FAI Money Limited v Vujcich - [2021] NZHC 2267

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2019-488-0063

[2021] NZHC 2267

UNDER Part 18 of the High Court Rules 2016

IN THE MATTER OF

a proceeding to determine priority of competing equitable interests to the proceeds for the sale of land

BETWEEN

FAI MONEY LIMITED

Plaintiff

AND

CAROLINA CATHARINA MARIA VUJCICH (AS EXECUTOR OF THE

ESTATE OF GERARDUS JOZEF MARIE MARTENS) AND ED JOHNSTON & CO TRUSTEES LTD

First Defendants

Continued over

Hearing: 3 May 2021

Appearances:

A R B Barker QC for Plaintiff

N P Tetzlaff for First Defendants

D E Shortland for Fourth Defendant C Baker for Sixth Defendant

No appearance for Seventh Defendant

Judgment:

31 August 2021

JUDGMENT OF PETERS J

This judgment was delivered by Justice Peters on 31 August 2021 at 2 pm pursuant to r 11.5 of the High Court Rules

Registrar/Deputy Registrar

Date: ...................................

FAI MONEY LIMITED v VUJCICH [2021] NZHC 2267 [31 August 2021]

AND
WENDY RUTH JOHNSTON

Second Defendant (Discontinued)

DONALD ANZAC GEORGE REYLAND, AILSA GLORIA REYLAND AND
EDWARD ERROL JOHNSTON
Third Defendants (Discontinued)

WAYNE MATTHEW MCKENNA
Fourth Defendant

GRAEME MARK JESPERSEN

Fifth Defendant (Discontinued)

EDWARD ERROL JOHNSTON
Sixth Defendant

SECRETARY OF THE TREASURY OF NEW ZEALAND

Seventh Defendant

Solicitors:Glaister Ennor, Auckland Smith & Partners, Auckland Teei & Associates, Auckland
Price Baker Berridge, Auckland

Counsel:A R B Barker QC, Auckland D E Shortland, Auckland

Introduction

[1] This judgment determines applications for orders vesting property disclaimed by the Official Assignee.1

[2] Those seeking a share of the disclaimed property are the plaintiff, the first and fourth defendants, and the sixth defendant, Mr Edward Johnston, in whose bankruptcy the Official Assignee was acting at the date of the disclaimer, being 12 July 2016. I refer to the applicants as “FAI”, “the Trustee”, “Mr McKenna” and “Mr Johnston” respectively.

[3] Mr Johnston was adjudicated bankrupt in November 2012 and was discharged in March 2016.

[4] The disclaimed property was Mr Johnston’s (one-fifth) “interest in the Broadpine No. 1 Partnership ...” (“property”). The partnership was formed in the 1980s, to hold land, and then realise the value in radiata pine growing on that land (“land”).

[5] The Official Assignee disclaimed the property on the basis it was “onerous property” in the sense of s 117 Insolvency Act 2006 (“Act”).

[6] In 2017, several of the partners applied for orders to facilitate a sale of the right to harvest the trees on the land, whether by a sale of the land itself or by a sale of the right only. Fitzgerald J made the orders sought in October 2018, including orders lapsing caveats lodged against the certificate of title to the land, with the proceeds of sale to be held in trust pending further order of the Court.2 The right to harvest the trees was then sold. The land was retained.

[7]As matters stand, the property comprises:

(a)A one-fifth share in the land. In 2019, the assessed value of the land for rating purposes was…

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: [2021] NZHC 2267
Decision Date: 31 August 2021

CaseChat Overview and Summary

FAI Money Limited brought proceedings against Carolina Vujcich, Ed Johnston & Co Trustees Ltd, and others, seeking orders vesting property disclaimed by the Official Assignee in the context of Edward Johnston's bankruptcy. The property in question was a one-fifth interest in the Broadpine No. 1 Partnership, which held land with radiata pine trees. The Official Assignee disclaimed the property as onerous under the Insolvency Act 2006. The dispute centred on the allocation of the proceeds from the sale of the right to harvest the trees and the land itself. The key legal issues were whether the applicants, other than Mr Johnston, had suffered loss or damage due to the disclaimer and, if so, whether it was fair to vest the disclaimed property or part of it in them under section 119 of the Act.

The court held that FAI Money Limited, as a secured creditor with an equitable mortgage over the land and proceeds from the sale, had not suffered loss or damage due to the disclaimer. The court found it fair to vest $72,000 in Ed Johnston & Co Trustees Ltd, as it was the amount secured by an unregistered mortgage over the land. Wayne Matthew McKenna's claim was dismissed due to insufficient evidence to demonstrate he suffered loss or damage. Mr Johnston's claim for the balance of $100,000 was upheld, as the court found it fair to vest it in him given his significant contributions to the property's costs over the years.

The court ordered that FAI Money Limited and Ed Johnston & Co Trustees Ltd be paid the agreed sums, with the remaining $100,000 to be paid to Mr Johnston. The court directed the parties to draft the final orders, considering the current lockdown restrictions in Auckland. The court reserved the right to address any disputes over costs and disbursements if necessary.

Orders