Body Corporate 203344 v Secretary of the Treasury of New Zealand

[2024] NZHC 1090

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2024-404-000042

[2024] NZHC 1090

BETWEEN

BODY CORPORATE 203344

Applicant

AND

THE SECRETARY OF THE TREASURY OF NEW ZEALAND

Respondent

Hearing:	15 February 2024
Appearances:	E L McCallum for Applicant
Judgment:	6 May 2024

JUDGMENT OF VAN BOHEMEN J

This judgment was delivered by me on 6 May 2024 at 2:30 pm pursuant to r 11.5 of the High Court Rules 2016.

Registrar/Deputy Registrar

……………………………..

Counsel/Solicitors:

Wilson Harle, Auckland

BODY CORPORATE 203344 v THE SECRETARY OF THE TREASURY OF NEW ZEALAND [2024] NZHC 1090 [6 May 2024]

[1]    Body  Corporate  203344   (the   Applicant)   applies,   in   accordance   with s 119(1)(b) and (3) of the Insolvency Act 2006,  for an order that the property at  Unit 21C and Accessory Unit 21C and 1/76 share in Accessory Unit 1W, deposited plan 203344 (identifier NZA132A/182) (together, the Unit) vest in the Applicant.

[2]    The Unit is part of a unit title development at 30 Westward Ho Road, Glen Eden, Auckland.

[3]As recorded in my minute dated 15 February 2024:1

(a)The registered owners of the Unit were adjudicated bankrupt following non-payment of their share of the costs incurred by the Applicant in remediating Stage 2 of the development at 30 Westward Ho Road.

(b)Following the adjudication of the owners as bankrupt, the Unit vested in the Official Assignee who has disclaimed the Unit. As a consequence, the Unit has vested in the Crown.

(c)The Applicant seeks the vesting of the Unit in order to recover debts owing to it in respect of the Unit.

(d)The Treasury (the Respondent) has advised the solicitors for the Applicant that it does not oppose the application for vesting and will abide by the decision of the Court. There are no other parties with interests recorded on the title to the Unit.

(e)I have granted leave to the Applicant to bring the application by way of originating application.

[4]    The background  to  the  application  is  set  out  in  a  memorandum  dated  16 January 2024 from counsel for the Applicant as follows:

4.The Applicant is owed a substantial debt in relation to the Unit (Debt). The Debt arises primarily for regular unpaid levies and levies relating

1      Body Corporate 203344 v Secretary  of  the  Treasury  HC  Auckland  CIV-2024-404-000042, 15 February 2024 (Minute van Bohemen J).

to remedial work done by the Applicant. The Debt also includes interest on the unpaid levies, which the Applicant is entitled to charge under section 128 of the Unit Titles Act 2010, and the reasonable costs incurred by the Applicant in the process of recovering the unpaid levies, which the Applicant is entitled to recover under section 124 of the Unit Titles Act 2010.

5.The registered owners of the Unit, Marie Lou-Bennett Chao and David Tzane Yick Lou Chao (Chaos) were adjudicated bankrupt on 31 August 2023 on the application of the Applicant. The Unit then vested in the Official Assignee.

6.On 19 September 2023 the Unit was disclaimed by the Official Assignee in accordance with section 117 of the Insolvency Act 2006 (Insolvency Act), ending all rights, interests, and liabilities of both the Official Assignee and the Chaos in the Unit. Upon disclaimer by the Official Assignee, the Unit vested in the Crown bona vacantia. The effect of the bankruptcy of the Chaos and the disclaimer is that no party other than the Respondent retains a beneficial interest in the Unit.

7.The value of the Debt as of 15 January 2024 is $349,845.75. Until the Debt is paid, it will continue to increase as a result of interest and recovery expenses on the outstanding amount, as well as further levies. The amount of the Debt is likely similar to or in excess of the value of the Unit. However, because the Applicant’s rights of recovery of the Debt are limited to the registered owner, it has no means of recovery of the Debt until the Unit’s ownership changes.

8.Despite numerous attempts, including during the abovementioned bankruptcy proceedings, the Applicant has not been able to contact the Chaos for several years. The Applicant hired a private investigator to locate the Chaos, but the private investigator reported … that no further information regarding the Chaos’ whereabouts could be found. The Applicant considers that the Chaos may no longer be in New Zealand, and do not appear to intend to deal with the Unit. While the Chaos remain the registered owners of the Unit, the Applicant is unable to access a 25% financial assistance package (FAP) contribution from the Ministry of Business, Innovation and Employment that it would otherwise be entitled to. …

[5]    Under s 117 of the Insolvency Act, the Official Assignee may disclaim onerous property, which includes property of a bankrupt that is unsaleable, or not readily saleable, or that may give rise to a liability to pay money or to perform an onerous act.2 A disclaimer by the Assignee brings to an end the rights, interests and liabilities of the Assignee and the bankrupt in relation to the property disclaimed but does not

2      Insolvency Act 2006, s 117(1) and (4)(a)(ii).

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.3

[6]    As confirmed by the Court of Appeal in Fish Man Ltd (in liq) v Hadfield, disclaimed property vests in the Crown bona vacantia, with the bankrupted registered owners holding the property on trust for the Crown.4 As Thomas J held in Re Body Corporate 201036, the same applies for stratum estates.5

[7]    Under s 119(1)(b) of the Insolvency Act, a person suffering loss or damage as a result of a disclaimer by the Official Assignee may apply to the Court for an order that the disclaimed property be vested in that person. Under s 119(3), the Court may make such an order if it is satisfied that it is fair that the property should be vested in the applicant.

[8]    I accept that the Applicant has suffered loss and damage as a result of the Official Assignee’s disclaimer of the Unit. As a result of the disclaimer, the Applicant has no practical ability to recover the debt owed to it in respect of the Unit.

[9]    In Re Body Corporate 201036, Thomas J was satisfied that it was fair to vest a unit in that Body Corporate, having regard to the following considerations:6

(a)It will provide the Body Corporate with a way of selling the unit to relieve it of the potential burden of shouldering the obligations in regard to the unit;

(b)If it is unable to sell the unit prior to repairs commencing, the Body Corporate will take on the obligations in respect of the unit and should have a corresponding interest in the unit;

(c)The Body Corporate can authorise access to the unit for the repair of common property;

(d)The Treasury has been consulted and has no interest in any involvement with the unit;

(e)There is no other registered interest such as a mortgage;

3      Section 118.

4      Fish Man Ltd (in liq) v Hadfield [2017] NZCA 589, [2018] 2 NZLR 428 at [34]–[35].

5      Re Body Corporate 201036 [2016] NZHC 2035, (2016) 17 NZCPR 659 at [20].

6 At [31].

(f)The owner of the reversionary interest in the base land … has been served and taken no steps and in any case the [Unit Titles Act 2010] prohibits the surrender of a unit holder's stratum estate  to  the  lessor; and

(g)[The registered owner] has no interest in the unit and has taken no steps to have the unit vested in her. She is an undischarged bankrupt and can be presumed to lack the means to pay the outstanding levies.

[10]   I am satisfied the same considerations apply in the present case and warrant the making of the order sought. Moreover, as Lang J said in Re Body Corporate 447594:7

There is no point in the Crown continuing to remain the beneficial owner of the unit in circumstances where levies will continue to increase and remain unpaid.

[11] Accordingly, I make the order sought as set out at [1] above.

G J van Bohemen J

7      Re Body Corporate 447594 [2018] NZHC 3078 at [11].