Mullins

[2022] NZHC 2422

IN THE HIGH COURT OF NEW ZEALAND WHANGANUI REGISTRY

I TE KŌTI MATUA O AOTEAROA WHANGANUI ROHE

CIV-2022-483-2

[2022] NZHC 2422

UNDER	section 119(1)(b) of the Insolvency Act 2006
IN THE MATTER	of a disclaimer of property of the bankrupt estate of Joshua Phillip Ford
AND IN THE MATTER	of an application for vesting of property
BY	Emma Louise Mullins Applicant

Hearing:	21 September 2022
Appearances:	J Gilbert for Applicant
Judgment:	21 September 2022

JUDGMENT OF ASSOCIATE JUDGE JOHNSTON

[Oral]

[1]                  This is an application by Emma Mullins for an order pursuant to s 119(1)(b) of the Insolvency Act 2006 for an order for the vesting of property.

[2]Section 119 provides as follows:

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):

RE MULLINS [2022] NZHC 2422 [25 September 2022]

(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.

[3]                  Ms Mullins’ application is undefended, and has accordingly proceeded by way of formal proof.

[4]The background is not complicated.

[5]                  Joshua Phillip Ford and Ms Mullins were in a de facto relationship and had lived in a property at 17 Potaka Street in Marton since May 2009. In September 2011 they purchased the property as joint tenants. They borrowed funds for that purpose from Westpac Banking Corporation.

[6]                  Their relationship came to an end in December 2011, within three months or so of having acquired the property.

[7]                  Mr Ford vacated the property, and since then Ms Mullins has taken responsibility for all outgoings and maintenance in relation to the property including repayments of the loan from Westpac and in respect of which Westpac holds a first registered mortgage security over the property.

[8]                  The position seems to be that Mr Ford made no direct financial contribution to the acquisition of the property, though he may have made some modest financial contributions after that, and of course that does not mean that he made no other type of contribution.

[9]                  On 19 January 2016, some years after the couple separated, Mr Ford was adjudicated bankrupt.

[10]              On 29 January 2016, the Official Assignee disclaimed the property pursuant to s 117 of the Insolvency Act 2006 which, as Mr Gilbert submits, effectively brought Mr Ford’s rights and liabilities in respect of the same to an end.

[11]              However, the original registration of the property in the joint names of Mr Ford and Ms Mullins has never been changed and, as already said, Ms Mullins has continued to live at the property and taken responsibility for all outgoings and maintenance.

[12]              Ms Mullins speculates that the property may be worth around the $400,000 mark. There is no need to be more precise than that. I do not think it is going too far in the context of this case for me to take judicial notice of the likelihood that a three-bedroom family home in Marton, which is within commuting distance of the city of Palmerston North, is unlikely to have a value much lower than that.

[13]              Ms Mullins now applies to this Court for an order transferring the property into her sole name.

[14]              The Court made directions as to service requiring her to serve the originating documentation on both Mr Ford and Westpac. There is evidence before the Court of service having been effected on both of those parties. Neither have entered an appearance. In relation to this point, Ms Mullins’ current partner, Mr Jade Olsen has indicated that he does not oppose this application. That is important because, for all the Court knows, he may have some interest in the property.

[15]              Mr Gilbert was good enough to take me through the relevant law relating to   s 119(1)(b).

[16]              As he submitted, the Court needs to be satisfied of two things, first that     Ms Mullins has suffered loss or damage as a result of the Official Assignee’s disclaimer, and second that it is fair that the property should be vested in her sole name.

[17]              In relation to the first of those issues, Mr Gilbert referred me to Re Shallish1 where the Court considered a comparable situation and Associate Judge Osborne (as he was) said:

Had the Assignee elected to take the benefit of Ms Malone’s interest in the Lowe Street property, the interest would have carried with it the equal responsibility for the financial outgoings. The effect of the disclaimer has therefore been to relieve Ms Malone’s bankrupt estate of that equal obligation and, in practical terms, to leave Mr Shallish with the entire obligation. There is a clear implication in the act of disclaimer that Mr Malone’s equity in the property was outweighed by the obligations. Mr Shallish has picked up all the obligations.

[18]Mr Gilbert also referred me to the judgment of Associate Judge Smith in

Re Kaya2 where the Judge made similar observations.

[19]              I am satisfied that the same analysis applies here  — except perhaps that     Ms Mullins’ loss if the property were not transferred to her sole name would be of a higher order of magnitude as she has borne sole responsibility for the outgoings and maintenance on the property for something like eleven years, much to her credit.

[20]              I accept Mr Gilbert’s submission that the undoubted substantial increase in the value of the property from the acquisition through to today’s date is an irrelevance. As the Court of Appeal said in Fish Man Ltd (in liquidation) v Hadfield,3 that is because damage must be evident as at the date of the disclaimer.

[21]              As to fairness, that, obviously, is a very general test. It seems to me to be useful to ask whether the vesting of the property in Ms Mullins’ would result in unfairness to any other party. The candidates here are Mr Ford and the Official Assignee (whose positions are essentially the same), Westpac and possibly Mr Olsen. Mr Ford’s contributions to the property appear to have been minimal, and I do not see that the vesting of the property in Ms Mullins would be unfair to him. The Official Assignee has of course waived any interest. Neither were interested enough to enter an appearance in this proceeding. Nor was Westpac. Mr Olsen, as already said, has acquiesced in the transfer.

1      Re Shallish, HC Invercargill Registry, Associate Judge Osborne, 16 September 2010.

2      Re Kaya [2017] NZHC 570 at [10].

3      Fish Man Ltd (in liquidation) v Hadfield [2017] NZHC 589 at [43].

[22]              In relation to this issue, Mr Gilbert referred me to Panther v Panther4. In that case Heath J was prepared to make a vesting order even although it was conceivable that that might affect the interests of another party on the basis that if that other party sought a remedy there were avenues by which that could be done. I don’t think it is necessary to take that approach in this case as I have difficulty seeing how any of the above parties could advance a claim. However, I agree in the sense that, if there were some interest as yet unidentified, a vesting order would not, in and of itself, prevent it being advanced.

[23]              For those reasons, I make the orders sought by Ms Mullins in the terms set out in paragraph 12 of her statement of claim.

[24]I make no order as to costs.

Associate Judge Johnston

Solicitors:
Crowley Waugh, Whanganui for applicant

4      Panther v Panther [2016] NZHC 809.