Keung v Official Assignee
[2021] NZCA 92
•26 March 2021 at 10.30 am
| IN THE COURT OF APPEAL OF NEW ZEALAND I TE KŌTI PĪRA O AOTEAROA |
| CA99/2020 [2021] NZCA 92 |
| BETWEEN | SENG BOU (PAUL) KEUNG |
| AND | OFFICIAL ASSIGNEE |
| Hearing: | 29 September 2020 |
Court: | Brown, Venning and Katz JJ |
Counsel: | M J Tingey for Appellant |
Judgment: | 26 March 2021 at 10.30 am |
JUDGMENT OF THE COURT
A The appeal is dismissed.
B There is no order as to costs.
____________________________________________________________________
REASONS OF THE COURT
(Given by Katz J)
Introduction
Seng Bou (Paul) Keung appeals a decision of Associate Judge Bell, in the High Court at Auckland, declining to annul Mr Keung’s bankruptcy adjudication.
Mr Keung was adjudicated bankrupt on 20 September 2010, on the basis that he had not paid a non-party costs order against him in the sum of $66,155.
Mr Keung filed his statement of affairs with the Official Assignee on 9 November 2010. He was automatically discharged from bankruptcy on 9 November 2013. Almost five years later, in September 2018, Mr Keung applied to have his bankruptcy annulled under s 309 of the Insolvency Act 2006 (the Act). That section provides that the Court may, on the application of the Official Assignee or any person interested, annul a bankruptcy in certain circumstances. Under s 309(1)(a) the Court can do this if it considers that the bankrupt should not have been adjudicated bankrupt. An annulment on that basis operates retrospectively — it is effective from the date of adjudication.[1] Alternatively, if a bankrupt has fully paid or satisfied all of their debts, and agreed to meet the Official Assignee’s fees and costs, they can seek an annulment under s 309(1)(b). Such an annulment operates only from the date of the order of annulment.[2]
[1]Insolvency Act 2006, s 309(3)(a).
[2]Section 309(3)(b).
Although Mr Keung meets the criteria for a s 309(1)(b) annulment, he does not seek an annulment on that basis. Mr Keung wants to completely remove the “stain” of bankruptcy from his record. He believes that the only way to do this is by obtaining a retrospective annulment under s 309(1)(a).
Associate Judge Bell found that the non-party costs order was made in breach of natural justice and that Mr Keung should not therefore have been adjudged bankrupt based on that debt.[3] Those findings are not appealed. The Judge declined to annul Mr Keung’s bankruptcy, however, on the basis that Mr Keung lacked standing to attack the non-party costs order by asking the court to “look behind” the relevant judgment. The Judge further found that, even if Mr Keung had standing, it would not have been appropriate in all the circumstances for the Court to have exercised its discretion to grant an annulment.
[3]Keung v Official Assignee [2020] NZHC 32 [High Court judgment].
The key issues raised by Mr Keung’s appeal are:
(a)whether the Judge made an error of law in finding that Mr Keung lacked standing to seek an annulment of the bankruptcy adjudication on a basis that required the Court to go behind the judgment debt; and
(b)whether the Judge erred in concluding that (regardless of the issue of standing) this would not have been an appropriate case for the exercise of the Court’s discretion to grant an annulment.
We propose to consider these issues in reverse order. We do so on the basis that if the Judge was correct in his conclusion that it would not be appropriate to annul Mr Keung’s bankruptcy, regardless of any standing issues, then the issue of standing is academic. In that event, it would be more appropriate for the issue of standing to be considered and determined by this Court in a future case in which it has real practical significance.
Further background
Mr Keung had previously been (voluntarily) bankrupted in 1997. He was discharged from that bankruptcy in 2000. Mr Keung, or interests associated with him, subsequently acquired a farm near Kaikoura (the Goose Bay Ranch) that he planned to develop into a tourism business and sustainable hunting game park. In 2007, GBR Investment Ltd (a company associated with the Koulanov family) acquired an interest in the Goose Bay property. This was achieved by the property being sold to Goose Bay Ranch Holdings Ltd. GBR Trustees Ltd (a trustee company associated with the Keung family) owned the majority of the shares in that company. GBR Investment Ltd owned a significant minority interest.
Unfortunately, the relationship between Mr Keung and the Koulanov family broke down. GBR Investment Ltd successfully applied for Goose Bay Ranch Holdings Ltd to be put into liquidation.[4] Although Mr Keung was not a defendant in that proceeding, he gave evidence as a director of Goose Bay Ranch Holdings Ltd.
[4]GBR Investment Ltd v Goose Bay Ranch Holdings Ltd [2010] NZCCLR 11 (HC).
GBR Investment Ltd, as the successful plaintiff, sought costs against Goose Bay Ranch Holdings Ltd and also three non-parties — GBR Trustees Ltd, Mr Keung, and another company associated with Mr Keung. The non-parties were not served with the costs application/memorandum (although Goose Bay Ranch Holdings Ltd was). Goose Bay Ranch Holdings Ltd filed a memorandum on costs, but the non‑parties did not. Associate Judge Gendall nevertheless ordered costs against the non-parties on the basis that:[5]
…I am satisfied that Mr Keung, although a non-party, through his interests is likely to have funded the defence to the present application and it is clear he also clearly controlled and directed this defence and must have believed that he and his interests stood to benefit from the litigation… Under all the present circumstances, I take the view that it is entirely fair and proper for the costs order which is to follow in favour of the plaintiff to be made also against Mr Keung as a non-party jointly and severally…
Mr Keung disputes that he funded the defence and says that, if he had been given the chance, he would have given evidence about the source of the funding.
[5]GBR Investment Ltd v Goose Bay Ranch Holdings Ltd HC Christchurch CIV-2009-409-613, 21 April 2010 at [20].
Mr Keung appealed both the liquidation decision and the non-party costs decision. He also sought a stay of execution of the costs order. His stay applications were declined by the High Court[6] and by this Court.[7] It appears that the natural justice argument (that the non-parties had not been served with the costs memorandum) did not feature to any significant degree in the arguments advanced at the stay hearings.
[6]GBR Investment Ltd v Goose Bay Ranch Holdings Ltd HC Christchurch CIV-2009-409-613, 21 May 2010 (Minute of French J).
[7]Keung v GBR Investment Ltd [2010] NZCA 396, [2012] NZAR 17.
Mr Keung did not comply with GBR Investment Ltd’s bankruptcy notice, which was based on the non-party costs order. Although there is a dispute about whether Mr Keung was formally served with the bankruptcy application, it is of no practical consequence as the application clearly came to Mr Keung’s attention. He was represented by counsel at a call of the bankruptcy application on 2 August 2010, but Mr Keung was not represented at subsequent hearings. On 20 September 2010, Associate Judge Osborne adjudicated Mr Keung bankrupt in his absence. Mr Keung was clearly aware of that hearing, as he had corresponded with the Registry to seek an adjournment.
On 13 October 2010, the Official Assignee discontinued Mr Keung’s costs appeal. Mr Keung first contacted the Official Assignee two days later, at which time he objected to the discontinuation of his appeals, to no avail.
In November 2013, just before his discharge from bankruptcy, Mr Keung applied under s 226 of the Act to reverse the decisions of the Official Assignee to discontinue the liquidation and non-party costs appeals. Subsequently, however, in a deed dated 26 July 2016, Mr Keung agreed to discontinue those applications. In exchange, the Official Assignee agreed to take a neutral stance on any actions Mr Keung might take to restore the appeals in his capacity as a trustee or director of a third party.[8]
If Mr Keung had the necessary standing, would this be an appropriate case for the exercise of the Court’s discretion to grant an annulment under s 309(1)(a)?
[8]In the High Court, the Judge said Mr Keung did not have standing as either director or trustee to challenge the costs order at issue: see High Court judgment, above n 3, at [64]–[69]. That aspect of the decision has not been appealed.
As the Judge noted, even if one of the s 309(1) grounds are made out, the Court has a residual discretion whether to annul the adjudication. The Judge indicated that he would not have exercised that discretion in Mr Keung’s favour. He identified three factors that weighed against granting an annulment:[9]
(a)that Mr Keung was clearly insolvent when he was made bankrupt;
(b)that Mr Keung had delayed in his application for annulment; and
(c)that Mr Keung had been bankrupt before.
[9]High Court judgment, above n 3, at [72].
Mr Tingey submitted, on behalf of Mr Keung, that a properly balanced exercise of discretion would favour the annulment being granted. The Judge, he submitted, gave improper weight to factors which he considered weighed against an annulment being granted and failed to take into account other relevant factors. Further, he submitted, the decision is “plainly wrong”.
Although Mr Tingey’s written submissions tended to approach this aspect of the appeal as an appeal from the exercise of a discretion, he submitted at the appeal hearing that the Court should treat it as a general appeal, because the Judge was ultimately not required to exercise his discretion given his view that Mr Keung lacked standing. Rather, the Judge simply set out how he would have exercised his discretion if Mr Keung had had standing. Mr Tingey acknowledged, however, that little is likely to turn on the approach the Court adopts.
In our view this aspect of the appeal is appropriately treated as an appeal against the exercise of a discretion.[10] The Judge conducted a careful analysis of the factors he saw as relevant to the exercise of the Court’s discretion, and provided a reasoned decision for his view that it would not have been appropriate for the Court to exercise its discretion to grant an annulment if he were wrong on the issue of standing. We share Mr Tingey’s view, however, that little turns on the precise approach.
Mr Keung’s solvency at the time of his adjudication
[10]Kacem v Bashir [2010] NZSC 112, [2011] 2 NZLR 1 at [32] per Blanchard, Tipping and McGrath JJ. See also May v May (1982) 1 NZFLR 165 (CA) at 169170.
The first factor that the Judge identified as weighing against an annulment was that Mr Keung was insolvent at the time of his bankruptcy. The Judge made the following observations on this issue:[11]
[73] Mr Keung’s statement of assets and liabilities made in October 2010 showed that he had minimal assets and that his liabilities were large - $830,000. The claims notified to the Official Assignee were much larger, although most were not examined. While Mr Keung contested some of them, especially that made by GBR Investment Ltd, he was clearly insolvent. Even if no costs order had been made against him, he still faced a serious solvency problem. That may have arisen from the liquidation of Goose Bay Ranch Holdings Ltd, which Mr Keung sees as having caused a major loss of value, but that does not take away from the fact that he was broke. While the Koulanovs may have pursued him zealously, his bankruptcy does appear inevitable. He seems to have recognised that by not opposing the bankruptcy application. If he was going to be made bankrupt anyway, there is less reason for annulling his adjudication.
[11]High Court judgment, above n 3.
Mr Tingey submitted that the Judge erred in focussing on the fact that Mr Keung’s liabilities exceeded his assets, rather than whether he could meet his liabilities when they fell due.[12] He argued that it is speculative to assume that Mr Keung would not have been able to meet his debts and, further, that the Judge failed to take into account other assets listed in Mr Keung’s statement of position.
[12]See Holdgate v Blocassa Ltd [2007] NZCA 132 at [19].
We accept Ms Deligiannis’s submission, however, that the “other assets” listed in Mr Keung’s statement of position are speculative claims based on uncertain future events. They include, for example, a claimed indemnity from Goose Bay Ranch Holdings Ltd. That company has been in liquidation since November 2009 and remains in liquidation. Although Goose Bay Ranch Holdings Ltd may have had some fairly limited assets available to it, there is no evidence that it was in a position to provide any significant financial support to Mr Keung relative to the level of his debt.
Mr Keung also claimed a possible recovery from GBR Investments Ltd as an asset. He had apparently failed to advance such a claim at the time of his bankruptcy, however. The prospect of any such recovery was therefore speculative and remote. Little or no weight could reasonably have been given to the prospect of significant recoveries from these types of prospective claims.
Evidence supporting the inference that Mr Keung was unable to meet his debts at the time he was adjudicated bankrupt includes the following:
(a)On 21 May 2010, French J issued a teleconference minute declining Mr Keung’s application for a stay of execution of the non-party costs order pending an appeal. She records that Mr Keung’s lawyer had advised the Court that it would not be possible for Mr Keung to either make payment or provide security pending the appeal. GBR Investments Ltd accordingly opposed a stay “given Mr Keung’s obviously perilous financial position”.[13]
[13]Minute of French J, above n 6, at [7].
(b)On 16 September 2010, Mr Keung sent an email to the High Court Registry seeking an adjournment of his bankruptcy hearing, which was scheduled for 20 September 2010. He advised that he was seeking legal aid and, further, that his lawyer was “preparing a Creditors Proposal on my behalf and on behalf of the two companies”. However, “[u]ntil legal aid is accepted we are required to raise funds for each part of advice and legal work undertaken and this is slowing down the process”. Mr Keung sought time “to find ways to achieve a more robust financial solution” for his creditors and stated that his personal assets totalled only $8,500, although he had managed to get some outside support from a family business for a creditor’s proposal. Mr Keung noted that his associated trustee companies also had no assets, only an ability to sue and claim against GBR Investments Ltd.
(c)Having failed to obtain an adjournment, Mr Keung did not appear in Court on 20 September 2010 to oppose being adjudicated bankrupt. Nor did he appeal the bankruptcy adjudication.
(d)On 15 October 2010, Mr Keung stated in an email to the Official Assignee that:
… I have nothing Robert but an old car and my dive gear, I have no funds at this time personally, and recently asked a friend to send me some as I can’t even afford to come home in reality although I have a return ticket that I brought. I have been living with a family friend in England and with my friends family in Norway … Over my life I have supported a lot of people and charities now I suppose it is my turn to be looked after.
During my time in NZ I have been battling [health issues] …. my doctor has me off work and I was on the sickness benefit and she told me to get away from all the Court work until I was better, so I did just over two months ago, that is what I am doing, but then I was made bankrupt, so I have not really had a break.
…
… I am not directly or indirectly in control of assets, I am not a beneficiaries of any Trust or organization that I know of that has any assets. I am not a settler of any active or asset owning Trust. No one is holding assets for me. I am not owed any money personally from any company or Trust. I have no assets overseas or in NZ .
…
It is my sincere request that you help me find a way to make a claim in relation to the matters at hand [i.e. a claim against the Koulanov interests], I am counting on that as my only way to find any funds to address creditors and … restore my financial situation.
(e)The statement of assets, debts and liabilities dated 21 October 2010 that Mr Keung provided to the Official Assignee lists assets (excluding the “other assets” referred to at [21] above) of $4,500 (comprising furniture, personal property and a motor vehicle) and liabilities of $830,000, including significant debts owing to Westpac.
(f)Mr Keung’s statement of affairs of 9 November 2010 recorded that Mr Keung was currently on a sickness benefit, had been unemployed for two months (predating his bankruptcy) and was unlikely to gain paid employment in the next 12 months. The type of income he was receiving was noted as “Gifts/Friends/Family/Woofing”. He stated that he was paying off outstanding court fines at the rate of (only) $7.00 per week. He said that he had sought budget advice and tried to settle his debts. In response to the question “When did you become unable to pay your debts as they became due? What made you choose this date?” Mr Keung did not dispute that he was unable to pay his debts. Rather, he simply stated, “Not sure – Judgment was by Court Order in my absence”.
(g)In an email to the Official Assignee dated 20 July 2011, Mr Keung stated that:
I still hv no property or assets, other than my car and some personal belongings and still hope things will turn around in my bankruptcy for the better.
Mr Keung’s own evidence therefore paints a dire picture of his financial position at the relevant time.
Mr Tingey submitted, however, that there is clear evidence that Mr Keung would have been able to meet his debts, because during his bankruptcy (and subsequently) he did settle all his debts, including those owing pursuant to personal guarantees. This was despite the financial difficulties he faced as a result of being adjudicated bankrupt. In total Mr Keung paid over $500,000 to creditors, over $100,000 for the liquidators’ costs and $101,000 to the party who issued the bankruptcy notice.
The Official Assignee, on the other hand, realised only $665.13 in assets (a tax refund) and was notified of potential claims in excess of $5 million. Of this, $3,706,440 was a claim from GBR Investment Ltd. Mr Keung challenged this under s 238 of the Act. Eventually, by deed dated 24 May 2017, the matter was settled and GBR Investment Ltd and the Koulanov interests withdrew any claims in relation to Goose Bay Ranch Holdings Ltd and the Keung interests and agreed to not oppose any application to annul Mr Keung’s bankruptcy.
Mr Keung filed his annulment application on 16 September 2018, and an amended application on 12 April 2019.
By late 2018, Mr Keung appears to have settled all of the claims against him (including claims pursuant to personal guarantees) apart from a claim by Westpac, which was settled subsequently. A number of these claims were settled during the period of Mr Keung’s bankruptcy, with the remaining claims being settled after Mr Keung’s discharge. Although the source of the funds to settle those debts is not entirely clear, they were not settled by the Official Assignee. Nor is there any suggestion that they were otherwise settled from Mr Keung’s personal assets. Mr Tingey submitted that the appropriate inference, including from the evidence referred to at [23(b)] above, is that Mr Keung has access to family money and used this resource to settle his debts. Mr Tingey submitted that, in assessing Mr Keung’s solvency at the relevant time, the Court should take into account his ability to access funds through his family interests.
We reject that submission. At the time of Mr Keung’s bankruptcy (and subsequently) there is no evidence that his family interests had entered into any binding commitment to meet Mr Keung’s debts as they fell due. Mr Keung’s solvency must therefore be assessed with reference to his ability to meet his debts from his own resources. As set out above, even on Mr Keung’s own analysis, his assets and income were negligible, and his debts very significant. Mr Keung clearly had no realistic prospect of paying his debts (which included outstanding legal fees and credit card bills) as they fell due.
It is also of note that the negotiations that took place between Mr Keung and his creditors occurred against the backdrop of Mr Keung’s bankruptcy. Most or all of his creditors appear to have settled for significantly less than the full amount of their claims.
Mr Keung’s settlement of his debts over a period of many years, apparently using money provided by family interests, does not therefore support the conclusion that, at the time of his bankruptcy, Mr Keung was able to meet his debts as they fell due.
Taking the various matters we have outlined into account, the Judge was correct in our view to conclude that Mr Keung was insolvent at the time of his bankruptcy. This is a factor that weighs heavily against annulling his adjudication.
Delay in seeking an annulment
The second factor that the Judge said weighed against annulling Mr Keung’s bankruptcy was his significant delay in seeking an annulment. The Judge noted that Mr Keung did not file his annulment application until eight years after he had been adjudicated bankrupt. The Judge considered that after “such a long time the value of finality should not be disturbed”,[14] with reference to a number of previous cases where annulment had been refused on the grounds of delay.[15]
[14]High Court judgment, above n 3, at [76].
[15]See Re Ponsford, ex parte Ponsford [1904] 2 KB 704 (CA) where a delay of three months was held fatal. See also Re Williams (1968) 13 FLR 10 (Federal Court of Bankruptcy), and domestically Creser v Creser [2014] NZHC 3267 at [50] where a two-year and a ten-year delay respectively weighed against the Judge exercising their discretion to annul a bankruptcy.
Mr Tingey accepted that delay may be a factor weighing against an annulment but submitted that the Judge had placed undue weight on delay in this case. In particular, he submitted, the importance of finality is significantly diminished here because no third parties would be practically affected by an annulment. Mr Tingey further submitted that the delay must be seen in the context that Mr Keung was facing significant stress-related health issues at the time of his adjudication. Subsequently, his ability to attend to legal matters was affected by earthquakes in Christchurch (2010) and Kaikoura (2016) and changes in his legal team. Mr Keung also hoped that other legal proceedings he was involved in may have assisted in a later annulment application.
We do not find any of these arguments persuasive. As we have noted above, Mr Keung compromised the various claims against him (apparently using family resources) against the backdrop of his bankruptcy. As a result, he was in a very strong negotiating position, because the likely alternative was that his creditors would receive nothing. The submission that no third parties would be practically affected by an annulment, and that his bankruptcy should therefore be annulled retrospectively (rather than prospectively under s 309(1)(b)), must be assessed in this broader context. Having obtained a significant advantage from his bankruptcy in terms of his dealings with third party creditors, Mr Keung now seeks to annul it retrospectively, on the basis that third parties will not be affected.
As for the various explanations provided for the delay, they are far from compelling and certainly cannot justify an eight-year delay in seeking an annulment. As the Judge noted, for the purposes of considering the delay factor, time will not run against a bankrupt until he becomes aware of the circumstances that allow him to apply for an annulment.[16] In Mr Keung’s case time started running from the day he was adjudicated bankrupt.
[16]High Court judgment, above n 3, at [75].
The principle of finality is accorded significant weight in the insolvency context, due to the need to promote commercial certainty.[17] The principle is reflected in various provisions of the Act. For example, a bankruptcy adjudication is final, unless set aside on appeal.[18] Similarly, an adjudication of bankruptcy cannot be recalled or rescinded under s 414 or through the Court’s inherent jurisdiction. Rather, the only course is to annul the bankruptcy under s 309.[19]
[17]See Creser v Creser, above n 15, at [45]–[48]; and Re Guest, ex parte BNZ Finance Ltd [1991] 1 NZLR 250 (HC) at 255.
[18]Insolvency Act, s 61.
[19]See Re Byron (a debtor), ex parte Commissioner of Inland Revenue [1964] NZLR 508 (SC); and Commissioner of Inland Revenue v Faloon [2016] NZHC 990.
In our view the Judge was correct to conclude that Mr Keung’s delay of eight years in filing the annulment application weighed strongly against granting it.
Mr Keung’s previous bankruptcy
The third factor that the Judge suggested weighed against an annulment was that this was Mr Keung’s second bankruptcy:[20]
[77] Mr Keung has been bankrupt once before – from 15 September 1997 to 15 September 2000. A retrospective annulment may be justified to clear the stain of bankruptcy, if there was no basis for the adjudication, but that argument is harder if the debtor has been bankrupt before and was insolvent when he was adjudicated a second time.
In essence, the Judge found that the effect of an annulment on Mr Keung’s reputation would be less as it was already “stained” by the first bankruptcy (a voluntary bankruptcy).
[20]High Court judgment, above n 3.
Mr Tingey submitted that the Judge erred in failing to take into account that, as a second bankruptcy, the record of it would never be removed from the Insolvency Register[21] and so would continue to have a significant adverse effect on Mr Keung and his business dealings.
[21]Insolvency Act, s 449A.
Mr Tingey also referred to the following passage of Mr Keung’s evidence:
Each day I am forced to deal with the stigma and oppressive internet advertising under my name search which stem from these injustices. The prejudice this causes are of a major concern to me and those I associate with. I am only seeking to find the best solutions to ease the burden and bring an end to the undermining of many positive achievements I am a part of.
Mr Keung further explained in cross-examination that he is still involved in property and investment affairs and “would like to achieve an exoneration”. He expressed concern that the series of proceedings relating to his association with the Goose Bay investment and the Koulanov family interests had lasted over 10 years and “has constantly brought into question my character”.
Ms Deligiannis submitted that, given Mr Keung’s prior bankruptcy, a retrospective annulment would not clear the stain of bankruptcy from his name. Even if his second bankruptcy was annulled and the record of the bankruptcy removed from the Insolvency Register, the fact that he has been adjudicated bankrupt will always be available information on the internet for anyone who is interested enough to search for it. The stain of being adjudicated bankrupt will remain.
Although the annulment of Mr Keung’s second bankruptcy would likely reduce the “stain” against his name to some extent, some stain will inevitably remain. Any media or other reports of both Mr Keung’s bankruptcies will likely remain on the internet (regardless of the removal of such information from the Insolvency Register). Permanently removing information from the internet is likely to be challenging, if not impossible. Further, it is apparent from Mr Keung’s evidence that his concerns about adverse publicity extend far beyond the fact of his second bankruptcy. An annulment will have little or no effect on the availability on the internet of media coverage of the protracted litigation between Mr Keung (and his associated interests) and the Koulanov interests which Mr Keung says has “constantly” brought into question his character.
Taking these matters into account, in our view the Judge was correct to find that Mr Keung’s previous bankruptcy weighs against an annulment, although this factor does not carry as much weight as the other two factors the Judge identified.
Is the absence of moral wrongdoing a relevant factor?
Mr Tingey referred to two other factors (not considered by the Judge) that, he submitted, weighed in favour of an annulment.
First, Mr Tingey submitted that the Judge ought to have considered the absence of moral wrongdoing by Mr Keung as a factor balancing in favour of annulment, as Woodhouse J did in Re Wallace.[22] In particular, Mr Tingey submitted that, following his second bankruptcy, Mr Keung did his utmost to ensure all rightful creditors were paid and has settled all his debts.
[22]Re Wallace (a bankrupt) [1964] NZLR 863 (SC).
There is no discussion in Wallace of the significance of the absence of “moral misconduct” in that case. That fact was only mentioned in passing and does not appear to have formed a material (or possibly any) part of the Court’s reasoning. The annulment in Wallace was sought on the basis that the debts of the bankrupt had been fully paid or satisfied (the ground now set out in s 309(1)(b)). The Court was satisfied that Mr Wallace had fully paid all of his debts, apart from a proof of debt lodged by his family which had been rejected by the Official Assignee. An annulment was granted accordingly.
This case differs from Wallace in that Mr Keung has not fully paid his creditors but has instead reached a compromise with each of them. As we have noted previously, the quantum of those compromises was no doubt influenced by Mr Keung’s bankruptcy.
In any event, we do not find it helpful to view this issue through a “moral wrongdoing” lens. The Act clearly recognises that the fact that a bankrupt has fully paid or satisfied his debts may be relevant to an application for an annulment. Indeed, that is the basis for an annulment under s 309(1)(b). We also accept that this factor may be relevant to the exercise of the discretion under s 309(1)(a), and that it is a factor weighing in favour of an annulment in this case. As noted, however, this factor carries less weight in circumstances where the debts have been compromised rather than fully paid.
Is annulment the appropriate remedy for the breaches of Mr Keung’s rights?
Mr Tingey’s final argument was that the Judge ought to have considered the role that annulment would play in remedying the breaches of Mr Keung’s rights, namely:
(a)the breach of his right to natural justice by not being served with the non-party costs’ application; and
(b)the breach of his right of access to the court by being adjudicated bankrupt when he ought not to have been.
Mr Tingey submitted that the only realistically available remedy for the breach of these rights that is sufficient and would grant any relief to Mr Keung would be an annulment of his bankruptcy.
Mr Wilkinson, who addressed this particular argument on behalf of the Official Assignee, acknowledged that the Judge did not explicitly consider the infringement of s 27 of the New Zealand Bill of Rights Act 1990, but submitted that there was no need for him to do so. Rather, that part of the judgment was premised on the established breach of Mr Keung’s natural justice rights.
Mr Wilkinson further submitted that, in any event, the Bill of Rights Act does not necessarily lead to an annulment because there were other effective remedies available to Mr Keung. This case is therefore distinguishable from both Baigent’s Case[23] and Attorney-General v Taylor[24] in that Mr Keung can receive a remedy under the Act if he follows the appropriate process. Specifically, Mr Keung could have:
(a)opposed the bankruptcy and sought an adjournment until the appeal against the non-party costs judgment had been determined;
(b)appealed the bankruptcy order and sought an order under s 416 of the Act suspending the adjudication pending the appeal to this Court;
(c)applied at any time for an order for discharge from bankruptcy under s 294(1) of the Act; and/or
(d)filed judicial review proceedings against the decision of the Official Assignee.[25]
[23]Simpson v Attorney-General [1994] 3 NZLR 667 (CA) [Baigent’s Case] at 676 per Cooke P.
[24]These were cases when the Court resorted to unprecedented remedies for Bill of Rights Act breaches as no other effective remedy was available: see Attorney-General v Taylor [2018] NZSC 104, [2019] 1 NZLR 213 at [41] per Glazebrook and Ellen France JJ and [104] per Elias CJ.
[25]Mawhinney v Environment Court [2015] NZHC 1663 at [14]–[21].
In November 2013 (three years out of time and just prior to his discharge), Mr Keung did apply under s 226 of the Act to reverse the decisions of the Official Assignee to discontinue the appeals against the liquidation and costs decisions. Subsequently, however, in a deed dated 26 July 2016, Mr Keung agreed to discontinue those applications.
We accept Mr Wilkinson’s submission that the Act provided other remedies for the breaches of Mr Keung’s rights. Mr Keung elected not to pursue those remedies in a timely fashion, or at all. The remedy he did pursue (albeit belatedly) was discontinued.
The Court, of course, retains a residual discretion to grant Mr Keung the particular remedy he seeks (an annulment), but the fact that there were other avenues of redress available, that Mr Keung elected not to pursue, is relevant.
Conclusion on the exercise of the Court’s discretion
Mr Keung was clearly insolvent at the time of his adjudication. This is a factor that weighs heavily against an annulment, as is the eight-year delay in seeking an annulment. Further, given Mr Keung’s previous bankruptcy, it will not be possible to entirely remove the “stain” of bankruptcy from his name, although we accept that that stain is significantly compounded by the second bankruptcy.
Mr Keung has now satisfied all of his debts — a factor that weighs in favour of an annulment. Indeed, Mr Keung would have strong grounds for an annulment under s 309(1)(b) on this basis. Mr Keung, however, wants a retrospective annulment under s 309(1)(a). As we have explained, the fact that Mr Keung has satisfied all of his debts carries somewhat less weight when seeking a retrospective annulment, as Mr Keung has had the benefit of being able to compromise his debts in circumstances where his creditors had minimal negotiating power due to his bankruptcy.
Finally, while an annulment is an available remedy for the breach of Mr Keung’s rights, there are other remedies available under the Act. It is significant that Mr Keung chose not to avail himself of most of these, and discontinued the one remedy he did pursue (the s 226 application).
Taking all of these matters into account, it is our view that the Judge did not err in concluding that if Mr Keung had the necessary standing this would not be an appropriate case for the exercise of the Court’s discretion to annul his bankruptcy under s 309(1)(a).
Given our conclusion on this issue, it is not necessary for us to determine whether the Judge was correct to find that Mr Keung lacked standing to seek an annulment on a basis that required the Court to go behind the petitioning creditor’s judgment debt. We accordingly do not propose to address that issue.
Result
The appeal is dismissed.
As neither party sought costs, there is no order as to costs.
Solicitors:
Ronald W. Angland & Son, Leeston for Appellant
Crown Law Office, Wellington for First Respondent
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