Official Assignee keeps up the fight

Official Assignee keeps up the fight
Tuesday June 28, 2011

Occasionally you come across cases which take on a life of their own.  I have been enjoying following a fight between the Official Assignee (“the OA”) in one corner and Anne Menzies (“Annie”) and Simon Palmer as trustees of the Kahurangi Trust (“the Trust”) in the other corner.  The background to the dispute is that Keith Bainbridge (“Keith”), who through his company, Bainbridge Development & Construction Ltd (“BDC”) developed a property at Shelley Beach Road, Herne Bay which turned out to be a leaky building. With bankruptcy looming Keith entered into a property relationship agreement (“the Mat Prop Agreement”) with his wife, Anne.  Keith was owed just over $1mil by his company BDC.  The relevant deal between Keith and Anne, under the Mat Prop Agreement, was that Annie would pocket $682k in cash and Keith would retain a debt of some $366k.  No prizes figuring out who between the two of them got the better deal.  It was highly unlikely Keith was ever going to see the money given his pending bankruptcy so it is hard to imagine that he was particularly worried about any unequal division. On 22 June 2005, Keith was adjudicated bankrupt.  Enter the OA.  The OA determined that a number of transactions involving the Trust (which was Keith and Anne’s family trust) did not pass the smell test.  The OA alleged that Keith had placed a number of assets beyond the reach of his creditors by transferring them to the Trust at undervalue.  The OA issued voidable transaction notices and then when the notices had gone unanswered, the OA issued proceedings against the Trust. The notices related to Keith having sold two Shelly Beach Road properties to the Trust under their real value, various gifts of debts that Keith made to the Trust and the Mat Pro Agreement. The Trust failed to take any steps to prevent the OA obtaining judgment against it for just over $2.1mil.  However, at some point the Trust must have woken up to the fact that it was now facing judgment- probably after being served with the default judgment the OA had received on 28 July 2009.   Now that the OA had the Trust’s (Annie Menzie and Simon Palmer (Keith’s solicitor)) full attention, the Trust went on the offensive.  During August 2010, the Trust had the default judgment set aside and had its time to challenge the notices extended – round 1 to the Trust. Good fights never end with just one round.  Round two started in February 2011 when the Court upheld a caveat that the OA placed on the Trust’s property (Summit Drive, in Mt Albert) and ordered that the trust pay the OA almost $8k in costs. The Trust was down but decided to come out fighting by filing a number of counterclaims against the OA including claiming misfeasance in public office in seven respects.  The Trust claimed that the OA failed to properly investigate Keith’s affairs, that it should never obtained judgment against it as it would cause hardship, that it had ulterior motives and that it failed to take legal advice on relevant law.  Probably not the best strategy to allege some sort of incompetence against public servants who are spending someone else’s (tax payer’s in this instance) money to hurt you.  The OA decided to take the relatively rare step of seeking to knock out the counterclaims by way of a counterclaim defendant’s application for summary judgment.  The Court granted summary judgment in favour of the OA describing the counterclaims as being “spoiling counterclaims”. Annie unfortunately, for her, did not escape without copping a bit of justified criticism from the Court – Round three to the OA. Now when defendants are down and especially when they are really down, it is not uncommon to start filing a raft of interlocutory applications.  The trust was quick off the bat and started off with seeking further and better discovery. Just to really make a point the Trust’s SC on 4 April 2001 requested (could be differently described but I will adopt the Court’s summary) that Associate Judge Bell recuse himself from the case for apparent bias.  The Court quickly dismissed the request but did, on 5 May 2011, grant some additional discovery to the Trust.  Round Four-possibly evenly split. Round five (I have put this in this order due to the timing of when the Court’s decision was handed down) was the Trust’s attempt to join Keith as a party.  The Court rightly could not see any basis of a claim by Annie against Keith. Personally, I would have thought that Keith had done more than enough for Annie.  The Trust provided no reason for why they wanted Keith joined.  In my experience, if you want a Court to do something, providing a reason or two to justify what you are after is generally a good idea.  The Court could not think of any reason why Keith should be joined so the Trust’s application was dismissed.  Round Five to the OA. Watch this space.  I suspect that the OA is not going to get its $2.1mil without having to deal with a few more interesting (if that is the way to put it) arguments from Annie.  Hopefully, Keith’s creditor (it appears there is only one) will get their money in due course.

 

By Chris Patterson