Questnet Limited v Lane HC Auckland CIV 2008-404-7693
[2010] NZHC 512
•21 April 2010
IN THE HIGH COURT OF NEW ZEALAND
AUCKLAND REGISTRY
CIV-2008-404-7693
UNDER the Insolvency Act 2006
IN THE MATTER OF the bankruptcy of WILFRED ROYCE LANE
BETWEEN QUESTNET LIMITED Judgment Creditor
ANDWILFRED ROYCE LANE Judgment Debtor
Hearing: 19 and 21 April 2010
Counsel: Robert Hucker and Danisha Langsiu for Judgment Creditor
No appearance Judgment Debtor
Judgment: 21 April 2010 at 9:12am
[ORAL] JUDGMENT OF HUGH WILLIAMS J.
A. There will be an order adjudicating the Judgment Debtor bankrupt on
21 April 2010 at 9:12a.m.
B. The costs are to be dealt with in accordance with paragraph [37] of this judgment.
Introduction
[1] This is an application for the adjudication in bankruptcy of the Judgment
Debtor, Mr Lane.
QUESTNET LIMITED V LANE HC AK CIV-2008-404-7693 21 April 2010
[2] As will be seen, the application has some unusual features about it which need to be particularized. Thus this judgment is somewhat more extensive than most judgments seeking adjudication.
Formal Requirements
[3] The Judgment Creditor, Questnet Limited, issued a Bankruptcy Notice out of this Court against Mr Lane on 20 November 2008 for US$888,915.22 plus costs of NZ$7634.00 and required payment of that debt within 21 days with the issue of a Bankruptcy Notice being threatened in default.
[4] The Bankruptcy Notice was based on a default judgment which was issued out of the High Court of Hong Kong for US$737,600.31 plus interest registered in New Zealand by Questnet on 17 or 24 September 2007.
[5] The Bankruptcy Notice (and an Order for Directions as to Service and Service out of New Zealand dated 20 November 2008) was served on Mr Lane in Hong Kong on 10 December 2008.
[6] Payment not having been received, on 6 April 2009 Questnet issued a Bankruptcy Summons against Mr Lane, together with an application for his adjudication in bankruptcy. That, together with the required accompanying document, was served on Mr Lane on 21 May 2009.
[7] On 13 July 2009 Mr Lane filed a notice of his intention to oppose bankruptcy with a full affidavit setting out the basis for his opposition. The grounds of opposition were that he had been “held captive in Hong Kong against his will by way of a prohibition order ... for nearly three years” as a result of Questnet’s actions. Additional grounds were that the Court lacked jurisdiction to enforce judgments of courts of countries outside the Commonwealth; that Questnet had issued other bankruptcy proceedings against him “for the very same default judgment”; and that Mr Lane had appealed to the courts of appeal in New Zealand and Hong Kong against the Hong Kong default judgment and its registration in this country respectively.
[8] On 27 November 2009 Mr Lane filed an “Appearance” saying because he was “being forcibly held outside New Zealand under a Departure Prohibition Order
at Hong Kong” at the behest of Questnet, he could not appear in person in Auckland.
Further Facts
[9] In the run up to the fixture for the defended bankruptcy hearing on 19 April
2010, Mr Lane first forwarded a memorandum dated 9 April 2010. It was sent by email and the signed original arrived on the morning of the fixture. The heading sought adjournment of the 19 April 2010 fixture “so Creditor can be given time to disclose details as to recent settlement of the debt”.
[10] In it, he acknowledged he knew of the fixture and sought an adjournment because it was “only in March 2010 that new developments arose revealing that there is now apparent settlement of the debt”. This he supported by reference to an affidavit filed in Hong Kong proceedings.
[11] Further, Mr Lane said that “although it is likely that the hearing will not proceed” at the fixture, he was unable to appear because he has been “called upon and selected to represent New Zealand in professional sports on the European tour”.
He attached a letter from the President of the New Zealand Pool Association saying
it was the “official Sporting Council for New Zealand Pocket Billiards” confirming Mr Lane would be representing New Zealand on the European tour commencing in April 2010. An attached travel agent’s printout showed Mr Lane was booked to fly Hong Kong-Munich-Trieste on 12-13 April 2010, returning on 21-22 April.
[12] Mr Lane sent a submission by the same means dated 16 April 2010 suggesting that having regard to the amount of the original claim and that there was “no [sic] a far less amount to be paid ... if there is any amount at all”, the act of bankruptcy set out in the adjudication application no longer existed. He backed up those documents with emails “from the offices of Rocky Lane, world record holder undefeated” dated 16 and 18 April 2010 suggesting it would be “unsafe to enter adjudication” because any amount left was “easily affordable”. He went on to say that “believing adjournment to be a probability given that it is highly likely there is
no longer any debt outstanding, I went about my business which requires me to travel”. He suggested that, at the very least, he should have an opportunity of responding to the latest affidavit sworn by a Ms Campbell, a legal executive in the New Zealand firm acting for Questnet, which outlined the latest chapters in the litigious history between these parties.
Previous Judgments in Questnet v Rinck and Lane
[13] The foregoing is no more than a skeletal account of the dispute between these parties and the litigation between Questnet, Mr Lane and a Mr Rinck. But it is a sufficient account for present purposes because the history has been comprehensively outlined on a number of occasions by various Judges in two jurisdictions and a fuller understanding of the background can be taken from two of those judgments.
[14] The first is the judgment of the Court of Appeal of the Hong Kong Special Administrative Region given on 18 March 2010 (with reasons for the judgment being issued on 26 March 2010).
[15] The plaintiff was shown as Questnet with Messrs Rinck and Lane as first and second defendants respectively. Le Pichon JA described the subject matter of the appeal as follows:
1. This was an appeal by the second defendant (who appeared in person) from an order ... made on 17 March 2009 dismissing the second defendant’s application to set aside the decision of Master Roy Yu of 16 April 2008. Master Yu had dismissed the second defendant’s application to set aside the default judgment entered against him by Master de Souza on 4 September 2007 in the sum of US$737,600.31 together with interest and costs.
2. At the outset of the hearing, the second defendant applied for an adjournment or, alternatively, that leave be granted for the withdrawal of the appeal. After hearing from both parties, the application for an adjournment/withdrawal was refused and as the second defendant stated that he was in no position to proceed with the appeal, the court had no option but to dismiss the appeal with costs ...
[16] The judgment continued:
4. In outline, the facts are these. The underlying action concerns the misappropriation of corporate funds held on express trusts by the first defendant, a former director and employee of the plaintiff, and the knowing receipt and dishonest onward remittance of about Euro 582,806.44 by the second defendant who was the plaintiff’s former Chief Legal Officer.
5. The plaintiff obtained a Mareva injunction and a disclosure order against the first defendant on 21 July 2006. When the first defendant disclosed by his fourth affirmation filed on 17 August 2006 that the sum
of Euro 582,806.44 had been placed on trust with the second defendant, and that the second defendant had, on his instructions, paid debts owed
to his creditors, a Mareva injunction was obtained against the second
defendant the same day.
6. Chu J found the second defendant guilty of contempt of the injunction
in remitting that sum of Euro 582,806.44 to the first defendant and his wife at the first defendant’s direction when he knew that the injunction prevented him from doing so. The facts that gave rise to the finding of contempt also found the second defendant’s liability in knowing receipt/dishonest assistance.
7. ... Various attempts to set that aside in proceedings below proved unsuccessful.
...
11. By letter of 7 March 2010 to the plaintiff’s solicitors and copied to the court, the second defendant, while acknowledging that he and the first defendant had been held jointly liable to the plaintiff in respect of a debt of about US$700,000, indicated that the debt had since been (or was in the process of being) settled by the first defendant following
enforcement proceedings over the first defendant’s Swiss bank account.
The second defendant indicated his wish to “withdraw” his appeal in those circumstances. ...
...
14. As earlier mentioned, at the outset of the hearing, the second defendant applied for an adjournment or, alternatively, that leave be granted for the withdrawal of his appeal. The application was made on the basis that it would be known within a period of approximately 7 weeks whether or not the first defendant’s debt would be fully satisfied and, in that eventuality, the appeal would be rendered unnecessary.
15. Quite apart from the fact that the parties were unable to agree on the exact amount still outstanding, the plaintiff’s position was that even in the best-case scenario, the proceeds from the Swiss bank account would not be sufficient to clear both capital and interest owed by the first defendant, and thus nothing would be served by an adjournment.
16. The second defendant then was asked to outline the basis of his appeal
so that the court could form a view as to whether the appeal had any substance as no written submissions had been filed by him. It transpired that the present appeal stands or falls with his appeal in
CACV 206. The second defendant’s case is that the judge should not have relied on the judgment of Chu J in the contempt proceedings in refusing to set aside the default judgment and the findings therein made because, it was said, substantial grounds exist for appealing that judgment.
...
18. So far as CACV 206 is concerned, apart from the Notice of Appeal filed on 21 July 2008 and the Notice of Setting down the appeal of 4 August
2008, no further steps have been taken by the second defendant. That
appeal (the success of which is critical to the present appeal) has lain fallow for over 19 months.
19. Accordingly, it is plain that for over 1½ years, the second defendant has made no effort whatever to progress CACV 206 upon which the present appeal depends. In my view, against the backdrop of this chronology, the administration of justice would not be furthered by granting any further indulgence to this litigant.
The other Judges of the Court agreed.
[17] It is also instructive to record passages from the judgment of our Court of
Appeal in Lane v Questnet Limited[1]delivered on 9 December 2009, that is, before
[1] Lane v Questnet Limited [2009] NZCA 578.
the Hong Kong Court of Appeal judgment to which reference has just been made. In dismissing Mr Lane’s appeal against Asher J’s refusal to set registration of the Hong Kong judgment aside, the judgment first began:
[1] The appellant, Mr Lane, is a resident of Hong Kong. The respondent, Questnet Ltd (Questnet), runs its business in Hong Kong. Mr Lane was employed by Questnet to manage its legal work. After retiring from Questnet, Mr Lane formed a business relationship with Kurt Rinck, a former senior executive of Questnet. That relationship ultimately led to proceedings brought by Questnet in Hong Kong against both Mr Lane and Mr Rinck claiming they had misappropriated Questnet’s funds. On 4 September 2007, Questnet obtained judgment by default against Mr Lane in the High Court of Hong Kong. This judgment, for US$737,600.31 plus interest and costs, was registered in New Zealand by Questnet on 24 September 2007.
[2] Mr Lane applied to the High Court in New Zealand to set aside registration of the Hong Kong judgment. In a judgment now reported as Questnet Ltd v Lane [2008] NZAR 495, Asher J dismissed Mr Lane’s application.
...
[4] The events leading up to the registration of judgment in New Zealand are helpfully set out by Asher J at [2]–[6] and [11]–[20] and we largely adopt that description below.
[5] Mr Lane became Questnet’s chief legal officer in 1999. As Asher J noted
at [2], Mr Lane describes himself as a professional sportsman but he has a New Zealand law degree and was involved with various legal and consultancy firms in Asia as a consultant or legal executive from 1989 to
1999. He was promoted in September 1999 to the position of director for legal affairs for Questnet. In this capacity, he headed the company’s legal
department with about five or six in-house counsel reporting to him. He remained in that position until June 2005. On leaving Questnet, Mr Lane worked as a business consultant for Mr Rinck.
[6] Questnet says that Mr Rinck wrongly took for his own use trust funds that belonged to Questnet. Questnet began proceedings against Mr Rinck in 2006 and obtained Mareva orders against him. The Mareva orders required Mr Rinck to file affidavit evidence as to what had happened to the funds he was alleged to have taken. In his affidavits responding to that order, Mr Rinck says the funds in question were deposited in bank accounts belonging to Mr Lane and thereafter disbursed by Mr Lane on Mr Rinck’s instructions.
[7] Asher J sets out at [6] the exact funds transferred by Mr Lane according
to an affidavit sworn by Mr Lane in the Hong Kong High Court as follows:
a) US$105,000 on or about 27 July 2006, transferred by
Mr Lane to a company in Austria;
b) US$100,000 on or about 21 August 2006, transferred by
Mr Lane to a company in Austria;
c) US$535,477.50 on or about 28 August 2006, transferred to
Mr Rinck’s wife’s bank account.
[8] Mr Rinck’s disclosure led to Mr Lane being joined to the proceedings on
23 August 2006. The allegation against him was that he had knowingly received Questnet’s funds.
...
[11] Mr Lane did not comply with a disclosure order which led to him being found guilty of contempt on 15 June 2007.
...
[13] An order was made prohibiting Mr Lane from leaving Hong Kong and
he continued to reside there. He gave no Hong Kong address and told the
Hong Kong Court he could not do so because he “moved around periodically”. In his affidavit filed in the New Zealand High Court he said he maintained close contact with his wife and children in New Zealand, they regularly checked correspondence sent to his New Zealand address and would scan and e-mail any material to him on the day it was received.
[14] On 6 August 2007, Questnet obtained a summons from the High Court
of Hong Kong requiring all parties concerned to attend before the Court on
14 August 2007 at 9.30 am at a hearing on behalf of Questnet for an application for default judgment against Mr Lane. The summons was not a new proceeding but an application for default judgment against Mr Lane in the existing proceedings involving both Mr Rinck and Mr Lane.
[15] On 17 August 2007 the High Court of Hong Kong ordered that service on Mr Lane in respect of the summons and the affidavit in support be substituted by advertising the documents in an English newspaper published and widely circulated in Hong Kong and by posting the documents to his New Zealand family’s address.
[16] There was evidence before Asher J that the order for substituted service and the summons were posted to Mr Lane at his New Zealand address on 22 August 2007 and advertised in The Standard in Hong Kong on 24 August 2007.
[17] There is no evidence as to when the documents arrived in New Zealand
at the stated address. Mr Lane in his affidavit in the application to set aside registration of the judgment says that he received scanned and emailed copies of some of the documents. He does not say the exact date on which he received them but did say that on 3 September 2007, the day before the date when the summons was to be heard, he wrote a letter which was faxed to the Court. He said that because there was a warrant for his arrest at large in relation to the contempt proceedings he decided not to appear on 4 September 2007 as this “would have had detrimental conclusions regarding my liberty”.
[18] In his letter to the Hong Kong High Court, Mr Lane says that he had just learned of the summons which was served at what he described as “my permanent address for service”. He appears to assume that the summons relates to a default judgment entered against him with which he has not been served. He sought time “by which to take out summons under r 9, order 13 to set aside this judgment”.
[19] When the matter came before Master De Souza in the High Court of Hong Kong on 4 September 2007 judgment by default was entered against Mr Lane for the full amount sought. It is plain on the evidence that Master De Souza had Mr Lane’s letter of 3 September before him.
[20] The Hong Kong judgment was registered in New Zealand on
24 September 2007. The application to set aside was made on 21 November
2007.
[21] On 18 December 2007, Mr Lane applied to set aside the default judgment in Hong Kong. His application for an interim stay of enforcement
of the judgment pending his application to set aside was dismissed by Master
Hui on 28 December 2007. A further application for an interim stay was dismissed by Sakhani J on 18 January 2008. The application to set aside the default judgment was dismissed on 16 April 2008. An appeal against that decision was filed with the Hong Kong Court of Appeal in April 2008 and is due to be heard in March 2010. A further application for stay (pending appeal) was dismissed by the High Court of Hong Kong on 5 October 2009.
[22] Mr Lane’s defence to the Questnet proceedings is that he acted on instructions from Mr Rinck and was misled by him as to the origin and
nature of the funds placed with him. Mr Lane says that Mr Rinck was his employer and he did not know that the funds were subject to a Mareva order.
[18] The Court of Appeal then carefully considered each of the three grounds of appeal, namely lack of sufficient notice of the registration proceedings; that enforcement was inconsistent with public policy; and reliance on the pending appeal
in Hong Kong. Each of those grounds was rejected and the appeal was dismissed.
[19] It remains to add two things:
a) The Hong Kong prohibition order against Mr Lane was discharged on
29 December 2009. He has accordingly been free to leave Hong
Kong since then.
b)Ms Campbell’s affidavit details efforts to recover the judgment debt against Mr Rinck by reference to an affidavit (her 36th) filed in the Hong Kong proceedings by Ms Li. From the total judgment exclusive
of costs and interest against both defendants for HK$20,692,329.26, Questnet has recovered some HK$8,840,584.28 and is in the process
of endeavouring to recover a further sum of approximately CHF$1,590,369.40. If successful, Mr Rinck will still owe Questnet more than HK$100,000 plus costs and interest, but if the Swiss recovery action is unsuccessful the amount of the judgment debt against Mr Rinck will be about CHF$11,658,112.98.
c) An earlier affidavit in those proceeding from Ms Campbell exhibited the Melaaron Family Trust deed of which Mr Lane was the settlor. On 31 March 2007 the Trust owned a number of properties but was apparently heavily mortgaged. But, at least at that date, Mr Lane was a beneficiary who was owed a moderately significant sum of money by the Trust.
Submissions
[20] Mr Hucker initially made the point that there were no further available challenges to the judgment underlying the application for adjudication, particularly with the dismissal of the two appeals earlier discussed (and the lack of any application for leave to appeal to the New Zealand Supreme Court).
[21] He made the point that the outstanding costs in this country themselves would themselves qualify for an order for adjudication, though conceding that further proceedings or an amendment to the current proceedings would be required for Questnet to be able to rely on that debt.
[22] He therefore submitted that the formal requirements for adjudication had been made out and the petitioning creditor was accordingly prime facie entitled to adjudication (Re Twidle;[2] Re Fidow (A Debtor)[3]).
[2] Re Twidle [1960] NZLR 748;
[3] Re Fidow (A Debtor) [1989] 2 NZLR 431.
[23] Mr Hucker submitted there were no discretionary factors which should be held to bar adjudication under s 37 of the Insolvency Act 2006 when the criteria discussed by Associate Judge Faire in Child v Diners Club (NZ) Ltd[4] were taken into account. Mr Lane could not satisfy the Court it was not just to make an order for adjudication. Any suggestion an order would be pointless for lack of assets was gainsayed by the Melaaron Family Trust evidence earlier discussed. It is a New Zealand entity and Mr Lane, though he apparently spends little time in New Zealand nowadays, is a New Zealand citizen.
[4] Child v Diners Club (NZ) Ltd HC Auckland CIV-2008-404-4623, 11 December 2009.
[24] Mr Hucker submitted Mr Lane’s notice of intention to oppose adjudication was no more than a collateral attack on the Hong Kong judgment and its registration in this country neither of which should be accorded any weight in light of the appellate judgments.
[25] He stressed that although Questnet had been successful in effecting certain recoveries from Mr Rinck’s assets in the Hong Kong proceedings, the judgment was
by no means satisfied and Mr Lane had paid nothing on account. In any event,
Mr Hucker submitted, where a judgment creditor has a judgment against a number of
debtors, it is entitled to select those against whom it takes enforcement action and select between the assets available.
[26] Mr Lane’s submissions were earlier summarized.
Discussion and Decision
[27] The formal prerequisites to an adjudication of Mr Lane in bankruptcy were made out at the fixture on 19 April 2010. The proceedings were then adjourned part- heard to 21 April 2010 for presentation of the required certificate as to the debt currently owed, and delivery of judgment.
[28] There is a judgment against Mr Lane (and Mr Rinck) in the Hong Kong proceedings which remains in force despite his efforts and as a result of his appeal. The judgment has been validly registered in New Zealand. His attempt to have registration set aside has been unsuccessful both in this Court and on appeal. While Questnet has been successful in obtaining payment of some of the money due to it under the judgment from Mr Rinck’s assets, the judgment is by no means satisfied and a substantial sum remains owing by both judgment debtors. Formally, therefore, Questnet is entitled to an order for Mr Lane’s adjudication in bankruptcy.
[29] Over the history of this litigation, Mr Lane has raised every obstacle possible
to Questnet’s attempts to enforce its judgment in its litigation against him. As at the present, all those effort have been unsuccessful (with the exception of the dismissal
of another creditor’s petition by Questnet concerning another debt).[5] The only
[5] Lane v Questnet Limited H C Auckland CIV-2007-404-6164 5 November 2008, Asher J
remaining grounds on which Mr Lane seeks adjournment – not dismissal of the adjudication proceeding - is that he was unable to be present at the hearing and believes the judgment debt has or will be satisfied.
[30] There is no basis to take the view Mr Lane was unable to be present at the
19 April hearing. The prohibition order preventing him leaving Hong Kong was dissolved on 29 December 2009. Indeed, it appears he was absent from Hong Kong
at the time of the hearing, but he chose to absent himself from the hearing by
travelling to Europe to pursue his sporting interests rather than travel to New Zealand to meet – if he could – Questnet’s allegations against him. That was his choice, and the adjudication application is to be determined with Mr Lane’s choice in mind.
[31] No doubt Mr Lane would claim that he thought the adjudication proceeding against him would be adjourned because of the contents of Ms Campbell’s latest affidavit and the exhibits she put before the Court. In effect, he would have claimed
he thought the debt had been or would be satisfied and assumed adjournment of the adjudication proceedings would follow, that being drawn to the Court’s attention.
[32] There are several responses to this.
[33] In the first place, Mr Lane puts forward no basis on which he could have reached a justifiable belief that the debt was or would shortly be satisfied. His knowledge of Questnet’s recovery proceedings could only have come from documents served on him, and they plainly showed any recovery would not amount
to complete payment and a substantial sum of money would remain owing to Questnet by the judgment debtors. Even a lay person would have understood both that and the fallacious basis for any assumption that this proceeding would be adjourned. That would have been much more apparent to a qualified lawyer. There was simply no justification for any assumption that these proceedings would be adjourned from 19 April 2010.
[34] Secondly, it is plain that at the date of the fixture the judgment debt would not be fully repaid, even though further recoveries may be made in the future. There was thus more than a qualifying amount for adjudication owing by the jugment debtors at the date of this fixture. There can have been no basis for Mr Lane to believe otherwise. In the unlikely event that full recovery is made in the future, Mr Lane would be entitled to annulment of his adjudication.
[35] Thirdly, and of pivotal importance, Mr Lane has had every opportunity over a lengthy period to meet the substantial judgment against him (and Mr Rinck). He has paid nothing. The certificate produced by Mr Hucker shows the default judgment
plus interest (totalling US$888,915.22) plus costs ($7360) remains unpaid. Mr Lane’s adjudication in bankruptcy should accordingly follow.
[36] In all those circumstances, the Court concludes that there is no basis at law or
in fact not to make an order for Mr Lane’s adjudication in bankruptcy and there will
be an order accordingly on 21 April 2010 timed at 9:12am.
[37] The judgment creditor is entitled to costs on a 2B basis plus disbursements.
.................................................................
HUGH WILLIAMS J.
Solicitors:
Hucker & Associates (R B Hucker), P O Box 3843 Shortland Street Auckland 1140.
Copy for:
W R Lane, Suite 907, Silvercord, Tower Two, 30 Canton Road, Kowloon, Hong Kong.
Case Officer: Clar[email protected]
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