THE OFFICIAL ASSIGNEE V HONK APARTMENTS LIMITED HC AK CIV 2009-404-6222

THE OFFICIAL ASSIGNEE V HONK APARTMENTS LIMITED HC AK CIV 2009-404-6222 24 September 2009IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY CIV 2009-404-6222BETWEEN THE OFFICIAL ASSIGNEE IN BANKRUPTCY OF THE PROPERTY OF SUSAN SPENCER Plaintiff AND HONK APARTMENTS LIMITED Defendant Hearing: (on the papers) Counsel: G A D Neil for Plaintiff Judgment: 24 September 2009JUDGMENT OF HEATH JSolicitors: Meredith Connell, PO Box 2213, Auckland[1] Susan Spencer (nee Hamilton) was adjudged bankrupt on 1 July 2008. Her property vested in the Official Assignee. Ms Spencer was adjudged bankrupt on the application of the Official Assignee, in his capacity as Assignee in bankruptcy of the property of her husband, Mr Kim Spencer. [2] The Official Assignee in bankruptcy of the property of Susan Spencer seeks a freezing order to restraining Honk Apartments Ltd (Honk) from dealing with a property situated at 33A Lindsay Crescent, Hamilton. [3] Mr Neil, for the Official Assignee, submits: a) The Assignee has a good arguable claim against Honk under ss 211 and 212 of the Insolvency Act 2006. Those provisions relate to the Official Assignee's ability to recover from a transferee an amount calculated by reference to the under-value at which a property owned by a bankrupt has been disposed of to a third party. b) Honk has assets within the jurisdiction. c) There is a real risk the value of the Lindsay Crescent property will be disposed of, through sale by Honk. d) The balance of convenience and interests of justice require a freezing order to be made. [4] I am satisfied from the evidence filed that: a) The Lindsay Crescent property was owned by Ms Spencer at the time it was transferred to Honk, on 28 May 2008. b) An agreement for sale and purchase (dated January 2008) between Ms Spencer and Honk disclosed (initially) a purchase price of $1, subsequently amended to an amount equating to the sum owing on first mortgage.c) At the time the agreement was signed, Ms Spencer had a Proposal to creditors pending under Part XV of the Insolvency Act 1967. The Official Assignee (in respect of Mr Spencer) was disclosed as being owed $450,000. Ms Spencer withdrew the Proposal on 25 February 2008. At that time, the Official Assignee was opposing the Proposal. d) On settlement, on 26 May 2008, the amount required to discharge the first mortgage was $70,058.20 and that sum was paid to settle the purchase of the property. e) A registered valuer, Mr Dymock, has assessed the value of the property, both as at 28 May 2008 and the present time, at $227,000. Hence, the amount of the alleged under-value to be recover from Honk is $156,941.80. [5] I am satisfied that those facts give rise to a good arguable claim for the amount sought under ss 211 and 212. Plainly, the Lindsay Crescent property is within the jurisdiction of this Court. [6] The next issue is whether there is a real risk that Honk will dissipate or dispose of the asset, so as to render itself "judgment proof": see Shaw v Narain[1992] 2 NZLR 544 (CA) at 548. I accept Mr Neil's submission that affirmative proof of likelihood of disposal or "nefarious intent" is unnecessary. [7] At the time Ms Spencer transferred the Lindsay Crescent property, it was subject to an asset preservation order made by Lang J, on 19 May 2008. The Court directed substituted service of the order because Ms Spencer could not be located. The order was served on the firm of solicitors acting for Ms Spencer, North Harbour Law. [8] Both Mr and Mrs Spencer left New Zealand in April and May 2008. Their current whereabouts are unknown.[9] A director of Honk, Mr Tauber, appears to have been associated with the Spencers on other occasions. The nature of the transaction between Ms Spencer and Honk suggests that it was not arm's length. The date on which the agreement was signed, taken in conjunction with the timing of the withdrawal of the Proposal, also suggests that the disposition of the property to Honk was planned, for the purpose of defeating creditors. Further disposal cannot be ruled out. [10] I am satisfied that there is a real risk of disposition as described in Shaw v Narain. I am also satisfied that an order is required because the disposal of the asset is likely to prejudice the Official Assignee's attempts to enforce any judgment he might obtain. [11] I consider that the interests of justice require an order to be made to protect the Official Assignee in bankruptcy of the property of Ms Spencer, pending determination of the present proceeding. [12] Because the Official Assignee is a statutory officer appointed under the Insolvency Act 2006 and the State Sector Act 1988, Mr Neil submits that the requirement to give an undertaking as to damages ought to be dispensed with. A similar dispensation order was made by Wylie J, in Official Assignee v Fry (High Court, Auckland, CIV 2009-404-439, 4 February 2009). [13] I am satisfied that it would be inappropriate to require an undertaking in the circumstances of this case, though that ought not to be regarded as a general statement of principle. Each case will turn on its own facts. [14] Westpac Banking Corporation is shown as a mortgagee of the property, on the computerised certificate of title. Its position will need to be protected by the order made. I direct service on the bank and reserve leave for it to apply on 24 hours' notice, to vary or discharge the order I shall make. [15] Annexed to this judgment and marked A is a copy of the freezing order that I make, together with ancillary directions.[16] In accordance with the terms of the order it shall enure until 7 October 2009, at midday, so that extension of it may be considered when the application for directions filed by the Official Assignee comes before the Court, in the Duty Judge List, that day. [17] Costs reserved. ___________________________ P R Heath JAFREEZING ORDER PURSUANT TO RULE 32.2 HIGH COURT RULESTo: The Respondent, Honk Apartments LimitedAnd to: Westpac Banking Corporation 1. The plaintiff has a good arguable case on an accrued or prospective cause of action that is justiciable in the Court. 2. The Court has considered the plaintiff's application for a freezing order and has read a memorandum from Mr G A D Neil, counsel for the plaintiff, in support. 3. The Court is satisfied, having regard to all the circumstances disclosed by affidavit evidence filed in support of the application, that there is a danger that judgment in favour of the plaintiff will be wholly or partly unsatisfied, because the assets listed in para 4 below may be disposed of. 4. This freezing order is made in respect of the following asset: a. A property at 33A Lindsay Crescent, Hamilton, which is more fully described in Certificate of Title 66C/802 (South Auckland). 5. Subject to para 6 below, this order restrains Honk Apartments Ltd from disposing of, dealing with, or diminishing the value of, the asset listed ion para 4 above. 6. This freezing order does not prohibit you from dealing with the asset covered by the order for the purpose of- a. Paying legal expenses related to the freezing order; or b. Meeting mortgage payments in respect of the asset. 7. As the freezing order has been made without notice to you, it will have no effect after midday on 7 October 2009, unless on that date it is continued orrenewed. On that date you or your counsel are entitled to be heard by the Court in opposition to the continuation or renewal of the order. 8. You may apply to the Court by interlocutory application to discharge or vary the order. If you apply, you must give the applicant notice of not less than 24 hours. 9. This order does not affect anyone outside New Zealand until it is declared enforceable by a court in the relevant country, (in which case it affects a person only to the extent that it has been declared enforceable) unless the person is – a. A person to whom this order is addressed, or an officer of that person, or an agent appointed by power of attorney of that person; or b. A person who –i. Has been given notice of this order at that person's residence or place of business within New Zealand; andii. Is able to prevent acts or omissions outside the jurisdiction of this court that constitute, or assist, a breach of this order. 10. The proceeding is listed for call in the Duty Judge List at 10am on 7 October 2009. 11. Service of all papers filed in this proceeding and the reasons for judgment of 24 September 2009 shall be served on Honk Apartments Ltd and Westpac Banking Corporation together with this order. 12. The Court dispenses with the need for the Official Assignee to give an undertaking as to damages. 13. Costs reserved.