Body Corporate 201036
[2020] NZHC 1462
•25 June 2020
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2020-404-678
[2020] NZHC 1462
UNDER s 119 of the Insolvency Act 2006 IN THE MATTER OF
an order vesting property in BODY CORPORATE 201036
BETWEEN
BODY CORPORATE 201036
Applicant
Hearing: 25 June 2020 Appearances:
LD Hawes-Gandar for the Applicant
Judgment:
25 June 2020
ORAL JUDGMENT OF ASSOCIATE JUDGE SMITH
This judgment was delivered by me on 25 June 2020 pursuant to r 11.3 of the High Court Rules
Registrar/Deputy Registrar
Solicitors:
Rainey Law, Auckland
Body Corporate 201036 [2020] NZHC 1462 [25 June 2020]
[1] The applicant (the Body Corporate) which is body corporate for a residential development in Auckland known as Parnell Terraces.
[2]The current registered proprietor of Unit R6 is Ms Carmel Moerangi Murphy.
[3] As at 20 March 2020, the total amount owing by Ms Murphy in unpaid levies, ground rent, special levies, administration costs, penalties and debt recovery costs, stands at $393,427.93. A contribution to ground rent is required, as the development is built on leasehold property. Ground rental assessed to Unit R6 continues to run at
$1,364.07 per month.
[4] Ms Murphy could not pay the levies and other costs, and on 7 August 2019 she became bankrupt on her own application.
[5]On 20 February 2020, the Official Assignee disclaimed any interest in Unit R6.
[6] The Body Corporate now applies for an order under s 119 of the Insolvency Act 2006 (the Act) for an order vesting Unit R6 in it.
[7]Sections 118 and 119 of the Act provide:
118 Effect of disclaimer
A disclaimer by the Assignee—
(a) brings to an end, on and from the date of the disclaimer, the rights, interests, and liabilities of the Assignee and the bankrupt in relation to the property disclaimed:
(b) does not affect the rights, interests, or liabilities of any other person, except in so far as is necessary to release the Assignee or the bankrupt from a liability.
119 Position of person who suffers loss as result of disclaimer
(1) A person suffering loss or damage as a result of disclaimer by the Assignee may—
(a) claim as a creditor in the bankruptcy for the amount of the loss or damage, taking account of the effect of an order made by the court under paragraph (b):
(b) apply to the court for an order that the disclaimed property be delivered to, or vested in, that person.
(2) The bankrupt may also apply for an order that the disclaimed property be delivered to, or vested in, the bankrupt.
(3) The court may make an order under subsection (1)(b) or (2) if it is satisfied that it is fair that the property should be delivered to, or vested in, the applicant.
[8]The requirements for a vesting order under s 119 are:
(1)A disclaimer by the Official Assignee of the bankrupt’s interest in the relevant property.
(2)Loss, damage, or disadvantage caused by the disclaimer.1
[9] If those two jurisdictional thresholds are met, the Court has an overall discretion as to whether it is fair to vest the property in the applicant.
[10] In this case, the jurisdictional threshold requirements are clearly met. First, the Official Assignee has disclaimed the relevant property. Secondly, I accept the submission of Mr Hawes-Gandar that the disclaimer has caused loss to the Body Corporate as follows:
(1)When the Official Assignee disclaimed the unit, the disclaimer had the effect of bringing to an end all the rights, interests and liabilities of both the Official Assignee and Ms Murphy in the unit, including the obligation to pay the Body Corporate levies;
(2)Due to the disclaimer, there is now no person on whom the Body Corporate can call to meet its levies; and
(3)There are now significant outstanding levies owed to the Body Corporate in respect of Unit R6.
[11] I also accept Mr Hawes-Gandar’s submission that this case is on all fours with the decision of Thomas J in Re Body Corporate 201036.2 That decision related to the same residential apartment development with which I am now concerned, and the Judge concluded that the jurisdiction under s 119 of the Act is available to a body
1 Re Body Corporate 201036 [2016] NZHC 2035 at [24] – [25].
2 Re Body Corporate 201036, above n.1.
corporate in circumstances such as the present. Her Honour was also satisfied that it would be fair to vest the relevant unit in that case in the Body Corporate, as there was no other person with a better interest in the unit who was willing and capable of paying the levies owing.3 Mr Hawes-Gandar submits that it would be fair to make the vesting order in this case as it will provide the Body Corporate with a way of selling the unit to relieve it of the burden of the ongoing obligations in regard to Unit R6. Furthermore, the secretary for the Treasury has been notified of the application as required, and has no objection to the vesting order sought. Others who might have had an interest have also been properly served, including Ms Murphy, the former mortgagee Westpac Banking Corporation (who until very recently also had a charging order on the title to Unit R6) and the owner of the freehold on which the residential development is built. None of those parties has opposed the application.
[12] The other unit holders in the development are currently effectively bearing the burden of the absence of any revenue coming in for Unit R6, and in accordance with the view of Thomas J in Re Body Corporate 201036, I am satisfied that that ongoing loss is sufficient to make it fair that Unit R6 should be vested in the applicant (there being no other party in whom the unit might appropriately be vested).
[13] For all those reasons, I make an order under s 119 of the Act vesting Unit R6 (the land described in computer unit title register NA129D/172, being a stratum estate in leasehold with the legal description Unit R6, Deposited Plan 201036) in the Body Corporate.
Associate Judge Smith
3 At [31].
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