Xing v Wang

[2023] NZHC 1273

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2022-404-2418

[2023] NZHC 1273

IN THE MATTER	of the Insolvency Act 2006
AND
IN THE MATTER	of the Bankruptcy of Mengqui WANG
BETWEEN	Zhong XING Judgment Creditor
AND	Mengqui WANG Judgment Debtor

Hearing:	9 May 2023
Appearances:	Mr Z Xing in person (Judgment Creditor) R O Parmenter for Judgment Debtor
Judgment:	26 May 2023

JUDGMENT OF ASSOCIATE JUDGE LESTER

This Judgment was delivered by me on 26 May 2023 at 3.30pm pursuant to Rule 11.5 of the High Court Rules

Registrar/Deputy Registrar Date:

XING v WANG [2023] NZHC 1273 [26 May 2023]

[1]                 Mr Mengqui Wang (Mr Wang) applies to set aside a bankruptcy notice obtained by Mr Zhong Xing (Mr Xing).

[2]                 Mr Wang is one of 10 individuals who received bankruptcy notices issued by Mr Xing. In each case, the request for the issue of a bankruptcy notice and the accompanying bankruptcy notice are in the same terms. The debt relied on in each case arises from the same judgment.

[3]                 Each of the 10 judgment debtors apply to set aside the bankruptcy notice.   Mr Wang’s application was treated as an example, the outcome of which will determine the other nine applications as there is no suggestion of a material difference between them.

[4]                 In the nine other applications, a results judgment only will issue which will refer to this judgment as containing the reasons for the bankruptcy notice being set aside – that being the outcome advised to the parties at the conclusion of the hearing on 9 May 2023.

The judgment debt relied on by Mr Xing

[5]                 Mr Wang, along with the other nine judgment debtors, were purchasers of sections from a company called Green Land Investment Limited (Green Land). The purchasers sought specific performance of their agreements for sale and purchase with that claim resulting in a liability judgment, essentially in their favour, of Jagose J on 4 August 2022.1  That decision sets out in detail the history between Green Land,   Mr Xing and others, with the judgment debtor.

[6]                 Green Land’s counterclaim is in respass as some of the purchasers had, notwithstanding that they had not settled, built homes on the sections and some were in fact living in those homes.

1      Li & Ors v Green Land Investment Ltd [2022] NZHC 1906.

[7]The judgment on that counterclaim is dealt with in Li as follows:2

Last, on Green Land’s claim for trespass damages, necessarily founded on Green Land’s continued possession of the lots, the parties have agreed an annual $19,500 rate per lot. Mr Lowery has specified the periods for which such rates should apply to the trespassed lots; Mr Parmenter said in closing he accepted those calculations. I would award damages on this third counterclaim accordingly.

[8]                 The relief the purchasers may receive was subject to a remedies hearing on    1 May 2023. The outcome of that hearing was not to hand at the time of the hearing of the application to set aside the bankruptcy notices.

Mr Xing is not the judgment creditor

[9]                 As noted above, the judgment of trespass arose from Green Land’s counterclaim. On what basis then did Mr Xing obtain bankruptcy notices naming him as the judgment creditor?

[10]              Mr Xing’s request to issue a bankruptcy notice, which bears the Court stamp 21 December 2022, but which is dated 12 December 2022, contains the following:

I produce a certified copy of a final judgment or final order against [Mengqui WANG”, obtained by Green Land [I]nvestment [L]imited and later [transferred] to me upon [P]roperty [L]aw [A]ct notice expired and unremedied at 7.5.2022 in the [Auckland] court on [4.8.2022].

[11]The bankruptcy notice repeats the above passage.

[12]              Mr Parmenter, counsel for the judgment debtors, in the application to set aside the bankruptcy notice, asserted: “As things stand, the trespass damages are payable to Green Land …” and “Wang does not owe Xing trespass damages, so the bankruptcy notice proceeds on a false basis”.

[13]              Mr Xing, in his notice of opposition to the application to set aside the bankruptcy notice, refers to being: an “…assignee of the benefit of this judgment …”. No details of the alleged assignment are referred to in the notice of opposition.

2      Li & Ors v Green Land Investment Ltd, above n 1, at [65].

Mr Xing’s affidavit in support of the notice of opposition does not provide detail of an assignment and no assignment is produced by him.

[14]              Accordingly, by the time Mr Parmenter prepared his submissions, Mr Xing had not produced any evidence that he was entitled to enforce the judgment debt based on his reference to a Property Law Act notice in his request for a bankruptcy notice, nor an assignment.

[15]              Mr Parmenter, in his written submissions dated 4 April 2023, described the absence of evidence that Mr Xing was entitled to enforce Green Bank’s judgment, his “first port of call”. Mr Parmenter’s submissions were provided over a month before the hearing.

[16]              I note here that Mr Xing, in his submissions filed with the Court the day before the hearing, attached what purports to be a deed of assignment between Green Land and Mr Xing. The assignment is dated 23 December 2022. Mr Parmenter advised he had not seen these submissions prior to the hearing. In any event, given that Mr Wang put in issue from the start the basis upon which Mr Xing could enforce Green Land’s judgment, it was simply too late for Mr Xing to attach a purported deed of assignment to his submissions the day before the hearing.

[17]              In any event, the deed of assignment does not assist Mr Xing. The assignment is said to take effect from the “Effective Date”. Effective Date is defined as the date Mr Xing   receives   the   assignment   from   Green   Land.   The   deed   is   dated  23 December 2022. There is no other evidence as to what the effective date would be. All 10 bankruptcy notices were sought before 23 December 2022. Accordingly, even if the deed of assignment was properly produced, it would not have changed the fact that Mr Xing was not entitled to the benefit of Green Land’s judgment when he applied for the bankruptcy notices.

[18]              Section 17(5) of the Insolvency Act 2006 (the Act) provides that for the purposes of s 17, a creditor who has  obtained a final judgment includes a person  “… who is for the time being entitled to enforce a final judgment or final order”.

[19]              Accordingly, Mr Xing was not entitled to enforce Green Land’s judgment at the time he claimed he was entitled to do so when he applied for the bankruptcy notices.

[20]              I add here that when I put this issue to Mr Xing, he claimed that the purported deed of assignment dated 23 December 2022 on its cover sheet, at the top of the first page, and on the signature page, was a translation of an earlier version in Chinese entered into on 15 December 2022.   Mr Xing sought leave to produce that version.   I declined that application. Again, given Mr Parmenter had put in issue Mr Xing’s standing to enforce Green Land’s debt from the start, the obligation was on Mr Xing to explain his entitlement to do so in his opposition and affidavit.

[21]              In any event, a deed dated 15 December 2022 would not save all of the bankruptcy  notices  as  a  number  were  applied  for  on  7  December  2022  and  12 December 2022.

[22]Accordingly, the position is as follows:

(i)The specific basis upon which Mr Xing claimed to be able to enforce the Green Land judgment in his request for the issue of a bankruptcy notice was not maintained by him and not subject to any evidence.

(ii)Mr Xing did not in evidence, establish any other basis upon which he is entitled to enforce  Green  Land’s  judgment,  either  at  the  time  he applied for the bankruptcy notices or subsequently.

(iii)The only basis informally put before the Court is the deed of assignment dated 23 December 2022 which does not assist Mr Xing as it postdates his requests for the issue of bankruptcy notices.

[23]              In my view, the bankruptcy notices should not have been issued and should be set aside. As Mr Xing did not and could not satisfy s 17(5) of the Act, I find the notices are nullities and are set aside.

Does an assignee of a debt require leave to obtain a bankruptcy notice?

[24]The authors of The Law of Insolvency in New Zealand 2nd ed, note:3

The person who is for the time being entitled to enforce a final judgment or final order is, for the purposes of s 17 of the Act, deemed to be a creditor who has obtained the final judgment or final order.4 It follows that an assignee of a  judgment  debt,  whether  legal  or  equitable,  may  request  the  issue  of  a bankruptcy notice,5  but must first obtain leave of the court pursuant to       r 17.9(2)(c) of the High Court Rules 2016.6

[25]Rule 17.9(2)(c) of the High Court Rules 2016 (the Rules) provides:

(2)       The court’s leave is required to issue an enforcement process—

…

(c)if any change has taken place (whether by death or otherwise) in the parties entitled or liable to enforcement under the judgment; or

[26]              As the footnote to the above passage sets out below, there has been debate as to whether Master Venning’s (as he then was), view in Jenkins v Jenkins that the issuing of a bankruptcy notice was an enforcement process requesting leave was correct.

[27]              The predecessor to r 17.9 was r 556 of the Judicature Act 1908. That rule provided that no execution process should issue in the circumstances now covered by r 17.9.

[28]              Associate Judge Gendall (as he then was), distinguished Jenkins v Jenkins as the case before Associate Judge Gendall concerned the issue of a bankruptcy notice more than six years after the entry of judgment. Referring to Miller J’s decision in Riddiford, Judge Gendall said: “As Miller J noted in Riddiford, the bankruptcy process

3      Lynne Taylor and Grant Slevin The Law of Insolvency in New Zealand (Thomson Reuters, Wellington, 2021).

4      Insolvency Act 2006, s 17(5).

5      Re Palmer, ex parte Brims [1989] 1 QB 419 (CA) at 424-425.

6      Jenkins v Jenkins HC Christchurch B236/99, 25 June 1999 at [27]. This was because Master Venning held that the issue of a bankruptcy notice was an “enforcement process” for the purposes of the predecessor of r 17.9(2)(c) of the High Court rules 2016 (being r 556(2)(c)); compare with Riddiford v New Zealand Law Society HC Wellington CIV-2005-485-879, 15 December 2005 at [16]-[18]; Re Mitchell, ex parte Meo HC Palmerston North CIV-2007-454-519, 31 January 2008 at [15]-[16].

is a means of enforcing a judgment and is not an execution process” (emphasis added). Therefore, Judge Gendall found that r 556 did not apply where the bankruptcy notice was sought by the original judgment creditor, albeit more than six years after judgment.

[29]              Rule 17.9 of the Rules is concerned with an enforcement process. “Enforcement Process” is defined at r 17.1 as including every order referred to in     r 17.3. The issue of a bankruptcy notice is not one of the listed methods of enforcing judgments in r 17.3, but the definition of ‘enforcement process’ is an inclusive one.

[30]              It will be noted the authorities in footnote 6 above, referred to in The Law of Insolvency in New Zealand, concerned r 556 which referred to execution process. Rule 17.9 is concerned with enforcement processes. Bankruptcy is an accepted means of enforcing a judgment. In my view, the change in the wording of the Rules goes some way to providing an answer to the different approach to this issue.

[31]              Rule 17.1 defines “judgment creditor” as meaning: “The party entitled to enforce a judgment for the recovery or payment of a sum of money”.

[32]              In my view, there are sound policy reasons to require an assignee of a debt who requests a bankruptcy notice to establish they are a party entitled to enforce the judgment.

[33]              The absence of leave under r 17.9 in this case reinforces the view I have reached in relation to Mr Xing’s lack of standing to have obtained a bankruptcy notice. Requiring an assignee of a debt who seeks a bankruptcy notice to obtain leave to enforce the judgment they now control will mean they have to establish their status as a person entitled to enforce the judgment relied on. They will have to do that in order to  apply  for  a  bankruptcy  notice  in  any  event.   The  Court  should  only  issue   a bankruptcy notice to a party claiming to be a creditor by assignment if they have provided evidence they satisfy s 17(5) of the Act.

[34]              The above issues, while appearing to be technical in nature, in fact go to     Mr Xing’s right to enforce the judgment and therefore his right to obtain a bankruptcy

notice. I have already found Mr Xing has not demonstrated that he had the right to enforce the judgment at the time he claimed to have the status of judgment creditor as per s 17(5) of the Act.

[35]              Mr  Parmenter   raised   a   further   challenge   to   the   bankruptcy   notices. I understand each of the parties who received bankruptcy notices paid deposits on their sections. If they obtain orders for specific performance, then they may well be entitled to penalty interest against Green Land and in each case that penalty interest will exceed the liability a purchaser had under the trespass judgment. In the event that specific performance is not available then presumably the purchasers, who I understand are not otherwise in breach of their agreements for sale and purchase, would be entitled to the return of their deposits and/or damages. It is at least arguable that these potential claims by the purchasers could not be raised in the liability hearing as the exact nature of the purchasers’ rights against Green Land will not be known until the remedy judgment is released. If there has been  an assignment of the trespass judgment to  Mr Xing, that assignment would not deprive the purchasers of the benefit of claims they could have set up against Green Land’s attempts to enforce the judgment.

[36]              However, given my conclusion that Mr Xing lacked standing to obtain the bankruptcy notices and are nullified, I need not expand on this point albeit it is one which appears to have merit.

Costs

[37]              Mr Parmenter sought  costs on behalf of Mr Wang  on a 2B  basis, based  on  a quarter day hearing. In respect of all other applicants, he sought costs on a 2A basis in relation to the applications that were filed on their behalf, together with the sealing fee of the order setting aside the bankruptcy notice, again on a 2A basis. I consider that a proper and reasonable basis for the assessment of costs given it made sense for the 10 applications to be run on the basis of one example.

[38]              Accordingly, there is a costs award in favour of Mr Wang of $8,484.50 together with the filing fee of $200 on the application, the sealing fee of $50, the scheduling fee of $640 and the costs of the two bundles being $460.74 and $394.75.

[39]              Each of the other applicants is entitled to costs on a 2A basis in respect of their applications and costs on a 2A basis in relation to the sealing of a judgment together with a $200 filing fee, a $50 sealing fee and a scheduling fee. I order accordingly.

Associate Judge Lester