The concurrent bankruptcy imposed on litigious Wellington debtor Harry Memelink in March 2020 was set aside because debts allegedly due were not formally proved in court. The court hearing shone a light on tangled stratagems by Quentin Haines, Memelink’s former legal adviser, seeking to avoid forced sale of his own home.
Mr Memelink’s commercial behaviour has kept the courts busy for many years with multiple legal actions over disputed debts. He was bankrupted in August 2018 after failing to pay a court costs order imposed following his unsuccessful negligence claim against his then lawyers: Collins and May.
Whilst bankrupt, he was bankrupted again in March 2020, this time on the application of another lawyer formerly acting for him: Quentin Haines. This concurrent bankruptcy was set aside by the Court of Appeal; Mr Memelink’s earlier 2018 bankruptcy still stands.
The Court of Appeal was told of complicated legal manoeuvres that led to the second bankruptcy application. Mr Haines became embroiled in Mr Memelink’s business affairs when Mr Haines took out a second mortgage over his Levin property in favour of Fico Finance. Part of this Fico loan was advanced to Mr Memelink. Loan repayments were guaranteed by Mr Memelink’s family trust. Following a subsequent dispute over liability for interest, Mr Memelink had his family trust buy up the Fico second mortgage and threatened to sell up Mr Haines’ Levin home. A forced sale was blocked by court order, pending resolution of the argument between Mr Haines and Mr Memelink. The Court of Appeal was told Mr Haines then arranged to break Mr Memelink’s family trust’s hold over the Levin property as second mortgagee. Mr Haines had a prior first mortgage over the Levin property bought out by friendly allies and the property then sold in an arrangement which allowed Mr Haines to lease back his Levin home. This sale by the replacement first mortgagee did not raise enough to repay the second mortgage now held by Mr Memelink’s family trust. It was left as an unsecured creditor; the mortgage was valueless as security.
Mr Haines was then back in court seeking to bankrupt Mr Memelink on a court costs order, part of their dispute over the Fico mortgage. The Court of Appeal ruled the High Court had no grounds to bankrupt Mr Memelink. First: the costs order claimed was incorrectly claimed as a debt owed by Mr Memelink personally; it was not, it was a debt owed by Memelink’s family trust and his trust in turn was owed a greater amount in another costs order against Mr Haines’ family trust. Secondly: debts allegedly owed by Mr Memelink personally to other creditors which had arisen since his first bankruptcy and left unpaid were not proved in court. It was not enough for Mr Haines lawyer to state in court that other creditors wanted to see Mr Memelink bankrupted a second time. These debts were levies imposed by three separate body corporates. Mr Memelink has a history of disputing levies imposed by body corporates. The body corporates had to separately apply to court for Mr Memelink’s further bankruptcy.
Memelink v. Haines – Court of Appeal (14.04.21)
21.066