Body Corporate 203344 v Flores
[2022] NZHC 3410
•14 December 2022
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV 2022-404-2199
[2022] NZHC 3410
BETWEEN BODY CORPORATE 203344
Applicant
AND
RUBEN FLORES and ROSALINDA LAPITAN
First Respondents
ASB BANK
Second RespondentTHE SECRETARY OF THE TREASURY OF NEW ZEALAND
Third Respondent
Hearing: 14 December 2022 Appearances:
N S Skara for the applicant
No appearances for the respondents
Judgment:
14 December 2022
JUDGMENT OF CAMPBELL J
This judgment was delivered by me on 14 December 2022 at 3.00 pm pursuant to Rule 11.5 of the High Court Rules
Registrar/Deputy Registrar
BODY CORPORATE 203344 v FLORES and OTHERS [2022] NZHC 3410 [14 December 2022]
Introduction
[1] The applicant is the body corporate for a unit title development at 30 Westward Ho Road, Glen Eden, Auckland. The development is a complex of apartments. The first respondents are the registered owners of unit 18E1 in the apartment complex. The second respondent has a mortgage registered over unit 18E.
[2] The applicant is owed a substantial debt in relation to unit 18E. The debt arises primarily from unpaid levies for remedial works carried out by the applicant to the apartment complex.
[3] The first respondents were adjudicated bankrupt on 6 December 2012. Unit 18E then vested in the Official Assignee as part of the first respondents’ estates in bankruptcy.
[4] On 18 June 2013, the Official Assignee disclaimed, under s 117 of the Insolvency Act 2006, all rights, interests and liabilities that it and the first respondents had in relation unit 18E.
[5] The current debt owed to the applicant in respect of unit 18E is over $374,000 (including a recent levy for repair works beginning on 1 August 2022). Until the debt is paid, it will increase as a result of interest and recovery expenses. The debt will be recoverable from whoever is the current owner of the unit (under s 124 of the Unit Titles Act 2010).
[6] The second respondent’s mortgage over unit 18E secures a debt of approximately $60,000.
Orders sought by applicant
[7] The applicant applied, by originating application dated 15 November 2022, for the following:
1 Together with an accessary unit and a share in an access unit. For convenience, I refer to all of these as “unit 18E”.
(a)An order that unit 18E vest in the applicant under s 119(1)(b) of the Insolvency Act.
(b)An order granting permission under r 19.5 of the High Court Rules 2016 for the applicant to seek the above order by originating application.
(c)A direction under r 18.7 that no parties beyond the named respondents are required to be served.
[8] The application has been served on the respondents. No notices of opposition have been filed. The third respondent has sent a letter to the applicant’s solicitors stating that it does not intend to oppose the application or appear. The second respondent filed a memorandum saying it abided the decision of the Court. There was no appearance by or on behalf of the first respondents when the application was called.
Preliminary matters
[9] The originating application procedure is appropriate for a proceeding seeking a vesting order under s 119(1)(b). Its use for such orders has been approved on other occasions. I grant the applicant permission to proceed in that way.
[10] The only parties with an interest in the application for a vesting order are the named respondents and the Official Assignee. The Official Assignee has stated in correspondence that it does not intend to oppose or appear at the hearing of the vesting application. I therefore direct that no parties beyond the named respondents are required to be served.
Should the vesting order be made?
[11] Upon unit 18E being disclaimed, it vested in the Crown bona vacantia, with the first respondents holding it on trust for the Crown. The first respondents will not resume ownership of the unit after discharge from bankruptcy, unless they apply for an order to that effect under s 119(2) of the Insolvency Act.
[12] Section 119(1)(b) of the Insolvency Act allows a person suffering loss or damage as a result of disclaimer by the Official Assignee to apply to this Court for an order that the disclaimed property vest in that person. The Court may make a vesting order if it is satisfied that it is fair that the property should be vested in the applicant.
[13] Because of the disclaimer, the applicant has no practical ability to recover the debt from the first respondents (as the unit would not form part of their estates in a subsequent bankruptcy). The disclaimer has left the applicant with no person on whom it can call to meet its levies. Accordingly, the applicant is a person who is, in terms of s 119, suffering loss or damage as a result of a disclaimer.
[14] This court has on several occasions held that, in circumstances similar to those faced by the applicant, it is fair to vest a unit in a body corporate.2 I consider that to be the case here. Without the vesting order, the applicant has no practical means of recovering the debt. The debt would then be shouldered instead by other unit owners. The first respondents have taken no steps to have unit 18E vested in them and have voiced no opposition to the applicant’s application for the vesting order.
[15] The applicant says the second respondent’s interest as registered mortgagee will be unaffected by a vesting order. For the avoidance of any doubt, I propose that the vesting order be subject to an express condition that it does not affect the second respondent’s interest as registered mortgage.3
[16]For these reasons, I consider it fair to make the vesting order sought.
Result
[17] I order, under s 119(1)(b) of the Insolvency Act 2006, that the property at unit 18E, 30 Westward Ho Road, Glen Eden, being unit 18E, accessory unit 18E and 1/76 share in access unit 1W on Deposited Plan 203344, with the LINZ identifier NA132A/219, vest in the applicant, on the condition that this vesting does not affect the interest of the owner of registered mortgage 5672858.4.
2 For example, Re Body Corporate 201036 [2016] NZHC 2035, (2016) 17 NZCPR 659.
3 Land Transfer Act 2017, s 89(3).
Campbell J