Kaya

[2017] NZHC 570

IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY

CIV-2016-485-814 [2017] NZHC 570

UNDER

Section 119(1)(b) of the Insolvency Act

2006

IN THE MATTER

of a disclaimer of property of bankrupt
Mehmet Kaya

AND IN THE MATTER

of an application of JOANNE PATRICIA KAYA for vesting of property of the bankrupt

Applicant

On the papers
Judgment:	28 March 2017

JUDGMENT OF ASSOCIATE JUDGE SMITH

[1]      The applicant (Ms Kaya) is the wife of Mehmet Kaya, who was adjudicated bankrupt on his own application on 28 January 2016.

[2]      At the date of Mr Kaya’s bankruptcy, Mr and Ms Kaya jointly owned a property at 48 Meremere Street, Wainuiomata, being the land contained in Computer Freehold Registers WN8D/759 and WN16D/883, Wellington Registration District (the property).

[3]      There  is  one  mortgage  registered  on  the  titles  to  the  property,  namely mortgage 7430533.3 to ASB Bank Ltd (the Bank).

[4]      Following Mr Kaya’s bankruptcy, the Official Assignee concluded that there would be insufficient equity in the property to justify a sale.  The Official Assignee accordingly disclaimed her interest in Mr Kaya’s interest in the property, pursuant to

s 117 of the Insolvency Act 2006 (the Act), on 10 March 2016.

KAYA [2017] NZHC 570 [28 March 2017]

[5]      Ms Kaya now applies under section 119(1)(b) of the Act for an order vesting

Mr Kaya’s interest in the property in her.

[6]      On 21 October 2016 I directed that the application was to be served on Mr Kaya,  on  the  Treasury  Department  representing  the  Crown,  and  on  the mortgagee.

[7]      The secretary to the Treasury has now confirmed that the Crown does not wish to be involved with the application for a vesting order, and will abide by the decision of the court. The Official Assignee has also provided a letter confirming the application is not opposed by the Official Assignee (representing Mr Kaya’s interests).

[8]      Ms  Kaya’s  application  was  emailed  to  the  Bank,  but  the  Bank  has  not responded.   However counsel has submitted an extract from a home loan offer recently made by the Bank to Ms Kaya containing a special condition that she must produce evidence that the property has been transferred into her sole name.  In those circumstances, I am prepared to infer that the Bank has no objection to Ms Kaya’s application.

[9]      Section 119 of the Act provides:

119     Position of person who suffers loss as result of disclaimer

(1)      A person suffering loss or damage as a result of disclaimer by the

Assignee may—

(a)       claim as a creditor in the bankruptcy for the amount of the loss or damage, taking account of the effect of an order made by the court under paragraph (b):

(b)       apply to the court for an order that the disclaimed property be delivered to, or vested in, that person.

(2)       The  bankrupt  may  also  apply  for  an  order  that  the  disclaimed property be delivered to, or vested in, the bankrupt.

(3)       The court may make an order under subsection (1)(b) or (2) if it is satisfied that it is fair that the property should be delivered to, or vested in, the applicant.

[10]     The effect of the Official Assignee’s disclaimer of Mr Kaya’s interest in the property was not only to bring Mr Kaya’s rights in relation to the property to an end

— it also bought to an end his liabilities in relation to the property.1    By contrast,

Ms Kaya’s liabilities in relation to the property have continued.  She is now solely liable for the outgoings, including the payments due under the mortgage to the Bank. Ms Kaya says that if she cannot rearrange the terms of the Bank mortgage and obtain a further advance, she will be unable to afford to keep the property (in which she lives with the parties’ four children).   If she is unable to maintain the mortgage payments  and  other outgoings,  she faces  the prospect  of  a substantial  loss  if a mortgagee sale left a shortfall in the amount owing to the Bank.

[11]     Associate Judge Osborne noted in Re Shallish that the effect of the Official Assignee’s disclaimer in that case was to relieve the bankrupt’s estate of the equal obligation the bankrupt should have been bearing under the mortgage, leaving the bankrupt’s co-owner with the entire obligation.2   The same applies in this case, and I am accordingly satisfied that Ms Kaya is “a person suffering loss or damage as a result of disclaimer by the Assignee” within the meaning of s 119(1) of the Act.

[12]     The remaining question is whether or not it is fair that Mr Kaya’s share in the property should be vested in Ms Kaya.   I am satisfied that it is.   As I noted in Re Parker,3   there  is  a  clear  implication  in  the  act  of  disclaimer  itself  that  the bankrupt’s  equity in the  asset disclaimed was seen as being outweighed by the obligations that went with it.  That is also so in this case, and it accordingly seems unlikely that there will be any financial gain for Ms Kaya if a vesting order is made. In those circumstances, and having regard to the fact that she is now solely liable for the outgoings (but has an opportunity to re-finance, provided Mr Kaya’s interest is

vested in her), I am satisfied that it is fair that the property should be vested in

Ms Kaya.   Accordingly, I make an order that the interest of Mehmet Kaya in the

1      Section 118(a) of the Act.

2      Re Shallish HC Invercargill CIV-2010-425-439, 16 September 2010 at [13] and [14].

3      Re Parker [2016] NZHC 3124, at [21].

property is vested in the applicant, Joanne Patricia Kaya.

Associate Judge Smith

Solicitors:

Hutt City Law Limited, Petone for the applicant