THE OFFICIAL ASSIGNEE IN BANKRUPTCY OF THE PROPERTY OF SPENCER V SPENCER & CASH LIMITED HC AK CIV 2008-404-006354

THE OFFICIAL ASSIGNEE IN BANKRUPTCY OF THE PROPERTY OF SPENCER V SPENCER & CASH LIMITED HC AK CIV 2008-404-006354 14 October 2008IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY CIV 2008-404-006354UNDER the Insolvency Act 2008 IN THE MATTER OF the bankruptcy of SUSAN SPENCER (also known as SUSAN HAMILTON) BETWEEN THE OFFICIAL ASSIGNEE IN BANKRUPTCY OF THE PROPERTY OF SUSAN SPENCER (ALSO KNOWN AS SUSAN HAMILTON) Applicant AND SPENCER & CASH LIMITED Respondent Hearing: 14 October 2008 Counsel: G A Neil for applicant No appearance for respondent Judgment: 14 October 2008 at 12:30pmORAL JUDGMENT OF ASSOCIATE JUDGE ABBOTTSolicitors: Meredith Connell, PO Box 2213, Auckland 1140[1] The Official Assignee in Bankruptcy of Susan Spencer (the Assignee) has applied for orders pursuant to s 207 of the Insolvency Act 2006 for the retransfer to him of an interest in property of the bankrupt created by a mortgage given by her shortly before her bankruptcy. [2] The mortgage was given to Spencer & Cash Limited. That company has been served with the application but has neither filed notice of opposition nor appeared today.Background[3] At material times the bankrupt Susan Spencer (Mrs Spencer) owned a property at 6-8 Clarke Street, Waihi. [4] On 11 April 2008 Mrs Spencer executed a mortgage over that property in favour of Spencer & Cash Limited as mortgagee. The mortgage was registered on 14 April 2008. [5] Mrs Spencer was adjudicated bankrupt by this Court on 1 July 2008. [6] On 18 August 2008 the Assignee issued a notice of cancellation of the mortgage, on the ground that it was an irregular transaction, pursuant to s 206 of the Insolvency Act 2006 (the Act). The notice was filed and served on Spencer & Cash Limited the same day. [7] Spencer & Cash Limited has not exercised its statutory right to object to the cancellation. Time for doing so has now expired.The application[8] The Assignee's notice claimed that the mortgage given by Mrs Spencer to Spencer & Cash Limited is an irregular transaction in terms of s 192 of the Act by reason of being an insolvent charge as contemplated by s 198 of the Act, because: a) It was given over Mrs Spencer's property; b) It was given within six months of her adjudication; c) Immediately after she gave the mortgage Mrs Spencer was unable to pay her due debts; d) There is no evidence that the mortgage was given for consideration or in substitution for a prior charge. [9] The Assignee relies on the presumption under s 200 of the Act namely that a bankrupt who gives a charge within the six months immediately before adjudication is presumed to be unable to pay his or her due debts immediately after the charge, unless the contrary is proved. [10] Under s 206(4) of the Act, an irregular transaction is cancelled automatically as against a person on whom the Assignee has served notice under s 206(2) of the Act, if the person does not give the Assignee notice of objection within 20 working days. [11] The Assignee seeks further orders to enable him to undo the irregular transaction: a) An order under s 207(1)(a) of the Act that the interest in the property which Mrs Spencer transferred to Spencer & Cash Limited be retransferred to him; and b) An order under s 207(2) of the Act directing the Registrar-General of Land to cancel the entry of the mortgage against the title.[12] Section 207 of the Act reads:207 Court may order retransfer of property or payment of value(1) On the cancellation of an irregular transaction under which property of the bankrupt, or an interest in property of the bankrupt, was transferred the Court may make an order for— (a) the retransfer to the Assignee of the property or interest in the property; or (b) payment to the Assignee of a sum of money that the Court thinks appropriate, but the sum must not be greater than the value of the property or interest in the property when the transaction was cancelled. (2) The Court may make any other order for the purpose of giving effect to an order under subsection (1). (3) An order under subsection (1) is in addition to any other rights and remedies available to the Assignee, and this section does not restrict those rights.[13] Although there is no express power in that section (or in the Act) to order release of the mortgage (as there is for voidable charges given by a company: s 295(e) of the Companies Act 1993), it is implicit in the provision for automatic cancellation, and in s 207(2), that the Court can make such orders as are necessary to give effect to the automatic cancellation under s 206(4). [14] I am satisfied that I have the power to make the orders sought, and that the orders are warranted in the circumstances of this case.Orders[15] I make the following orders: a) An order retransferring to the Official Assignee all interests transferred to Spencer & Cash Limited in the property situated at 6-8 Clarke Street, Waihi, which is more particularly described in Certificate of Title SA27C/1163, pursuant to the legal mortgage of the fee simple granted by Susan Spencer as mortgagor to Spencer & Cash Limited as mortgagee by way of instrument executed upon 11 April2008 and registered on 14 April 2008 as memorial no. 7783034.1 ("the mortgage"); and b) An order directing the Registrar-General of Land to cancel the entry or memorial on the computer register pursuant to which the mortgage is registered. [16] The Assignee seeks costs. The rationale is that the costs incurred in having to seek these ancillary orders could have been avoided, and will otherwise fall on the general creditors of Mrs Spencer. [17] I have no difficulty with that rationale but note that the costs were not sought in the application. It is possible that the respondent accepted that there was no realistic basis for opposing the application and simply chose to let the orders be made. I am not prepared to make an order for costs, at least without allow the respondent an opportunity to be heard. [18] If the Assignee wishes to pursue an application for costs he is to file and serve a memorandum within 7 days. The respondent is to file and serve any memorandum in opposition with a further 14 days. Unless the memoranda raise any matters on which I feel further submissions are needed, I will determine the issue on the papers. ____________________Associate Judge Abbott