Wetini v Official Assignee

[2022] NZHC 3068

IN THE HIGH COURT OF NEW ZEALAND HAMILTON REGISTRY

I TE KŌTI MATUA O AOTEAROA KIRIKIRIROA ROHE

CIV-2021-419-309

[2022] NZHC 3068

IN THE MATTER

of an application under s 119 of the Insolvency Act 2006

UNDER

Part 18 of the High Court Rules

BETWEEN

DIANA ELIZABETH WETINI

Plaintiff

AND

THE OFFICIAL ASSIGNEE

Defendant

Hearing:

On the papers

Appearances:

P Fisher for Plaintiff

No appearance for Defendant (abides decision of court)

Judgment:

23 November 2022

JUDGMENT OF LANG J

[on application for orders under s 119 of the Insolvency Act 2006]

This judgment was delivered by me on 23 November 2022 at 3.30 pm, pursuant to Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar Date……………

Solicitors:
Clancy Fisher Oxner & Bryant, Tokoroa

WETINI v THE OFFICIAL ASSIGNEE [2022] NZHC 3068 [23 November 2022]

[1]    This proceeding concerns a residential property situated at 35 Weka Place, Tokoroa (the property). The property is currently registered in the names of the plaintiff, Ms Diana Elizabeth Wetini and her former spouse, Mr Steven Paul Morehu Wetini.

[2]    Mr Wetini was adjudicated bankrupt on 21 October 2013. His interest in the property vested in the Official Assignee immediately on his adjudication.1 Mr Wetini remains an undischarged bankrupt.

[3]    On 8 January 2014 the Official Assignee disclaimed any interest in the property under s 117 of the Insolvency Act 2006 (the Act). This meant the share in the property formerly held by the Official Assignee vested in the Crown.

[4]    Mr and Mrs Wetini separated in 2011. Since that date the property has been variously occupied by Mrs Wetini, Mr Wetini and their children. Whilst Mr Wetini was occupying the property during 2020 he carried out renovations to, and refurbishment of, the property. During this period Mr Wetini also met the outgoings payable on the property including all utility payments, rates and mortgage instalments. Mrs Wetini considers the cost of the renovations and the outgoings Mr Wetini has paid is likely to be approximately $20,000.

[5]    Mrs Wetini was able to negotiate a sale of the property in February 2021 but this could not be completed because she could not provide the purchaser with clear title to the property. This resulted from the fact that the Official Assignee has disclaimed any interest in it and Mr Wetini was unable to execute a transfer given the fact that he remains bankrupt.

[6]    Mrs Wetini is now living in the property but wishes to sell it. This will not be possible whilst Mr Wetini remains a registered proprietor of the property.

[7]    The sum of approximately $100,000 remains owing on a mortgage registered against the title to the property. However, the mortgagee has no objection to the property being vested in Mrs Wetini provided its rights as mortgagee are unaffected.

1      Insolvency Act 2006, s 7(1)(a).

[8]    To navigate this impasse Mrs Wetini seeks an order under s 119(3) of the Act vesting her former husband’s share of the property in her. The Official Assignee abides the decision of the Court and the Treasury has confirmed the Crown does not oppose the order that Mrs Wetini seeks.

The law

[9]Section 119 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.

[10]   Although the Insolvency Act provides no guidance as to when it will be ‘fair’ to make a vesting order under s 119(3), Toogood J in Goldstone v Goldstone identified the following circumstances as being relevant to the Court’s determination:2

(a)the applicant's former interest in it, if any;

(b)how and when such interest was acquired;

(c)if the applicant had no interest in the disclaimed property, what other relationship formerly existed between the applicant and the property;

(d)whether the applicant has maintained or increased the value of the property to be vested or prevented its transfer to a third party;

(e)the circumstances in which the disclaimed property became vested in the Assignee through bankruptcy;

(f)the rights and interests of third parties, if any, and, in particular, whether they consent to the vesting; and

(g)the consequences of any vesting for the applicant and any other persons.

2      Goldstone v Goldstone [2019] NZHC 1649 at [41].

[11]   On appeal, the Court of Appeal observed that the assessment of fairness “must take in all the circumstances of both the applicant(s) and the property”.3

[12]   In Re Body Corporate 201036 a unit within an apartment complex was abandoned by its bankrupt owner and subsequently disclaimed by the Official Assignee.4 A registered mortgage held over the unit had also been discharged. The body corporate responsible for managing the affairs of the complex was therefore unable to levy the owner of the unit or the mortgagee for the unit’s share of the cost of remediation works carried out on the complex. This amounted to approximately

$170,00. In those circumstances Thomas J was satisfied it was appropriate to vest the unit in the body corporate.5

[13]   A similar situation arose in Re Body Corporate 447594.6 In that case, the registered proprietors of a unit in a complex managed by a body corporate had been adjudicated bankrupt. The Official Assignee disclaimed the unit as onerous property. This left the body corporate unable to recover outstanding levies of approximately

$104,000. I made orders vesting the unit in the body corporate, noting:

[11] … There is no point in the Crown continuing to remain the beneficial owner of the unit in circumstances where levies will continue to increase and remain unpaid.

[14]   In each of these cases, as in the present, the Crown did not oppose the order sought by the applicant.

Decision

[15]   Mrs Wetini has clearly suffered damage as a result of the Official Assignee disclaiming the property. The disclaimer meant she was no longer able to deal with the property or realise her interest in it. This has already cost her the ability to complete the sale of the property she negotiated last year.

3      Goldstone v Goldstone [2021] NZCA 664 at [26].

4      Re Body Corporate 201036 [2016] NZHC 2035, (2016) 17 NZCPR 659.

5 Above n 4, at [42].

6      Re Body Corporate 44759 [2018] NZHC 3078.

[16]   The unfortunate position in which Mrs Wetini now finds herself can only be rectified if she becomes the sole owner of the property. Mrs Wetini accepts that, should such an order be made, the Official Assignee should receive the sum of $20,000 from the sale proceeds of the property by way of recompense for the cost of the refurbishments that Mr Wetini carried out and the outgoings he paid on the property during 2020.

[17]   I am therefore satisfied in terms of s 119(3) of the Act that it is fair to vest Mr Wetini’s share of the property in Mrs Wetini.

Result

[18]   I therefore make an order under s 119(3) vesting in Mrs Wetini the share of the property registered in the name of Steven Paul Morehu Wetini in Lot 287 on Deposited Plan 12859 being the land described in Identifier SA10B/488 subject to Mortgage 7203353.1.

[19]   The order is made on the condition that when Mrs Wetini sells the property she is to pay the sum of $20,000 to the Official Assignee from the sale proceeds by way of reimbursement for the expenditure Mr Wetini incurred in carrying out renovations and paying outgoings on the property during 2020.

Lang J