Gong v Zhang

[2018] NZHC 3301

IN THE HIGH COURT OF NEW ZEALAND PALMERSTON NORTH REGISTRY

I TE KŌTI MATUA O AOTEAROA TE PAPAIOEA ROHE

CIV-2018-454-68

[2018] NZHC 3301

UNDER

the Insolvency Act 2006

IN THE MATTER

of the bankruptcy of Shijun Zhang

BETWEEN

YAOMING GONG

Judgment Creditor

AND

SHIJUN ZHANG

Judgment Debtor

Hearing:	13 December 2018
Appearances:	No appearance for either party
Judgment:	13 December 2018

ORAL JUDGMENT OF ASSOCIATE JUDGE JOHNSTON

[1]                 This bankruptcy proceeding was called in the Palmerston North commercial list on 31 October 2018. The judgment debtor, Shijun Zhang, did not appear. I made an order adjudicating him bankrupt.

[2]                 Shortly after being notified the office of the Official Assignee ascertained that an order adjudicating Zhang bankrupt had been made in the High Court in Auckland on 4 October 2018.

[3]                 In those circumstances, the Official Assignee made an informal request for the re-call and rescission of my judgment pursuant to s 414 of the Insolvency Act. The contention is that the Court has jurisdiction to do so, either pursuant to that section,

GONG v ZHANG [2018] NZHC 3301 [13 December 2018]

the High Court Rules provide for the recall of judgments before sealing, or its inherent jurisdiction .

[4]                 The judgment creditor has not raised any objection to this. His debt is of course provable in the pre-existing bankruptcy.

[5]                 Although there are examples of this Court recalling and rescinding adjudications in bankruptcy in various different circumstances, the preponderance of authority is to the effect that an order for adjudication in bankruptcy cannot be recalled or rescinded, notwithstanding the broad terms of s 414 or its predecessor in the 1967 Act. The cases identify the policy reasons for this which are essentially that an order for adjudication in bankruptcy alters the status of the bankrupt and vests title to all his or her property in the Official Assignee. It is a judgment in rem which operates against all the world. To my mind, that reasoning holds true in the vast majority of circumstances. It means in effect that the only way that an order for adjudication for bankruptcy can be challenged is by appeal. However, there is as always room for exceptional circumstances. Although no authorities have been bought to my attention dealing with situations such as the present, it appears to me that an adjudication in bankruptcy made when the judgment debtor is already bankrupt is a unique category of case. The judgment debtor’s status is already that of a bankrupt and title to his or her property has already vested in the Official Assignee (or any other assignee in bankruptcy) pursuant to the first order. The net effect of this appears to me to be that a second order is in effect a nullity. That seems to me to justify a distinction being drawn between cases in this category and the general run of cases.

[6]                 On the basis of that distinction I am prepared to conclude that the Court has jurisdiction to recall and rescind the order for adjudication in bankruptcy here.

[7]                 That leaves only the question of the judgment creditor’s costs. I see no obvious reason for depriving the judgment creditor of his costs in this matter. He will have his costs on a 2B basis together with disbursements in relation to his bankruptcy proceeding.

[8]Accordingly:

(a)I now recall and rescind my order of 31 October 2018 adjudicating the judgment debtor bankrupt;

(b)I award costs of that earlier application on a 2B basis to the judgment creditor. I leave it to the Registrar to liaise with counsel to sort out the quantum of those costs. But, if there are any difficulties, the matter may be referred to me by memorandum and I will award it on the papers.

Associate Judge Johnston

Solicitors:
CR Law, Palmerston North for the judgment creditor