Body Corporate 362260 v Zhao

[2019] NZHC 702

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2018-404-2476

[2019] NZHC 702

UNDER

the Insolvency Act 2006

IN THE MATTER

of the bankruptcy of HUAN ZHAO

BETWEEN

BODY CORPORATE 362260

Judgment Creditor/Respondent

AND

HUAN ZHAO

Judgment Debtor/Applicant

Hearing:

4 April 2019

Counsel:

Ms Zhao in person

Mr J R Duckworth for the Respondent

Minute:

4 April 2019

ORAL JUDGMENT OF ASSOCIATE JUDGE SMITH

This oral judgment was delivered by me on 4 April 2019, pursuant to r 11.3 of the High Court Rules

Registrar/Deputy Registrar

Solicitors / Counsel:

Jennifer G Connell & Associates, Auckland

Copy to:
H Zhao

BODY CORPORATE 362260 v ZHAO [2019] NZHC 702 [4 April 2019]

[1]                 Ms Zhao applies to set aside a bankruptcy notice issued against her by the Body Corporate on 21 February 2019.

[2]                 The bankruptcy notice claimed the sum of $3,385.82, based on orders made by the Tenancy Tribunal and subsequently registered in the District Court.

[3]                 The Tenancy Tribunal ordered Ms Zhao and Jun Yin to pay the Body Corporate the total sum of $10,360.52, made up as follows:

(i)	Unpaid levies to 20 April 2018	$6,164.04
(ii)	Interest to 20 April 2018	$486.98
(iii)	Costs	$2,859.50
(iv)	Filing fee	$850.00
Total	$10,360.52

[4]                 Ms Zhao did not file an appeal against the Tenancy Tribunal decision, but she did on two separate occasions in August of 2018 attempt to obtain a rehearing. Both of those applications for rehearing were declined by the Tenancy Tribunal (by orders dated 1 August 2018 and 21 August 2018).

[5]                 Since the unsuccessful rehearing applications were made, Ms Zhao has made a number of payments in reduction of the amounts ordered by the Tenancy Tribunal. She says that she has paid a total of $7,501.02, leaving only the amount awarded for costs in the Tenancy Tribunal ($2,859.50). Until today, the Body Corporate has taken the view that Ms Zhao has only paid the sum of $6,924.70 in reduction of the amounts awarded by the Tenancy Tribunal. However, in  the  course of  the  hearing today  Mr Duckworth advised that he has  located  a  further  interest  payment  made  by Ms Zhao (approximately $486.00) which had not previously been taken into account. He advised that, for the purposes of the application to set aside the bankruptcy notice, the Court may work on the basis that the bankruptcy notice is to be amended to claim only the sum of $2,859.50, together with the costs of $796.00 claimed in the bankruptcy notice.

[6]                 Ms Zhao does not raise any cross-claim of the kind described in s 17 of the Insolvency Act 2006. Her concern is solely that she says she should not have to pay the $2,859.50 that she was ordered to pay by the Tenancy Tribunal. In her view, the Body Corporate has failed to respond to her requests for a breakdown of the figure, and declined to engage with her to show her how the claim for the $2,859.50 has been made up. She told me today that she is simply not prepared to pay an amount which, in her mind, is not due and owing.

[7]                 The adjudicator dealt with the issue of costs in the determination by referring first to the Body Corporate's entitlement to recover levies and "any reasonable costs incurred in collecting the levy" under s 124 of the Unit Titles Act 2010. The Unit Titles Act 2010 provides at s 124(2) that the amount of any unpaid levy, together with any reasonable costs incurred in collecting the levy, is recoverable as a debt due to the body corporate by the person who was the unit owner at the time the levy became payable or by the person who was the unit owner at the time the proceedings are instituted. The adjudicator clearly had before him some figures which made up the claimed costs of $2,859.50. At paragraph 12 of the adjudicator's decision, the adjudicator said "I have no reason to consider that the costs claimed are unreasonable, taking into account the steps taken to recover the unpaid levies".

[8]                 More recently, there has been email correspondence between Ms Zhao and Ms Andrea Scott, the Body Corporate manager who has been handling the matter for the respondent. In an email to Ms Zhao dated 23 August 2018, Ms Scott referred to an amount of $1,678 as the "balance of our attendant costs awarded by the adjudicator as per the Tenancy Tribunal order". Ms Scott explained that that sum had not previously been invoiced, as the Body  Corporate  was  awaiting  the  outcome  of Ms Zhao's application for a rehearing. Ms Zhao immediately queried how the resulting figure got to $2,859.50, and on the same day Ms Scott responded by email giving the breakdown of an amount of $1,181.50 that had been invoiced prior to the hearing. The $1,181.50, together with the $1,678, made up the $2,859.50 awarded by the adjudicator.

[9]                 It is not the function of this Court sitting in its bankruptcy jurisdiction to act as some sort of appeal court from decisions of the Tenancy Tribunal. Ms Zhao knew that

she had a period of 10 working days within which to file any appeal to the District Court, and she did not take that opportunity. (I say that she knew of that 10 working day period, because it is stated in the notes accompanying the Tenancy Tribunal decision, under the heading "Right of Appeal".)

[10]              On the face of it then, the adjudicator appears to have had before him or her sufficient information on which to decide whether the costs claim of $2,859.50 was reasonable within the meaning of s 124 of the Unit Titles Act, and I can only conclude on the information I have before me today, including what the adjudicator said in the decision, that the adjudicator did regard the costs claimed as reasonable, and thus a "debt due" by Ms Zhao to the Body Corporate.

[11]              Ms Zhao has not raised any other basis on which the bankruptcy notice could be set aside. Subject to one matter, to which I will come shortly, the result is that the application to set aside the bankruptcy notice must be dismissed.

[12]              The matter just alluded to is that it now appears that the amount of $3,385.82 stated in the bankruptcy notice was overclaimed — the amount should have been

$2,859.50. That error does not render the bankruptcy notice a nullity, however. Section 418 of the Insolvency Act 2006 provides that a proceeding under the Act must not be invalidated or set aside for a defect (which includes misdescription, misnomer, or omission) in a step that must be taken as part of, or in connection with, the proceeding, unless a person is prejudiced by the defect. The section goes on to provide that the Court may order the defect to be corrected, and may order the proceeding to continue, on the conditions that the Court thinks appropriate in the interests of everyone who has an interest in the proceeding.

[13]              A number of authorities have found that defects in the amount claimed in a bankruptcy notice come within the section. For example, in Re Nigro ex parte Clayton,1 counsel for the creditor conceded that the amount provided for in the bankruptcy notice was in excess of the true amount owing, and sought an amendment to the bankruptcy notice under the corresponding provision to s 418 in the Insolvency Act 1967. The Judge held that the error was not substantial enough to make the

1      Re Nigro ex parte Clayton, HC Auckland, B353/90, 24 May 1990.

proceedings so defective that they were a nullity, and he allowed the application for amendment. So in this case, I do not consider the difference between the $3,385.82 claimed in the bankruptcy notice and the correct figure of $2,859.50 to be substantial enough to take the case outside the remedial jurisdiction of s 418. Correcting the error cannot prejudice Ms Zhao — the correction is in her interests, as it reduces the amount for which she is liable.

[14]              Having regard to those considerations, I make an order under s 418 of the Insolvency  Act  2006  correcting  the  bankruptcy  notice  by  substituting  the figure

$2,859.50 for the figure $3,385.82 where that figure appears in the bankruptcy notice.

[15]              Subject to that correction, the application to set aside the bankruptcy notice is dismissed.

[16]              Mr Duckworth has asked for costs in the ordinary way, and the usual rule is that costs follow the event (that means the losing party is normally required to contribute to the successful party's costs). In this case, the amounts in dispute are very small, and I do not consider that costs on a 2B basis would be appropriate. I make an order for costs in favour of the respondent Body Corporate, on a 1A basis, with disbursements as fixed by the Registrar.

Associate Judge Smith