Official Assignee v The the King

[2022] NZHC 3446

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2022-404-1654

[2022] NZHC 3446

UNDER

Section 339 of the Property Law Act 2007

IN THE MATER

of the bankrupt estate of Vinay Vasantrao Rajput

BETWEEN

OFFICIAL ASSIGNEE IN BANKRUPTCY OF THE PROPERTY OF VINAY VASANTRAO RAJPUT

Plaintiff

AND

HARSHA VINAY RAJPUT

Defendant

Hearing:	On the papers
Counsel:	R Hindriksen for the Plaintiff
Judgment:	15 December 2022

JUDGMENT OF GAULT J

This judgment was delivered by me on 15 December 2022 at 4:00 pm pursuant to r 11.5 of the High Court Rules 2016.

Registrar/Deputy Registrar

……………………………………

Solicitors:

Mr N Gareth and Mr R Hindriksen, Meredith Connell, Office of the Crown Solicitor, Auckland

OFFICIAL ASSIGNEE v RAJPUT [2022] NZHC 3446 [15 December 2022]

[1]                  This application for summary judgment by the Official Assignee (Assignee) was listed for first call on 8 November 2022. The Assignee seeks orders under s 339 of the Property Law Act 2007 (PLA) that the property situated at 179 Taylor Street, Blockhouse Bay, Auckland (property)1 be sold and the proceeds be divided between Ms Rajput and the Assignee.

[2]                  These proceedings were filed on 9 September 2022 and served on Ms Rajput on 12 September 2022. Ms Rajput did not file any opposition and there was no appearance by or for her at the first call. Other interested parties have also been served as required2 and have taken no steps in the proceeding.

[3]                  Mr Hindriksen, for the Assignee, sought summary judgment at the first call. He filed a helpful memorandum in support. As he submitted, there is no doubt that applications for sale orders under s 339 of the PLA are amenable to the summary judgment procedure and summary judgment has been granted in many cases.

[4]                  However, even where the application is undefended, applications for such sale orders ordinarily proceed by way of a formal proof hearing. That is because s 339 involves the exercise of a judicial discretion or evaluation having regard to prescribed statutory factors, requiring a judgment with reasons. Such applications are generally not suited to orders in a busy list court. As Mr Hindriksen was aware, the Court is sometimes able to make an exception and deal with the matter without requiring a formal proof hearing.3

[5]                  In this case, I was not able to deal with the matter in the list but I did not consider that a formal proof hearing was required and offered to deal with the application on the papers. I have now had an opportunity to review the documents more fully. A formal proof hearing is not required and would add further cost which, if the orders sought are made, would ultimately reduce Ms Rajput’s share of the sale proceeds.

1      Identifier NA107D/469, Legal Description Lot 2 Deposited Plan 32739.

2      Property Law Act 2007, s 341(2).

3      See for example Bank of New Zealand v Padamati [2021] NZHC 45; and Official Assignee v Harding [2022] NZHC 1509.

Background

[6]                  The property is a cross-leased, fee simple estate. Ms Rajput and her husband, Mr Rajput, were registered as joint tenants of the property on 16 September 2013.

[7]                  The property is encumbered by first and second ranking mortgages, three caveats and three charging orders.

[8]                  On 27 May 2021, Mr Rajput was adjudicated bankrupt  by  order  of  the High Court at Auckland.

[9]                  The Assignee has admitted or resolved to admit unsecured creditor claims totalling $137,604.76 in the bankruptcy. Additionally, the fees and expenses that the Assignee incurs in administering the bankrupt estate are payable. As of 18 August 2022, the Assignee’s time costs and expenses were $23,277.15 and $44,034.20 respectively. The unsecured creditor claims and administration costs exceed the bankrupt’s equity in the property, which the Assignee assessed as being $152,469.47.

[10]              On the bankrupt’s adjudication, his interest in the property was severed from the interest of Ms Rajput so that a half interest in the property is vested in the Assignee and the other half interest is held by Ms Rajput.

[11]              Shortly after the adjudication, the Assignee discovered that the property was listed for sale. Ms Rajput and the Assignee co-operated so that the property could remain listed for sale with some alterations to the listing agreement. An offer to purchase was received in July 2021 but withdrawn before the Assignee was satisfied that the sale price was fair. A further offer was received in August 2021 but Ms Rajput turned it down in favour of going to auction. An auction date was set for 15 October 2021. Ms Rajput refused to accept the highest bid following the auction.

[12]              In November 2021, there were further offers but Ms Rajput countered both offers with a higher price that neither potential purchaser was prepared to accept. The Assignee sought to get Ms Rajput to accept an offer for $1.2 million, which the Assignee considered was clearly established to be the market value. Ms Rajput did not respond. Despite subsequent correspondence about a proposal that would enable

Ms Rajput to retain the property, Ms Rajput did not accept the Assignee’s proposal or provide the Assignee with an alternative proposal.

[13]              The Assignee considers that Ms Rajput has had three distinct opportunities to accept reasonable fair market offers of sale with agreement of the Assignee and has failed to do so. The Assignee considers Ms Rajput has failed to co-operate in marketing the property for sale or purchasing the Assignee’s interest in the property since then, and delayed progressing matters for an additional seven months by representing that she would make a reasonable proposal which was never forthcoming.

[14]              An updated valuation in October 2022 assessed the market value of the property to be $1.05 million (including chattels).

Legal principles

[15]              Under s 339 of the PLA, the Court may make, in respect of property owned by co-owners, an order for the sale of the property and division of the proceeds among the co-owners.4

[16]              In considering an application under s 339, the Court must have regard to the following factors set out in s 342:

(a)the extent of the share in the property of any co-owner by whom, or in respect of whose estate or interest, the application for the order is made;

(b)the nature and location of the property;

(c)the number of other co-owners and the extent of their shares;

(d)the hardship that would be caused to the applicant by the refusal of the order, in comparison with the hardship that would be caused to any other person by the making of the order;

4      Section 339(1)(a).

(e)the value of any contribution made by any co-owner to the cost of improvements to, or the maintenance of, the property; and

(f)any other matters the Court considers relevant.

Analysis

[17]I turn to assess the statutory factors on the basis of the affidavit evidence.

[18]              Ms Rajput has a half share in the property, which is a residential property in suburban Auckland. I accept that it may be Mr and Ms Rajput’s family home. I am not aware of any other occupants. I also accept that sale will likely result in Ms Rajput and her husband having to find a new home. I am unaware of any contributions made by Ms Rajput.

[19]              However, I am satisfied that the statutory factors weigh in favour of the orders sought for the following reasons.

[20]              First, from May 2021 the Assignee attempted to negotiate with Ms Rajput and secure a sale at a reasonable price and also offered her the opportunity to purchase the Assignee’s half share. Ms Rajput was unwilling to accept what the Assignee considered were reasonable offers at market value, and she failed to progress an alternative purchase of the Assignee’s half share. The market price has reduced since Ms Rajput disengaged.

[21]Secondly, Ms Rajput has not opposed the Assignee’s claim.

[22]              Thirdly, the property is the only realisable asset of material value in the bankrupt estate. Without a sale, there will be no recoveries to pay creditor claims and bankruptcy administration costs. The hardship that will be caused to the Assignee and creditors by refusing the order outweighs the hardship caused to Ms Rajput by ordering sale. The Assignee has legal duties to Mr Rajput’s creditors. Sale of the property is required to realise the Assignee’s half interest for the benefit of creditors.

[23]Finally, Ms Rajput will receive her half share of the net proceeds after costs.

[24]              Turning to the terms of sale, given the updated valuation and the risk of a further deteriorating market, I accept the Assignee’s proposed reduction in the reserve from $1.1 million to $1.05 million is appropriate.

[25]              The order sought includes a stay for 14 days from the date of service of the sealed orders on Ms Rajput to provide her with a final opportunity to purchase (or arrange for the purchaser of) the Assignee’s half interest in the property. Given the holiday period, I consider a longer stay of 28 days is appropriate.

Result

[26]I make orders in the terms sought, save for the longer stay, as follows:

(a)Under s 339 of the PLA, orders that:

(i)The property be sold by public auction with a reserve at

$1,050,000 under the control and conduct of the Assignee in accordance with the orders set out below.

(ii)The Assignee is authorised to sign any authority to sell, agreement for sale and purchase, a memorandum of transfer or other document required to carry into effect the sale of the property for and on behalf of Ms Rajput.

(iii)The bankrupt and Ms Rajput as occupiers are to:

(A)maintain the property in good tidy condition up to settlement;

(B)co-operate with the Assignee in the sale and marketing process; and

(C)permit access to the property as and when required by the Assignee and/or his appointed real estate agency for the purposes of photographing and marketing it for sale.

(iv)The proceeds from the sale of the property shall be disbursed in the following priority and manner:

(A)in payment of such commission, marketing costs and other sums as are contractually payable to the real estate agency contracted to sell the property;

(B)in payment of other costs of sale, including but not limited to such reasonable legal costs incurred by the Assignee that are directly attributable to the sale of the property, water charges, rates arrears and/or other apportionments;

(C)subject to the order made at paragraph (a)(iv)(D) below, any balance shall be divided equally between Ms Rajput and the Assignee; and

(D)from Ms Rajput’s half share of the net sale proceeds, costs of this proceeding (including those awarded on the interlocutory application for summary judgment) plus disbursements as fixed by the Registrar shall be deducted by the Assignee and retained by him.

(b)An order that the orders set out in order (a) above be stayed for a period of 28 days from the date of service of the sealed orders of the Court on Ms Rajput, to provide her with a final opportunity to purchase (or arrange for the purchase of) the Assignee’s half interest in the property.

(c)An order reserving the Assignee leave to urgently return to the Court for further directions or orders of the Court if the occupiers of the property do not comply with the above orders or act in a way that impedes the sale process.

[27]              Costs to the Assignee on a 2B basis, together with disbursements as fixed by the Registrar.

Gault J