Body Corporate 201036 - [2020] NZHC 1462

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…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

Continue reading Body Corporate 201036

Details

AGLC: Body Corporate 201036 [2020] NZHC 1462
Case: [2020] NZHC 1462
Decision Date: 25 June 2020

CaseChat Overview and Summary

In the High Court of New Zealand, Auckland Registry, Body Corporate 201036 sought an order to vest a residential property, Unit R6, located in Parnell Terraces, Auckland, in itself. The property was currently owned by Ms Carmel Moerangi Murphy, who had become bankrupt and had the Official Assignee disclaim any interest in the property. The Body Corporate sought the order under section 119 of the Insolvency Act 2006 to recover unpaid levies, ground rent, special levies, administration costs, penalties, and debt recovery costs amounting to $393,427.93.

The legal issues before the court were whether the disclaimer by the Official Assignee had caused loss or damage to the Body Corporate and whether it was fair to vest the property in the Body Corporate under section 119 of the Insolvency Act 2006. The court accepted the Body Corporate's submission that the disclaimer had indeed caused loss to it by ending the rights, interests, and liabilities of the Official Assignee and Ms Murphy in the property, including the obligation to pay levies. The Body Corporate could no longer call on any person to meet its levies, and there were significant outstanding levies owed to it in respect of Unit R6.

After considering the submissions of the Body Corporate and the absence of opposition from other interested parties, including the former mortgagee Westpac Banking Corporation and the owner of the freehold on which the residential development was built, the court found that it was fair to vest Unit R6 in the Body Corporate. This would allow the Body Corporate to sell the unit to relieve itself of the burden of the ongoing obligations in regard to Unit R6. The Secretary for the Treasury had been notified of the application and had no objection to the vesting order sought. The other unit holders in the development were currently bearing the burden of the absence of any revenue coming in for Unit R6. Therefore, the court made an order vesting Unit R6 in the Body Corporate under section 119 of the Insolvency Act 2006.

Orders