Domazet fka Mendis v Panui - [2025] NZHC 1342

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2024-404-2721

[2025] NZHC 1342

UNDER the Insolvency Act 2006

IN THE MATTER

of the bankruptcy of DARIN GEORGE PANUI

BETWEEN

NETHNI HANDUNIKA DOMAZET

formerly known as Nethni Mendis Judgment Creditor

AND

DARIN GEORGE PANUI

Judgment Debtor

Hearing: 26 May 2025

Counsel:

B M K Pamatatau / E M Hooker for the Judgment Creditor S M Kilian for the Judgment Debtor

Judgment:

27 May 2025

JUDGMENT OF ASSOCIATE JUDGE BRITTAIN

This judgment was delivered by me on 27 May 2025 at 4.00 p.m. pursuant to Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar Date.......................................

Solicitors:

Craig, Griffin and Lord, Auckland Kilian & Associates, Auckland

DOMAZET v PANUI [2025] NZHC 1342 [27 May 2025]

Introduction

[1] The judgment debtor, Darin Panui (Mr Panui), applies for an order setting aside a bankruptcy notice served on him by the judgment creditor, Nethni Domazet (Ms Domazet). Ms Domazet was formerly known as Nethni Mendis.

[2] Mr Panui is a builder. In 2018, Mr Panui and his company, Trojan Building Services Ltd (Trojan), agreed to construct two dwellings for Ms Domazet on a property she owned in Manurewa. The parties signed a construction contract (the contract). The project did not go well. Mr Panui abandoned the project before the footings of the dwellings were constructed.

[3] In 2020, Ms Domazet commenced a proceeding against Mr Panui and Trojan in the District Court, claiming damages for breach of the contract (the District Court proceeding).

[4] Mr Panui and Trojan did not file a statement of defence. On 26 July 2022, Judge D J Clark entered judgment by formal proof for Ms Domazet against Mr Panui and Trojan for $74,593.17 and disbursements as fixed by the Registrar (the judgment).1 Mr Panui and Trojan applied to set the judgment aside. That application was dismissed by Judge Clark on 26 February 2024.2

[5] Mr Panui now applies to set aside the bankruptcy notice on the ground that he has a counterclaim which exceeds the judgment debt and which he could not set up in the District Court proceeding.

Legal principles

[6] Section 17 of the Insolvency Act 2006 (the Act) prescribes the grounds for setting aside a bankruptcy notice where the debtor has a counterclaim, set off or cross demand equal to or greater than the judgment debt, which they could not use in the proceeding in which the judgment was obtained.

1 Mendis v Panui [2022] NZDC 13261.
2 Mendis v Panui [2024] NZDC 2349.

[7]Section 17 of the Act relevantly provides:

17 Failure to comply with bankruptcy notice

(1)A debtor commits an act of bankruptcy if—

(a)a creditor has obtained a final judgment or a final order against the debtor for any amount; and

(b)execution of the judgment or order has not been halted by a court; and

(c)the debtor has been served with a bankruptcy notice; and

(d)the debtor has not, within the time limit specified in subsection…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2025] NZHC 1342
Decision Date: 27 May 2025

CaseChat Overview and Summary

The High Court of New Zealand, Auckland Registry, was presented with an application by Darin George Panui, the judgment debtor, to set aside a bankruptcy notice served on him by Nethni Handunika Domazet, the judgment creditor. The case revolves around a construction contract dispute that resulted in a judgment debt of $74,593.17 plus disbursements, which was entered against Panui and his company, Trojan Building Services Ltd, for their failure to complete a construction project on Domazet’s property in Manurewa. Panui now seeks to set aside the bankruptcy notice on the grounds that he has a counterclaim which he could not use in the original proceeding due to its substantial overlap with the contractual claims.

The court was required to decide whether Panui’s counterclaim, which he asserts is a tort of negligence due to Domazet’s alleged breach of contract by providing inconsistent building plans, could serve as a basis for setting aside the bankruptcy notice. This required consideration of whether the counterclaim was genuinely triable and whether it could not have been used as a defence in the original proceeding in which judgment was obtained. The court also had to assess if there were any procedural defects or arguable grounds of defence that would justify setting aside the bankruptcy notice.

The court held that Panui’s proposed counterclaim, whether framed in contract or tort, was not a genuine triable cross claim because it was essentially a reiteration of the defences he had failed to successfully raise in the original proceeding. The court found that the matters Panui now sought to raise were previously considered and rejected by the District Court judge, who held that it was not arguable that Panui was entitled to suspend work due to the alleged breaches. Since Panui did not appeal this decision and had not demonstrated any procedural defect or substantive reason to question the soundness of the judgment, the court declined to set aside the bankruptcy notice. The court ordered Panui to pay Domazet’s costs on a 2B basis together with disbursements as fixed by the Court.

In summary, the court’s decision reinforces the principle that a counterclaim to set aside a bankruptcy notice must be genuinely triable and not merely a reiteration of arguments that could have been, but were not, raised in the original proceeding. The court’s ruling underscores the importance of addressing potential defences at the appropriate stage in litigation to avoid subsequent claims that could undermine the enforcement of a judgment.

Orders