OFFICIAL ASSIGNEE v RAJPUT [2022] NZHC 3446

OFFICIAL ASSIGNEE v RAJPUT [2022] NZHC 3446 [15 December 2022]IN THE HIGH COURT OF NEW ZEALANDAUCKLAND REGISTRYI TE KŌTI MATUA O AOTEAROATĀMAKI MAKAURAU ROHECIV-2022-404-1654[2022] NZHC 3446UNDER Section 339 of the Property Law Act 2007IN THE MATER of the bankrupt estate of Vinay VasantraoRajputBETWEEN OFFICIAL ASSIGNEE IN BANKRUPTCYOF THE PROPERTY OF VINAYVASANTRAO RAJPUTPlaintiffAND HARSHA VINAY RAJPUTDefendantHearing: On the papersCounsel: R Hindriksen for the PlaintiffJudgment: 15 December 2022JUDGMENT OF GAULT JThis judgment was delivered by me on 15 December 2022 at 4:00 pmpursuant to r 11.5 of the High Court Rules 2016.Registrar/Deputy RegistrarSolicitors:Mr N Gareth and Mr R Hindriksen, Meredith Connell, Office of the Crown Solicitor, Auckland[1] This application for summary judgment by the Official Assignee (Assignee)was listed for first call on 8 November 2022. The Assignee seeks orders under s 339of the Property Law Act 2007 (PLA) that the property situated at 179 Taylor Street,Blockhouse Bay, Auckland (property)1 be sold and the proceeds be divided betweenMs Rajput and the Assignee.[2] These proceedings were filed on 9 September 2022 and served on Ms Rajputon 12 September 2022. Ms Rajput did not file any opposition and there was noappearance by or for her at the first call. Other interested parties have also been servedas required2 and have taken no steps in the proceeding.[3] Mr Hindriksen, for the Assignee, sought summary judgment at the first call.He filed a helpful memorandum in support. As he submitted, there is no doubt thatapplications for sale orders under s 339 of the PLA are amenable to the summaryjudgment procedure and summary judgment has been granted in many cases.[4] However, even where the application is undefended, applications for such saleorders ordinarily proceed by way of a formal proof hearing. That is because s 339involves the exercise of a judicial discretion or evaluation having regard to prescribedstatutory factors, requiring a judgment with reasons. Such applications are generallynot suited to orders in a busy list court. As Mr Hindriksen was aware, the Court issometimes able to make an exception and deal with the matter without requiring aformal proof hearing.3[5] In this case, I was not able to deal with the matter in the list but I did notconsider that a formal proof hearing was required and offered to deal with theapplication on the papers. I have now had an opportunity to review the documentsmore fully. A formal proof hearing is not required and would add further cost which,if the orders sought are made, would ultimately reduce Ms Rajput's share of the saleproceeds.1 Identifier NA107D/469, Legal Description Lot 2 Deposited Plan 32739.2 Property Law Act 2007, s 341(2).3 See for example Bank of New Zealand v Padamati [2021] NZHC 45; and Official Assignee vHarding [2022] NZHC 1509.Background[6] The property is a cross-leased, fee simple estate. Ms Rajput and her husband,Mr Rajput, were registered as joint tenants of the property on 16 September 2013.[7] The property is encumbered by first and second ranking mortgages, threecaveats and three charging orders.[8] On 27 May 2021, Mr Rajput was adjudicated bankrupt by order of theHigh Court at Auckland.[9] The Assignee has admitted or resolved to admit unsecured creditor claimstotalling $137,604.76 in the bankruptcy. Additionally, the fees and expenses that theAssignee incurs in administering the bankrupt estate are payable. As of 18 August2022, the Assignee's time costs and expenses were $23,277.15 and $44,034.20respectively. The unsecured creditor claims and administration costs exceed thebankrupt's equity in the property, which the Assignee assessed as being $152,469.47.[10] On the bankrupt's adjudication, his interest in the property was severed fromthe interest of Ms Rajput so that a half interest in the property is vested in the Assigneeand the other half interest is held by Ms Rajput.[11] Shortly after the adjudication, the Assignee discovered that the property waslisted for sale. Ms Rajput and the Assignee co-operated so that the property couldremain listed for sale with some alterations to the listing agreement. An offer topurchase was received in July 2021 but withdrawn before the Assignee was satisfiedthat the sale price was fair. A further offer was received in August 2021 but Ms Rajputturned it down in favour of going to auction. An auction date was set for 15 October2021. Ms Rajput refused to accept the highest bid following the auction.[12] In November 2021, there were further offers but Ms Rajput countered bothoffers with a higher price that neither potential purchaser was prepared to accept.The Assignee sought to get Ms Rajput to accept an offer for $1.2 million, which theAssignee considered was clearly established to be the market value. Ms Rajput didnot respond. Despite subsequent correspondence about a proposal that would enableMs Rajput to retain the property, Ms Rajput did not accept the Assignee's proposal orprovide the Assignee with an alternative proposal.[13] The Assignee considers that Ms Rajput has had three distinct opportunities toaccept reasonable fair market offers of sale with agreement of the Assignee and hasfailed to do so. The Assignee considers Ms Rajput has failed to co-operate inmarketing the property for sale or purchasing the Assignee's interest in the propertysince then, and delayed progressing matters for an additional seven months byrepresenting that she would make a reasonable proposal which was never forthcoming.[14] An updated valuation in October 2022 assessed the market value of theproperty to be $1.05 million (including chattels).Legal principles[15] Under s 339 of the PLA, the Court may make, in respect of property owned byco-owners, an order for the sale of the property and division of the proceeds amongthe co-owners.4[16] In considering an application under s 339, the Court must have regard to thefollowing factors set out in s 342:(a) the extent of the share in the property of any co-owner by whom, or inrespect of whose estate or interest, the application for the order is made;(b) the nature and location of the property;(c) the number of other co-owners and the extent of their shares;(d) the hardship that would be caused to the applicant by the refusal of theorder, in comparison with the hardship that would be caused to anyother person by the making of the order;4 Section 339(1)(a).(e) the value of any contribution made by any co-owner to the cost ofimprovements to, or the maintenance of, the property; and(f) any other matters the Court considers relevant.Analysis[17] I turn to assess the statutory factors on the basis of the affidavit evidence.[18] Ms Rajput has a half share in the property, which is a residential property insuburban Auckland. I accept that it may be Mr and Ms Rajput's family home. I amnot aware of any other occupants. I also accept that sale will likely result in Ms Rajputand her husband having to find a new home. I am unaware of any contributions madeby Ms Rajput.[19] However, I am satisfied that the statutory factors weigh in favour of the orderssought for the following reasons.[20] First, from May 2021 the Assignee attempted to negotiate with Ms Rajput andsecure a sale at a reasonable price and also offered her the opportunity to purchase theAssignee's half share. Ms Rajput was unwilling to accept what the Assigneeconsidered were reasonable offers at market value, and she failed to progress analternative purchase of the Assignee's half share. The market price has reduced sinceMs Rajput disengaged.[21] Secondly, Ms Rajput has not opposed the Assignee's claim.[22] Thirdly, the property is the only realisable asset of material value in thebankrupt estate. Without a sale, there will be no recoveries to pay creditor claims andbankruptcy administration costs. The hardship that will be caused to the Assignee andcreditors by refusing the order outweighs the hardship caused to Ms Rajput by orderingsale. The Assignee has legal duties to Mr Rajput's creditors. Sale of the property isrequired to realise the Assignee's half interest for the benefit of creditors.[23] Finally, Ms Rajput will receive her half share of the net proceeds after costs.[24] Turning to the terms of sale, given the updated valuation and the risk of afurther deteriorating market, I accept the Assignee's proposed reduction in the reservefrom $1.1 million to $1.05 million is appropriate.[25] The order sought includes a stay for 14 days from the date of service of thesealed orders on Ms Rajput to provide her with a final opportunity to purchase (orarrange for the purchaser of) the Assignee's half interest in the property. Given theholiday period, I consider a longer stay of 28 days is appropriate.Result[26] I make orders in the terms sought, save for the longer stay, as follows:(a) Under s 339 of the PLA, orders that:(i) The property be sold by public auction with a reserve at$1,050,000 under the control and conduct of the Assignee inaccordance with the orders set out below.(ii) The Assignee is authorised to sign any authority to sell,agreement for sale and purchase, a memorandum of transfer orother document required to carry into effect the sale of theproperty for and on behalf of Ms Rajput.(iii) The bankrupt and Ms Rajput as occupiers are to:(A) maintain the property in good tidy condition up tosettlement;(B) co-operate with the Assignee in the sale and marketingprocess; and(C) permit access to the property as and when required bythe Assignee and/or his appointed real estate agency forthe purposes of photographing and marketing it for sale.(iv) The proceeds from the sale of the property shall be disbursed inthe following priority and manner:(A) in payment of such commission, marketing costs andother sums as are contractually payable to the real estateagency contracted to sell the property;(B) in payment of other costs of sale, including but notlimited to such reasonable legal costs incurred by theAssignee that are directly attributable to the sale of theproperty, water charges, rates arrears and/or otherapportionments;(C) subject to the order made at paragraph (a)(iv)(D) below,any balance shall be divided equally between Ms Rajputand the Assignee; and(D) from Ms Rajput's half share of the net sale proceeds,costs of this proceeding (including those awarded on theinterlocutory application for summary judgment) plusdisbursements as fixed by the Registrar shall bededucted by the Assignee and retained by him.(b) An order that the orders set out in order (a) above be stayed for a periodof 28 days from the date of service of the sealed orders of the Court onMs Rajput, to provide her with a final opportunity to purchase (orarrange for the purchase of) the Assignee's half interest in the property.(c) An order reserving the Assignee leave to urgently return to the Courtfor further directions or orders of the Court if the occupiers of theproperty do not comply with the above orders or act in a way thatimpedes the sale process.[27] Costs to the Assignee on a 2B basis, together with disbursements as fixed bythe Registrar.________________________________Gault J