Luo v Shiu - [2022] NZHC 3302

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2022-404-000384

[2022] NZHC 3302

UNDER the Insolvency Act 2006

BETWEEN

MANFEI COMPANY LIMITED

Judgment Creditor

AND

XIAOLING (ANNIE) SHIU

Judgment Debtor

CIV-2022-404-000385

BETWEEN

ZHENLIN (ROBERT) LUO
Judgment Creditor

AND

XIAOLING (ANNIE) SHIU

Judgment Debtor

Hearing: On the papers

Appearances:

S Judd / Z Chen for the Judgment Creditors D Bigio KC for the Judgment Debtor

Judgment:

9 December 2022

COSTS JUDGMENT OF ASSOCIATE JUDGE GARDINER

This judgment was delivered by me on 9 December 2022 at 11.30 a.m. pursuant to Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar Date.......................................

Solicitors:

Pidgeon Law, Auckland Righteous Law, Auckland D Bigio KC, Auckland
S R G Judd, Auckland

MANFEI COMPANY LTD v SHIU [2022] NZHC 3302 [9 December 2022]

Introduction

[1] The debtor, Ms Shiu, applied to set aside two bankruptcy notices seeking an amount she owed to the creditors under a judgment of Whata J.1 Alternatively, she sought a stay of execution of the judgment pending appeal. The creditors opposed both applications. On 18 July 2022, Tahana J granted the stay on the condition that Ms Shiu provide appropriate security within 15 working days.2

[2] Ms Shiu eventually paid the security and Tahana J confirmed the stay on 12 September 2022. Counsel then filed a joint memorandum seeking consent orders setting aside the bankruptcy notices (effectively withdrawing them) and for costs to be determined on the papers. I made those orders by way of minute on 21 September 2022.

[3] Ms Shiu seeks costs on the basis that she succeeded in having the bankruptcy notices set aside. She points to the fact that a date had been set down for the hearing of her stay application in early April 2022, and yet the creditors still chose to serve bankruptcy notices on her some three weeks later. She says that, having taken the risk that the stay would be granted and the bankruptcy notices inevitably set aside, the creditors should pay her costs.

[4] The creditors submit that Ms Shiu should pay their costs. They say that they were successful in obtaining security for the judgment debt that was not provided or offered when they issued the bankruptcy notices. They state that the costs incurred could have been avoided had Ms Shiu provided security within a reasonable timeframe instead of seeking an extension of time and then a variation of conditions from Tahana J, which resulted in adjournments of the bankruptcy applications.

Legal principles

[5] The general principle under the High Court Rules 2016 is that costs follow the event, so the party who fails pays the costs of the party who succeeds.3 This principle

1      Luo v Shiu [2021] NZHC 3564.
2      Luo v Shiu [2022] NZHC 1707.
3      High Court Rules 2016, r 14.1(a).

applies to the outcome of an interlocutory application as well as whole proceedings (with some exceptions). In this case, there has been no determination by the…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

Continue reading Luo v Shiu

Details

AGLC: Luo v Shiu [2022] NZHC 3302
Case: [2022] NZHC 3302
Decision Date: 9 December 2022

CaseChat Overview and Summary

In Luo v Shiu, the debtor, Xiaoling (Annie) Shiu, applied to set aside two bankruptcy notices and to stay execution of a judgment debt owed to the creditors under a judgment of Whata J. The creditors, Zhenlin (Robert) Luo and Manfei Company Limited, opposed the applications. On 18 July 2022, Tahana J granted the stay on the condition that Ms Shiu provide appropriate security within 15 working days. Ms Shiu eventually paid the security, and Tahana J confirmed the stay on 12 September 2022. Counsel then filed a joint memorandum seeking consent orders setting aside the bankruptcy notices and for costs to be determined on the papers. I made those orders by way of minute on 21 September 2022. Ms Shiu seeks costs on the basis that she succeeded in having the bankruptcy notices set aside. The creditors submit that Ms Shiu should pay their costs. They say that they were successful in obtaining security for the judgment debt that was not provided or offered when they issued the bankruptcy notices. The creditors argue that the costs incurred could have been avoided had Ms Shiu provided security within a reasonable timeframe instead of seeking an extension of time and then a variation of conditions from Tahana J, which resulted in adjournments of the bankruptcy applications.

The general principle under the High Court Rules 2016 is that costs follow the event, so the party who fails pays the costs of the party who succeeds. This principle applies to the outcome of an interlocutory application as well as whole proceedings (with some exceptions). The Court will consider the reasonableness of the stance of both parties up to the point of discontinuance and may also consider the reason for discontinuing. When an application to set aside a bankruptcy notice or statutory demand is withdrawn, rather than relying solely on the presumption in r 15.23, the Court enquires into the surrounding circumstances and what happens afterwards to ascertain which side has substantially succeeded and which side has substantially failed.

In this case, the creditors argue that they should pay Ms Shiu’s costs as they were successful in receiving security for the judgment. However, it is difficult to see how that can qualify as success in the proceeding when obtaining security is not the purpose of a bankruptcy notice. More significantly, the risk the creditors took in issuing the notices counts against them. Following her filing of a notice of appeal in the Court of Appeal in February 2022, Ms Shiu applied to stay Whata J’s judgment on 11 March 2022. The creditors filed their notice of opposition on 16 March 2022. The Court set down the application for hearing on 20 June 2022. Notwithstanding this, the creditors issued bankruptcy notices, which were served on Ms Shiu on 26 April 2022. It should have been obvious to the creditors that the fate of the bankruptcy notices was tied to the outcome of Ms Shiu’s stay application. Instead of waiting for that determination, the creditors issued the notices knowing that the stay might be granted. This exerted pressure on Ms Shiu, forcing her to file a setting aside application and incur further costs as a result. On the other hand, until the stay was ordered, the creditors were legally entitled to issue the notices. Whata J entered judgment against Ms Shiu on 21 December 2021, ordering her to pay a total of $2,671,183.73 to the creditors. Four months passed and Ms Shiu had not paid the amount ordered. The creditors chose to pursue the debt as they were able to do under the law. In my view, the matter is finely balanced. There are reasons why it would be appropriate for the creditors to pay Ms Shiu’s costs as well as reasons going the other way. Ultimately, weighing up the competing arguments, I consider in my discretion that the parties should be responsible for their own costs in this case.

Costs are to lie where they fall.

Orders