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Re Body Corporate 201036

Re Body Corporate 201036

Case [2016] NZHC 2035 31 August 2016

Bona Vacantia

Adverse Possession

Easements & Covenants

Mortgages & Security Interests

Insolvency Law

Property Law

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IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2016-404-1235 [2016] NZHC 2035

UNDER Section 119 of the Insolvency Act 2006

IN THE MATTER

of an order vesting property in Body
Corporate 201036

AND

BODY CORPORATE 201036

Applicant

Hearing: 18 August 2016

Appearances:

J P Wood for the Applicant

Judgment:

31 August 2016

JUDGMENT OF THOMAS J

This judgment was delivered by me on 31 August 2016 at 3pm pursuant to Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar

Date:………………………….

Solicitors:

Rainey Law, Auckland.

BODY CORPORATE 201036 [2016] NZHC 2035 [31 August 2016]

Introduction

[1] The complex of buildings known as Parnell Terraces (“Parnell Terraces”) is a leaky building. The applicant, its body corporate (Body Corporate), seeks an order that one of the units within the complex, which has been abandoned by its bankrupt owner and disclaimed by the Official Assignee, be vested in the name of the Body Corporate. The Body Corporate intends to either sell the unit to someone willing to pay for the repairs, or to repair the unit itself and then sell it to recoup the costs.

Facts

[2] The registered proprietor of unit C3 in Parnell Terraces (the unit), which is a stratum estate in leasehold, is Ms Weina Chen. On 4 August 2014, Ms Chen was adjudicated bankrupt on her own petition. On 10 October 2014, the Official Assignee disclaimed its interest in the unit. The effect of this was that the unit became, according to the applicant, ownerless.

[3] A letter from Treasury has been provided which confirms that:

(a) Following Ms Chen’s bankruptcy and the subsequent disclaimer, the

ownership interest passed to the Crown;

(b)The Crown has no interest in claiming or exercising any ownership interest in the unit;

(c) The Crown does not object to the Court vesting the ownership interest in the Body Corporate; and

(d)The Crown does not wish to be served or further involved with the application and will abide the decision of the Court.

[4] Westpac had a registered mortgage over the unit, which it discharged on

9 November 2015.

[5] Parnell Terraces is currently subject to a scheme (the scheme) pursuant to s

74 of the Unit Titles Act (the Act), under which owners are to pay for repairs on the basis of each unit’s utility interest. Given its utility interest of 1.24 per cent, the share apportioned to the unit (which is unpaid) is approximately $170,000.

[6] The last known address for Ms Chen was the address provided in her application for bankruptcy, but she had also provided an email address for service to the Body Corporate secretary. The Body Corporate has sent her notice of the proceedings, including the Crown’s lack of objection to the vesting, and has filed affidavit evidence of their emails to her. There has been no response.

Analysis of proposed approach

[7] On bankruptcy, all property (in or outside of New Zealand) either belonging to the bankrupt or vested in the bankrupt, vests in the Assignee automatically and any…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

Continue reading Re Body Corporate 201036

Details

AGLC: Re Body Corporate 201036 [2016] NZHC 2035
Case: [2016] NZHC 2035
Decision Date: 31 August 2016

CaseChat Overview and Summary

The case of Re Body Corporate 201036 involved a request by the body corporate of Parnell Terraces to vest a unit within the complex, which had been abandoned by its bankrupt owner and disclaimed by the Official Assignee, in its own name. The body corporate intended to either sell the unit to someone willing to pay for the repairs, or to repair the unit itself and then sell it to recoup the costs. The primary legal issue the court had to decide was whether it was fair to vest the disclaimed unit in the body corporate. The court considered the effect of the disclaimer on the ownership of the unit, the financial loss to the body corporate, and the absence of any other person with a better interest in the unit who was willing and capable of assuming responsibility for it.

The court held that the disclaimed unit had vested in the Crown as bona vacantia. However, there was a distinction between an ownership interest in a fee simple estate and an ownership interest in a stratum estate. The court accepted the submission that there was an issue regarding strata titles and that the rationale for escheat did not apply. While the concept of bona vacantia could still apply to a strata title, the court found that the Body Corporate had suffered a loss or damage as a result of the disclaimer. The court was satisfied that it was fair to vest the disclaimed unit in the Body Corporate, as it would provide a way of selling the unit to relieve it of the potential burden of shouldering the obligations in regard to the unit.

The court further found that the proposed ownership of the unit was within the Body Corporate’s powers, as the reason the Body Corporate sought to have the unit vested in it was to fulfill its duties under the Act and under the scheme. The court concluded that there were no other options available to the Body Corporate in this unusual circumstance, and that there was no person prejudiced by the order. The application was therefore granted.

Orders