Land: Mitchell v. Zhang

Property vendors do not have to volunteer information about potential planning restrictions listed on the public record the High Court ruled when ordering property developer Lei Zhang pay up on a $5.8 million south Auckland purchase she tried to cancel after finding council records marked a road potentially cutting through land intended for subdivision.

Ms Zhang tried to cancel her purchase of the Mitchell family lifestyle block at Karaka after discovering she was overpaying $1.8 million.  The one hectare Karaka property on Pararekau Road forms part of potential residential land covered by the Special Housing Areas Act.  The High Court was told Ms Zhang agreed to buy one week after failing to purchase a neighbouring property at auction.  An acquaintance at Auckland City Council carried out an online search later in the day after she signed up.  He told Ms Zhang there was an indicative road across the Mitchell property marked on the Auckland Unitary Plan.  If constructed, this road will reduce the number of subdividable lots.

Ms Zhang said she was entitled to cancel; the Mitchells were in breach of a clause in the standard contract for sale and purchase which requires vendor disclosure of ‘any notice’ from the local authority.  Justice Venning said there is no requirement for vendors to provide a written schedule setting out provisions of a local plan as it applies to their property.  The plan designation of an indicative road was not a ‘notice’ putting any obligations on the Mitchells.  No disclosure was required.

Mitchell v. Zhang – High Court (19.12.17)

18.023

Bankruptcy: Fish Man v. Hadfield

Discharged from bankruptcy, Mark Richard Hadfield recovered ownership of his home against claims of unpaid creditors who argued they should get cash out of his Auckland home which had increased in value dramatically in the three years of his bankruptcy.

Mr Hadfield lives with his wife in Cameron Place, Ranui, west Auckland.  He was bankrupted in 2013 following liquidation of his failed tropical fish business: The Fish Man Ltd.  Mr Hadfield owed The Fish Man some $133,400 for funds the District Court ruled had been taken from his company.  On bankruptcy, the Insolvency Service took control of all Mr Hadfield’s assets, including his home.  It disclaimed any interest in his Cameron Place home.  There was no equity in the property.  The legal effect of Insolvency Service disclaiming land is that the bankrupt is no longer the owner; ownership passes to the Crown.  In fact, little happens.  As long as bankrupts keep up mortgage payments and pay rates, they stay living on the property as if they were still the owner.  The Insolvency Act requires court applications to sort out future ownership.

Mr Hadfield was discharged from bankruptcy in 2016.  One year prior, Fish Man liquidators applied to have the property sold, saying increases in Auckland property values meant there was now sufficient equity in Cameron Place to generate cash for repayment of Mr Hadfield’s debts.  Mr Hadfield applied to have Cameron Place re-vested in his name.  His wife claimed an interest in the property as relationship property; it was their family home, she had kept up mortgage payments both before and after her husband’s bankruptcy.

The Court of Appeal ruled it was too late for Fish Man liquidators to reverse the disclaimer and have Cameron Place sold.  Creditor objections to a disclaimer must be made within fifteen days.  They must also prove loss was suffered because of the disclaimer.  Objections cannot be raised years after the event, following an upsurge in property prices and with the benefit of hindsight, the Court said.

The Court of Appeal ruled Cameron Place was to be reregistered in the names of Mr and Mrs Hadfield.  Fish Man’s right to recover its $133,400 expired when Mr Hadfield was discharged from bankruptcy.  

The Fish Man Ltd v. Hadfield – Court of Appeal (14.12.17)

18.022

Negligence: Southland Indoor Leisure v. Invercargill City

A sixteen million dollars damages award against Invercargill City following Southland Indoor Leisure Centre’s catastrophic roof collapse was cut in half by the Supreme Court.  The Leisure Centre itself was partly to blame by not following up on an earlier engineering report.

IAG Insurance paid out when the Leisure Centre roof collapsed in 2010 under weight of snow.  IAG then took legal action in the name of the Leisure Centre against Invercargill City alleging negligence by Council when signing off on construction.  A compliance certificate was issued without checking construction complied with the building code.  The primary cause of the roof collapse was a missing weld in one roof truss; if in place the roof would have held.

Supreme Court judges were split 3-2 over whether the Leisure Centre was partly to blame.  The majority ruled there was contributory negligence.  When the Leisure Centre sought expert engineering advice in 2006 about persistent roof leaks, it also asked for an ‘assessment of the roof … to be certain it is absolutely safe’.  Concerns had been voiced following contemporary media reports of a stadium roof collapse in Poland: 65 died and 170 were injured.  The engineering report recommended truss welds and support fixings be inspected.  No inspection was carried out.  Failure to inspect amounted to contributory negligence, the Court ruled.  An inspection would most likely have identified the problem and seen the roof strengthened.  The Leisure Centre was fifty per cent to blame for the subsequent roof collapse.

Southland Indoor Leisure Centre v. Invercargill City – Supreme Court (14.12.17)

18.021