Domazet fka Mendis v Panui
[2025] NZHC 1342
•27 May 2025
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 (4),—
complied with the requirements of the notice; or
(ii)satisfied the court that he or she has a cross claim against the creditor.
…
(7)In subsection (1)(d)(ii), cross claim means a counterclaim, set-off, or cross demand that—
(a)is equal to, or greater than, the judgment debt or the amount that the debtor has been ordered to pay; and
(b)the debtor could not use as a defence in the action or proceedings in which the judgment or the order, as the case may be, was obtained.
[8] Section 17(1)(d)(ii) requires a genuine triable cross claim for the enforcement of a right sounding in money that could not have been advanced as a defence in the proceeding in which judgment was obtained.3
[9] The inability to raise the asserted counterclaim, set-off or cross demand in the proceeding in which judgment was obtained is primarily concerned with the inability to do so as a matter of law.4
3 Robertson v ASB Bank Ltd [2014] NZCA 597 at [17] and [23].
4 Clark v UDC Finance Ltd [1985] 2 NZLR 636 (HC) at 639–640.
[10] In addition, the High Court has inherent jurisdiction to set aside a bankruptcy notice. The extent of the inherent jurisdiction was comprehensively reviewed by Master Kennedy-Grant in Re Wise,5 relevantly holding that:6
(c)The grounds on which the jurisdiction may be exercised are:
(i)procedural defect in the obtaining of the judgment on which the bankruptcy notice is based; and/or
(ii)the existence of arguable grounds of defence to the claim for which judgment was given;
(d)The grounds in which the jurisdiction may be exercised may extend beyond those stated in (d) [sic] to any ground on which the Court feels it necessary to intervene to prevent injustice but I make no finding on that point in this judgment;
[11] The above grounds suggest that it is necessary to demonstrate a substantive reason for questioning the soundness of the judgment.7 The issue is whether a challenge to a judgment by way of appeal may be sufficient.
Discussion
Mr Panui’s proposed claim against Ms Domazet
[12] Mr Panui says that Ms Domazet breached her obligations under the contract because her architect provided two sets of building consent plans, each containing a different design for the sub-floor of the dwellings. It is asserted that this placed Mr Panui and Trojan in a position where they could not continue with the build, entitling them to suspend work.
[13] Counsel for Mr Panui submitted that the counterclaim is for the tort of negligence. Reference was also made to a potential claim by Mr Panui against Ms Domazet’s architect and Auckland Council, for alleged negligence.
[14] Mr Panui’s claim against Ms Domazet is for his losses arising from his inability to complete the contract, and a delay in collecting his tools from Ms Domazet’s property.
5 Re Wise, ex parte Benecke HC Auckland B 227-228/95, 21 June 1995.
6 At 6.
7 Krukziener v Hanover Finance Ltd HC Auckland CIV-2007-404-2896, 12 August 2008 at [29].
[15] Mr Panui has recently filed a fresh proceeding in the District Court against Ms Domazet and Auckland Council. Counsel for Mr Panui submitted that the application to set aside the bankruptcy notice should be stayed until the new District Court proceeding is determined. There is no formal application for a stay of this proceeding.
Analysis
[16] The basic proposition advanced by Mr Panui is that he was not in breach of the contract, because he was frustrated in his performance of his contractual obligations and Ms Domazet was in breach of her obligations under the contract. Mr Panui’s claim is entirely related to the performance of the contract.
[17] The difficulty that Mr Panui faces is that the matters he now seeks to raise could have been used as a defence in the District Court proceeding in which the judgment was obtained.
[18] The matters that Mr Panui now seeks to raise were grounds advanced by him in his unsuccessful application to set the judgment aside. The grounds were rejected by Judge Clark as not arguable on the facts.8 The Judge held that it was not arguable that Mr Panui was entitled to suspend work.9
[19] It does not assist Mr Panui to now seek to characterise his claim against Ms Domazet as based in tort. Even if it is a tortious claim, it is co-extensive with Mr Panui’s claim against Ms Domazet for breach of the contract. Whether Mr Panui’s claim is in contract, tort or both, it remains a claim that could have been used as a defence to Ms Domazet’s claim in the District Court proceeding. Mr Panui is now prevented from raising these matters by s 17(7)(b) of the Act.
[20] Mr Panui did not exercise his right to appeal Judge Clark’s decision dismissing his application to set the judgment aside. There is no extant application for leave to appeal out of time. There is no basis to question the soundness of the judgment.
8 Mendis v Panui, above n 2, at [36]–[47].
9 At [64] and [73]–[81].
Decision and orders
[21] There is no basis to stay the application to set aside the bankruptcy notice. The judgment debtor’s application for an order setting aside the bankruptcy notice is declined.
[22] The judgment debtor shall pay the judgment creditor’s costs on a 2B basis together with disbursements as fixed by the Court. The hearing occupied less than a quarter day, and there is no allowance for second counsel.
Associate Judge Brittain
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