Official Assignee v Harrison (bankrupt)
[2020] NZHC 1548
•3 July 2020
IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY
I TE KŌTI MATUA O AOTEAROA ŌTAUTAHI ROHE
CIV-2020-409-241
[2020] NZHC 1548
UNDER the Land Transfer Act 2017 IN THE MATTER
of an application to sustain a caveat
BETWEEN
OFFICIAL ASSIGNEE, in bankruptcy of Angela Janice Harrison
Applicant
AND
ANGELA JANICE HARRISON (bankrupt)
Respondent
Hearing: 1 July 2020 Appearances:
D M W Dingwall for Applicant
Ms Harrison (bankrupt) in person respondent
Judgment:
3 July 2020
JUDGMENT OF ASSOCIATE JUDGE LESTER
This judgment was delivered by me on 3 July 2020 at 9.30am pursuant to Rule 11.5 of the High Court Rules
Registrar/Deputy Registrar 3 July 2020
OFFICIAL ASSIGNEE v HARRISON (bankrupt) [2020] NZHC 1548 [3 July 2020]
[1] This proceeding concerns an application by the Official Assignee (OA) to sustain a caveat lodged by the OA over a property of which the respondent, Ms Harrison, is the sole registered proprietor.
[2] Ms Harrison was bankrupted by order of this Court on 29 November 2016.1 The OA lodged a caveat, the subject to this application, against Ms Harrison’s property the following day. On 28 May 2020, Ms Harrison applied to lapse the caveat. Ms Harrison having taken that step; the OA brought this originating application to sustain the caveat over the property.
Basis of application to sustain
[3] The OA’s position is straightforward, being that all property belonging to Ms Harrison vested in the OA under s 101 of the Insolvency Act 2006 (the Act) upon bankruptcy. Nothing further was required to give effect to that vesting. As the property is now vested in the OA, the applicant has a caveatable interest in the property.
[4] The caveat as lodged identifies the interest claimed by the OA as arising by virtue of s 101 of the Act.
[5] Ms Harrison was adjudicated bankrupt on 29 November 2016. She has not yet completed a statement of affairs, meaning that pursuant to s 290 of the Act she is not due for automatic discharge from bankruptcy. The three years for automatic discharge does not start to run until after the filing of a statement of affairs.
1 Hrrison v Harrison [2016] NZHC 2854.
[6] Hinde McMorland & Sim Land Law in New Zealand discusses the impact of bankruptcy on a land owner’s interests under the Land Transfer Act 2017 (LTA). The authors state:2
A bankruptcy commences on the date and at the time when the debtor is adjudicated bankrupt. Section 101 of the Insolvency Act 2006 provides that on adjudication all property belonging to the bankrupt vests in the Assignee without the Assignee having to intervene or take any other step in relation to the property. Any rights of the bankrupt in the property are expressly extinguished. Nothing in the Land Transfer Act 2017 restricts the operation of sections 101-104 of the Insolvency Act 2006.
Section 101 of the Insolvency Act 2006 overrides the title of the registered owner of the land within the exception of the Land Transfer Act 2017 s 51(3)(b).
[7] Given the effect of s 101 of the Act, I am satisfied the application must be granted. The property in question is now vested in the OA and, as such, the OA is entitled to maintain a caveat over the property.
[8] Accordingly, there is an order that Caveat 10641542.1 against Record of Title CB1D/261, legally described as Lot 22 Deposited Plan 22347, not lapse.
[9]I will deal with the application for costs at the conclusion of this judgment.
[10] I was able to deal with the application to sustain the caveat in short order because the law in relation to when a caveat will be removed is clear. In Sims v Lowe the Court of Appeal stated:3
… an order for the removal of such a caveat will not be made under s 143 [now s 142 Land Transfer Act 2017], unless it is patently clear that the caveat cannot be maintained either because there was no valid ground for lodging it or that such valid ground as then existed no longer does so.
[11] The OA accepted the onus of establishing a caveatable interest and I am satisfied the effect of s 101 of the Act means that onus has been satisfied.
2 D W McMorland (ed) Hinde McMorland & Sim Land Law in New Zealand
(looseleaf ed, LexisNexis) at [9.045].
3 Sims v Lowe [1988] 1 NZLR 656 at 659-660.
[12] In plain terms, the outcome of this application was dictated by the fact Ms Harrison is bankrupt and the effects of s 101 of the Act. It is not a case where, for example, Ms Harrison was able to establish that she held the property as trustee so the property would not be available to her creditors.
[13] Ms Harrison’s objection to the caveat is expanded on by her in an affidavit sworn on 29 June 2020 filed after the OA’s application was first called in the Court List on 25 June 2020. Given there were a number of matters raised by Ms Harrison and reference to a number of earlier decisions, I wanted an opportunity to read those decisions to come to grips with the history of the matter.
[14] Ms Harrison, in her affidavit, expands on her challenge to the caveat. It is clear from her second affidavit (and indeed all of the papers she has filed) that she does not consider it was fair and reasonable that she was adjudicated bankrupt in 2016.
[15] I requested the Registry make available to me the 2016 bankruptcy file. The bankruptcy notice issued against Ms Harrison relates to a costs award made against her by Faire J earlier in 2016.4 The judgment creditors served Ms Harrison with a bankruptcy notice and Ms Harrison applied to have it set aside. That application was determined by Associate Judge Matthews in a decision released on 30 August 2016.5
[16] Associate Judge Matthews set out Ms Harrison’s arguments which, in substance, were a challenge to the correctness of Faire J’s judgment. Ms Harrison argued that Faire J’s judgment was flawed. Associate Judge Matthews records in his judgment that he explained to Ms Harrison more than once during the hearing that it was not the function of the Court on an application to set aside a bankruptcy notice to go behind a final judgment of the Court. No appeal had been lodged against Faire J’s decision. Associate Judge Matthews records:6
I informed Ms Harrison during each of her numerous attempts to tell my why the judgment of Faire J was wrong, that I would not go behind the judgment, and I explained to her carefully why that was so. I have set out this reason in this judgment so that there can be no misunderstanding on this point.
4 Harrison v Harrison [2016] NZHC 574.
5 Harrison v Harrison [2016] NZHC 2027.
6 At [22].
[17] Associate Judge Matthews declined the application to set aside the bankruptcy notice. He records that he asked Ms Harrison whether she was able to pay the costs award and she informed the Court that she was able to. On that basis, the Judge granted Ms Harrison more time to meet the bankruptcy notice. Ms Harrison did not do so and she opposed the application that she be adjudicated bankrupt. The hearing of her opposition to the adjudication application took place on 24 November 2016 with Associate Judge Osborne (as he then was) releasing his judgment on 29 November 2019.7 Associate Judge Osborne referred to a number of passages from Associate Judge Matthews’ earlier decision.
[18] While Ms Harrison was late filing her notice of intention to oppose adjudication, Associate Judge Osborne reviewed the substantive grounds of opposition Ms Harrison wanted to raise, to assess their merits in considering whether leave should be granted for the opposition to be filed late.
[19] Associate Judge Osborne identified the key proposition in the proposed notice of opposition was an allegation the judgment creditors as trustees had fraudulently administered the Valerie Geard Trust. Ms Harrison’s submissions concluded that the trustees reliance on the costs and disbursements award made by Faire J was to oppress and cause her detriment which was disproportionate to the amount of the claim.
[20] Associate Judge Osborne recorded the tone of the proposed notice of opposition was reflected in its concluding paragraph, which he said was printed in the notice of opposition in bold and in capital letters. The passage was reproduced in his judgment in ordinary font and is as follows:8
“And on the further grounds that it is totally dispute (sic) the costs order that was obtained fraudulently and improperly, and that is oppressive use of the Insolvency Act 2006 which is seriously oppressive and disproportionate against my aggrieved mother in her 78th year in broken health from a culmination of denial of justice and transgression of her rights and to me in my 57th year at the greater end of my working life and our multiple pets and home of 17 years and our right to fairness and justice, and on the grounds of other principles of law and legal references and in the evidence contained in my sworn affidavit which will be filed in support of this notice and my submissions.”
7 Harrison v Harrison, above n 1.
8 At [27].
[21] Ultimately, Associate Judge Osborne concluded that the grounds on which Ms Harrison sought to oppose the adjudication application were a close reproduction of those advanced to Associate Judge Matthews and reflected a failure by Ms Harrison to accept the outcome of the costs award of Faire J, and the dismissal of her application to set aside the bankruptcy notice by Associate Judge Matthews. Associate Judge Osborne noted that there was no appeal or review of either decision. Ms Harrison was bankrupted accordingly.
[22] Ms Harrison filed two affidavits opposing the present application to sustain the caveat. Having read both affidavits, it is clear to me that Ms Harrison is seeking to again run the arguments not accepted at the time of her bankruptcy, namely that the costs award against her was the result of a flawed judgment. Ms Harrison says the judgment creditor trustees knowingly and intentionally claimed costs while they were acting in breach of trust and breach of an earlier order of the Court.
[23] Ms Harrison records that a judgment may be set aside if there has been a substantial miscarriage of justice. That may well be the case, but the fact is, Ms Harrison did not apply to appeal or review the costs award that led to her bankruptcy, nor to appeal, review or set aside the decisions of Associate Judge Matthews or Associate Judge Osborne that I have already referred to.
[24] Some four years have passed since the costs award upon which Ms Harrison’s bankruptcy was based.
[25] There is reference in Ms Harrison’s documents to the obligations on the OA who she says is not able to abuse statutory power.
[26] At its most basic, Ms Harrison’s position is summarised by the following paragraph of her second affidavit sworn 29 June 2020:
27. The Court recklessly removed the caveat, put costs on me when me and my mother, a tenant in common, were within our lawful rights to the protective beneficial caveat on the vested Trust Property which was the subject of institutional constructive trust law, and then the government caveated my mother’s and my home while the breachers of trust continued in their violation of Trust and Fiduciary Law.
[27] In short, the points Ms Harrison relies on to resist the OA’s caveat continuing are the same arguments raised before Associate Judge Matthews and Associate Judge Osborne.
[28] From the submissions presented by Ms Harrison at the hearing of the application to sustain the caveat, it is clear that Ms Harrison does not accept she has properly been made bankrupt and for that reason she does not accept the Act applies to her. It is for that reason, Ms Harrison has not completed the statement of affairs which, pursuant to s 290(1), must be completed before the three years of bankruptcy ends.
[29] Ms Harrison’s position is based on her not accepting the correctness of the costs judgment upon which the bankruptcy notice that led to her adjudication was based.
[30] The OA’s caveat is dependent on the interest vested in the OA by virtue of Ms Harrison’s bankruptcy. All the OA has to show is the interest recorded in the caveat is reasonably arguable, meaning that all the OA has to demonstrate is there is a reasonably arguable case that Ms Harrison is indeed bankrupt. Given there is a sealed order of this Court recording Ms Harrison’s adjudication, as I have said, I am satisfied the threshold is met.
[31]Section 61 of the Act provides:
61 Adjudication final and binding
Unless an adjudication is appealed under this Act,—
(a)no one can later assert that the adjudication was not valid or that a prerequisite for adjudication was absent; and
(b)the adjudication is binding on all persons.
[32] I simply do not have the power to review the decisions of Associate Judge Matthews and Associate Judge Osborne that led to Ms Harrison’s bankruptcy. The order adjudicating Ms Harrison bankrupt was sealed and is a final order.
[33] While Ms Harrison was adamant the process that led to her bankruptcy was flawed and a device by the judgment creditors to side-line and silence her, and the strength of her feelings on that issue cannot be doubted, such does not entitle me to look behind the bankruptcy process.
[34] In short, in the absence of their having been an appeal against the adjudication order, s 61 of the Act binds Ms Harrison, the OA and the Court.
[35] As Associate Judge Matthews said in his judgment “[t]here is a system for the determination of disputes by which all who use the civil jurisdiction of the High Court are bound.”9
Observation
[36] It was clear to me how strong lyMs Harrison feels about the events leading to her bankruptcy. The reality is that unless Ms Harrison completes a statement of affairs, her bankruptcy may be open ended. The amount of the costs judgment on which she was bankrupted was some $12,000. There were additional costs awards arising from the decisions of Associate Judge Matthews and Associate Judge Osborne. The total value of creditors in her bankruptcy is in the region of $20,000 - $25,000. While that is not an insignificant sum, it is a sum that may well be within the ability of Ms Harrison to pay off over a period of time. The idea of making such a payment may well be repugnant to Ms Harrison but given she is the registered proprietor of a property, one way or another, the costs judgment will be payable. All that is happening at the moment is that interest is accumulating on the debt.
Costs
[37] The OA has applied for costs. There is no reason why they should not follow the event.
9 Harrison v Harrison, above n 5, at [21].
[38] Accordingly, there is an order that the Official Assignee is entitled to costs on a 2B basis together with disbursements as fixed by the Registrar.
Associate Judge Lester
Solicitors:
D M L Dingwall, Solicitor for the Official Assignee, Christchurch Copy to the Respondent, Ms A J Harrison, Christchurch
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