HG Metal Manufacturing Limited v Navaratnam
[2023] NZHC 637
•28 March 2023
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2022-404-44
[2023] NZHC 637
UNDER the Insolvency Act 2006 IN THE MATTER OF
the bankruptcy of Sherine Sangeetha Navaratnam
BETWEEN
HG METAL MANUFACTURING LIMITED
Judgment Creditor
AND
SHERINE SANGEETHA NAVARATNAM
Judgment Debtor
Hearing: 14 February 2023 (via VMR) Appearances:
T B Fitzgerald for judgment creditor Judgment debtor in person
Judgment:
28 March 2023
JUDGMENT OF ASSOCIATE JUDGE TAYLOR
This judgment was delivered by me on 28 March 2023 at 10am, pursuant to r 11.5 of the High Court Rules
Registrar/Deputy Registrar Date:
Solicitors:
Bell Gully, Auckland for judgment creditor
Copy to:
The judgment debtor
HG METAL MANUFACTURING LIMITED v NAVARATNAM [2023] NZHC 637 [28 March 2023]
Introduction
[1] Sherine Sangeetha Navaratnam (Mrs Navaratnam), the alleged judgment debtor in this matter, applies to set aside a bankruptcy notice served on her on the 22 July 2022.
Background
[2] Justice Woolford issued an order dated 22 October 2020 ordering that the award of Wade M Coriell be entered as a judgment against Mrs Navaratnam as the second defendant.1 This judgment registers the arbitral award made by Mr Coriell in Singapore as a judgment against the second defendant, Mrs Navaratnam, in New Zealand.
[3] The award requires Mrs Navaratnam to pay the plaintiff (jointly and severally with the first defendant, Mr Vashiharan Navaratnam) (Mr Navaratnam) a specified amount. The bankruptcy notice is based on this judgment. Execution of the judgment has not been stayed.
[4] The bankruptcy notice was issued against Mrs Navaratnam on 24 January 2022 by HG Metal Manufacturing Limited (HG Metal), the judgment creditor. The notice was served to Mrs Navaratnam on 22 July 2022.
Application to set aside bankruptcy notice
Application
[5] Mrs Navaratnam seeks orders setting aside the bankruptcy notice, on the following grounds:2
(a)Mrs Navaratnam was served a bankruptcy notice which did not have a certified copy of the judgment or order attached.
(b)The documents on file do not contain a final judgment or final order.
1 HG Metal Manufacturing Limited v Navaratnam HC Auckland CIV-2020-404-1955, 22 October 2020 (Minute of Woolford J).
2 Interlocutory application to set aside bankruptcy notice dated 3 August 2022 at [2].
(c)HG Metal is not an entitled creditor and do not have an enforceable award.
(d)Permission has not been granted by the Court to enforce the award.
(e)Even if permission has been granted, that permission has been granted without jurisdiction.
(f)The Court has no discretion to grant enforcement permission for an award issued in another convention country if the party seeking enforcement (HG Metal) does not fulfil the conditions laid down in Article IV of the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (1958).
(g)Mrs Navaratnam is obligated to respond under Article 36 only after HG Metal has filed an application that establishes the presumptive validity of the award, and that award has been invoked on Mrs Navaratnam. No such award has been invoked.
(h)The award is not underpinned by a valid arbitration agreement and the Court has no discretion to allow for an enforcement of an award that has been made without jurisdiction.
(i)Enforcement of the bankruptcy notice will be a complete derogation of Mrs Navaratnam’s rights.
Memorandum of Sangeetha Navaratnam dated 3 August 2022
[6] Mrs Navaratnam has filed a memorandum to notify the Court of her position on the bankruptcy notice. She states that she examined the documents on file on 29 July 2022 and did not find an award that has proven matters under art 35(2) of sch 1 of the Arbitration Act 1996. She states that her obligation to respond under art 36 only arises if HG Metal invoked an award on her which has proven matters. Mrs Navaratnam states that it is a breach of her rights to be compelled to answer a bankruptcy notice that is not founded on a valid award. She requests that the Court set aside the bankruptcy notice as it prejudices her rights under the Arbitration Act and further rights not known to her.
Memoranda filed by Vashiharan Navaratnam dated 3 August 2022
[7] Mr Fitzgerald for HG Metal has objected to the memoranda filed by Mr Navaratnam being read by the Court on the basis that Mr Navaratnam has no standing and no orders are sought against him. By minute dated 2 September 2022,
Associate Judge Gardiner denied Mr Navaratnam leave to file any memoranda with the Court in relation to this proceeding.
[8]Accordingly, memoranda filed by Mr Navaratnam alone will not be read.
Memorandum of Sangeetha Navaratnam and Vashiharan Navaratnam dated 10 February 2023
[9] In this memorandum, Mr and Mrs Navaratnam repeat the arguments that have been already raised in previous applications by them. These can be summarised as follows:
(a)HG Metal has not complied with art 35(2) of sch 1 of the Arbitration Act;
(b)HG Metal has not provided evidence that Mrs Navaratnam has been served with any application to enter an arbitration award in accordance with r 26.24 of the High Court Rules 2016;
(c)there is no evidence attached to the bankruptcy notice in the form and manner required by the Insolvency Act and Mrs Navaratnam’s position is that an award that complies with art 35(2) is required to be attached to the bankruptcy notice.
Opposition to application to set aside bankruptcy notice
Notice of opposition
[10]HG Metal opposes Mrs Navaratnam’s application on the following grounds:3
(a)No prejudice arises from the fact that the bankruptcy notice did not include a copy of the substantive order. The order was clearly described in the bankruptcy notice and a copy of the order was attached to Mrs Navaratnam’s appeal of the judgment, indicating that she is well aware of it.
(b)The bankruptcy notice is founded on a judgment of the High Court of which enforcement has not been stayed. Mrs Navaratnam has taken no steps to
3 Notice of opposition to application to set aside bankruptcy notice dated 19 August 2022 at [1]– [3].
oppose the judgment. In any event, the objection is without merit as HG Metal did file the required material.
(c)The Court has already rejected this argument when it was raised by Mr Navaratnam previously. Further, it was specifically dismissed by the High Court after a defended hearing.4 The Court of Appeal has stated that it “[could not] see the basis on which Mr Navaratnam might impugn the [High Court’s] finding”.5
Affidavit of Catherine Rong Fu dated 18 August 2022
[11] Ms Rong Fu, a graduate at Bell Gully (solicitors for HG Metal), had made an affidavit in support of the notice of opposition. Ms Rong Fu states that the application has arisen out of a debt owed by Mr and Mrs Navaratnam pursuant to a guarantee signed by them in favour of HG Metal related to the debts of their company. This dispute was resolved by an arbitral award in Singapore by Mr Coriell, dated 23 April 2020. HG Metal were successful in the arbitration. Ms Rong Fu outlines that as Mr and Mrs Navaratnam now reside in New Zealand, HG Metal commenced proceedings in the High Court to have the award recognised as a judgment in New Zealand against both Mr and Mrs Navaratnam. Ms Rong Fu states that the resulting litigation has been complex and has spanned at least nine High Court and Court of Appeal files.
[12] The following is a summary of the events as outlined by Ms Rong Fu in her affidavit.
(a)Substantive proceedings against Mrs Navaratnam began on 4 September 2020 when HG Metal served her with an originating application to enter award as judgment (dated 4 August 2020) and the affidavit of Benjamin James Dominikovich in support of the originating application seeking entry as judgment of arbitral award (affirmed 12 June 2020). This was sent to Mrs Navaratnam’s solicitor at the time by way of email and was accepted on behalf of Mrs Navaratnam. A further affidavit of service of Mr Dominikovich was filed dated
4 HG Metal Manufacturing Ltd v Navaratnam [2021] NZHC 1920.
5 Navaratnam v HG Metal Manufacturing Ltd [2021] NZCA 701 at [22].
18 September 2020, with annexed copies of the email exchanges with Mrs Navaratnam’s solicitor.
(b)The affidavit of Mr Dominikovich that was filed alongside the application included a duly certified copy of both the arbitration agreement and the award.
(c)Mrs Navaratnam did not file any documents in opposition to HG Metal’s application. The proceeding was called on 22 October 2020 and there was no appearance for Mrs Navaratnam. Judgment was entered and sealed. Execution of the order has not been stayed.
(d)On 9 November 2020 a copy of the order was emailed to Mr Navaratnam to request confirmation that he could provide a copy to Mrs Navaratnam or inform Bell Gully (the law firm for HG Metal) how to serve the order on Mrs Navaratnam. No response to this email was provided but it is presumed the order was passed on as a copy was attached to Mrs Navaratnam’s notice of appeal.
(e)At the time the affidavit was affirmed, the appeal of the judgment had not been heard. There are various minutes relating to the appeal that are outlined in and attached to Ms Rong Fu’s affidavit.
[13] Ms Rong Fu further outlined key steps in Mr Navaratnam’s litigation as the issues raised in this application are similar to Mr Navaratnam’s litigation. The following is a summary of her deposal regarding Mr Navaratnam’s litigation.
(a)The High Court entered judgment against Mr Navaratnam on 28 July 2021. Many of Mr Navaratnam’s arguments in relation to the validity of the arbitration agreement and the award raised in the application were dismissed by the Court. Mr Navaratnam made three recall applications which were all dismissed.
(b)Mr Navaratnam applied for leave from the Court of Appeal to appeal the decision out of time. Leave was declined. Effectively, Ms Rong Fu deposes that Mr Navaratnam has lost every opportunity to review or appeal the High Court decision. Mr Navaratnam applied for judicial review of various decisions of the Court which was struck out by the Judge. Mr and Mrs Navaratnam have sought leave to appeal that decision, which is opposed by HG Metal. The hearing took place in July 2021 and at the time of Ms Rong Fu’s affidavit a decision had not been made.
(c)Mr Navaratnam has been served a bankruptcy notice. He applied to set it aside and was unsuccessful. HG Metal has applied for orders for Mr Navaratnam’s bankruptcy which have been opposed by Mr Navaratnam. The application was argued on 11 May 2022 and at the time of Ms Rong Fu’s affidavit the High Court decision had not been issued.
[14] In respect of a copy of the order, Ms Rong Fu states that it is correct that the bankruptcy notice did not attach a copy of the order. However, the bankruptcy notice specifically referred to the order which Mrs Navaratnam is familiar with. As noted above, Mr Navaratnam was emailed a copy of the letter and was asked to provide a copy to Mrs Navaratnam. It appears that this has been done as a copy of the order was attached to her notice of appeal of the judgment. The day after the application was served, HG Metal wrote to Mrs Navaratnam to enclose a copy of the order. Mrs Navaratnam has not responded to this letter.
[15] Mrs Navaratnam states in her application to set aside the bankruptcy notice that the copy of the application for issue of a bankruptcy notice that is on the Court file did not include a copy of the order. Ms Rong Fu, however, states that the copy of the bankruptcy notice that was filed in Court did “attach” a copy of the order as required by rule 24.8(3). She states, however, that the attached copy of the order did not make it onto the High Court Registry’s file. She states that there is no question that the copy that HG Metal served on Mrs Navaratnam did not include a copy of the order.
HG Metal’s submissions
[16] Mr Fitzgerald filed submissions dated 7 February 2023 in opposition to the application to set aside the bankruptcy notice.
[17]Mr Fitzgerald summarises the procedural background as follows:
(a)The bankruptcy notice was based on an arbitral award obtained in Singapore (the award) against Mrs Navaratnam and Mr Navaratnam and entered as a judgment in New Zealand on the application of HG Metal.
(b)Mrs Navaratnam did not appear or file any opposition to HG Metal’s application and judgment was entered by default.
(c)Mrs Navaratnam appealed the decision to enter judgment but then often failed to attend court conferences (even when specifically directed), pay security for costs or take other steps as directed.
(d)This led the Court of Appeal on its own motion to request submissions on whether the appeal should be struck out. The Court decided not to do so and set a timetable for submissions for the appeal, made a costs order and warned that it would not accept further delay.
(e)Mrs Navaratnam refused to comply with the costs orders and refused to file submissions on appeal.
(f)The Court of Appeal struck out Mrs Navaratnam’s appeal on 8 September 2022.6
[18] Mr Fitzgerald submits that the argument HG Metal did not file the material required by art 35(2), sch 1 of the Arbitration Act has been Mr and Mrs Navaratnam’s primary concern through the litigation. He submits they have advanced this argument
6 Navaratnam v HG Metal Manufacturing Ltd [2022] NZCA 425.
numerous times, in the substantive litigation against Mr Navaratnam, in his application to extend time to file an appeal, in Mrs Navaratnam’s appeal, in the judicial review application of the Court’s prior dismissal of it, when Mr Navaratnam applied to set aside the bankruptcy notice issued to him, and again in numerous conferences and interlocutory and recall applications. Mr Fitzgerald submits the argument has not had any success in any of these attempts and is simply wrong as HG Metal did file the material required by art 35(2).
[19] Mr Fitzgerald submits that HG Metal has complied with art 35(2). He sets out at [8], [9] and [10] of his submissions details of compliance with art 35(2). He submits that there is no argument that it was not complied with and if there were, the dispute has been finally determined by previous judgments.
[20] Mr Fitzgerald then deals with the other grounds in Mrs Navaratnam’s application as follows:
(a)Paragraph 2(a) of the application concerned the fact that the bankruptcy notice did not annex a certified copy of the underlying judgment. He submits the High Court dismissed this defect, pursuant to s 418 of the Insolvency Act, at the first call of the application on 1 September 2022. Accordingly, this issue has already been resolved.
(b)Paragraph 2(d) of the application alleges that HG Metal required, but did not receive, permission to enforce the award. He submits this argument is misconceived as the award has been entered as a judgment and HG Metal does not require separate permission to enforce it. He submits the High Court has already ruled on this issue when adjudicating Mr Navaratnam bankrupt.7
(c)Paragraph 2(h) of the application alleges the award was not underpinned by a valid arbitration agreement. He submits it is not clear what the basis of this argument is as the arbitration agreement is in the
7 HG Metal Manufacturing Ltd v Navaratnam [2022] NZHC 2183 at [34].
guarantee that was annexed to Mr Dominikovich’s affidavit and the argument has no substance.
[21] Finally, Mr Fitzgerald submits that the issues raised in the application are meritless, and in the event have already been finally determined by the Court.
Mrs Navaratnam’s submissions
[22] Mrs Navaratnam did not file any written submissions. As noted at [9], Mr and Mrs Navaratnam filed the joint memorandum dated 10 February 2023.
[23] Mrs Navaratnam made brief oral submissions at the hearing. She raised the following points:
(a)the application was not served on her personally,
(b)she does not acknowledge signing any guarantees in relation to the original debt;
(c)the bankruptcy notice did not attach the sealed order;
(d)art 35(2) of the Arbitration Act has not been complied with.
[24] These submissions are iterative of submissions that have been filed in the memorandum referred to above.
Legal principles
[25] The Court may set aside a bankruptcy notice if satisfied the debtor has complied with the notice’s requirements, or if the debtor has satisfied the Court that he or she has a cross claim against the creditor.8
8 Insolvency Act 2006, s 17(1)(d)(ii).
[26] A cross claim is a counterclaim, set-off or cross demand that is equal to, or greater than, the amount the debtor has been ordered to pay, and that the debtor could not use as a defence in the action or proceeding in which the judgment was obtained.9
[27] The expression “could not use as a defence” usually connotes legal, rather than practical or factual impediments — a failure to take advantage of an opportunity will not suffice.10 There must be “cogent circumstances” for a judgment debtor to be able to establish a factual inability to set up the cross claim as a defence.11
[28] If a debtor does satisfy the Court that he or she has a cross claim, there is no relevant act of bankruptcy. In that case, the Court has no residual discretion to allow the bankruptcy notice to stand. But the cross claim must be “genuine” and “triable”, requiring the debtor to demonstrate that the claim has true substance and that he or she genuinely proposes to pursue it.12
[29]In establishing the cross claim is genuine and triable, a debtor must show:13
(a)there is a prima facie case that has a fair chance of success;14
(b)there is a degree of mutuality between the subject of the cross-claim and the underlying judgment debt;15
(c)the counterclaim, set-off, or cross-demand is sounding in money:16
(d)the cross-claim is against the creditor, not a third party;17 and
(e)the debtor [genuinely] proposes to pursue the cross-claim.18
9 Section 17(7). See also Clark v UDC Finance Ltd [1985] 2 NZLR 636 (HC) at 637. The latter requirement reflects the principles of res judicata and issue estoppel: Flow Control Ltd v Il Forno Ltd [2021] NZHC 1159.
10 Flow Control Ltd v Il Forno Ltd, above n 9, at [21], citing Clark v UDC Finance Ltd, above n 9, at 640 and Hardy v Booth [1992] 1 NZLR 356 (HC) at 13.
11 Aluminium Plus Wellington Ltd v Shaw [2017] NZHC 2607 at [53].
12 Sharma v ANZ Banking Group (NZ) Ltd (1992) 6 PRNZ 386 (CA) at 389; and Wikeley v Jacomb
[2014] NZCA 146 at [37]–[40].
13 Mao v Kim [2021] NZHC 3253 at [33].
14 Clark v UDC Finance Ltd, above n 9, at 647.
15 Re Elvin, ex parte Sandilands [1990] 3 NZLR 124 (HC).
16 Robertson v ASB Bank Ltd [2014] NZCA 597 at [24].
17 Re Faloon, ex parte Bank of New Zealand HC Wellington B175/97, 12 August 1997.
18 Sharma v ANZ Banking Group (NZ) Ltd, above n 12, at 389.
Analysis
[30] The issue to be determined in this judgment is whether there is any merit in the application by Mrs Navaratnam to set aside the bankruptcy notice.
[31] The main ground advanced by Mrs Navaratnam to set aside the bankruptcy notice is non-compliance by HG Metal with art 35(2), sch 1 of the Arbitration Act. In this respect, I accept Mr Fitzgerald’s submission that art 35(2) has been complied with and, in any event, as submitted by Mr Fitzgerald, the matter has already been finally determined by the Court and cannot be re-advanced as an argument again. The judgment of the Court of Appeal was released on 14 February 2023 dismissing Mrs Navaratnam’s application to recall the Court’s judgment striking out her appeal. The Court of Appeal held that this argument was not tenable.19 The Court of Appeal also held that this issue had already been determined by a specific finding of Justice Katz in her judgment.20
[32] In my view, this argument cannot be advanced again by Mrs Navaratnam as a basis on which to set aside the bankruptcy notice.
[33] Turning to the other grounds of Mrs Navaratnam’s application, I deal with these as follows:
(a)The bankruptcy notice did not annex a certified copy of the underlying judgment. It is common ground that the bankruptcy notice did not attach a copy of the sealed order. Mr Fitzgerald submitted the failure to do so was due to inadvertence. Mr Fitzgerald submits that the bankruptcy notice did specifically refer to the sealed order and Mrs Navaratnam is familiar with it. Accordingly, there is no possible prejudice or confusion arising from the fact the bankruptcy notice did not attach a copy of the letter. Mr Fitzgerald also submitted that the High Court dismissed this defect pursuant to s 418 of the Insolvency Act on the first call of the application and accordingly it has already
19 Navaratnam v HG Metal Manufacturing Ltd [2022] NZCA 425 at [15].
20 HG Metal Manufacturing Ltd v Navaratnam [2021] NZHC 1920 at [47].
been resolved. I accept this argument and do not find that this is a valid ground on which to set aside the bankruptcy notice.
(b)Mrs Navaratnam alleges she has not been personally served with the bankruptcy notice. In response to this, Mr Fitzgerald referred the Court to the affidavit of service dated 28 July 2022 and submits that no evidence that the bankruptcy notice was not served has been presented to the Court. I accept that the bankruptcy notice was validly served in accordance with the affidavit of service and again this is not a ground on which to set aside the bankruptcy notice.
Result
[34] As a result of the conclusions I have reached at [32] and [33], I am of the view that Mrs Navaratnam’s application to set aside the bankruptcy notice should be dismissed.
Orders
[35]I make the following orders:
(a)Mrs Navaratnam’s application to set aside the bankruptcy notice is dismissed.
(b)As to costs, consistent with the approach of the Court in the proceeding against Mr Navaratnam and based on the indemnity contained in the guarantee signed by Mr and Mrs Navaratnam, indemnity costs are appropriate. Counsel for HG Metal is to submit a memorandum as to the indemnity costs, which will then be fixed by the Court.
Associate Judge Taylor
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