MacKenzie v MacKenzie
[2025] NZHC 2781
•24 September 2025
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2025-404-374
[2025] NZHC 2781
BETWEEN BRIAN DOUGLAS MACKENZIE
Applicant/Judgment Debtor
AND
HEATHER JOY MACKENZIE
Respondent/Judgment Creditor
Hearing: 28 July 2025 Appearances:
M Taylor for the Applicant/Judgment Debtor
D G Hayes for the Respondent/Judgment Creditor
Judgment:
24 September 2025
JUDGMENT OF ASSOCIATE JUDGE C B TAYLOR
[Application to set aside a Bankruptcy Notice]
This judgment was delivered by me on 24 September 2025 at 3:00pm
Pursuant to Rule 11.5 of the High Court Rules 2016
……………………………………… Registrar/Deputy Registrar
Solicitors:
Blackwells Lawyers (Simon Blackwell), Newmarket, Auckland, for the Applicant/Judgment Debtor Hunwick Law, Hamilton, for the Respondent/Judgment Creditor
Counsel:
Matt Taylor, Meadowbank, Auckland, for the Applicant/Judgment Debtor David G Hayes, Taupo, for the Respondent/Judgment Creditor
MACKENZIE v MACKENZIE [2025] NZHC 2781 [24 September 2025]
Application
[1] This is an application by the judgment debtor, Brian Douglas MacKenzie (Brian), to set aside the bankruptcy notice dated 3 January 2025 issued by the judgment creditor, Heather Joyce MacKenzie (Heather).1
Background
[2] This application is one of a number which have been before this Court as a result of the bankruptcy of Brian’s cousin, Mr Malcolm MacKenzie (Malcolm). Heather is Malcolm’s former wife.
[3] Following the death of Malcolm’s father, Mr Donald MacKenzie, Malcolm was involved in litigation with his siblings in relation to his entitlement as a beneficiary to assets held by a trust called the Pencarrow Trust (the Trust Litigation) and his father’s residual estate (the Estate Litigation) in which he contested his entitlement under his father’s will.
[4] In approximately mid-2016, the Trust Litigation was settled out of Court. Malcolm was paid around $935,000 under the agreed settlement arrangements.
[5] The Estate Litigation proceeded to a hearing and Malcolm was unsuccessful. Consequently, in around August 2018, the Court awarded costs in favour of his siblings of approximately $224,000.
[6] Brian provided substantial support and assistance to Malcolm over a number of years during the Trust Litigation and the Estate Litigation. Brian maintained throughout that it was agreed between him and Malcolm that he was to be compensated for the work and services provided.
1 Due to the commonality of surnames in this case, the parties are referred to by their first names. No disrespect is intended.
[7] Malcolm made two payments to Brian, each of $150,000, one in August 2016, and one in May 2017. These payments were made from the settlement proceeds Malcolm received in the Trust Litigation settlement. Brian however accepts that these payments, totalling $300,000, were loans to him from Malcolm.
[8] In approximately September 2018, shortly after Malcolm’s unsuccessful Estate Litigation, Malcolm asked Brian to assign these loans to Heather. Accordingly, a document dated 29 September 2016 was prepared and signed by the parties to record that the two sums, advanced by Malcolm to Brian, were to be owed to Heather (the Loan Assignment).
[9]On 30 November 2018 Malcolm went into voluntary bankruptcy.
[10] In 2018 and 2019, Brian made various payments to Heather totalling $110,000. These payments reduced the amounts payable under the Loan Assignment to
$190,000.
[11] In around August 2020, Heather commenced proceedings against Brian to recover the balance of the loan of $190,000.
[12] In July 2021 the Official Assignee commenced an application seeking orders determining whether Brian had a valid claim in Malcolm’s bankruptcy and if so, the amount of that claim. In response, Malcolm filed an application seeking a cancellation or a reduction of Brian’s claim against his bankruptcy estate`.
[13] It was agreed by the parties that the applications ought to be treated as appeals under s 226 of the Insolvency Act 2006. Associate Judge Andrew (as he then was) heard the applications and, by judgment dated 13 April 20222 upheld Brian’s entitlement to payment from Malcolm for the work and services performed. His Honour:
(a)declined Malcolm’s application seeking to cancel the admitted claim by the Official Assignee;
2 Official Assignee v MacKenzie [2022] NZHC 781.
(b)allowed the appeal against the decision of the Official Assignee not to admit Brian’s claim in Malcolm’s bankruptcy;
(c)found that Brian had a valid claim in the bankruptcy of Malcolm; and
(d)found that, on a quantum meruit basis, the value of Brian’s claim is
$225,000 plus GST.
[14] In August 2024, Heather’s claim against Brian for payment of $190,000 under the Loan Assignment proceeded to a hearing. Brewer J held:3
[27] I infer from the evidence that Mr Malcolm Mackenzie’s relationship with his siblings had become bitter. Following his success in the case to which I have just referred he brought a claim in respect of their father’s estate. His siblings opposed. Mr Malcolm Mackenzie lost and, on the defendant’s evidence, was ordered to pay his siblings’ court costs of over $200,000. He was made bankrupt for not paying those costs.
[28] I infer also that Mr Malcolm Mackenzie knew that the $300,000 debt owed him by the defendant, upon his imminent bankruptcy, would be payable to the Official Assignee. His assignment of the debt to the plaintiff was an attempt to avoid this.
[29]My reasons for this conclusion, on the balance of probabilities, are:
(a)Mr Malcolm Mackenzie had, two years previously, paid the plaintiff, ex gratia, $200,000. There was no other reason why he should, shortly before his bankruptcy, give her the benefit of the $300,000 debt.
(b)In a letter to the Official Assignee’s office dated 22 May 2019 he said, falsely:
Hyperion Trust was paid $150,000 on 25 August 2016 and another $150,000 on 8 May 2017. This was money due to Heather as a result of the distribution of the family trust. It was paid to Hyperion instead of Heather directly as she agreed to making a loan to Brian.
(c)The agreement was drafted by the defendant at the behest of Mr Malcolm Mackenzie. It falsely attributes the debt as being a loan from the plaintiff.
[30] I find also, on the balance of probabilities, that the defendant drafted the agreement knowing that it was intended to divert the debt from being made available to the Official Assignee:
3 MacKenzie v MacKenzie [2024] NZHC 2377 at [27] to [32].
(a)The defendant’s evidence is that he and Mr Malcolm Mackenzie were very close. He assisted Mr Malcolm Mackenzie with both his cases against the siblings. I infer he knew the adverse outcome of the second case and that costs had been awarded against Mr Malcolm Mackenzie.
(b)The defendant drafted the agreement, he and his wife signed it, and he presented it to the plaintiff to sign.
(c)The defendant knew it was false.
(d)The defendant has worked in the finance industry for over 20 years and for over 50 years has been a qualified Chartered Accountant. I infer he knew very well what the agreement was intended to achieve.
[31] I do not conclude it is more likely than not that the plaintiff was also aware of the purpose of the agreement. I suspect she did, given the wording of the agreement and the payment of $50,000 to Mr Parmenter, but she is a lay person and there is a history of Mr Malcolm Mackenzie giving her money.
[32] I find that the agreement is not void for illegality. Mr Malcolm Mackenzie was not bankrupt when he assigned his debt to the plaintiff and caused the defendant to draw up the agreement. His intent, with the knowing assistance of the defendant, was to keep the benefit of the debt from the Official Assignee if he became bankrupt. All that does is make the agreement voidable at the suit of the Official Assignee. Until and unless it is made void it is enforceable by the plaintiff against the defendant.
[15] Brewer J gave judgment in favour of Heather for $190,000 plus interest, and it is on this judgment that the bankruptcy notice Brian seeks to set aside, or stay, is based.
[16] On 28 November 2024, the Official Assignee made applications under ss 206 and 207 of the Insolvency Act 2006 for orders cancelling irregular transactions (the OA Applications). The OA Applications include seeking orders cancelling the Loan Assignment.
[17] It was agreed between Brian and the Official Assignee that Brian would take an assignment of the Official Assignee’s rights to sue pursuant to s 221 of the Insolvency Act 2006.
[18] In relation to the OA Applications, on 26 June 2025, directions were made by Associate Judge Brittain as follows:
(a)An order pursuant to s 221 of the Insolvency Act 2006 (IA) approving an assignment by the Official Assignee (OA) to Brian MacKenzie of the OA’s rights to sue in respect of:
(i)The application by the OA dated 28 November 2024 under s 206 of the IA to cancel irregular transactions; and
(ii)The application by the OA dated 28 November 2024 under s 207 of the IA to recover property from the respondent, Heather MacKenzie.
…
(b)That the assignment be approved on the terms in the Deed of Assignment dated 8 April 2025, with the additional conditions set out below:
(i)Any settlement between Brian MacKenzie and Heather MacKenzie in relation to the OA applications will be subject to the consent of the OA. Such consent shall not be unreasonably withheld.
(ii)Leave is reserved to the parties to seek further directions in relation to any settlement of the OA applications, if necessary.
[19] A hearing of the OA Applications is scheduled in the Tauranga High Court on 1 October 2025.
Legal principles
[20] The Court may set aside a bankruptcy notice if satisfied the debtor has complied with the notice's requirements, or if the debtor has satisfied the Court that he or she has a cross claim against the creditor.4
[21] A cross claim is a counterclaim, set-off or cross demand that is equal to, or greater than, the amount the debtor has been ordered to pay, and that the debtor could not use as a defence in the action or proceeding in which the judgment was obtained.5
[22] The expression "could not use as a defence" usually connotes legal, rather than practical or factual impediments—a failure to take advantage of an opportunity will
4 Insolvency Act 2006, s l7(l)(d)(ii).
5 Section 17(7). See also Clark UDC Finance Ltd [1985] 2 NZLR 636 (HC) at 637. The latter requirement reflects the principles of res judicata and issue estoppel: Flow Control Ltd v Il Forno Ltd [2021] NZHC 1159.
not suffice.6 There must be "cogent circumstances" for a judgment debtor to be able to establish a factual inability to set up the cross claim as a defence.7
[23] If a debtor does satisfy the Court that they have a cross claim, there is no relevant act of bankruptcy. In that case, the Court has no residual discretion to allow the bankruptcy notice to stand. But the cross claim must be "genuine" and "triable", requiring the debtor to demonstrate that the claim has true substance and that they genuinely propose to pursue it.8
[24]In establishing the cross claim is genuine and triable, a debtor must show:9
(a)there is a prima facie case that has a fair chance of success;10
(b)there is a degree of mutuality between the subject of the cross-claim and the underlying judgment debt;11
(c)the counterclaim, set-off, or cross-demand is sounding in money;12
(d)the cross-claim is against the creditor, not a third party; and13
(e)the debtor [genuinely] proposes to pursue the cross-claim.14
Submissions for Brian
[25] Mr Taylor, for Brian, submits that that Brian has a cross claim or set off that could not be raised in the proceedings in which Heather’s judgment was obtained. He submits that Brian is owed $225,000 plus GST by Malcolm’s bankruptcy estate which
6 Flow Control Ltd v Il Forno Ltd, above n 4, at [21], citing Clark v UDC Finance Ltd, above n 4, at 630 and Hardy v Booth [1992] 1 NZLR 356 (HC) at 13.
7 Aluminium Plus Wellington Ltd v Shaw [2017] NZHC 2607 at [53].
8 Sharma v ANZ Banking Group (NZ) Ltd (1992) 6 PRNZ 386 (CA) at 389; and Wikeley v Jacomb
[2014] NZCA 146 at [37]-[40].
9 Mao v Kim [2021] NZHC 3253 at [33].
10 Clark v UDC Finance Ltd, above n 4.
11 Re Elvin, ex parte Sandilands [1990] 3 NZLR 124 (HC).
12 Robertson v ASB Bank Ltd [2014] NZCA 597 at [24].
13 Re Falloon, ex parte Bank of New Zealand HC Wellington Bl 75/97, 12 August 1997.
14 Sharma v ANZ Banking Group (NZ) Ltd, above n 7.
cannot be disputed given the judgment of Associate Judge Andrew is not under challenge.
[26] Mr Taylor refers to Clark v UDC Finance Limited in which he acknowledges it was held that a mere failure to take advantage of opposing a claim cannot be said to be inability to raise that claim15 but he nonetheless submits:
(a)this is not a case of failure of Brian to take advantage of opposing the claim, but rather that the set-off could not be raised in the claim by Heather, because Malcolm was the person who loaned the funds to Brian; and
(b)the OA Applications were commenced only after judgment was issued in favour of Heather.
[27] He also refers to Krukziener v Hanover Finance Ltd (previously known as Elders Finance Ltd)16 and Re Wise17 as authorities for the proposition that the Court has inherent jurisdiction to set aside a bankruptcy notice to prevent an abuse of process and the present case is one where the Court should use its inherent jurisdiction to intervene to prevent an injustice.
[28] Mr Taylor submits that if the OA Applications are successful (as they relate to the Loan Assignment), then the judgment on which the bankruptcy notice is based will no longer be enforceable by Heather. Referring to Brewer J’s judgment, he submits this Court has held that the Loan Agreement was intended to divert the funds from being made available to the Official Assignee in Malcolm’s bankruptcy and in doing so, the Court commented that the Loan Agreement “is voidable at the suit of the Official Assignee”,18 and the “suit” referred to by his Honour is presently afoot in the form of the OA Applications.
[29]Mr Taylor submits:
15 Clark v UDC Finance Limited [1985] 2 NZLR 636.
16 Andrew Mark Krukziener v Hanover Finance Ltd (Previously known as Elders Finance Ltd) CIV 2007-404-002896, 16 November 2007, 12 August 2008.
17 Re Wise, ex parte Benecke HC Auckland, B227-228/95, 21 June 1995.
18 Mackenzie v Mackenzie [2024] NZHC 2377.
(a)if Brian (who is the applicant in the OA Applications as the assignee of the Official Assignee’s rights to sue) is successful in obtaining orders cancelling the Loan Assignment, then the balance of the loan will be repayable to Malcolm, not Heather;
(b)the Court has determined that Brian has a set-off (of $225,000 plus GST) in Malcolm’s bankruptcy, and as the set-off exceeds the balance of the loan ($190,000), Brian would be entitled to rely on his set-off;
(c)in light of these circumstances, there is an issue as to the safety of the underlying judgment in favour of Heather.
[30] Mr Taylor submits it would be an abuse to allow bankruptcy proceedings against Brian to proceed when there is good reason to doubt the judgment on which the proceedings are based, and accordingly the bankruptcy notice ought to be set aside or stayed until the OA Applications have been determined by this Court.
[31] Mr Taylor notes that he put it to counsel for Heather that these proceedings ought to be adjourned until after the OA Applications are determined, but this approach was declined.
Submissions for Heather
[32] Mr Hayes, for Heather, submits simply that she has a judgment of the Court and relies upon the principle of finality of judgment.
[33] Mr Hayes’ argument is that if the Loan Agreement was cancelled as against the Official Assignee, there is no substantive set-off in favour of Brian and any setoff is speculative or indirect at best, because the OA Applications require payment of any funds recovered to the Official Assignee before any distribution. He submits if there are any issues with set-off, these would be more appropriately dealt with at the time Heather applies for an adjudication order against Brian.
[34] Mr Hayes submits that Brian’s submissions are based upon law that applies only where there is an injustice or abuse of process, and that the submissions are
attempting to stretch the law to get around the principle of finality of judgment, and therefore the Court’s inherent jurisdiction is of no assistance in this case.
[35]Mr Hayes submits that:
(a)Section 17(1)(d)(ii) of the Insolvency Act 2006 requires evidence of a set-off, but any set-off claimed in the present case is indirect, as the Official Assignee will receive and distribute any funds obtained through the OA Applications.
(b)The amount of the setoff, even indirectly, will be well short of a full setoff.
(c)The set-off would not appear to apply if the Loan Assignment were set aside as the judgment in favour of Heather still exists and the real issue is whether the judgment can be set aside. Even if the judgment could be challenged, presently there are no facts capable of supporting an appeal.
[36] Mr Hayes takes issue with Brian’s reliance on the Krukziener decision to support use of the Court’s inherent jurisdiction. He submits this would require the Court to find grounds to “doubt” the judgment, which must be a high bar or special circumstances. He submits this is not possible on the facts, and notes the judgment was not appealed.
[37] Mr Hayes also takes issue with Brian’s reference to Re Wise, and submits that while it is authority that the Court can intervene to prevent injustice, there can be no injustice in this case given that Brian is seeking to avoid a judgment which has been properly obtained. Mr Hayes adds that the possibility of the Official Assignee applying to cancel the Loan Assignment was known during the hearing before Brewer J and is not a new argument. Therefore the proposition that the judgment becomes unenforceable when the Loan Assignment is cancelled is plainly wrong, as Heather has a sealed judgment and the principles of finality of judgment must apply.
[38] While Mr Hayes accepts that there is provision in bankruptcy to consider set- off, the amount asserted by Brian as liable to be set-off is insufficient. His submission is that Brian has kept $190,000 held by him against the $225,000 debt, so Malcolm’s bankrupt estate owes him just $68,750 and therefore, even if the OA Applications succeeded in reversing the Loan Assignment, there still would be no direct set-off as Brian will not benefit directly because the assignment of the OA Application requires payment to the Official Assignee of amounts recovered, who then distributes them to creditors.
[39] Mr Hayes submits the Insolvency Act provides that the Loan Assignment would be “cancelled as against the person named in the notice” and that no reference is made to cancelling the Loan Assignment as against the other party to the transaction. He submits accordingly that an order that the Loan Assignment be cancelled against Heather simply means that the Official Assignee can treat the Loan Assignment as cancelled for his purposes, but would not allow Brian to assert the judgment in favour of Heather is cancelled.
[40] Mr Hayes submits that Brewer J’s judgment does not allow the parties to “come back” and have the decision reversed if the Official Assignee cancels the Loan Assignment”, and that judgment simply stated that the claim relied upon the Loan Assignment which in other circumstances could have been cancelled.
[41] In light of Brewer J’s factual findings, Mr Hayes’ submission is that Brian was partly guilty of attempting to defeat the Official Assignee in his role of preparing the Loan Assignment and therefore does not have clean hands in bringing this discretionary application, a factor the Court should take into account.
[42] In relation to the OA Applications, Mr Hayes submits the following is the position:
(a)in the normal course of things, the Official Assignee would be taking the action to cancel the Loan Assignment, but in this case Brian is now “fronting” that proceeding;
(b)as part of the assignment, the Official Assignee is to receive the proceeds and then distribute the funds pro rata;
(c)theoretically, should the OA Applications succeed in cancelling the Loan Assignment transaction as against Heather, the amount involved would be about $110,000, being the amount she has received from Brian, with the remaining amount of $190,000 being still owed by Brian;
(d)according to the OA assignment agreement dated 8 April 2025 between the Official Assignee and Brian, the $110,000 would be paid to the Official Assignee for distribution after the Official Assignee’s costs are deducted, and therefore there is nothing left to set off;
(e)that sum would be divided, after any costs of the Official Assignee, between creditors in the bankruptcy estate (being Brian owed $68,750 and the estate of Malcolm Mackenzie’s father owed the costs award of about $225,000) so in the end Brian would only receive a distribution of approximately $15,000–$25,000 which does not offset the judgment debt.
[43] Finally, Mr Hayes submits that because Brian has applied to stay enforcement of the judgment as a more appropriate application in the circumstances, it follows that this application was unnecessary.
Result
[44] I am of the view that the bankruptcy notice issued by Heather against Brian should be stayed until the outcome of the OA Applications is known. The reasons for my view are:
(a)It is reasonably arguable that the judgment in favour of Heather is “unsafe” to the extent that if the Loan Assignment is cancelled, then the remaining amount outstanding under the loan to Brian will be payable
to the Official Assignee in Malcolm’s bankruptcy estate. Accordingly, Heather will have no entitlement to be paid the remaining $190,000 and therefore it is reasonably arguable that the judgment of Brewer J must be open to challenge.
(b)Andrew J’s judgment established Brian has a valid claim in Malcom’s bankruptcy for $225,000 plus GST, and that judgment is not subject to challenge. Consequently, in my view there is a reasonable argument that if the OA Applications succeed in having the Loan Assignment cancelled, then when the Official Assignee seeks to recover the outstanding balance of the loan as representative of Malcolm’s bankruptcy estate from Brian, Brian can assert a corresponding set-off to negate his obligation to make payment of the outstanding balance. I do not accept the issues raised by Mr Hayes that the set-off to Brian is indirect and speculative. It may be true if the Loan Assignment is set aside and the $110,000 previously paid to Heather is recovered by the Official Assignee, that will be distributed among Malcolm’s creditors. This does not prevent Brian asserting a set-off for the fees owed to him by Malcolm’s bankruptcy estate when the Official Assignee seeks to make a claim for the balance of the loan of $190,000.
[45] In the light of the above, and on the authority of the Krukziener decision, there is an inherent risk that if the bankruptcy notice is not stayed until the outcome of the OA Applications is known, the bankruptcy proceedings could proceed against Brian on the basis of Heather’s judgment which is, as noted above, unsafe. Therefore the Court’s inherent jurisdiction must arise to prevent that potential injustice.
Orders
[46]I make the following orders:
(a)The bankruptcy notice is adjourned until after the determination of the Official Assignee Applications. Following determination of the
Official Assignee Applications, either party may bring the proceeding back to Court;
(b)as Brian is the successful party, costs should follow the event. Counsel are directed to endeavour to agree costs and, failing agreement being reached within a period of 20 working days from the date of this judgment, counsel for Brian will file a memorandum as to costs (not to exceed five pages) within 5 working days after the expiry of the 20 working day period, and counsel for Heather will file a memorandum (not to exceed five pages) in response within 5 working days of receipt of counsel for Brian’s memorandum. A decision as to costs will then be made on the papers.
…………………………………
Associate Judge C B Taylor
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