Loan Investment Trustees v Ding

[2023] NZHC 3288

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2023-404-000462

[2023] NZHC 3288

BETWEEN

LOAN INVESTMENT TRUSTEES LIMITED
Judgment Creditor

AND

ZHAOHAI DING

Judgment Debtor

Hearing:	20 November 2023
Appearances:	J J K Spring / E Powell for the Judgment Creditor Judgment Debtor in Person
Judgment:	20 November 2023

JUDGMENT OF ASSOCIATE JUDGE GARDINER

This judgment was delivered by me on 20 November 2023 pursuant to Rule 11.3 of the High Court Rules.

Registrar/Deputy Registrar

Date.......................................

Solicitors:

MinterEllisonRuddWatts, Auckland

LOAN INVESTMENT TRUSTEES LTD v DING [2023] NZHC 3288 [20 November 2023]

Introduction

[1]                 Zhaohai Ding applies to set aside a bankruptcy notice issued by this Court on 23 March 2023 for $3,277,383.97 he owes on a judgment Loan Investment Trustees Limited (LITL) obtained against him on an unopposed summary judgment application on 14 March 2023 (the Judgment). LITL opposes the application.

[2]                 The judgment sum concerns Mr Ding’s debt to LITL as guarantor of funds advanced by LITL to Annecy Holding Limited (in liquidation) and secured by a mortgage granted by that entity over the property at 389 Dominion Road, Mt Eden, Auckland (the Property).

[3]                 After the bankruptcy notice was issued, LITL, as mortgagee and in the exercise of its power of sale as mortgagee, accepted an unconditional offer to purchase the Property for $3,050,000, which settled on 27 June 2023.

[4]                 Completion of the sale has left a shortfall for which Mr Ding remains liable under the Judgment. The amount of the judgment sum which remains owing is

$391,730.11, including costs and interest under the Interest on Money Claims Act 2016.

[5]Execution of the Judgment has not been halted by the Court.

[6]Mr Ding was served with the Bankruptcy Notice on 26 April 2023.

[7]                 Mr Ding filed this application on 9 May 2023 together with a supporting affidavit  sworn  on  10  May  2023.  Mr  Ding  filed  further  affidavits  sworn  on  14 June and 16 August 2023. On 17 August 2023, at a call  in  the bankruptcy list, Mr Ding’s (then) counsel requested an opportunity for Mr Ding to file further evidence, which was granted. Mr Ding did not file any further evidence or submissions, as directed at the call.

[8]                 At a Duty Judge List Mention on 9 November 2023, Mr Ding advised that he was now representing himself in this matter. His then counsel, Mr R Wang, was given leave to withdraw. The Court granted Mr Ding until 5.00 pm on 16 November 2023

to file written submissions. On 16 November 2023 Mr Ding filed a fourth affidavit. He did not file any written submissions but made oral submissions today.

The law

[9]                 Section 13 of the Insolvency Act 2006 (the Act) provides that a creditor may apply for a debtor to be adjudicated bankrupt if, among other things, the debtor has committed an act of bankruptcy within the period of three months before the filing of the application.

1. Section 17 of the Act provides that a debtor commits an act of bankruptcy if:

(a)a creditor has obtained a final judgment or a final order against the debtor for any amount; and

(b)execution of the judgment or order has not been halted by a court; and

(c)the debtor has been served with the bankruptcy notice; and

(d)the debtor has not, within 10 working days after the date of service of that notice (if served in New Zealand):

(i)complied with the requirements of the notice; or

(ii)satisfied the Court that he or she has a cross-claim against the creditor.

[11]              Rule 24.10 of the High Court Rules 2016 extends the time for compliance with a bankruptcy notice until an application to set aside the bankruptcy notice has been determined, where a valid application has been made within the 10 working day limit.1

[12]              To have a bankruptcy notice set aside, a debtor must satisfy the Court that they have a genuine, triable cross-claim (a counterclaim, set-off or cross-demand) that is equal to or greater than the judgment debt or amount the debtor has been ordered to

1      High Court Rules 2016 at r 24.10 and sch 1(B2).

pay, and that could not have been used as a defence in the action in which the relevant judgment was given.2

[13]              In Robertson v ASB Bank Ltd the Court of Appeal confirmed the following approach:3

(a)the onus is on the debtor to show that they have a genuine triable cross- claim;

(b)the debtor must show a genuine triable claim in terms of both liability and quantum;

(c)not only the existence of a cross-claim must be established, but also that it is equal to or greater than the judgment debt, and could not have been used as a defence in the proceeding of which the judgment was entered;

(d)the summary nature of the procedure is wholly unsuitable for the determination of disputed questions of fact; and

(e)the Court need not accept uncritically, evidence that is inherently lacking in credibility, for example where it is inconsistent with contemporary documents, or inherently improbable.

Discussion

[14]              Mr Ding filed his application to set aside the bankruptcy notice before the Property was sold by LITL on 27 June 2023. His grounds for setting aside the bankruptcy notice were that by the date of the hearing of an application for his adjudication he would be able to pay any shortfall owing under the Judgment; and therefore, it would be just and equitable for the bankruptcy notice to be set aside. In his affidavit in support sworn on 10 May 2023, he describes a development he is involved with in Henderson and his ability to cancel agreements and obtain a refund of deposits he has paid if insufficient progress is made towards titles being issued.

2      Insolvency Act 2006, s 17(7); and Clark v UDC Finance Ltd [1985] 2 NZLR 636 (HC) at 637.

3      Robertson v ASB Bank Ltd [2014] NZCA 597 at [22] and [32].

[15]              In his second affidavit sworn on 14 June 2023, Mr Ding deposes that he has commenced selling four properties at Henderson and anticipates being able to pay the shortfall on settlement of those sales two to three months later when code compliance certificates issue. Alternatively, by cancelling some of the agreements and obtaining a refund of the deposits he has paid.

[16]              In his third affidavit sworn on 16 August 2023, Mr Ding deposes that he expects to complete development of five of the Henderson properties by the end of the year, that the total profit from the Henderson properties will be over $1 million, and that he has received an unconditional offer for one property.

[17]              In his fourth affidavit sworn on 16 November 2023, Mr Ding asks the Court to adjourn the application for two months to give him time to sell the Henderson properties or obtain a refund of deposits for that development, or for his family trust to obtain a refund of part of a deposit it paid for a property in Parnell.

[18]              In submissions, Mr Ding confirmed that he asks for the bankruptcy notice to be set aside to give him time to sell the Henderson properties and/or to obtain a refund of deposits he has paid for those properties and/or to claim a refund of the deposit his family trust has paid for the Parnell property.

[19]I refuse Mr Ding’s application to set aside the bankruptcy notice.

[20]              As outlined, the Court will set aside a bankruptcy notice if satisfied that the debtor has a genuine, triable cross-claim that is equal to or greater than the judgment debt or amount the debtor has been ordered to pay, that could not have been used as a defence in the action in which the relevant judgment was given.

[21]              Mr Ding does not claim to have a cross-claim against LITL. Rather, he indicates that he intends to pay LITL the amount of the judgment sum owing after the mortgagee sale. He wants the bankruptcy notice to be set aside to give him time to secure funds to pay LITL. That is not a legitimate reason under the Act for a bankruptcy notice to be set aside.

[22]              If Mr Ding does not comply with the bankruptcy notice by 5:00 pm today, he will have committed an act of bankruptcy. LITL will be entitled to apply to the Court for an order adjudicating him bankrupt. Mr Ding will have the opportunity to oppose that application. The onus will be on him to persuade the Court that an order for his adjudication should not be made. The Court has a discretion to refuse adjudication for the reasons set out in s 37 of the Act. These include that the debtor can pay his or her debts or it is just and equitable that the Court does not make an order of adjudication. Mr Ding will have the chance to persuade the Court not to make an order adjudicating him bankrupt on those grounds.

Result

[23]I  order  that  Mr  Ding’s  application  to  set  aside  the  bankruptcy  notice

is dismissed.

[24]              As the unsuccessful party, Mr Ding will pay LITL’s costs and reasonable disbursements. LITL seeks solicitor / client costs. LITL should file its submissions on costs of not more than three pages within 15 working days. Mr Ding may file a response of not more than three pages within 10 working days.

Associate Judge Gardiner