Shallish, re HC Invercargill CIV 2010-425-439

[2010] NZHC 1713

IN THE HIGH COURT OF NEW ZEALAND INVERCARGILL REGISTRY

CIV-2010-425-000439

IN THE MATTER OF     the bankruptcy of KRISTIE ADELE MALONE

ANDIN THE MATTER OF  an application by SCOTT PHILIP SHALLISH for a vesting order

SCOTT PHILIP SHALLISH Applicant

Counsel:         R M Adams

Judgment:      16 September 2010

JUDGMENT OF ASSOCIATE JUDGE OSBORNE

as to order vesting disclaimed property: s 119 Insolvency Act 2006

[1]      The order sought would vest in Mr Shallish the interest of his former partner, Kristie Adele Malone, in a property which the couple owned at 25 Lowe Street, Invercargill.

Background

[2]      Mr Shallish and Ms Malone had a de facto relationship from mid-2004 to January 2007.    They purchased  and  jointly owned  the  Lowe  Street  property in September 2006.   After their separation Ms Malone was, on 19 June 2008, adjudicated bankrupt.

[3]      Following the separation, Mr Shallish occupied and took responsibility for the Lowe Street property.   He met outgoings including mortgage, insurance and

rates.

SCOTT PHILIP SHALLISH HC INV CIV-2010-425-000439  16 September 2010

[4]      On  24  September  2008  the  Official  Assignee  gave  notice  under  s  117

Insolvency Act 2006 disclaiming the Official Assignee’s interest in Ms Malone’s property interest in the Lowe Street property.  The effect of the notice was that the Official Assignee would not take steps to realise the asset, and Ms Malone was therefore free to deal with the asset without further involvement of the Official Assignee.

[5]      After the disclaimer Mr Shallish continued to meet all obligations in relation to the property.  Ms Malone has not during that period contributed to payment of the mortgage debt, but by reason of her bankruptcy she is personally free from liability in relation to that debt.

[6]      Mr Shallish needs to refinance the Lowe Street property in order to deal with his financial situation. He had approval from a bank for the refinance.

[7]      In the meantime, Ms Malone on 9 July 2010 has entered into a relationship property agreement with Mr Shallish.  The agreement recognises the steps which Mr Shallish has taken and is taking with regard to the mortgage on the Lowe Street property.   In recognition, Ms Malone has agreed that the Lowe Street  property became (from the date of the agreement) Mr Shallish’s sole and separate property.

Basis of application – s 119 Insolvency Act

[8]      Section 119 Insolvency Act provides:

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):

(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.

[9]      In his evidence in support of the application Mr Shallish says:

The result of the Notice of Disclaimer is that I am unable to deal with the property and will continue to sustain losses as a result as I am solely responsible for the outgoings and have no means of alleviating that burden, either with refinancing or through sale of the property.

[10]     It  is  thus  that  Mr  Shallish  seeks  to  bring  himself  within  the  Court’s jurisdiction to grant him an order vesting Ms Malone’s interest in the property in him.

[11]     For her part, Ms Malone has dealt with the financial obligations which Mr Shallish has taken on by entering into the relationship property agreement and agreeing that the Lowe Street property becomes Mr Shallish’s sole and separate property.

Discussion

[12]     Counsel has not referred me to, nor have I found, any case similar to the present which has considered the application of s 119 Insolvency Act or the parallel provisions of s 269(5) Companies Act 1993.

[13]     Furthermore, counsel has not explained in the papers filed why the solicitors who acted on the relationship property agreement did not simply have Ms Malone at that time execute a transfer of her interest.  The effect of the Assignee’s disclaimer was to leave Ms Malone free to deal with her interest without further advice from the Assignee.

[14]     However, on the basis of the application made, I am able to recognise a damage to Mr Shallish through the disclaimer.  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 Ms Malone’s equity in the property was outweighed by the obligations.   Mr Shallish has picked up all the obligations.

[15]     In  these  circumstances,  the  test  under  s  119(3)  is  whether  the  Court  is satisfied that it is fair the property should be delivered to or vested in Mr Shallish.

[16]     It is clear that a vesting order would be fair.  It is significant that Ms Malone herself has acknowledged that position through the relationship property agreement she has entered.

Orders

[17]     I order:

[1]      The interest of Kristie Adele Malone in the property at 25

Lowe Street, Invercargill, more particularly described in Identifier SL180/134 Southland Registry as being Lot 2 deposited plan 2286, is hereby vested in Scott Philip Shallish.

[2]      Leave  is  reserved  to  counsel  to  apply  for  any  necessary consequential directions.

Associate Judge Osborne