BCH Investments Limited v Nguy

[2022] NZHC 2312

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2021-404-2309

[2022] NZHC 2312

IN THE MATTER

of the Insolvency Act 2006

AND

IN THE MATTER

of the bankruptcy of Jesse Seang Ty Nguy

BETWEEN

BCH INVESTMENTS LIMITED

Judgment Creditor

AND

JESSE SEANG TY NGUY

Judgment Debtor

Hearing:

30 August 2022 (by AVL)

Appearances:

B A Vautier for Judgment Creditor

D P H Jones KC for Judgment Debtor

Judgment:

9 September 2022

JUDGMENT OF ASSOCIATE JUDGE LESTER

BCH INVESTMENTS LIMITED v NGUY [2022] NZHC 2312 [9 September 2022]

[1]                  The judgment creditor’s application to bankrupt the judgment debtor is opposed but in reality, what the judgment debtor seeks is an adjournment so that his appeal against the judgment upon which the bankruptcy proceedings are based can be heard.

[2]                  But for the appeal, which is scheduled to be heard on 3 November 2022, there would be no basis for opposing the adjudication, hence I approach this matter on the basis that s 42 of the Insolvency Act 2006 (the Act) is the relevant section.

42.      Halt or refusal of application when judgment under appeal

(1)This section applies if the creditor’s application for adjudication relies on one of the following acts of bankruptcy:

(a)the debtor failed to comply with a bankruptcy notice (see section 17):

…

(2)If the debtor has appealed against the judgment or order underlying the bankruptcy notice or the judgment for nonpayment of trust money, as the case may be, and the appeal is still to be decided, then the court may—

(a)halt the creditor’s application for adjudication; or

(b)refuse the application.

Background

[3]                  The judgment debtor is a former solicitor. A former client commenced negligence proceedings against him in February 2019. On 23 September 2020, the hearing of that proceeding was set down to commence on 18 October 2021. However, on 2 August 2021 the solicitor then representing the judgment debtor was granted leave to withdraw. On 30 August 2021, Moore J dismissed an informal application by the judgment debtor for an adjournment.

[4]                  The judgment debtor then made a formal application for an adjournment which was dismissed on 9 September 2021.1 The adjournment was sought essentially on the basis that, given the withdrawal of the judgment debtor’s counsel and his health issues, he  was  unable  to  adequately  prepare  for  trial.  The  judgment  debtor  instructed a solicitor to act for him on that application for an adjournment.

[5]                  A  second  application  for  an  adjournment  was  made,  this  time  with    Mr Jones KC as counsel for the judgment debtor.2 Mr Jones’ instruction was limited to the second application for an adjournment which was made on similar grounds to the first application namely, that the judgment debtor’s medical condition and his inexperience as a litigator meant that he would be unable to properly prepare and present his defence and it was in the interests of justice to grant the adjournment. The judgment debtor also said he had been able to access his full legal file from his previous solicitors. The second application for an adjournment was declined. The Court said the judgment debtor had been aware of the trial date since September 2020 and therefore had ample time to make arrangements to ensure he was in a position to arrange representation or otherwise defend the proceedings and arrange witnesses. The result of the substantive hearing was judgment was entered against the judgment debtor on 1 November 2021 for in excess of $940,000 including costs.3

[6]                  A notice of appeal was filed on 25 November 2021. In summary, the grounds of appeal are that the judgment debtor was unable to conduct his defence properly and was compromised in his ability to represent himself due to his health issues, meaning there had been a miscarriage of justice.  The judgment debtor asserts, while he was   a solicitor, he was inexperienced in litigation he was unable to properly conduct his defence.

[7]                  Notwithstanding the appeal, bankruptcy proceedings were commenced. No application for a stay of the judgment was sought.

1      BCH Investments Ltd v Nguy [2021] NZHC 2360.

2      BCH Investments Ltd v Nguy [2021] NZHC 2730.

3      BCH Investments Ltd v Nguy [2021] NZHC 2932.

[8]The application for adjudication was filed in March 2022.

[9]                  Accordingly, while adjudication is opposed, the reality is that time is sought to allow the appeal to be heard on 3 November 2022.

Principles applying to s 42 of the Act

[10]              I refer to Associate Judge Sussock’s decision in Re Mahon, ex parte Waimauri Ltd, where her Honour drew together the relevant principles.4

(1)Is the judgment debtor bona fides in prosecuting the pending appeal.

[11]              Judge Sussock noted this factor does not generally include a consideration of the merits of the appeal unless the Court considers there is absolutely no prospect    of success.5 Here, the appeal could be criticised as amounting to a collateral attack  on the two  judgments refusing the formal  applications  for adjournment rather than a challenge to the substantive judgment, but I am not prepared to conclude the appeal has absolutely no prospect of success.

(2)                 What stage the appeal has reached and whether there has been delay in prosecuting the appeal

[12]              The hearing date is only two months out. There is a complaint that the judgment debtor missed the deadline for paying security within the prescribed time and he was granted an indulgence to pay the security late. The judgment debtor was also late filing his case book on appeal and was granted a further extension. While counsel submit the judgment creditor has not pursued “the appeal with any alacrity”, there is no evidence that  an appeal date could have  been obtained  any earlier  –   Mr Jones advised the appeal is set down for a day.

[13]              Counsel for the judgment creditor says there is no evidence the judgment debtor will actually continue with the appeal, but the substance of this application is founded on the basis that the appeal will be pursued.

4      Re Mahon, ex parte Waimauri Ltd [2021] NZHC 1538.

5 At [32].

(3)                 Whether an order halting the application for an adjudication order would unduly prejudice the judgment creditor

[14]              Counsel for the judgment creditor notes the judgment debtor has not provided a statement of assets and liabilities. However, the judgment creditor has not identified any specific prejudice that would arise from delay. I accept that the appeal date is almost exactly a year after the substantive judgment, however, other than what might be called ‘frustration’ at delay, I cannot identify any factor that would unduly prejudice the judgment creditor.

[15]              The judgment creditor says it is entitled to the fruits of its judgment. That is true but if the appeal is dismissed and Mr Nguy can pay, then interest will be payable on the judgment sum. If Mr Nguy cannot pay then he will be bankrupt and whether the judgment creditor receives a recovery will depend on the investigations of the Official Assignee.

(4)                 Whether the bankruptcy proceeding might render the appeal nugatory as the judgment creditor will be unable to prosecute the appeal

[16]              Mr Jones submits that adjudication would effectively extinguish the judgment debtor’s right to appeal. Evidence on this issue either way is scant but I accept it is far from certain that the appeal would proceed.

[17]              Mr Vautier, on behalf of the judgment creditor, submitted a number of factors stood against the Court exercising its discretion in the judgment debtor’s favour.    Mr Vautier pointed to the non-compliance in relation to security in the case on appeal already noted, the judgment debtor’s lack of frankness about his financial position, particularly where his affidavits show he  has  recently  travelled  to  Hong  Kong and Vietnam, that the judgment debtor can instruct senior counsel when he wishes and further, that the judgment debtor tried to avoid service of the bankruptcy notice, amongst other issues.

[18]              While I accept all of these are factors that add to the judgment creditor’s frustration, as is almost invariably the case where the Court is exercising a discretion, the ultimate question comes down to what is in the interests of justice.

Decision

[19]              I am satisfied that it is in the interests of justice to temporarily halt the adjudication process but on strict conditions. I reach that view because the appeal date is only two months out. When the absence of any specific prejudice to the judgment creditor is balanced against the consequences of adjudication, I am satisfied a deferral of the adjudication process in the first instance, for a little over two months, is called for.

[20]              The first condition is that the appeal must proceed on 3 November 2022. That the hearing date is only two months out is for me the determining factor in this case. If the appeal does not proceed for any reason for which the judgment debtor is responsible, then the halt of the bankruptcy proceedings will terminate.

[21]              I accept Mr Vautier’s point on behalf of the judgment creditor, that what might be called delaying tactics by Mr Nguy in evading service of the bankruptcy notice means he is now getting the benefit of that delay. The reality is, in the absence of prejudice, if the appeal date had been three or four months out my conclusion would be the same.

[22]              The second condition is that Mr Nguy is to meet all timetable directions in relation to his appeal. In the event Mr Nguy fails to comply the judgment creditor may seek that its adjudication application be relisted as it may do in the event the appeal is abandoned.

[23]              The Registrar is to relist the application for adjudication in the first Associate Judge’s Insolvency List after 3 November 2022. If the appeal proceeds and if by the time of the call date a judgment has not been received (as would seem likely), counsel are to by memorandum seek an adjournment through to the next List date. If the appeal does not proceed then the judgment debtor can expect to be adjudicated on that next List date.

Costs

[24]Costs are reserved.

Associate Judge Lester

Solicitors:

Glaister Ennor, Auckland (for Judgment Creditor) Great Wall Lawyers, Auckland (for Judgment Debtor)

Copy to counsel:

D P H Jones KC, Barrister, Auckland (for Judgment Debtor)