Hare v Hare (a bankrupt) - [2019] NZHC 2801

IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY

I TE KŌTI MATUA O AOTEAROA TE WHANGANUI-A-TARA ROHE

CIV-2018-485-330

[2019] NZHC 2801

BETWEEN
KELLY-ANN HARE

Applicant

AND

JONATHAN KEITH HARE (A DECLARED BANKRUPT)

Respondent

Hearing: 17 July 2019

Appearances:

G M Letts and R M Stoop for Applicant No appearance for Respondent

O J G Upperton for Commissioner of Inland Revenue (Interested Party)

P R W Chisnall for Official Assignee (Interested Party)

Judgment:

31 October 2019

JUDGMENT OF CLARK J

[1] This application by Ms Hare raises a novel question concerning (broadly speaking) the relative priorities of a charging order registered over a property by the Commissioner of Inland Revenue (the Commissioner) and a spouse’s relationship property interest in that property. The specific issue is whether a charging order issued under s 184 of the Child Support Act 1991, and registered against a family home prior to the commencement of a de facto relationship, should be taken into account when calculating the value of a spouse or partner’s protected interest in the family home under s 20B of the Property (Relationships) Act 1976 (the PRA).

HARE v HARE (A DECLARED BANKRUPT) [2019] NZHC 2801 [31 October 2019]

Background

[2] There is no particular contention about the relevant background facts, which can be briefly stated. Mr Hare owns a property at Olivia Crescent, Tawa, valued at approximately $320,000. On 2 May 2011, the Commissioner was granted a charging order under s 184 of the Child Support Act in respect of unpaid child support owed by Mr Hare. The charging order was registered against the title of the Olivia Crescent property on 16 May 2011. The Olivia Crescent property is also subject to a mortgage to ASB Bank, which, as at the date of the hearing, was approximately $86,030.

[3] In late 2012, Mr Hare commenced a relationship with Ms Hare. The couple began living together at the Olivia Crescent property in January 2013. They married in May 2017.

[4] On 15 March 2016, Mr Hare was adjudicated bankrupt on the application of the Commissioner. In the months following, the Official Assignee took steps to realise the property by way of sale and to have the Commissioner remove the charging order in anticipation of a sale. Before the property was listed for sale, Ms Hare lodged a notice of claim of interest under s 42 of the PRA. Such a notice has the effect of a caveat lodged pursuant to the Land Transfer Act 2017 to protect an interest claimed under the PRA.

[5] In March 2017, following correspondence between Mr Hare and the Official Assignee concerning the possibility of Ms Hare acquiring the Olivia Crescent property, Ms Hare filed in the Family Court an application for:

(a)an order determining the length of her de facto relationship with Mr Hare;

(b)a declaration that the Olivia Crescent property is a “family home” such that the provisions of ss 20B and 20C of the PRA apply and Ms Hare has a “protected interest” in…

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: [2019] NZHC 2801
Decision Date: 31 October 2019

CaseChat Overview and Summary

The case of Hare v Hare (a bankrupt) was brought by Kelly-Ann Hare (Ms Hare) in the High Court of New Zealand, seeking a declaration as to the value of her protected interest in a family home under the Property (Relationships) Act 1976 (the PRA). The issue at the heart of this case was whether a charging order issued under the Child Support Act 1991 and registered against a family home prior to the commencement of a de facto relationship should be taken into account when calculating the value of a spouse or partner’s protected interest in the family home under the PRA. Ms Hare argued that the charging order, which was a child support debt, should not be taken into account when determining the equity in the family home, while the Commissioner of Inland Revenue (the Commissioner) argued that the charging order should be taken into account. The Commissioner’s position was that the charging order was a secured debt and, therefore, should be factored into the calculation of equity under the PRA. The court found that the charging order was a charge within the meaning of the Insolvency Act 2006 and, by virtue of which, the Commissioner was entitled to claim payment in priority to other creditors. The court held that the charging order is a secured debt and is to be taken into account when determining the equity in the Olivia Crescent property. The equity is to be calculated by ascertaining the market value or agreed value of the Olivia Crescent property and deducting the outstanding amounts of the mortgage debt and the child support debt. The value of Ms Hare’s protected interest is one-half of the equity in the Olivia Crescent property, assuming that amount remains less than the specified sum at the time of calculation. The court withheld a final order as to costs as the Commissioner wished to be heard on costs if the issue was determined in “the Commissioner’s favour”.

Orders