Lee v ANZ National Bank Limited HC Ak CIV 2008-404-5932

[2008] NZHC 2108

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV2008-404-5932

IN THE MATTER OF     The Insolvency Act 2006

BETWEEN  SHI SHEN LEE Judgment Debtor

AND  ANZ NATIONAL BANK LIMITED Judgment Creditors

Hearing:         17 Deember 2008

Appearances:  R Sharma for Judgment Debtor

M G Colson for Judgment Creditor

Judgment:      19 December 2008 at 5.00 pm

RECORD OF ORAL JUDGMENT AND SUPPORTING REASONS O

ASSOCIATE JUDGE SARGISSON

[on application to set aside bankruptcy notice]

Solicitors:

Shean Singh, PO Box 10018, Dominion Road, Auckland 1146

Bell gully, PO Box 1291, Wellington 6140

SHI SHEN LEE V ANZ NATIONAL BANK LIMITED HC AK CIV2008-404-5932  19 December 2008

[1]      The  judgment  debtor  has  filed  an  application  to  set  aside  the  bankruptcy notice.   I heard argument and indicated I was satisfied the application must fail and that I would issue a record of the decision with reasons.  I now do that.

[2]      The bankruptcy notice was served on the judgment debtor on 13 September

2008.  His application to set aside the bankruptcy notice was filed within time on 29

September 2008.

[3]      It is not in dispute that the judgment creditor has obtained a final judgment execution of which has not been halted by a court and that the debtor has failed to comply with the requirements of the notice.

[4]      However, the debtor asserts that he has  a  counterclaim  equal  to  or  greater than the judgment debt the bankruptcy notice is based on, which he could not use as

a defence in the action in which the creditor obtained the judgment.

[5]      Both counsel agree that:

a)            It is trite law that it is incumbent on the debtor to show grounds why the bankruptcy notice should be set aside and in that regard the onus is on the judgment debtor to establish a sufficient evidential foundation

for the grounds relied on to demonstrate they are genuinely arguable.

b)For present purposes the debtor must therefore establish a sufficient evidential foundation to demonstrate that the counterclaim is genuinely arguable.

[6]      In his evidence the judgment debtor relies on he explains that:

a)        He  has  filed  a  counterclaim  which  was  severed  from  the  creditor’s claim in the proceeding filed under CIV2006-404-2282; and

b)The counterclaim   is   live   and   is   currently   going   through   the interlocutory steps with a view to its being allocated a date for trial.

[7]      The evidence however does not deal with the circumstances said to give rise

to the counterclaim and provides no evidential foundation for the contention that the counterclaim is one that is genuinely arguable. Indeed, the evidence does little more than assert that there is a counterclaim and that it  is  live. It provides no basis on which the Court can make any sort of assessment as to its possible merits or whether

it is genuinely arguable.

[8]      Counsel for the debtor pointed to a judgment of Associate Judge Doogue in CIV2006-404-2282 dated 2 August 2007 that dealt with the judgment creditor’s application for security of costs in respect of the counterclaim. Contrary to counsel’s submission,  the  judgment  does  not  assist  the  judgment  debtor  to  show  he  has  a meritorious counterclaim.  His Honour stated:

…That leads to the next point, which is that I am required to attempt some assessment of the merits of the defendant’s claim.  When I approach matters

in that way I have to say that I have real doubts about the defendant’s claim. First of all there is some material that suggests that such contact as there was with the bank was simply an  account-opening  exercise  conducted  with  a

junior staff member. That would seem to be an unpromising start from which to launch  allegations  of  a  comprehensive  duty  of  care.   Second  the

alleged negligent breach of duty of care does not fit well with the contractual arrangements that exist between the plaintiff and the defendant as banker and customer  –  creditor  and  debtor. If the duty of care were to  be  accepted

uncritically, it would represent a very substantial abridgement of the banks contractual rights against the defendant.   As well I believe there is force in

what Mr Colson said that a duty of care would be unlikely to be found in circumstances where it would amount to saying  that  the  bank  was  not entitled to act in the public interest to investigate what it saw as questionable

conduct on the part of the defendant. The same comments apply to the complaints about the bank placing the matter for the Serious Fraud Office.

A further issue, and one I raised in discussion with Mr Sharma, was whether any harm that was done to the defendant  can  in  fact  be  vindicated  by bringing an action of negligence when essentially parts of it as least seem to

involve allegedly defamatory comments.  My overall impression is that the

counter-claim is not a strong one. I have to accept that impression is based upon a necessarily cursory examination of the evidence and the issues. It may be that the defendants claim can be shored up by changes

to the pleadings and that it may ultimately be found to be supported by evidence.   So  my  comments  are  of  course  restricted  to  the  context  of  the present application.

[Emphasis added]

[9]      Counsel for the debtor stressed His Honour’s last comment that his impression of the merits was based upon  a  necessarily cursory examination  of  the evidence and the issues.  But as I have already noted there is no evidence before me

that provides any foundation for the submission counsel for the debtor made that the merits of the counterclaim are other than as  described  by His  Honour.   Certainly, there is nothing before me to indicate that the counterclaim is genuinely arguable.

[10]     Counsel also argued the fact that an appeal  has  been  lodged  and  that  the

Court has indicated it will allocate a date for the hearing of the counterclaim should

be  sufficient  to  satisfy  the  Court  that  there  is  indeed  a  meritorious  counterclaim. Counsel  acknowledged  however  in  answer  to  my  questions  that  the  one  does  not follow from the other.

[11]     Counsel for the  judgment  debtor  conceded  that  in  these  circumstances  the Court  cannot  make  any real  assessment  of  the  possible  merits  of  the  counterclaim and therefore cannot be satisfied for the purpose of s 17 of the Insolvency Act 2006, that the debtor has indeed got a qualifying counterclaim.

[12]     The   debtor   plainly  has   not   discharged   the   onus   on   him   to   show   the counterclaim is genuinely arguable.

[13]     Accordingly I am forced to conclude that this ground for the application to set aside the bankruptcy notice must fail.

[14]     The  only  remaining  ground  advanced  in  support  of  the  application  to  set aside  the  bankruptcy  notice  raises  abuse  of  process  based  on  the  ground  the judgment the creditor obtained was given without jurisdiction.  This ground was not expressly raised  in  the  grounds  of  the  application  itself  but  counsel  for  the  debtor argued there is sufficient evidence in the affidavits to point to an abuse of process on this basis.

[15]     The debtor’s supporting affidavits refer briefly to an attack by way of appeal

on  the  judgment  which  is  the  foundation  for  the  bankruptcy  notice  and  counsel informed  me  that  an  appeal  has  been  lodged. Counsel  pointed  to  the  debtor’s evidence that says the Court erred by allowing the creditor:

a)        To pursue recovery of debt arising under a loan agreement dated 15

December  2000  as  opposed  to  a  later  agreement  about  which  there was some doubt;

b)A  late  amendment  to  the  claim  to  enable  it  to  rely  on  the  earlier agreement.

[16]     Counsel submitted the amendment was out of time and statute barred.

[17]     I am unable to accept the submission that there is a sufficient evidential basis

to demonstrate the possible existence of a limitation issue. There is simply insufficient existence to support the contention. It is implicit in the judgment that the Judge was satisfied that the contractual right to enforce defaults under the loan agreement continued.                   I have  no  reason  to  assume  the  provisions  of  the  loan agreement  did  not  treat  the  defaults  as  continuing  defaults  and  that  the  relevant provisions of the loan agreement remain alive for recovery purposes.

[18]     Furthermore,  if  there  is  any merit  in  the  point,  the  point  is  one  for  appeal. The  fact  that  the  judgment  may  be  appealable  does  not  mean  it  was  obtained  in circumstances that give rise to an abuse of process.   The debtor was represented at the substantive hearing.  He had the opportunity to raise the point if it was a genuine issue.

[19]     I cannot therefore see any arguable basis in the evidence before me for abuse

of process.

Result

[20]     Having regard to the above matters, the following are the orders made on the application:

a)        The application to set aside the bankruptcy notice must fail and it is accordingly declined.  The bankruptcy notice therefore stands;

b)As the judgment creditor is the successful party in the application to set  aside  the  bankruptcy  notice,  it  is  entitled  to  an  order  for  costs under the statutory costs regime.   Accordingly there will be an order for costs  in  its  favour  on  a  2B basis  together  with  disbursements  as fixed by the Registrar.

[21]     It is appropriate that I record:

a)        The judgment creditor is free to proceed with a petition based on the bankruptcy notice;

b)Nothing  in  this  judgment  is  to  be  taken  as  preventing  the  judgment debtor from raising a defence to the petition.

Associate Judge Sargisson