Body Corporate 203344 v Yong - [2022] NZHC 3411

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV 2022-404-2198

[2022] NZHC 3411

BETWEEN
BODY CORPORATE 203344

Applicant

AND

MEI YUEN YONG and KIM LAN CHO

First Respondents

STEVE YONG
Second Respondent

THE 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 YONG and OTHERS [2022] NZHC 3411 [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 19D1 in the apartment complex.

[2] The applicant is owed a substantial debt in relation to unit 19D. 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 19 June 2018. The Official Assignee initially considered the first respondents held unit 19D on a constructive trust for the second respondent and that the unit therefore did not vest in the Official Assignee as part of the first respondents’ estates in bankruptcy. In November 2021, the Official Assignee had a change of mind and concluded the unit had vested in the Official Assignee.

[4] On 5 November 2021, 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 19D.

[5] The current debt owed to the applicant in respect of unit 19D is over $340,000. 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).

Orders sought by applicant

[6] The applicant applied, by originating application dated 15 November 2022, for the following:

(a)An order that unit 19D vest in the applicant under s 119(1)(b) of the Insolvency Act.

1 Together with an accessary unit and a share in an access unit. For convenience, I refer to all of these as “unit 19D”.

(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 respondents are required to be served.

[7] 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. There was no appearance by or on behalf of the first or second respondents when the…

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.

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Details

Case: [2022] NZHC 3411
Decision Date: 14 December 2022

CaseChat Overview and Summary

In the case of Body Corporate 203344 v Yong, the applicant, a body corporate responsible for an apartment complex, sought to recover a substantial debt from the first respondents, the owners of unit 19D, who had been adjudicated bankrupt. The debt arose from unpaid levies for remedial works carried out by the applicant. Following a change in position by the Official Assignee, who initially considered the unit held on a constructive trust for the second respondent, the Official Assignee disclaimed all rights in relation to unit 19D under s 117 of the Insolvency Act 2006. The applicant then sought an order vesting unit 19D in itself under s 119(1)(b) of the Insolvency Act, to recover the outstanding debt of over $340,000.

The primary legal issue was whether it was fair to vest unit 19D in the applicant, considering the applicant had no practical ability to recover the debt from the first respondents due to their bankruptcy and the subsequent disclaimer by the Official Assignee. The court needed to determine if the applicant was suffering loss or damage as a result of the disclaimer and whether making the vesting order was fair. The court also had to consider if the vesting order aligned with previous cases where similar orders were made in favour of body corporates.

The court found that the applicant was indeed suffering loss or damage due to the disclaimer, as it had no practical means of recovering the debt from the first respondents. The court referred to previous cases where it had held that vesting a unit in a body corporate was fair under similar circumstances. The court concluded that without the vesting order, the applicant's debt would be unrecoverable, and the burden would fall on other unit owners. The court further noted that no respondent had voiced opposition to the applicant’s application. Therefore, the court determined that it was fair to make the vesting order sought by the applicant.

The court ordered that unit 19D, including the accessory unit and a share in an access unit, vest in the applicant under s 119(1)(b) of the Insolvency Act 2006. The court also granted the applicant permission to seek the vesting order by originating application and directed that no parties beyond the respondents were required to be served.

Orders