Wang
[2020] NZHC 1894
•31 July 2020
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2020-404-000696
[2020] NZHC 1894
UNDER the Insolvency Act 2006 AND
IN THE MATTER OF
an application by JIANPING WANG, company director, of Christchurch, for an order that the deceased estate of JIHONG LU be administered by an appointee under Part 6 of the Insolvency Act 2006
Hearing: 30 July 2020 Appearances:
R B Stewart QC and G Slevin for Applicant
A L Harlowe for Mr Bin Lu, an Interested Party
K G Davenport QC and A E Isaacs for Ms Weihua Zhang, an Interested Party
Judgment:
31 July 2020
JUDGMENT OF WYLIE J
[Reasons for oral ruling]
This judgment was delivered by Justice Wylie
On 31 July 2020 at 12.00 midday Pursuant to r 11.5 of the High Court Rules Registrar/Deputy Registrar
Date:…………………………
Solicitors/counsel:
Davidson Legal/R B Stewart QC and G Slevin, Christchurch Couch Harlowe Kovacevich/Ben Liu & Co, Auckland
K Davenport QC and A E Isaacs, Auckland
Re estate of JIHONG LU [2020] NZHC 1894 [31 July 2020]
Introduction
[1] The applicant, Jianping Wang, is a substantial creditor of Jihong Lu (Mr Lu). He has adduced evidence that, on 6 August 2019, he obtained summary judgment against Mr Lu in the sum of $1.5 million together with interest. The judgment has been sealed. Mr Wang has taken some steps to try and recover the monies owing to him. He held security over shares in a company. He has appointed receivers of that company, and he has received approximately $100,000 from the receivers in reduction of the amount is owing. He has also commenced proceedings in respect of a property in Mission Bay. That property has been sold, but the net proceeds of sale (approximately $810,000) are currently being held in a solicitor’s trust account, pending final resolution of those proceedings.
[2] Mr Lu died in Taiwan on 22 January 2020. A copy of his death certificate is before the Court. It records that his permanent residence was in Taiwan, but that he was a foreign national, with a passport, number LM488685. A document purporting to be Mr Lu’s last will and testament is also before the Court. In this document, Mr Lu described himself as a New Zealander and sets out the same passport number. The document is dated 7 January 2020. Mr Lu appointed Mr Bin Lu, his brother, as his administrator to execute his will. It records that, if Mr Bin Lu is unavailable, then Mr Bruce Davidson is to administer the will and that, if Mr Davidson is unavailable, then David Wong Tung is to be the administrator. Mr Lu made provision for his property, which he said includes real estate, securities, stock, an art collection, jewellery “etc.” He directed that it was to be used to pay his funeral expenses and taxes, as well as various debts which he listed. The named creditors include Mr Bin Lu and his mother, Ms Weihua Zhang. There was then provision for the distribution of 50 per cent of the residue of his estate to his son and daughter. There was then a curious provision. It reads as follows:
If it is insufficient an amount, my son and daughter shall each take 25% of the remaining part, and the other 50% shared by the legatees.
A number of individuals, including his mother, his nephews, his aunts, his sister-in- law and one other person are then listed. The document then states:
In the event of insufficient amount, the legacy shall be entrusted to the executor for distribution in proportion to the eight individuals listed above.
[3] Mr Wang is not one of the listed creditors. Nor is he one of the residuary beneficiaries.
[4] Mr Bin Lu has not as yet sought to be appointed as administrator of his late brother’s estate. He has claimed that he has been delayed in seeking appointment because of the COVID-19 crisis.
The application as filed
[5] Mr Wang, through his solicitors, filed a document headed “Application for Leave to File Application, Directions as to Service and for Appointment of Person to Administer an Insolvent Deceased Estate” on 7 May 2020. Relevantly, Mr Wang applied for orders as follows:
(a)Granting leave to file this application with 4 months of death pursuant to s 381(4) Insolvency Act 2006;
(b)… [As to service on Ms Zhang].
(c)… [As to service on Mr Bin Lu].
(d)That Peter David Ellis be appointed pursuant to s 385 Insolvency Act 2006 to administer the estate of Jihong Lu, deceased, and
(e)…
The application recorded that it was made in reliance on rr 24.4 to 24.51 of the High Court Rules 2016 and it referred to ss 379, 381, 382, 384 and 385 of the Insolvency Act 2006 (the Act).
[6]In a minute issued on 2 June 2020, Downs J made orders in terms of paras (a),
(b) and (c) of the application as filed.
[7] Both Mr Bin Lu and Ms Zhang, through their respective solicitors, have filed notices of opposition, opposing the grant of leave sought in para (a) of the notice of
1 These rules deal with other issues. Presumably the reference should have been to rr 24.44 – 24.45 dealing with insolvent deceased estates.
application, and also opposing the appointment of Mr Ellis to administer Mr Lu’s estate, as sought in para (d).
[8] The proceeding was called before me this morning. Mr Stewart QC, entered an appearance for Mr Wang. I raised with him the extent of his client’s application. He confirmed that Mr Wang is seeking to appoint an independent person to administer Mr Lu’s estate. He advised that, initially, Mr Ellis was proposed, but that more recently it has been proposed that a Mr Parson should be appointed. Mr Stewart confirmed that the application is brought under s 385 of the Act.
[9] Mr Stewart’s advice was consistent with the intitulement on the proceedings. It records that Mr Wang seeks an order that Mr Lu’s estate “be administered by an appointee under Pt 6 of the [Act]”.
[10] I pointed out to Mr Stewart that while s 385 gives the Court power to order that an administrator no longer administer an estate and to appoint the Assignee, the Public Trust or some other appropriate person to administer an insolvent deceased’s estate, such power can only be exercised where application has been filed for an order to administer the estate under Pt 6 of the Act and where the Court is satisfied that the estate is likely to be better administered by somebody other than the named administrator.
The oral application
[11] Mr Slevin, also appearing for Mr Wang, then made oral application for an order that the application filed should also be treated as an application that the late Mr Lu’s estate be administered under Pt 6 of the Act.
[12] This oral application was opposed by both Ms Davenport QC, for Ms Zhang, and Mr Harlowe, for Mr Bin Lu. They accepted that there was no prejudice to their respective clients but argued that there could be prejudice to the various creditors and beneficiaries named in Mr Lu’s will.
[13] Mr Slevin responded by asserting that the named beneficiaries could only have an interest in any residue after all debts have been paid and that they cannot be
adversely affected if the application is treated not only as an application to appoint Mr Ellis or Mr Parson as administrator of the estate, but also as an application to administer the estate under Pt 6 of the Act.
[14] In an oral ruling, I declined the application to treat the application as filed as also being an application to administer the estate under Pt 6 of the Act. I now set out my reasons for that ruling.
Analysis
[15] The Court can order that the estate of a deceased debtor be administered under Pt 6 of the Act on the application of the administrator of the estate (or on the application of a person who is applying to the Court for a grant of administration). It can also make such order on the application of a creditor who produces evidence establishing a debt due to him or her, or of a beneficiary.2 A creditor can apply for such order:
(a)if the administrator has not applied, after being requested in writing to do so, within 15 working days after receiving the request;3 or
(b)if after four months from the date of the debtor’s death, no administrator has been appointed and no application has been filed in the Court under s 380 by the administrator.4 The Court can allow an application to be filed before the months period has expired, if it is satisfied that the deceased committed an act of bankruptcy within three months before his or her death, or the estate that should have been available for the deceased’s creditors is reducing.5
[16] Once an order is made for the administration of an insolvent deceased’s estate under Pt 6, the whole of the estate at the date when the application for the order was filed, is vested in the person appointed by the Court.6 The appointee must immediately
2 Insolvency Act 2006, ss 379(1) and 381(1).
3 Section 381(2)(a).
4 Section 381(2)(b).
5 Section 381(4).
6 Section 387(1).
proceed to realise, administer and distribute the estate in accordance with the laws and practice of bankruptcy subject to any statutory modifications contained in Pt 6 of the Act.7 Priorities are established by the Act.8 If any surplus remains, it must be paid to the administrator of any other property of the deceased which does not form part of the insolvent deceased estate. If there is no such administrator, the surplus must be applied having regard to the interests of persons entitled to it in whatever manner is approved by the High Court.9
[17] It is not part of the duty of an appointee to divide any surplus in accordance with the trusts of the deceased’s will. Rather, it is the duty of the appointee to realise the assets and pay the creditors regardless of the provisions of the will and then to apply the surplus as directed by the Court. The operation of the will is suspended during the administration of a testator’s estate as an insolvent deceased estate.10
[18] As can be seen, the consequences of an order directing that an estate be administered under Part 6 of the Act as an insolvent deceased estate are potentially far-reaching.
[19] In the present case, there has been no express application that the late Mr Lu’s estate should be administered under Pt 6 of the Act as an insolvent deceased estate. While the application filed does refer to ss 379 and 381, no such order is sought.
[20] The High Court Rules require that an application for an order to administer under Part 6 of the Act must be by way of originating application – r 24.44. Normally one would expect that an originating application on notice would be filed, complying with Pt 19 of the Rules, and in particular, with r 19.10.
[21] Notice of an application must be given by serving the administrator or, if no administrator has been appointed, on those persons that the Court directs – r 24.45. Here, no administrator had been appointed. In those circumstances there would
7 Section 388.
8 Sections 393 and 274.
9 Section 394.
10 Re Loveridge [1937] NZLR 534 (SC) at 538-539; And see In Re F Hall & Sons Ltd [1939] NZLR 408 (SC and CA) at 424; Hall v Guardian Trust and Executors Company of New Zealand Ltd [1939] NZLR 993 (SC) at 997-998; Re Sadlier (deceased) [1977] 1 NZLR 214 (SC) at 216.
normally be a separate interlocutory application, without notice, for directions as to service, pursuant to rr 19.11 and 7.43A (which applies not only to proceedings commenced by way of statement of claim but also to proceedings commenced by way of originating application).
[22] Here, there was the one omnibus application, which relevantly, sought only the orders noted above at [5].
[23] Downs J directed service on Mr Bin Lu and Mrs Zhang. In the memorandum filed by Mr Wang’s then counsel, Mr Slevin, which accompanied the application, it was noted that Mr Bin Lu was Mr Lu’s brother, and that Mrs Zhang was his mother and that she might have an interest in his estate. No further information was then available. Mr Lu’s will has only become available after service was affected on Mr Bin Lu and Ms Zhang. It is now clear that there are a number of other persons interested under the late Mr Lu’s will, both creditors and beneficiaries. Those persons should be given the opportunity to participate in the hearing of any application made to administer the late Mr Lu’s estate as an insolvent deceased estate under Pt 6 of the Act. As I have noted, if the estate is administered under Pt 6, Mr Lu’s will be suspended. The interests of both named creditors and beneficiaries could well be affected. Further, the estate could end up being administered by somebody other than one of the named administrators.
[24] Given that named creditors and beneficiaries have not been served and (with the exception of Mr Bin Lu and Ms Zhang) are likely unaware of the proceedings, and given the risk of prejudice to those persons, I declined the oral application to treat the application filed as also being for an order that the estate be administered under Pt 6 of the Act. I did allow an adjournment to give counsel the opportunity to consider the position and obtain instructions.
Wylie J
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