Bankruptcy aimed at preventing ex from gaining share in family home overturned by Court of Appeal

The man's actions were designed to prevent his ex-partner from gaining a 50% share in the home he inherited from his father. File photo / Greg Bowker

A man’s attempts to prevent his former partner from gaining a half share of the family home included him telling her he had cancer and later that he was bankrupt.

But both efforts have failed.

The man’s former partner, who has led the legal case, partially on borrowed funds, told NZME through her lawyer Edwin Telle that after a “significant amount” of distress and anxiety, she can now move on and do what she planned from the start - buy her ex’s share of the family home.

Telle said what should have been a straightforward matter ended up being fought through the High Court and Court of Appeal.

The couple, whose names are suppressed, had been in a long-term relationship, but when it ended the woman sought to gain a 50% share in the home her ex had inherited from his father so she could continue to live in it with their child.

In a recently released decision, the Court of Appeal erased an earlier High Court order dismissing her application to have he ex’s bankruptcy abolished and threw out the associated order that the woman pay the man’s legal costs.

The man did not take part in either proceeding but was represented by the Official Assignee who opposed the woman’s initial application to the High Court, and then her appeal.

The couple met in the early 2000s and two years later they moved into a property owned by the man’s father.

The home was left solely to the man when his father died, but the couple continued to live in it as their family home with their child.

When they later separated, the Family Court granted the woman a temporary occupation order, and then later, a final occupation order, which meant she and their child were entitled to live there without the man.

The woman and the child continued to live at the home after the orders lapsed.

The home was worth about $830,000 at the start of legal proceedings but had increased in value to close to $1 million by the end.

In September 2020 the man suggested the woman give him $400,000 and “be done”. He then offered a $50,000 child support downpayment when she mentioned he had not been paying the support.

The following month, the woman emailed him a parenting agreement and a draft separation agreement saying she wanted to buy his half-share in the property.

He responded by saying the home was not relationship property but his separate property because he had inherited it from his father.

Neither of the agreements were signed. According to the decision, the man then embarked on a social media campaign alleging his former partner had been unfaithful and violent towards him and that he was not the child’s father.

Cancer and bankruptcy

In February 2021, he said he was prepared to sign the agreements if he was paid $500,000, and only if the parenting agreement was amended and their child was delivered to him.

The following month he said he was interested in selling the property at full market value because his financial situation was “dire”.

The man said he was living at a lodge run by a charity and feared being homeless and bankrupt because of cash flow issues, and that he could not obtain a loan because the woman had put a claim on the property.

In April 2021, the woman indicated she was willing to buy the property for $850,000.

The man sent his ex an email telling her he had had surgery for cancer, and that he could be “gone in six months" after asking her to take him back. Photo / 123RF

The man did not respond but then sent the woman an email asking her to take him back. When that failed, he told her the house would be going to a creditor auction as he was close to being bankrupt.

A month later, he wrote to her saying he’d had surgery for cancer, could be “gone in six months”and was instructing his solicitor to sell the property to leave a legacy for “you two”.

He said it was either that or he would leave everything to the Salvation Army.

A week later, he sent another email saying he had given up and would be declaring bankruptcy which would trigger the sale of the property and, because his debts were so great, the woman would be left with nothing.

He then filed for bankruptcy, which was approved by the Official Assignee. It was later found that he was not insolvent at the time of his application.

Investigations by the Assignee then triggered further communications between lawyers, including that the woman felt her former partner had acted deliberately to gain an advantage and that she could apply to have the bankruptcy annulled because the man’s assets were sufficient to discharge his outstanding debts.

The Assignee did not find any improper motive and said the dispute and the man’s motivations were “immaterial to the current position”.

The Assignee also denied the woman was an “interested person” with standing to challenge the adjudication. The Court of Appeal noted the position was, “very properly no longer maintained by the Assignee”.

‘An abuse of process’

In May 2022, she applied to the High Court to have the bankruptcy ruled invalid because he “was not bankrupt” and alleged what had occurred had been an abuse of process.

However, the High Court considered the woman had prevented her former partner’s bankruptcy from running its normal course by refusing to allow the property to be sold or to accept other solutions proposed by the Assignee.

The central issue determined on appeal was whether the Associate Judge was right to reject the woman’s contention that her former partner should not have been adjudicated bankrupt.

The Court of Appeal found the woman had offered her former partner a way out which, on the evidence presented, he had declined to consider because he did not think the price was fair, but took no steps to address.

It said the woman’s default position under the Property Relationship Act, before the bankruptcy, was that she was entitled to 50% of the relationship property.

The court had “little hesitation” in agreeing with her that her former partner’s “substantial actuating purposes” in seeking adjudication were to prevent or impede her from exercising her rights under the law to obtain a 50% share in the family home.

It also made it more difficult for her to continue living there with their child and diminished the relationship property pool readily available to her.

The man’s application to be adjudicated bankrupt in June 2021 was annulled. The costs order includes the Assignee’s administration costs.

Telle said it was unfortunate that a relatively large share of the value of the home would now be lost to administration and legal costs.

Tracy Neal is a Nelson-based Open Justice reporter at NZME. She was previously RNZ’s regional reporter in Nelson-Marlborough and has covered general news, including court and local government for the Nelson Mail.