OFFICIAL ASSIGNEE v HARRISON (bankrupt) [2020] NZHC 1548

OFFICIAL ASSIGNEE v HARRISON (bankrupt) [2020] NZHC 1548 [3 July 2020]IN THE HIGH COURT OF NEW ZEALANDCHRISTCHURCH REGISTRYI TE KŌTI MATUA O AOTEAROAŌTAUTAHI ROHECIV-2020-409-241[2020] NZHC 1548UNDER the Land Transfer Act 2017IN THE MATTER of an application to sustain a caveatBETWEEN OFFICIAL ASSIGNEE, in bankruptcy ofAngela Janice HarrisonApplicantAND ANGELA JANICE HARRISON (bankrupt)RespondentHearing: 1 July 2020Appearances: D M W Dingwall for ApplicantMs Harrison (bankrupt) in person respondentJudgment: 3 July 2020JUDGMENT OF ASSOCIATE JUDGE LESTERThis judgment was delivered by me on 3 July 2020 at 9.30ampursuant to Rule 11.5 of the High Court RulesRegistrar/Deputy Registrar3 July 2020[1] This proceeding concerns an application by the Official Assignee (OA) tosustain a caveat lodged by the OA over a property of which the respondent,Ms Harrison, is the sole registered proprietor.[2] Ms Harrison was bankrupted by order of this Court on 29 November 2016.1The OA lodged a caveat, the subject to this application, against Ms Harrison's propertythe following day. On 28 May 2020, Ms Harrison applied to lapse the caveat.Ms Harrison having taken that step; the OA brought this originating application tosustain the caveat over the property.Basis of application to sustain[3] The OA's position is straightforward, being that all property belonging toMs Harrison vested in the OA under s 101 of the Insolvency Act 2006 (the Act) uponbankruptcy. Nothing further was required to give effect to that vesting. As theproperty is now vested in the OA, the applicant has a caveatable interest inthe property.[4] The caveat as lodged identifies the interest claimed by the OA as arising byvirtue of s 101 of the Act.[5] Ms Harrison was adjudicated bankrupt on 29 November 2016. She has not yetcompleted a statement of affairs, meaning that pursuant to s 290 of the Act she is notdue for automatic discharge from bankruptcy. The three years for automatic dischargedoes not start to run until after the filing of a statement of affairs.1 Hrrison v Harrison [2016] NZHC 2854.[6] Hinde McMorland & Sim Land Law in New Zealand discusses the impact ofbankruptcy on a land owner's interests under the Land Transfer Act 2017 (LTA). Theauthors state:2A bankruptcy commences on the date and at the time when the debtor isadjudicated bankrupt. Section 101 of the Insolvency Act 2006 provides thaton adjudication all property belonging to the bankrupt vests in the Assigneewithout the Assignee having to intervene or take any other step in relation tothe property. Any rights of the bankrupt in the property are expresslyextinguished. Nothing in the Land Transfer Act 2017 restricts the operationof sections 101-104 of the Insolvency Act 2006.Section 101 of the Insolvency Act 2006 overrides the title of the registeredowner of the land within the exception of the Land Transfer Act 2017s 51(3)(b).[7] Given the effect of s 101 of the Act, I am satisfied the application must begranted. The property in question is now vested in the OA and, as such, the OA isentitled to maintain a caveat over the property.[8] Accordingly, there is an order that Caveat 10641542.1 against Record of TitleCB1D/261, legally described as Lot 22 Deposited Plan 22347, not lapse.[9] I will deal with the application for costs at the conclusion of this judgment.[10] I was able to deal with the application to sustain the caveat in short orderbecause the law in relation to when a caveat will be removed is clear. In Sims v Lowethe Court of Appeal stated:3 an order for the removal of such a caveat will not be made under s 143[now s 142 Land Transfer Act 2017], unless it is patently clear that the caveatcannot be maintained either because there was no valid ground for lodging itor that such valid ground as then existed no longer does so.[11] The OA accepted the onus of establishing a caveatable interest and I amsatisfied the effect of s 101 of the Act means that onus has been satisfied.2 D W McMorland (ed) Hinde McMorland & Sim Land Law in New Zealand(looseleaf ed, LexisNexis) at [9.045].3 Sims v Lowe [1988] 1 NZLR 656 at 659-660.[12] In plain terms, the outcome of this application was dictated by the factMs Harrison is bankrupt and the effects of s 101 of the Act. It is not a case where, forexample, Ms Harrison was able to establish that she held the property as trustee so theproperty would not be available to her creditors.[13] Ms Harrison's objection to the caveat is expanded on by her in an affidavitsworn on 29 June 2020 filed after the OA's application was first called in the CourtList on 25 June 2020. Given there were a number of matters raised by Ms Harrisonand reference to a number of earlier decisions, I wanted an opportunity to read thosedecisions to come to grips with the history of the matter.[14] Ms Harrison, in her affidavit, expands on her challenge to the caveat. It is clearfrom her second affidavit (and indeed all of the papers she has filed) that she does notconsider it was fair and reasonable that she was adjudicated bankrupt in 2016.[15] I requested the Registry make available to me the 2016 bankruptcy file. Thebankruptcy notice issued against Ms Harrison relates to a costs award made againsther by Faire J earlier in 2016.4 The judgment creditors served Ms Harrison witha bankruptcy notice and Ms Harrison applied to have it set aside. That application wasdetermined by Associate Judge Matthews in a decision released on 30 August 2016.5[16] Associate Judge Matthews set out Ms Harrison's arguments which, insubstance, were a challenge to the correctness of Faire J's judgment. Ms Harrisonargued that Faire J's judgment was flawed. Associate Judge Matthews records in hisjudgment that he explained to Ms Harrison more than once during the hearing that itwas not the function of the Court on an application to set aside a bankruptcy notice togo behind a final judgment of the Court. No appeal had been lodged against Faire J'sdecision. Associate Judge Matthews records:6I informed Ms Harrison during each of her numerous attempts to tell my whythe judgment of Faire J was wrong, that I would not go behind the judgment,and I explained to her carefully why that was so. I have set out this reason inthis judgment so that there can be no misunderstanding on this point.4 Harrison v Harrison [2016] NZHC 574.5 Harrison v Harrison [2016] NZHC 2027.6 At [22].[17] Associate Judge Matthews declined the application to set aside the bankruptcynotice. He records that he asked Ms Harrison whether she was able to pay the costsaward and she informed the Court that she was able to. On that basis, the Judgegranted Ms Harrison more time to meet the bankruptcy notice. Ms Harrison did notdo so and she opposed the application that she be adjudicated bankrupt. The hearingof her opposition to the adjudication application took place on 24 November 2016 withAssociate Judge Osborne (as he then was) releasing his judgment on29 November 2019.7 Associate Judge Osborne referred to a number of passages fromAssociate Judge Matthews' earlier decision.[18] While Ms Harrison was late filing her notice of intention to opposeadjudication, Associate Judge Osborne reviewed the substantive grounds of oppositionMs Harrison wanted to raise, to assess their merits in considering whether leave shouldbe granted for the opposition to be filed late.[19] Associate Judge Osborne identified the key proposition in the proposed noticeof opposition was an allegation the judgment creditors as trustees had fraudulentlyadministered the Valerie Geard Trust. Ms Harrison's submissions concluded that thetrustees reliance on the costs and disbursements award made by Faire J was to oppressand cause her detriment which was disproportionate to the amount of the claim.[20] Associate Judge Osborne recorded the tone of the proposed notice ofopposition was reflected in its concluding paragraph, which he said was printed in thenotice of opposition in bold and in capital letters. The passage was reproduced in hisjudgment in ordinary font and is as follows:8"And on the further grounds that it is totally dispute (sic) the costs order thatwas obtained fraudulently and improperly, and that is oppressive use of theInsolvency Act 2006 which is seriously oppressive and disproportionateagainst my aggrieved mother in her 78th year in broken health from aculmination of denial of justice and transgression of her rights and to me inmy 57th year at the greater end of my working life and our multiple pets andhome of 17 years and our right to fairness and justice, and on the grounds ofother principles of law and legal references and in the evidence contained inmy sworn affidavit which will be filed in support of this notice and mysubmissions."7 Harrison v Harrison, above n 1.8 At [27].[21] Ultimately, Associate Judge Osborne concluded that the grounds on whichMs Harrison sought to oppose the adjudication application were a close reproductionof those advanced to Associate Judge Matthews and reflected a failure by Ms Harrisonto accept the outcome of the costs award of Faire J, and the dismissal of her applicationto set aside the bankruptcy notice by Associate Judge Matthews. AssociateJudge Osborne noted that there was no appeal or review of either decision.Ms Harrison was bankrupted accordingly.[22] Ms Harrison filed two affidavits opposing the present application to sustain thecaveat. Having read both affidavits, it is clear to me that Ms Harrison is seeking toagain run the arguments not accepted at the time of her bankruptcy, namely thatthe costs award against her was the result of a flawed judgment. Ms Harrison says thejudgment creditor trustees knowingly and intentionally claimed costs while they wereacting in breach of trust and breach of an earlier order of the Court.[23] Ms Harrison records that a judgment may be set aside if there has beena substantial miscarriage of justice. That may well be the case, but the fact is,Ms Harrison did not apply to appeal or review the costs award that led to herbankruptcy, nor to appeal, review or set aside the decisions of AssociateJudge Matthews or Associate Judge Osborne that I have already referred to.[24] Some four years have passed since the costs award upon which Ms Harrison'sbankruptcy was based.[25] There is reference in Ms Harrison's documents to the obligations on the OAwho she says is not able to abuse statutory power.[26] At its most basic, Ms Harrison's position is summarised by the followingparagraph of her second affidavit sworn 29 June 2020:27. The Court recklessly removed the caveat, put costs on me when meand my mother, a tenant in common, were within our lawful rights to theprotective beneficial caveat on the vested Trust Property which was the subjectof institutional constructive trust law, and then the government caveated mymother's and my home while the breachers of trust continued in their violationof Trust and Fiduciary Law.[27] In short, the points Ms Harrison relies on to resist the OA's caveat continuingare the same arguments raised before Associate Judge Matthews and AssociateJudge Osborne.[28] From the submissions presented by Ms Harrison at the hearing ofthe application to sustain the caveat, it is clear that Ms Harrison does not accept shehas properly been made bankrupt and for that reason she does not accept the Actapplies to her. It is for that reason, Ms Harrison has not completed the statementof affairs which, pursuant to s 290(1), must be completed before the three years ofbankruptcy ends.[29] Ms Harrison's position is based on her not accepting the correctness of thecosts judgment upon which the bankruptcy notice that led to her adjudication wasbased.[30] The OA's caveat is dependent on the interest vested in the OA by virtue ofMs Harrison's bankruptcy. All the OA has to show is the interest recorded in thecaveat is reasonably arguable, meaning that all the OA has to demonstrate is thereis a reasonably arguable case that Ms Harrison is indeed bankrupt. Given there isa sealed order of this Court recording Ms Harrison's adjudication, as I have said, I amsatisfied the threshold is met.[31] Section 61 of the Act provides:61 Adjudication final and bindingUnless an adjudication is appealed under this Act,—(a) no one can later assert that the adjudication was not valid orthat a prerequisite for adjudication was absent; and(b) the adjudication is binding on all persons.[32] I simply do not have the power to review the decisions of AssociateJudge Matthews and Associate Judge Osborne that led to Ms Harrison's bankruptcy.The order adjudicating Ms Harrison bankrupt was sealed and is a final order.[33] While Ms Harrison was adamant the process that led to her bankruptcy wasflawed and a device by the judgment creditors to side-line and silence her, and thestrength of her feelings on that issue cannot be doubted, such does not entitle me tolook behind the bankruptcy process.[34] In short, in the absence of their having been an appeal against the adjudicationorder, s 61 of the Act binds Ms Harrison, the OA and the Court.[35] As Associate Judge Matthews said in his judgment "[t]here is a system for thedetermination of disputes by which all who use the civil jurisdiction of the High Courtare bound."9Observation[36] It was clear to me how strong lyMs Harrison feels about the events leading toher bankruptcy. The reality is that unless Ms Harrison completes a statement of affairs,her bankruptcy may be open ended. The amount of the costs judgment on which shewas bankrupted was some $12,000. There were additional costs awards arising fromthe decisions of Associate Judge Matthews and Associate Judge Osborne. The totalvalue of creditors in her bankruptcy is in the region of $20,000 - $25,000. While thatis not an insignificant sum, it is a sum that may well be within the ability ofMs Harrison to pay off over a period of time. The idea of making such a payment maywell be repugnant to Ms Harrison but given she is the registered proprietor ofa property, one way or another, the costs judgment will be payable. All that ishappening at the moment is that interest is accumulating on the debt.Costs[37] The OA has applied for costs. There is no reason why they should not followthe event.9 Harrison v Harrison, above n 5, at [21].[38] Accordingly, there is an order that the Official Assignee is entitled to costs ona 2B basis together with disbursements as fixed by the Registrar.__________________________________Associate Judge LesterSolicitors:D M L Dingwall, Solicitor for the Official Assignee, ChristchurchCopy to the Respondent, Ms A J Harrison, Christchurch