BOYKO v BANK OF NEW ZEALAND [2014] NZHC 54

BOYKO v BANK OF NEW ZEALAND [2014] NZHC 54 [4 February 2014]IN THE HIGH COURT OF NEW ZEALANDAUCKLAND REGISTRYCIV-2014-404-000109[2014] NZHC 54UNDER the Property Law Act 2007IN THE MATTER of Mortgage Instrument No. 5559739.3(North Auckland Registry)BETWEEN LARISA VASILIEVNA BOYKOApplicantAND BANK OF NEW ZEALANDRespondentHearing: 4 February 2014Appearances: Applicant in PersonD Broadmore for RespondentJudgment: 4 February 2014JUDGMENT OF VENNING JThis judgment was delivered by me on 4 February 2014 at 3.00 pm, pursuant to Rule 11.5 of the High Court Rules.Registrar/Deputy RegistrarDateSolicitors: Buddle Findlay, AucklandCopy to: ApplicantIntroduction[1] Ms Boyko seeks to pursue proceedings against the Bank of New Zealand (the Bank) to set aside a Property Law Act Notice relating to a property at Unit 112, 3 Morningside Drive, St Lukes, Auckland (the Property).[2] The application is opposed by the Bank. When the matter was first called before the Court, however, Mr Broadmore raised a preliminary point on behalf of the Bank. He submitted Ms Boyko had no standing to make the application.Background[3] Ms Boyko is the registered proprietor of the Property. On 17 April 2003 the Bank registered a mortgage over the Property. On or about 3 August 2004 the Bank and Ms Boyko entered a housing term loan agreement. Subsequently on 4 March 2008 the Bank and Ms Boyko entered a further housing term loan agreement. Both loan agreements were secured by the mortgage over the Property.[4] On 28 March 2011 Ms Boyko was adjudicated bankrupt. On 19 July 2012 the Official Assignee gave notice of disclaimer of the Property.[5] Despite her bankruptcy Ms Boyko continued to make regular payments towards the amounts outstanding under the loan agreements. However, on 2 July2013 the Bank received a letter from the solicitors for the Property's Body Corporate(Body Corporate 205963). The Body Corporate says it is owed in excess of $160,000 in body corporate levies in relation to the Property.[6] The Bank is concerned at the impact that obligation will have on the Bank'ssecurity. Accordingly, on 18 December 2013 the Bank issued the Property Law Act Notice pursuant to s 119 of the Property Law Act 2007. The Property Law Act Notice was served on the Crown and the Official Assignee. A copy of the Notice was sent to Ms Boyko by email.[7] The Property Law Act Notice expired on 24 January 2014. Ms Boyko commenced these proceedings on 23 January 2014.[8] Ms Boyko wishes to raise a number of points to challenge the validity of the Property Law Act Notice and mortgagee sale process the Bank has embarked upon. Ms Boyko says she was not properly served with the Notice (she was not served personally or by registered mail). She also says that the Property Law Act Notice is otherwise invalid or defective.[9] While opposing the application by Ms Boyko the Bank takes a preliminary point as to standing.[10] I heard from both Ms Boyko and Mr Broadmore for the Bank on the issue of standing.Decision[11] Having heard from the parties on the issue of standing I am satisfied Ms Boyko has no standing to bring the current proceedings.[12] On Ms Boyko's adjudication s 101 of the Insolvency Act 2006 applied. It provides:Status of bankrupt's property on adjudication(1) On adjudication,—(a) all property (whether in or outside New Zealand) belonging to the bankrupt or vested in the bankrupt vests in the Assignee without the Assignee having to intervene or take any other step in relation to the property, and any rights of the bankrupt in the property are extinguished; and(b) the powers that the bankrupt could have exercised in, over, or in respect of any property (whether in or outside New Zealand) for the bankrupt's own benefit vest in the Assignee.(2) This section is subject to section 104.[13] As a result, on Ms Boyko's adjudication the Property vested in the Official Assignee. Any powers she could have exercised in relation to the Property vested in the Official Assignee. If the Official Assignee had retained the Property it would have been for the Official Assignee, not Ms Boyko to bring this application.[14] Ms Boyko sought to argue that she retained a personal obligation under the mortgage contract and referred to cl 13.1 of the mortgage which provided:13.1 No release The Mortgagor shall not be released in respect of theMortgagor's liability by the giving of time or indulgence (or byreason of any other circumstances) to any other person.[15] That contractual provision cannot override the statutory effect of s 101 of the Insolvency Act.[16] Further, while Ms Boyko is correct that there are two aspects to a mortgage, the security and the personal covenant, to the extent that Ms Boyko has an existing and ongoing obligation to the Bank arising out of her personal covenant any such debt is a provable debt in her bankruptcy: s 232(1) of the Insolvency Act. Again the provisions of the Insolvency Act prevail.[17] More fundamentally, however, Ms Boyko does not retain any interest in the Property through the Official Assignee. The Official Assignee disclaimed the Property in 2012. The disclaimer brought to an end the rights, interests and liabilities of the Assignee and Ms Boyko in relation to the Property. The Property has reverted to the Crown.[18] In the circumstances Ms Boyko has no interest in the Property and therefore no standing to bring and pursue the proceedings she seeks to maintain against the Bank.Result[19] The application to set aside the Property Law Act Notice is accordingly dismissed.[20] In the circumstances I make no order for costs.__________________________ Venning J