RIGHTS OF CROWN

Evening Post, Volume CXVIII, Issue 57, 5 September 1934, Page 8

RIGHTS OF CROWN

BANKRUPT ESTATES

LIFE INSURANCE POLICIES

The right of the State Advances Office to require moneys from life insurance policies to be paid over to the office in cases where the estate over which it has a mortgage does not realise full liability of that mortgage was mentioned by Mr. W. J. Broadfoot (Government, Waitomo) in the House of Representatives last night during the course of his speech'on the Budget debate. Mr. Broadfoot said that the preferences enjoyed by the State trading departments were a matter of serious concern, and deserved the early consideration of the Government. For many years it had been thought that under sections 65 and 66 of. the Life Insurance Act life insurance policies up to £2000, with few exceptions, were exempt from proceedings by creditors. Two weeks ago he came across a case in which a man had loft an over-mortgaged farm and a life insurance policy of £150. The property would ■' not produce to- the amount of the mortgage, which was held by the State Advances Office, and the Department had cold-bloodedly instructed the insurance company not to pay out the amount of the policy to the widow as its claims had not been satisfied. When they set up State trading departments they should see that they enjoyed the same liabilities and privileges as private traders. The idea that a life insurance policy was protected had obtained in New Zealand for the last thirty years", and. no doubt the fact that the Crown as mortgagee could attach a claim for a liability would come as a rude shock to a large number of people. Such a position was never intended by the Legislature, and deserved the earnest consideration of the Minister of Finance. An amending law should be passed immediately protocting life insurance policies from claims by State Departments.

Mr. Broadfoot said that some years ago the Mayor of Auckland sued the Government Life Insurance Department for unpaid rates, and the verdict svent against him, because it was Crown property, which was exempt unless otherwise specified. Thus the policy holders in the Government Life Insurance Office were exempt from just charges of taxation. The position went a stage further. In a case decided in 1922, in re Buckingham, it was held that the Crown was not bound by the Chattels Transfer Act, and an execution issued by the Crown between an act of bankruptcy and the actual bankruptcy had been held as good. That fact gave the Crown priority over the private creditors, and again the position was grossly, unfair.