QUEENSTOWN LAKES DISTRICT COUNCIL V OFFICIAL ASSIGNEE (HC)

We acted for the council in this enforcement case.  In 2012 proceedings were brought against the council and a developer, Mr Morrison, for defects in a townhouse development in Queenstown.  The council had a cross claim against Mr Morrison seeking contribution from him.  In 2014 a settlement was reached between the council and the townhouse owners.  Mr Morrison was not a party to the settlement and the council elected to proceed with its cross claim against him.  Just prior to the council’s formal proof hearing against Mr Morrison, the council learnt Mr Morrison had been bankrupted.  The council elected to file a proof of debt in Mr Morrison’s bankruptcy rather than seeking leave to pursue Mr Morrison in bankruptcy. A proof of debt was filed in April 2014.  More than 4 years later, in October 2018, the Official Assignee rejected the council’s proof of debt.  The council applied to the High Court for an order reversing the Official Assignee’s decision to reject the council’s proof of debt.  The court found that it was clear Mr Morrison was the developer and a concurrent tortfeasor with the council and made the order sought.  The council’s proof of debt in the sum of $444,000 can proceed. There are funds available in the bankrupt’s estate and the council will receive a sizeable distribution.