LEISHA MAUD CONNOLLY Judgment Creditor AND SENG BOU (PAUL) KEUNG Judgment Debtor

[2024] NZHC 2868

IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY

I TE KŌTI MATUA O AOTEAROA ŌTAUTAHI ROHE

CIV-2024-409-510

[2024] NZHC 2868

IN THE MATTER

of the Insolvency Act 2006

AND

IN THE MATTER

of the bankruptcy of SENG BOU (PAUL) KEUNG

BETWEEN

LEISHA MAUD CONNOLLY

Judgment Creditor

AND

SENG BOU (PAUL) KEUNG

Judgment Debtor

Hearing:	On the papers
Counsel:	W J Palmer for Judgment Creditor
Judgment:	3 October 2024

JUDGMENT OF ASSOCIATE JUDGE PAULSEN

This judgment was delivered by me on 3 October 2024 at 4.15 pm pursuant to Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar Date:

CONNOLLY v KEUNG [2024] NZHC 2868 [3 October 2024]

[1]                 Ms Connolly, the judgment creditor, has filed a without notice interlocutory application seeking:

(a)leave to serve a bankruptcy notice (the bankruptcy notice) upon the judgment debtor (Mr Keung) outside of New Zealand; and

(b)orders dispensing with personal service and authorising substituted service of the bankruptcy notice and any future application for adjudication should Mr Keung fail to comply with the bankruptcy notice (adjudication application), and any other documents in relation to either the bankruptcy notice or the adjudication application that are required to be personally served on Mr Keung.

Background

[2]                 Ms Connolly has been engaged in litigation with Mr Keung in the District Court, High Court and Court of Appeal since May 2021. During that time Mr Keung has at times been represented by counsel and at other times has represented himself.

[3]                 In the course of the litigation Ms Connolly has obtained costs orders against Mr Keung which he has failed to pay. The details are:

(a)in respect of proceeding CIV 2022-409-301 (High Court proceeding):

(i)an order as to costs and disbursements in respect to an appeal against entry of summary judgment in the District Court, sealed on 18 October 2023;

(ii)an order as to costs and disbursements in respect to an interlocutory application for extension of time to appeal to the Court of Appeal, sealed on 1 December 2023; and

(b)in respect of proceeding CA 770/2023 (Court of Appeal proceeding), costs and disbursements ordered in a judgment dismissing an application for leave to appeal, sealed on 6 September 2024.

[4]                 Mr Keung is aware of the costs orders made against him. He has failed to pay any of them.

[5]                 Ms Connolly has applied for the issue of a bankruptcy notice against Mr Keung in respect to the costs orders. It is understood that Mr Keung is currently in Australia receiving medical treatment. His exact whereabouts are unknown, but the bankruptcy notice will be brought to his attention by means other than personal service.

Without notice application

[6]                 I am satisfied it is appropriate for Ms Connolly to make this application on a without notice basis under r 7.23(2)(a)(i) and (v) of the High Court Rules 2016 (the Rules). Requiring Ms Connolly to proceed on notice would defeat the purpose of the application and cause undue delay or prejudice to Ms Connolly in circumstances where the very reason for the application being made is that personal service on Mr Keung cannot be effected.

Application for leave to serve overseas — legal principles

[7]                 I accept counsel’s submission that Ms Connolly must obtain leave to serve the bankruptcy notice overseas. A bankruptcy notice must be served on a debtor in New Zealand unless the Court gives permission for service outside New Zealand.1  Under r 24.9 of the Rules, a bankruptcy notice must be served in accordance with pt 6 of the Rules. As a bankruptcy notice is neither a civil proceeding nor an originating document r 6.30 applies. Under r 6.30, a bankruptcy notice may be served on a judgment debtor overseas with leave of the Court.2

[8]                 Rule 6.30 does not specify the basis for such leave to be given. On applications like these the High Court has tended to reference the criteria under r 6.28(5) which are applicable to adjudication applications.3 Recently in Smartpay Ltd v Kumar, Associate Judge Gardiner put the matter this way:4

1      Insolvency Act 2006, s 17(3).

2      Westpac New Zealand Ltd, ex parte Boulton [2014] NZHC 693, (2014) 22 PRNZ 183 at [12] and [35].

3      Westpac New Zealand Ltd, ex parte Boulton, above n 2, at [14].

4      Smartpay Ltd v Kumar [2024] NZHC 2088.

[36]      The Court tends to approach applications for leave to serve bankruptcy notices overseas under r 6.30 by applying the test in r 6.28(5), on the basis that it is sensible to “look ahead” to any future bankruptcy application that might be brought by the creditor, relying on non-compliance with the bankruptcy notice. Rule 6.28(5) of the HCR provides:

(5)The court may grant an application for leave if the applicant establishes that —

(a)the claim has a real and substantial connection with New Zealand; and

(b)there is a serious issue to be tried on the merits; and

(c)New Zealand is the appropriate forum for the trial; and

(d)any other relevant circumstances support an assumption of jurisdiction.

[37]      Additionally, the Court considers whether it would be appropriate for any bankruptcy of the debtor to be administered in New Zealand.

(footnotes omitted)

[9]                 Counsel submits that the Court’s reasoning for relying on r 6.28(5) appears to be that any future application for adjudication orders will be an originating document for which leave under r 6.28(5) is required, so it promotes consistency in the law to consider the same factors for bankruptcy notices. For this reason, when granting leave to serve a bankruptcy notice outside of New Zealand, the Court will generally grant leave in respect to both the bankruptcy notice as well as any future application for adjudication orders that may be  necessary.  This  was  the  approach  Associate Judge Bell considered appropriate in Westpac New Zealand Ltd, ex parte Boulton, where he said:5

[14] On applications for leave to serve a bankruptcy notice out of New Zealand I generally apply the test under r 6.28(5) of the High Court Rules, but with a modification. Because a bankruptcy notice is not a civil proceeding, I look ahead to any future bankruptcy application by the creditor relying on non-compliance with the bankruptcy notice. I consider whether leave should be granted under r 6.28(5) for that bankruptcy application. I also consider whether it is appropriate for any bankruptcy of the debtor to be administered in New Zealand. If so satisfied, I generally give leave for the bankruptcy notice and the bankruptcy application at the same time.

5      Westpac New Zealand Ltd, ex parte Boulton, above n 2.

[10]             Associate Judge Bell also drew attention to the requirements of s 17(4)(b) of the Insolvency Act as follows:

[15] When leave is granted to serve a bankruptcy notice out of  New Zealand, the court must fix time to comply with the notice under s 17(4)(b) of the Insolvency Act. For service of a bankruptcy notice in Australia, generally 20 working days is fixed, although that may be extended if substituted service is ordered, to allow extra time for the notice to come to the actual knowledge of the debtor.

[11]             It is appropriate that Ms Connolly be granted leave to serve the bankruptcy notice along with any other documents in this proceeding overseas. The costs orders all arose from proceedings conducted in this country and are related to events that occurred in this country. The proceedings were determined according to New Zealand law. Mr Keung is ordinarily resident in this country and has substantial business interests here. It is understood he intends to return to this country. New Zealand is the appropriate forum for conducting proceedings between these parties, and in the event Mr Keung is adjudicated bankrupt his bankruptcy should be administered here.

Application for substituted service — legal principles

[12]Applications for substituted service are made under r 6.8 which provides:

6.8 Substituted service

(1)If reasonable efforts have been made to serve a document by a method permitted or required under these rules, and either the document has come to the knowledge of the person to be served or it cannot be promptly served, the court may—

(a)direct—

(i)that instead of service, specified steps be taken that are likely to bring the document to the notice of the person to be served; and

(ii)that the document be treated as served on the happening of a specified event, or on the expiry of a specified time:

(b)when steps have been taken for the purpose of bringing, or which have a tendency to bring, the document to the notice of the person on whom it is required to be served, direct that the document be treated as served on that person on a specified date:

(c)subject to any conditions that the court thinks just to impose, dispense with service of a document on a person and give to the party by whom the document is required to be served leave to proceed as if the document had been served.

(2)If a direction is given under subclause (1)(a) in respect of a document, the document must be treated as having been served at the place—

(a)at which the document is likely to have come to the notice of the person to be served; or

(b)where that person was or is likely to have been on the happening of the event or the expiry of the time specified under subclause (1)(a)(ii).

[13]             The Court of Appeal in Exportrade Corporation v Irie Blue New Zealand Ltd confirmed that substituted service under r 6.8 may be granted in relation to an overseas defendant.6

[14]             To obtain an order for substituted service it will generally be necessary for an applicant to show that:

(a)reasonable efforts have been made to serve the document;

(b)either the document cannot be promptly served, or it has come to the knowledge of the person to be served; and

(c)the proposed method of substituted service will be likely to bring the document to the notice of the person to be served.

[15]             It is appropriate to make an order for substituted service for the following reasons:

(a)Mr Keung’s whereabouts in Australia are not known. As he is not living there permanently it is difficult to see what meaningful efforts can be made to locate and serve the bankruptcy notice and other documents upon him other than by way of substituted service.

(b)It is unknown when Mr Keung may return to New Zealand.

6      Exportrade Corporation v Irie Blue New Zealand Ltd [2013] NZCA 675 at [14].

(c)Mr Keung has previously indicated in other proceedings that his preferred mode of service was by email, and he has most recently authorised a local solicitor, Mr Angland, to accept service of documents for him in proceedings before the Court of Appeal.

(d)Service in accordance with the orders sought in the application will bring the bankruptcy notice to Mr Keung’s attention.

Result

[16]I make the following orders:

(a)Leave is granted to Ms Connolly under r 6.30 of the High Court Rules 2016 to serve the bankruptcy notice issued in this proceeding  upon Mr Keung outside of New Zealand.

(b)Mr Keung is to comply with the bankruptcy notice within 20 working days for the purposes of s 17(4)(b) of the Insolvency Act 2006.

(c)Leave is granted under r 6.28 and 6.30 of the High Court Rules 2016 to serve any future creditors application and related documents in this proceeding upon Mr Keung outside of New Zealand.

(d)Personal service of the bankruptcy notice and any creditors application and related documents in this proceeding upon Mr Keung is dispensed with. Substituted service of such documents shall be deemed to have been effected two working days after the documents are sent by the methods set out in para [1(f)] of Ms Connolly’s without notice application of 17 September 2024.

(e)I reserve leave to any party to apply to vary these orders on three working days’ notice to the other party.

(f)Costs on this application are reserved.

O G Paulsen Associate Judge

Solicitors:

Buddle Findlay, Christchurch

Copy to: Mr Keung