Official Assignee v Koedyk

[2024] NZHC 1198

IN THE HIGH COURT OF NEW ZEALAND TAURANGA REGISTRY

I TE KŌTI MATUA O AOTEAROA TAURANGA MOANA ROHE

CIV-2024-470-26

[2024] NZHC 1198

UNDER

the Administration Act 1969

IN THE MATTER

of the deceased estates of Derek Koedyk and Heather Margaret Koedyk

BETWEEN

THE OFFICIAL ASSIGNEE

Applicant

AND

WAYNE GERARD KOEDYK AS

EXECUTOR OF THE ESTATE OF DEREK KOEDYK

First Respondent

WAYNE GERARD KOEDYK AS EXECUTOR OF THE ESTATE OF

HEATHER MARGARET KOEDYK

Second Respondent

Hearing:	13 May 2024
Appearances:	G S Caro for Applicant
Judgment:	15 May 2024

JUDGMENT OF WILKINSON-SMITH J

This judgment was delivered by me on 15 May 2024 at 10am.

Pursuant to Rule 11.5 of the High Court Rules.

………………………… Registrar/Deputy Registrar

Solicitors:

G S Caro, Auckland

THE OFFICIAL ASSIGNEE v KOEDYK [2024] NZHC 1198 [15 May 2024]

Introduction

[1]                  This  matter  concerns  the  administration  of  the  bankrupt  estate  of  Wayne Gerard Koedyk who was adjudicated bankrupt on 17 May 2021.

[2]                  Mr Koedyk is the executor of his parents’ deceased estates and is a beneficiary in both estates. His interests as beneficiary under both estates vested in the Assignee upon his adjudication in bankruptcy.

[3]                  The Assignee has asked Mr Koedyk in his capacity as executor of the two deceased estates to provide accounts of the deceased estates, but the requests have been ignored.

[4]                  The Assignee now seeks an order compelling Mr Koedyk to provide accounts for each of the deceased estates. The orders are sought under s 44 of the Administration Act 1969 and r 27.32(1) of the High Court Rules 2016.

[5]                  The proceeding was served on Mr Koedyk on 8 March 2024. He has taken no steps.

[6]The matter came before me for a formal proof hearing.

[7]I adopt the timeline set out in the memorandum of counsel for the Assignee.

Background

[8]                  The last wills of Derek Koedyk and Heather Margaret Koedyk were signed on 28 November 2000. Both wills appointed Mr Koedyk as executor and bequeathed him a one quarter share in the residuary estate.

[9]                  Derek Koedyk died on 15 April 2015. Probate was granted to Mr Koedyk on 6 July 2015.

[10]              Heather Margaret Koedyk died on 14 August 2019. That year, Mr Koedyk was granted probate over his mother’s estate.

[11]              On 26 November 2019, a half share in the proceeds of the sale of the family home ($308,850.38) was paid to the deceased estate of Derek Koedyk. That same day a half share in the proceeds of the sale of the family home ($306,925.38) was paid to the deceased estate of Heather Margaret Koedyk.

[12]On 17 May 2021, Mr Koedyk was adjudicated bankrupt.

[13]              When filing his statement of affairs on 29 March 2022, Mr Koedyk disclosed his interest in his mother’s deceased estate saying, “I have relinquished my share in favour of my children”. Mr Koedyk says that the share remains in the bank account of his mother’s estate.

[14]              On 1 July 2022, a letter was sent from the Assignee’s solicitor to Mr Koedyk’s solicitor seeking various information about the deceased estates including an account of the deceased estate of Heather Margaret Koedyk. On 22 July 2022, Mr Koedyk’s solicitor provided information about the deceased estates but did not provide any accounts.

[15]              On 8 August 2022, a further letter was sent from the Assignee’s solicitor to Mr Koedyk  regarding,  amongst  other  matters,   the   deceased   estate   of   Heather Margaret Koedyk. The Assignee received no response.

[16]              On 7 December 2023, the Assignee’s solicitor emailed Mr Koedyk’s solicitor seeking accounts for both deceased estates and advising that proceedings would be issued if the accounts are not provided by 2 February 2024.

The Assignee’s submissions

[17]              The Assignee submits that an interest in a deceased estate is property that vests in the Assignee on the bankruptcy of the legatee.1 If the deceased estate has been distributed prior to the bankruptcy adjudication, the distribution or what is left of it will vest in the Assignee. Any gift or legacy in the two-year period prior to

1      Official Assignee v Galvin [2016] NZHC 2145 at [22].

adjudication may be cancelled as of right by the Assignee as an insolvent gift under ss 204 and 206 of the Insolvency Act 2006.

[18]              In this case, Mr Koedyk’s father died six years prior to adjudication. Under his will, Mr Koedyk’s mother  was  granted  a  life  interest  in  the  family  home.  Mr Koedyk’s mother died on 14 August 2019. Mr Koedyk was adjudicated bankrupt less than two years later, on 17 May 2021. The family home was subsequently sold.

[19]              The  $308,850.38   payment   received   into   the   bank   account   of  Heather Margaret Koedyk on 26 November 2019 seems to be the half share belonging to the deceased estate of Derek Koedyk. The $306,925.38 payment the same day seems   to   be   the   half   share   belonging   to   the   deceased   estate    of    Heather Margaret Koedyk.

[20]              Mr Koedyk has told the Assignee that he gifted his interest in his mother’s estate to his children however the Assignee has not been provided with any evidence of that.

[21]              The Assignee submits that, given the timing, any gift of either legacy under either will by Mr Koedyk is an insolvent gift. I note that this depends upon timing. If Mr Koedyk gifted his residual interest in his father’s estate prior to 17 May 2019, that gift may not be cancellable as of right.

[22]              It appears from the bank accounts that distributions were made to each of   Mr Koedyk’s three siblings after November 2019. It is not clear from the bank statements how the remaining 25 per cent share of the combined estates (Mr Koedyk’s share) has been set aside or distributed.

Legal principles

[23]Section 44 of the Administration Act provides:

Every administrator shall, when required by the court so to do, exhibit on oath in the court a true and perfect inventory and account of the estate of the deceased; and the court shall have power as heretofore to require administrators to bring in inventories.

[24]              Rule 27.32(1) of the High Court Rules provides that a person “interested in a deceased’s estate” may apply for an order that the administrator files an inventory and account of the estate.

[25]              The Assignee is a “person interested” in both deceased estates.2 He is not in the same position as a creditor.

[26]              Rule 27.32(2)(a) of the High Court Rules provides that an applicant must make the application within three years of the grant appointing the administrator, but the period may be extended under r 1.19.3

[27]              In this case the Assignee submits it is in the interests of justice that time be extended given the life interest issue, the delay by Mr Koedyk in filing his statement of affairs and the subsequent refusal by Mr Koedyk to provide accounts despite requests from the Assignee to do so.

[28]              The Assignee submits that Mr Koedyk has breached his duty under s 138 of the Insolvency Act to assist the Assignee in the realisation of his property to the best of his ability.

[29]In Jay v Gilbert it was held: 4

There is little judicial consideration to date of s 44. That is no doubt due to it being sparingly used or needed. The purpose of the provision seems to be to confirm the role of the Court in assisting beneficiaries and others with an interest in the estate to obtain an up to date statement of the position of the estate. The nature of the information to be provided under s 44 is clarified to a certain degree by r 27.32 of the High Court Rules but there is still some flexibility. For example, what is covered by the concept of an inventory is not addressed. I accept the proposition in Reeves v Freeling that the Court has a discretion as to the nature of the inventory that will be accepted. That also suggests, as one would expect, that there is capacity for an applicant to return to the court to request compliance with an order that has been made.

(footnotes omitted)

2      See AMP Finance Ltd v Linecorp Investments Ltd HC Auckland CP351/90, 14 June 1991 where it was confirmed that in such a situation the Assignee is not a mere creditor.

3      Elishua v Freeland [2019] NZHC 398.

4      Jay v Gilbert [2015] NZHC 1791 at [5].

Discussion

[30]              Section 44 of the Administration Act permits a beneficiary to obtain an account of the estate of which they are a beneficiary. Where a person who has been adjudicated bankrupt is that beneficiary, the beneficial interest passes to the Assignee upon bankruptcy. Ordinarily the Assignee would simply deal with the executor to establish the extent of the beneficial interest. In this case, Mr Koedyk is both the executor of the two deceased estates, and a bankrupt beneficiary. He is not fulfilling his duties as an executor so far as the Assignee, as beneficiary, is concerned.

[31]              The Assignee only became aware of the beneficial interest in the estates when Mr Koedyk provided his statement of affairs. That statement of affairs was not provided until March 2022, almost a year after Mr Koedyk was adjudicated bankrupt. The Assignee advises that it was only provided as a result of Mr Koedyk being summonsed.

[32]              The Assignee has tried to engage with Mr Koedyk to resolve this matter without the necessity for court proceedings. The Assignee says that Mr Koedyk is effectively burying his head in the sand and simply refusing to engage. There has been a pattern of late or no engagement in related proceedings — until court proceedings are underway and a hearing is imminent.

[33]              Given that the Assignee only became aware of the beneficial interest in March 2022 and the desirability of engagement with bankrupt legatees in such circumstances, the Assignee cannot be faulted for the delay in seeking the s 44 order. It is in the interests of justice to extend the period under r 1.19 of the High Court Rules.

Result

[34]              The Assignee is entitled to the information which he is seeking. Mr Koedyk as executor of the two estates has declined to provide the information and has taken no steps in respect of this application.

Orders

[35]Accordingly, I make the following orders:

(a)Permission for the Assignee to commence the proceeding by way of originating application.

(b)Extension of time is granted under r 1.19 of the High Court Rules 2016 to make the application.

(c)That Mr Koedyk as executor of his father’s estate file, within 28 days of service of the order, a true and perfect inventory and account of the deceased estate of his father Derek Koedyk current to the date of service of the order; and verify those documents by affidavit.

(d)That Mr Koedyk as executor of his mother’s estate file, within 28 days of service of the order, a true and perfect inventory and account of the deceased estate of Heather Margaret Koedyk current to the date of service of the order; and verify those documents by affidavit.

(e)Leave is reserved for the Assignee to apply for further orders by memorandum.

Costs

[36]              The Assignee has succeeded in obtaining the orders sought and is entitled to costs. I make an order for costs in favour of the Assignee on a 2B basis.

Wilkinson-Smith J