mr Harman had guaranteed loans from Life Care to his companies, but accepted that it did not have a written guarantee signed by Mr Harman. Instead it relied on Mr Harman's admission of the guarantee in affidavits made after his adjudication.
The Court found that, on the balance of probabilities, Mr Harman gave an oral guarantee to Life Care in 2005, but that it was unenforceable. For a claim to be recognised in bankruptcy it must be a provable and enforceable debt. Oral guarantees are not enforceable and cannot be claimed in bankruptcy.
Life Care submitted that because Mr Harman admitted to the giving of the guarantee in the affidavits, the guarantee was enforceable and therefore provable in his bankruptcy, replying upon Lucas v Dixon, an English Court of Appeal decision from 1889. The Court held that the statements by Mr Harman as to the liabilities he had incurred were relevant but not determinative. Here, the party opposing the claim was the Official Assignee, not the bankrupt. Statements by a bankrupt as to debts incurred were not admissions binding on the Official Assignee.
See the judgment here.