Mu v Official Assignee
[2015] NZHC 3108
•8 December 2015
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV-2015-404-2149 [2015] NZHC 3108
UNDER s 226 of the Insolvency Act 2006 IN THE MATTER
of the bankruptcy of Danni Mu
BETWEEN
DANNI MU Applicant
AND
OFFICIAL ASSIGNEE Respondent
Hearing: 30 November 2015 Appearances:
Ms Mu applicant in person
Ms K Morrison and Mr J Gould for the respondentJudgment:
8 December 2015
JUDGMENT OF ASSOCIATE JUDGE J P DOOGUE
This judgment was delivered by me on
08.12.15 at 5 pm, pursuant to
Rule 11.5 of the High Court Rules.
Registrar/Deputy Registrar
Date……………
MU v OFFICIAL ASSIGNEE [2015] NZHC 3108 [8 December 2015]
Introduction
[1] The applicant, Ms Mu was adjudicated bankrupt by order of the High Court at Auckland on 7 May 2015 on the application of Body Corporate 312431. On the same day, Ms Mu filed a statement of claim commencing proceedings under CIV-2015-404-995 (“the Proceeding”).
[2] Upon Ms Mu being adjudicated bankrupt, all her property, including her rights and powers in respect of such property, vested in the Official Assignee (“the Assignee”).1 As a result, the Court directed the Proceeding be served on the Assignee, who was then to advise the Court what steps he wished to take in the Proceeding.
[3] Following an investigation into Ms Mu’s affairs and the issues raised in the Proceeding, the Assignee filed a memorandum on 20 August 2015 recording that he had resolved not to take any steps in the Proceeding (“the Decision”). On 21 August
2015, the Assignee wrote to Ms Mu to advise her of the Decision.
[4] On 1 September 2015, the Court issued a minute which recorded:
[1] Danni Mu, the plaintiff, was adjudicated bankrupt on 7 May 2015. Her causes of action in this proceeding vested in the Official Assignee. On
20 August 2015, the Official Assignee filed a memorandum advising that he has resolved not to take any steps in the proceeding. The effect of that is that the proceeding is discontinued.
[5] Ms Mu now appeals pursuant to s 226 of the Insolvency Act 2006 against the determination of the Assignee not to continue with the proceeding.
Background to the Proceeding
[6] The background to the Proceeding arises from Ms Mu’s ownership of one of
48 units in a residential development at Normanby Road, Mt Eden, Auckland. That property is known as “Normanby Mews”. The body corporate for that property, Body Corporate 312431 (“the Body Corporate”), is one of the defendants in the
proceeding which Ms Mu has filed.
1 Insolvency Act 2006, s 101.
[7] Normanby Mews is a non-weathertight building. In 2009 the Body Corporate commenced a proceeding against various parties involved in the construction of Normanby Mews alleging weather-tightness problems.
[8] In May 2013, the Body Corporate settled its leaky building proceeding for a confidential sum.
[9] On 4 December 2014, the Body Corporate filed a proceeding seeking approval of its scheme to complete a re-clad of Normandy Mews under s 74 of the Unit Titles Act 2010. Asher J approved the scheme on 7 May 2015.2
[10] Asher J recorded in the judgment that Court approval of the scheme was required as not all unit owners had formally cooperated with the form of the scheme.3 The application for approval was unopposed.4 The judgment also recorded that the application had been served on all the unit owners (including on Ms Mu) via personal service or substituted service.5
[11] The Body Corporate is currently undertaking repair works to Normanby
Mews, pursuant to the approved scheme.
[12] Ms Mu has been resolutely opposed to the settlement of the leaky building proceeding and the subsequent remediation project. This has brought her into conflict with the Body Corporate and the manager of the Body Corporate.
The Proceeding CIV-2015-404-995
[13] The Proceeding named Ms Mu as the sole plaintiff. The following three parties were named as defendants:
a) About Body Corporates Limited (“ABC Limited”). ABC Limited is the secretary for the Body Corporate.
2 Body Corporate 312431 v Auckland Council [2015] NZHC 961.
3 At [6].
4 At [9].
5 At [2].
b) Sharron Wynne O’Sullivan. Ms O’Sullivan, is a director and
representative of ABC Limited.
c) TBS Remcon Limited. TBS Remcon Limited have been engaged by the Body Corporate to undertake remedial work.
[14] In the Proceeding, Ms Mu sought damages from the defendants. She also sought an injunction against TBS Remcon Limited to stop the repair work to her unit.
[15] The proceeding that Ms Mu has filed is difficult to follow but it seems that it is alleged that the Body Corporate and Ms O’Sullivan have acted to the detriment of the owners generally. The Assignee’s understanding (which seems to be correct) is that Ms Mu appears to believe that the settlement which was actually obtained in this case was insufficient and that she ought to be in a position where she can instruct a Queens Counsel – from whom she has taken advice previously in this matter – to bring a damages claim. There is mention in her proceedings about a figure of $12.5 million potentially being achievable if settlement negotiations are gone about in the correct way.
[16] There are also allegations that ABC Limited and Ms O’Sullivan who is a director and representative of ABC Limited have held bogus meetings and were not authorised to act on behalf of the owners and did not act for the benefit of the Body Corporate but themselves. Further, there are allegations that ABC Limited and Ms O’Sullivan entered into an illegal contract with regard to the repair work for Normanby Mews and that the settlement which the Body Corporate reached was without authority. There are also other complaints about the way in which meetings were conducted. Further, Ms Mu alleges that she has not received any settlement monies but has instead received invoices for contributions. It appears that in fact Ms Mu’s shares of the settlement monies have been applied to an offset against the levies raised against her unit to meet the costs of repair.
[17] A further claim is that ABC Limited, Ms O’Sullivan and TBS Remcon
Limited emptied her apartment causing a tenant that she had in place to vacate.
Appeals under s 226 – Statute and principles
[18] Section 226 of the Insolvency Act 2006 (“the Act”) provides:6
226 Appeal from Assignee's decision
(1) A person (including the bankrupt or a creditor) whose interests, monetary or otherwise, are detrimentally affected by an act or decision to which this section applies may apply to the Court to reverse or modify the act or decision.
(2) This section applies to—
(a) an act or decision of the Assignee; or
(b) a decision of a District Court Judge in carrying out an examination under section 165.
(3) The application must be made—
(a) within 15 working days of the act or decision; or
(b) within the additional time that the Court allows.
(4) The Court may confirm, reverse, or modify the act or decision.
[19] The Assignee’s approach has been to accept that Ms Mu is a person whose interests are detrimentally affected by the Decision because, if the Proceedings were advanced and succeeded, in the sense that judgment was given for the sums claimed, and recovered, a surplus would be returned to Ms Mu.
[20] Ms Morrison for the Assignee submitted that the Decision “appealed” against
is the exercise of the statutory discretion conferred on the Assignee by ss 217 and
224 of the Act.
[21] Ms Morrison directed me to s 217 of the Act, which she submits provides the
Assignee with the general powers necessary to administer bankruptcies:7
217 Assignee’s general powers
(1) The Assignee has the powers –
(a) necessary to carry out the functions and duties of the
Assignee under this Act; and
(b) conferred on the Assignee by this Act.
(2) In particular, the Assignee has the powers set out in Schedule 1.
[22] Ms Morrison also referred me to Schedule 1 of the Act that outlines specific powers of the Assignee, which include:8
6 Insolvency Act 2006, s 226.
7 Section 217.
Schedule 1 Assignee’s general powers
The Assignee has the power to –
…
(b) begin, continue, discontinue, and defend legal proceedings relating to the property of the bankrupt;
…
[23] She further referred to s 224(1) which provides the Assignee with a
discretion in the administration of a bankrupt’s property:9
224 Assignee's discretion
(1) The Assignee may use his or her own discretion in the administration of the bankrupt's property, but must have regard to the resolutions of the creditors at creditors' meetings.
…
[24] In addition, counsel submitted that the Assignee is not required to take any steps in circumstances where there are no funds in the estate, as is the case here. In particular, she identified that reg 17 of the Insolvency (Personal Insolvency) Regulations 2007 states:10
17 Assignee not required to incur expense if bankrupt has no available assets
(1) The Assignee is not required to incur any expense in relation to the estate of a bankrupt who has no available assets.
(2) However, the Assignee may incur expense in that case (but cannot be required to do so) if the Assignee has obtained a guarantee
from the creditors or some of them.
[25] Having surveyed these provisions, as well as the relevant case law,11 the approach that the Court takes when considering appeals under s 266 is to treat the matter as an appeal against the exercise of a discretion. In that regard, I intend to follow the decision of Associate Judge Faire (as he then was) in Gollan v Official
Assignee where he held:12
8 Schedule 1.
9 Section 224.
10 Insolvency (Personal Insolvency) Regulations 2007, reg 17.
11 Glynbrook 2001 Ltd v Official Assignee for New Zealand [2012] NZCA 289; Gollan v Official
Assignee [2012] NZHC 1869; Henderson v Official Assignee [2015] NZHC 1341.
12 Gollan v Official Assignee, above.
[14] … a decision by an Assignee whether or not to continue legal proceedings commenced by a bankrupt before adjudication requires the Assignee to use his or her discretion.
[15] It follows that in this case, I am not dealing with the exercise of a general right of appeal but an appeal against a decision made in the exercise of discretion. The result is, as the Supreme Court explained in Kacem v Bashir that the criteria for a successful appeal are stricter, namely:
(a) Error of law or principle;
(b) Taking account of irrelevant considerations;
(c) Failing to take account of relevant considerations; (d) The decision was plainly wrong.
Discussion
[26] It is difficult to obtain a clear view of the allegations which Ms Mu makes because they are pleaded in a diffused, disorganised way in the pleading which she has filed. However, the understanding of her position can be supplemented by the outcome of the enquiries that the Assignee has made about the reasons why she wishes to bring the proceeding. The Assignee is familiar with not only the proceedings, but the background to them and has, obviously, had considerable contact with Ms Mu since her bankruptcy.
[27] Looking at matters overall, the Assignee came to the view that none of the allegations which Ms Mu made, to the extent that they could be comprehensible and could be understood, was of any merit. The Assignee’s enquiries indicated that while there was some dissent initially amongst the 48 owners as to the way in which the remediation should be undertaken, but that a majority eventually agreed and a scheme was settled for remediation of the apartments.
[28] Nor is there any question that the Body Corporate that was appointed was validly appointed and remains in place. Therefore, ABC Limited which is the secretary to the Body Corporate was authorised to take the steps that it has taken in all matters concerning the administration of the Body Corporate and the remediation scheme.
[29] In regard to the allegation that the defendants emptied her apartment causing a tenant that she had in place to vacate, the Assignee notes that it was a term of the remediation scheme which was settled by the High Court in this proceeding that
vacant possession would be available of the units and that the locks would be changed.
[30] It was on these broad grounds that the Assignee declined to sanction the continuation of the Proceeding.
[31] On the face of it the decision which the Assignee has made which is not to support the continuation of CIV-2015-404-995 is the correct one. It is not just a matter of there being no available assets which could be used for that purpose, which is something that is relevant under regulation 17 to which reference has been made earlier. That on its own would be sufficient ground for him declining to continue the proceedings.
[32] There are additional reasons supporting the Assignee’s position. Launching an attack on the authority of the first and second defendant in the proposed proceedings is pointless if the body corporate in whose name they were acting and under whose authority they took steps is correctly and validly appointed. That body corporate has been recognised in a number of proceedings, including the one in which Asher J approved the scheme of remediation for the property. There is no other body corporate. It is correct that at one point Ms Mu claimed that she represented a body corporate which had the support of owners, but it is plain that there was no body corporate which ever satisfied the requirements. The only plausible view that can be taken of the overall facts in this case is that the body corporate in this case, Body Corporate 312421, was the entity created on the deposit of the unit plan. There is no evidence that the body corporate so created has been expunged or has been removed and replaced as the body corporate in regard to the Normanby Mews. There is no evidence that any of the other allegations including misconduct on the part of the Body Corporate and Ms O’Sullivan have misconducted themselves. The Body Corporate appears to have been regularly constituted and obviously it must act through human agents to carry out its functions which is what Ms O’Sullivan’s role was.
[33] The main part of the proceeding which refers to the possibility of damages being recovered was plainly a matter that the Assignee would have needed to
consider. As I have mentioned, Ms Mu takes the position that had there been a proper approach taken to the negotiation of a settlement, a figure of $12.5 million additional to what was actually obtained would have been achieved.13 However, the owners and the body corporate committed themselves to a settlement on the basis that they did and it now too late to review that decision. Ms Mu may not like the decision but that is a far different thing from a claim that the settlement was not one which was authorised. Ms Mu is bound by what the majority decided. Therefore there is no point, even if there were resources available to do so, which there are not,
to take proceedings suing one or more of the defendants for the alleged shortfall in the amount that ought to have been recovered.
[34] I do not intend to consider all of the other miscellaneous points that the proceeding is apparently intended to raise. They are all founded on the same considerations as those that I have mentioned already. The only exception is the claim for damages for loss of the tenant which Ms Mu said was attributable to breach of duty by one or more of the defendants. The requirement to vacate the units so that the mediation could take place was part of the scheme which was settled by Asher J’s order. The defendants who were involved in bringing about that state of affairs were entirely justified in doing what they did.
Decision
[35] In my view, Ms Mu has failed to show that there were any grounds upon which the Court ought to review the decision of the Assignee.
[36] The application is dismissed.
J.P. Doogue
Associate Judge
13 The settlement figure actually achieved is confidential between the parties.
0
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