Body Corporate 447594

[2018] NZHC 3078

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2018-404-2440

[2018] NZHC 3078

IN THE MATTER

of an application for a vesting order in respect of land pursuant to s 119 of the Insolvency Act 2006

BETWEEN

BODY CORPORATE 447594

Plaintiff

Hearing:	26 November 2018
Appearances:	E Tobeck for Plaintiff
Judgment:	26 November 2018

JUDGMENT OF LANG J

[on application for vesting order under s 119 Insolvency Act 2006]

In the matter of BODY CORPORATE 447594 [2018] NZHC 3078 [26 November 2018]

[1]    In this proceeding Body Corporate 447594 seeks an order under s 119 of the Insolvency Act 2006 vesting in it unit 159 in an apartment complex known as the “Railway Campus”.

[2]    As I will shortly explain, the only parties affected by the application are the Crown  and  the  former  owners  of  the  unit,  Krishna  and  Nirmala  Murthy.    On 2 November 2018 Brewer J directed that the body corporate was not required to serve the application on the Crown because it has already advised it will not oppose the application and does not seek to be heard in relation to it.

[3]    The body corporate did not serve the proceeding on Mr and Mrs Murthy until recently but Mrs Murthy has orally advised the body corporate’s manager that they do not oppose the application. They were aware that the application was to be called today but were not present when it was called at 10 am.

Background

[4]    The Railway Campus complex required repairs to remedy weathertightness issues. A body corporate called Body Corporate 193764 initially administered the remedial work, which was undertaken in accordance with a scheme settled by this Court in October 2009 under s 48 of the Unit Titles Act 1972. The scheme permitted the body corporate to impose levies on unit owners to meet the cost of the work.

[5]    Mr and Mrs Murthy were unable to meet their share of the remedial costs. On 25 August 2010, Body Corporate 193764 obtained judgment against them in the sum of $43,963.91. Mr and Mrs Murthy were subsequently adjudicated bankrupt on the body corporate’s application because they could not meet the judgment debt. After investigating their affairs, the Official Assignee disclaimed the unit under s 117 of the Insolvency Act 2006. As a result, neither the Official Assignee nor Mr and Mrs Murthy have any further interest in the unit. Ownership of the unit has passed to the Crown, although Mr and Mrs Murthy remain the registered proprietors on the title.

[6]    This Court cancelled the original scheme of arrangement on 7 August 2014 and approved the creation of a new unit title structure. Body Corporate 447594, the applicant in this proceeding, has been responsible for undertaking the remedial work approved by the Court under the new scheme.

[7]    Since June 2015 the body corporate has been receiving the rent paid by tenants occupying unit 159. It has allocated the rent to outstanding levies payable by the owner of the unit, but this is insufficient to clear them. As at 20 September 2018, levies amounting to approximately $104,000 remain outstanding.

The application

[8]    The issues facing the body corporate have been exacerbated by the fact that in August 2018 the ground lease rental for the unit title development increased significantly. As a result, the levies that will be imposed in relation to all units in the complex are likely to increase significantly in the future. It seems clear that future rental income from unit 159 will be insufficient to meet these debts.

[9]    The body corporate has therefore applied for an order under s 119 of the Insolvency Act 2006 vesting the unit in it. It will no doubt sell the unit and apply the sale proceeds towards the outstanding levies. The purchaser will then be responsible for meeting future payments in relation to the unit.

[10]   The Treasury has confirmed in a letter dated 25 October 2018 that the Crown has no objection to the order sought by the body corporate,

Decision

[11]   I am satisfied it is appropriate to make the orders sought. 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.

[12]   I therefore make orders as sought. Given that the proceeding was only served on Mr and Mrs Murthy on 21 and 22 November, I direct that the orders are to lie in Court until 21 January 2019. If no steps have been taken to oppose the application by

that time, and an affidavit as to service has been filed, the body corporate may seal the orders.

Lang J

Solicitors:

Morgan Coakle, Auckland