Memelink v Official Assignee

[2023] NZHC 3317

IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY

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

CIV-2018-485-363

[2023] NZHC 3317

UNDER

the Insolvency Act 2006

IN THE MATTER

of the bankruptcy of Harry Memelink

BETWEEN

HARRY MEMELINK

Applicant

AND

THE OFFICIAL ASSIGNEE

Respondent

PETERLAND LIMITED
First Interested Party

PETER GOODSON

Second Interested Party

Hearing:

8 November 2023

Appearances:

No appearance by or for the Applicant P Chisnall for Respondent

P Barrett for first and second interested parties

Judgment:

4 December 2023

JUDGMENT OF ASSOCIATE JUDGE SKELTON

[1]    The applicant, Harry Memelink, was adjudicated bankrupt in August 2018. He applies under s 238 of the Insolvency Act 2006 for  an  order  cancelling  the  Official Assignee’s admission of a claim by the first interested party, Peterland Ltd (“Peterland”) in the bankruptcy. The second interested party, Peter Goodson, is a director and shareholder of Peterland. Peterland and Mr Goodson (Interested Parties) oppose the application.

MEMELINK v THE OFFICIAL ASSIGNEE [2023] NZHC 3317 [4 December 2023]

[2]    The Official Assignee filed a notice  of  appearance  and  affidavits  of  Robert McDonald, the Official Assignee at the Insolvency and Trustee Service in Christchurch. Mr Chisnall, counsel for the Official Assignee, appeared at the hearing to assist the Court.

[3]    The hearing of Mr Memelink’s application on 18 October 2023 was adjourned because Mr Memelink did not appear.1 Mr Memelink had advised that he was suffering from leg pain and needed to seek medical attention. I stated in my minute recording the adjournment that, if Mr Memelink failed to appear at the next hearing of his application, it would be likely that the Court would proceed to hear the matter in his absence  based  on  the  material  that  he  has  filed.2  On  7  November  2023,  Mr Memelink made a further application for adjournment of the hearing. He stated that he was still unwell and referred to a medical certificate, but no medical certificate was provided. On the same day, I declined the application for adjournment.3

[4]    Mr Memelink did not appear at the hearing on 8 November 2023, nor did he arrange for anyone to appear on his behalf. In the circumstances, and given the public interest in the efficient use of Court resources, I directed that the hearing would proceed in his absence.

Statutory framework

[5]    Mr  Memelink  has  previously  challenged   determinations   of   the   Official Assignee in this bankruptcy.4 In Memelink v The Official Assignee, Associate Judge Johnston summarised the relevant statutory framework for unsecured creditors as follows:5

1      An earlier application for adjournment by Mr Memelink was declined:  see  Memelink  v  Official Assignee HC Wellington CIV-2018-485-363, 16 October 2023 (Minute of Associate Judge Skelton)

2      Memelink v Official Assignee HC Wellington CIV-2018-485-363, 18 October 2023 (Minute of Associate Judge Skelton) at [13].

3      Memelink v Official Assignee HC Wellington CIV-2018-485-363, 7 November 2023 (Minute of Associate Judge Skelton).

4      Most recently, see Memelink v Official Assignee [2023] NZHC 2342.

5      Memelink v The Official Assignee [2020] NZHC 2709 (footnotes omitted). See also Memelink v Official Assignee [2022] NZHC 953 at [12].

[5]        The obligations of the Official Assignee in dealing with claims by unsecured creditors against bankrupt estates are dealt with in s 234 of the Insolvency Act which provides:

234       Assignee must examine creditor’s claim form

(1)The Assignee must examine each creditor’s claim form and the grounds of the debt, unless the Assignee considers it likely that no dividend will be paid to creditors.

(2)After examining the claim form, the Assignee must, as soon as practicable, do 1 or more of the following:

(a)admit the claim, in whole or in part:

(b)reject the claim, in whole or in part:

(c)require further evidence in support of the claim.

[6]        … The Official Assignee is obliged to consider creditors’ claim forms and admit or reject the same, in whole or in part, unless she has concluded that there is unlikely to be any funds available to pay unsecured creditors. [T]he Official Assignee may require additional evidence before making a determination.

[7]        The authorities indicate that the onus is on the claimant, and that, whilst the Official Assignee is not obliged to engage in a minute analysis of each claim, before accepting a claim, or any part of a claim, she must be satisfied that there is sufficient supporting evidence.

[8]        The Official Assignee’s determinations pursuant to s 234  of  the  Insolvency Act are challengeable pursuant to s 238 which provides:

(1)Court may cancel creditor’s claim

(a)The court may make an order cancelling an admitted creditor’s claim or reducing the amount claimed, if it considers that the claim was improperly admitted.

(b)The court may make the order on the application of the Assignee, the bankrupt, or any creditor.

(c)The court must not make an order under subsection unless the creditor who submitted the claim has been served with the application.

[9]        Applications pursuant to s 238 of the Insolvency Act raise de novo the issue of whether the claim is properly founded, and the Court must determine whether the Official Assignee’s determination and the process by which she reached that determination was reasonable. Again, the burden rests on the claimant or creditor to satisfy the Court that the claim is adequately supported.

[6]    In Holdgate v Bloccassa Ltd, Courtney J considered the relevant authorities in the context of the equivalent section in the Insolvency Act 1967, s 89(5), and held:6

[12] I therefore intend to proceed on the basis that an appeal under s 89(5) is an appeal de novo and to be approached in the manner described in Austin Nichols & Co v Stichting Lodestar. This requires me to make my own assessment of the proofs of debt and to decide what weight, if any, is to be given to the Official Assignee’s decision to admit the proofs of debt.

[7]    I intend to proceed with the same approach, making my own assessment of the claim and deciding whether the claim was properly admitted.

Background

[8]    Link Technology 2000 Ltd (“Link”) leased a unit at 141 Hutt Park Road, Lower Hutt from 18 August 2008. The initial six-year term of the lease was set to expire on 18 August 2014. The lease contained two rights of renewal for a further term of three years each. Mr Memelink personally guaranteed Link’s payment of the rent and performance  of  its  obligations  under  the  lease.  Peterland  purchased  141 Hutt Park Road in September 2015 from GPI (2002) Limited (former lessor). The property came with six tenancies, including Link’s tenancy.

[9]    There is a dispute as to whether Link exercised the right of renewal of the lease in 2014 or whether Link, by agreement with the former lessor, was holding over in the premises under cl 37.1 of the lease on a reduced rental. Peterland’s position is that Link was holding over after the lease expired in 2014. On 17 March 2017, Peterland gave Link 28 working days’ notice of the termination of the lease.

[10]   There were delays and difficulties associated with the removal of Link’s goods and chattels from the premises. The goods and chattels were relocated. Mr Memelink and/or Link collected some items. Other items were ultimately disposed of and the heavy machinery was sold as scrap metal. In June 2018, Link and Mr Memelink issued proceedings against the Interested Parties alleging repudiation of the lease and conversion, seeking declarations and damages. Mr Memelink was subsequently adjudicated bankrupt on 28 August 2018 and remains an undischarged bankrupt.

6      Holdgate v Bloccassa Ltd HC Auckland CIV-2005-404-002693, 4 July 2008 at [5]–[12].

[11]   Link was placed into liquidation on 19 May 2020. On 19 June 2020, the Official Assignee disclaimed any litigation rights that Mr Memelink and Link might have in the proceedings against the Interested Parties. On 9 March 2021, Grice J dismissed Mr Memelink’s application under s 119 of the Insolvency Act 2006 to vest the disclaimed causes of action in him.7 On 28 September 2021, Grice J dismissed Mr Memelink’s application under s 269 of the Companies Act for an order vesting any disclaimed litigation rights Link might have had in the proceedings in him.8

[12]   Mr Memelink sought leave to appeal both judgments. That application was dismissed on 16 December 2022.9

[13]   Peterland made a  claim  in the bankruptcy in the sum of $99,272.63.   On   20 September 2022, the Official Assignee admitted Peterland’s claim in the sum of

$84,709.13.    Mr Memelink was advised of this on 4 October 2022 and again on     19 October 2022.

Official Assignee’s position

[14]   The process followed by the Official Assignee in reaching the decision to admit Peterland’s claims is outlined in Mr McDonald’s affidavit evidence. In general terms, the Official Assignee:

(a)considered all the relevant documents as annexed to Mr McDonald’s affidavits;

(b)sought external legal advice; and

(c)corresponded with the solicitor for Peterland.

[15]   Mr Chisnall, for  the  Official  Assignee,  submits  that,  although  the  Official Assignee  had  disclaimed  the  causes  of  action  brought  by  Link  and   Mr Memelink against Peterland, the Official Assignee recognised that these causes of

7      Link Technology 2000 Ltd (in liq) v Peterland Ltd [2021] NZHC 428.

8      Link Technology 2000 Ltd (in liq) v Peterland Ltd [2021] NZHC 2550.

9      Link Technology 2000 Ltd (in liq) v Peterland Ltd [2022] NZHC 3506.

action could not be ignored in considering Peterland’s claim in Mr Memelink’s bankruptcy. This is because the disclaimer does not affect the rights and liabilities of any other person, i.e.  Mr  Memelink  as  guarantor  or  Peterland  as  a  creditor.10  Mr Chisnall submits that, as a guarantor under the lease, Mr Memelink may have been entitled to rely on any set-off that Link, as principal debtor, may have against Peterland. Accordingly the Official Assignee considered, as a key issue, whether the lease had been validly cancelled — either because Link was in arrears of rent or because it was simply a periodic tenancy by the relevant time.

[16]   The Official Assignee reached the conclusion that the lease had not been renewed and was validly terminated by Peterland.

[17]   The Official Assignee considered that Peterland became an involuntary bailee in respect of the goods and chattels remaining in the premises following termination of the lease. The Official Assignee went on to consider the costs claimed by Peterland for removal and disposal of the goods and chattels in the premises according to its duties as involuntary bailee. As recorded in the letter, dated 29 June 2020, from Peterland’s solicitors to the Official Assignee, the original claim by Peterland for the costs of relocating and subsequently disposing of Link’s and/or Mr Memelink’s machines, other equipment, chattels and materials was $99,272.63 (incl GST).

[18]   Mr McDonald states in his affidavit that he had some concerns about whether costs relating to security guards and property management fees, which totalled

$14,563.50, were reasonable and recoverable under the lease. These concerns were raised with Peterland’s solicitors, but no response was received. Therefore, the claim was admitted in the sum of $84,709.13.

Interested Parties’ position

[19]   Mr Barrett, for the Interested Parties, submits that in determining the weight that should be given to the Official Assignee’s decision to admit $84,709.13 of Peterland’s claim, all relevant matters were taken into account and, therefore, the decision to admit $84,709.13 was reasonable in all the circumstances.

10     Companies Act 1993, s 269(3)(b); and Insolvency Act 2006, s 118(b).

[20]   Mr Barrett also submits that Peterland’s claim as particularised in the letter of 29 June 2020, and the evidence in support of the claim as annexed to Mr McDonald’s affidavits, together with the weight that should be given to the Official Assignee’s decision, are sufficient for the Court to determine on a de novo basis that $84,709.13 of Peterland’s claim should be admitted.

Was Peterland’s claim properly admitted?

[21]   Based on Mr Memelink’s interlocutory application dated 21 April 2023, his affidavit in support sworn 21 April 2023, and the affidavit of Roy William Bassett-Burr in support sworn 2 October 2023, there appear to be four main arguments in support of the application for cancellation:

(a)Peterland unlawfully terminated the lease;

(b)Mr Memelink has a substantive claim which should be set off against Peterland’s claim;

(c)Link has a substantive claim which should be set off against Peterland’s claim; and

(d)Other parties have substantive claims which should be set off against Peterland’s claim.

[22]I deal with each of Mr Memelink’s arguments in turn.

Alleged unlawful termination of lease

[23]   Mr Memelink contends that the termination of the lease and eviction were unlawful because Link renewed the lease from 18 August 2024. However, there are a number of difficulties with Mr Memelink’s position.

[24]   First, on 14 July 2015, prior to Peterland purchasing the property, it appears that the former lessor’s lawyer sent an email to Peterland’s lawyer advising that Link did not renew the lease on expiry of the initial six-year term on 18 August 2014. He

further advised that the former lessor agreed verbally to allow Link to remain as a tenant under the holding over provisions in clause 37.1 of the lease at a reduced rental.

[25]   Consistent with this email, it is apparent that Mr Memelink’s initial response to the lease cancellation in March 2017 was that Link could not physically quit the premises and it was too difficult and expensive to relocate. No contention was made that Link had renewed the lease and Link did not apply for any relief.

[26]   It was not until July 2017 that Mr Memelink contended that the lease had been renewed and subsequently produced a handwritten note dated “April 2014” to Murray Horlor, the property manager and director of the former lessor, purporting to confirm renewal of the lease. However, as submitted by Mr Barrett, the note was produced belatedly and there is no evidence that Mr Horlor ever received the note. There is no acknowledgement of the note from Mr Horlor. Nor is there any evidence of any deed of renewal entered into by the parties, or any other steps taken to formalise the new lease.

[27]   A further issue with regard to the handwritten note is that, in Link’s statement of claim against the Interested Parties, Link pleads that it gave notice of extension of the lease in July 2014. This is inconsistent with the handwritten note which is dated “April 2014”.

[28]   Secondly, in support of his position that the lease was renewed, Mr Memelink contends that, in July 2017, a police officer had spoken to Mr Horlor who had confirmed that the lease had been renewed. However, the case summary report produced  to  support  that  contention  appears  to   record  a   conversation  with   Mr Memelink in which Mr Memelink states that the lease had been renewed “last year” i.e. 2016. This is inconsistent with the handwritten note and Link’s pleading. There is no reference to a discussion with Mr Horlor.

[29]   Thirdly, Mr Memelink relies on an exchange of emails on 25 August 2017 between Mr Memelink’s lawyer at the time, Quentin Haines, and Mr Horlor. In this exchange, Mr Haines refers to the handwritten note from Mr Memelink to Mr Horlor as follows:

6.In April 2014 Mr Memelink had discussions with you about the renewal of the lease. Mr Memelink provided you with a handwritten note confirming that the exercise of the rights of renewal to 17 August 2020.

7.You believed that that note constituted an exercise of the renewal under Deed of Lease.

[30]In response, Mr Horlor amended Mr Haines’ statements to read as follows:

6.In April 2014 Mr Memelink had discussions with you about the renewal of the lease. Mr Memelink was requested to provide us with written advice confirming the exercise of the rights of renewal.

7.I believed that an exercise of the renewal under Deed of Lease had been done.

[31]   The corrections made by Mr Horlor are significant. Mr Horlor does not accept that he received the handwritten note at the relevant time or that the note constituted an exercise of the renewal. Rather, he states that he believed “that an exercise of the renewal … had been done”. Mr Horlor passed away in February 2020.

[32]   Further, these issues have previously been considered by this Court in the context of the applications by Mr Memelink for orders vesting litigation rights in him, and the subsequent applications for leave to appeal. In dismissing the applications for leave to appeal, Grice J considered that the claim that the lease had been renewed “is weak”.11

[33]   On my assessment of the evidence before the Court, I consider that it is reasonable to conclude on the balance of probabilities that the lease was not renewed.

Mr Memelink’s alleged set-off

[34]   Mr Memelink contends that he has substantive claims against Peterland which should be set off against Peterland’s claim in the bankruptcy. However, as submitted by Mr Barrett, the Court has already concluded that Mr Memelink’s claim against Peterland is without merit and cannot succeed.12 In considering the causes of action

11     Link Technology 2000 Ltd (in liq) v Peterland Ltd, above n 9, at [24]–[26].

12     Link Technology 2000 Ltd (in liq) v Peterland Ltd, above n 7.

pleaded by Link and Mr Memelink in the  statement  of  claim  against  the  Interested Parties, Grice J found that:13

[66]  The only cause of action in which Mr Memelink has a personal   interest and might suffer loss or damage is that relating to patents (the fourth cause of action). I have concluded that claim is without merit and cannot succeed.

[35]   It is not apparent from the evidence that Mr Memelink has any claim that could support a set-off against Peterland’s claim.

Link’s alleged set-off

[36]   Mr Memelink also contends that Link has substantive claims against Peterland that should be set off against Peterland’s claim in the bankruptcy. However, as is apparent from the statement of claim against the Interested Parties, Link’s causes of action are premised on Link having validly renewed its lease and therefore having suffered loss due to alleged unlawful termination of the lease and eviction.

[37]   As I have found above, it is reasonable to conclude that the lease was not renewed. I am not satisfied that Link has any claim that could support a set-off against Peterland’s claim.

Alleged claims by other parties

[38]   In the interlocutory application, Mr Memelink also contends that Cudby & Meade Ltd, Mr Bassett-Burr and Link Trust No 1 having substantive claims against Peterland. There is very little evidence on these alleged claims. Regarding Cudby & Meade Ltd and Mr Bassett-Burr, the alleged claims appear to relate to various items of property owned by them being removed from the Hutt Park Road property by Peterland. Cudby & Meade Limited now appears to be in liquidation. The alleged claim by Link Trust No 1 appears to be claim against Mr Goodson relating to alleged illegal chemical dumping. On 31 May 2022, this Court appointed Ian Bruce Shephard and Jessica Jane Kellow as receivers of Link Trust No.1.14 Further, I do not consider that any claims by these parties against Peterland or Mr Goodson could give rise to a

13 At [66].

14     Body Corporate 81012 v Memelink [2022] NZHC 1244.

set-off against Peterland’s claim in the bankruptcy of Mr Memelink in his capacity as guarantor under the lease.

[39]   In the affidavit of Mr Bassett-Burr dated 2 October 2023, he refers to his appointment as replacement director for Mr Memelink for three companies, including Link and Cudby & Meade Ltd. Mr Bassett-Burr states that he has not been contacted by the Official Assignee to assist in relation to the assets of these companies, has not been involved in any decisions made by the Official Assignee, nor has he been consulted in any way in relation to the liquidation of the companies.

[40]   However, in Mr McDonald’s affidavit in reply, he notes that he has not seen a copy of any shareholders resolutions supporting the appointment of Mr Bassett-Burr as a director of these companies, and that Mr Memelink was not authorised or empowered to make such a resolution as the shares in the companies vested in the Official Assignee when Mr Memelink was adjudicated bankrupt. Mr McDonald refers to correspondence with Mr Memelink in which it was noted that the appointment of Mr Bassett-Burr as director was not approved and was null and void. Mr McDonald also denies the other allegations made by Mr Bassett-Burr in his affidavit relating to the Official Assignee’s management of the liquidation of Link and other companies.

[41]   I am not satisfied that any of the other parties referred to have claims which could support a set-off against Peterland’s claim in the bankruptcy.

Conclusion

[42]   For the reasons set out above, and on the basis of the material that was before the Official Assignee, and is now before the Court, I am satisfied that the claim by Peterland in the bankruptcy of Mr Memelink has been properly admitted in the sum of $84,709.13. I am satisfied that the Official Assignee’s admission of the claim and the process by which that determination was reached was reasonable.

[43]   Mr Memelink is also seeking ancillary discovery orders against Peterland,  Mr Goodson and other non-parties and orders directing that Peterland directors and “other persons” be called to answer questions and give evidence in Court. It is not clear how the discovery orders sought are relevant.

[44]   Given the findings that I have made with regard to the admission of Peterland’s claim, I do not consider that the ancillary orders sought by Mr Memelink are necessary or appropriate.

Result

[45]   Mr Memelink’s application for an order cancelling the Official Assignee’s admission of the claim by Peterland in the bankruptcy of Mr Memelink and for ancillary orders is dismissed.

[46]   As to costs, my preliminary view is that the Interested Parties and the  Official Assignee are entitled to costs on a 2B basis. The parties should endeavour to agree on costs. However, if agreement cannot be reached then memoranda not exceeding three pages (excluding costs schedules) may be filed and costs will be determined on the papers.

Associate Judge Skelton

Solicitors:

Anthony Harper, Christchurch Morrison Kent, Wellington