XING v WANG [2023] NZHC 1273

XING v WANG [2023] NZHC 1273 [26 May 2023]IN THE HIGH COURT OF NEW ZEALANDAUCKLAND REGISTRYI TE KŌTI MATUA O AOTEAROATĀMAKI MAKAURAU ROHECIV-2022-404-2418[2023] NZHC 1273IN THE MATTER of the Insolvency Act 2006ANDIN THE MATTER of the Bankruptcy of Mengqui WANGBETWEEN Zhong XINGJudgment CreditorAND Mengqui WANGJudgment DebtorHearing: 9 May 2023Appearances: Mr Z Xing in person (Judgment Creditor)R O Parmenter for Judgment DebtorJudgment: 26 May 2023JUDGMENT OF ASSOCIATE JUDGE LESTERThis Judgment was delivered by me on 26 May 2023 at 3.30pmpursuant to Rule 11.5 of the High Court RulesRegistrar/Deputy RegistrarDate:[1] Mr Mengqui Wang (Mr Wang) applies to set aside a bankruptcy noticeobtained by Mr Zhong Xing (Mr Xing).[2] Mr Wang is one of 10 individuals who received bankruptcy notices issued byMr Xing. In each case, the request for the issue of a bankruptcy notice and theaccompanying bankruptcy notice are in the same terms. The debt relied on in eachcase 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 willdetermine the other nine applications as there is no suggestion of a material differencebetween them.[4] In the nine other applications, a results judgment only will issue which willrefer to this judgment as containing the reasons for the bankruptcy notice being setaside – that being the outcome advised to the parties at the conclusion of the hearingon 9 May 2023.The judgment debt relied on by Mr Xing[5] Mr Wang, along with the other nine judgment debtors, were purchasers ofsections from a company called Green Land Investment Limited (Green Land). Thepurchasers sought specific performance of their agreements for sale and purchase withthat claim resulting in a liability judgment, essentially in their favour, of Jagose J on4 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 werein 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:2Last, on Green Land's claim for trespass damages, necessarily founded onGreen Land's continued possession of the lots, the parties have agreed anannual $19,500 rate per lot. Mr Lowery has specified the periods for whichsuch rates should apply to the trespassed lots; Mr Parmenter said in closing heaccepted those calculations. I would award damages on this thirdcounterclaim accordingly.[8] The relief the purchasers may receive was subject to a remedies hearing on1 May 2023. The outcome of that hearing was not to hand at the time of the hearingof 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'scounterclaim. On what basis then did Mr Xing obtain bankruptcy notices naming himas the judgment creditor?[10] Mr Xing's request to issue a bankruptcy notice, which bears the Court stamp21 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 [MengquiWANG", obtained by Green Land [I]nvestment [L]imited and later[transferred] to me upon [P]roperty [L]aw [A]ct notice expired andunremedied 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 asidethe bankruptcy notice, asserted: "As things stand, the trespass damages are payableto Green Land " and "Wang does not owe Xing trespass damages, so the bankruptcynotice proceeds on a false basis".[13] Mr Xing, in his notice of opposition to the application to set aside thebankruptcy 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 anassignment and no assignment is produced by him.[14] Accordingly, by the time Mr Parmenter prepared his submissions, Mr Xing hadnot produced any evidence that he was entitled to enforce the judgment debt based onhis reference to a Property Law Act notice in his request for a bankruptcy notice, noran assignment.[15] Mr Parmenter, in his written submissions dated 4 April 2023, described theabsence 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 beforethe hearing.[16] I note here that Mr Xing, in his submissions filed with the Court the day beforethe hearing, attached what purports to be a deed of assignment between Green Landand Mr Xing. The assignment is dated 23 December 2022. Mr Parmenter advised hehad not seen these submissions prior to the hearing. In any event, given that Mr Wangput in issue from the start the basis upon which Mr Xing could enforce Green Land'sjudgment, it was simply too late for Mr Xing to attach a purported deed of assignmentto his submissions the day before the hearing.[17] In any event, the deed of assignment does not assist Mr Xing. The assignmentis said to take effect from the "Effective Date". Effective Date is defined as the dateMr Xing receives the assignment from Green Land. The deed is dated23 December 2022. There is no other evidence as to what the effective date wouldbe. 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 thefact that Mr Xing was not entitled to the benefit of Green Land's judgment when heapplied for the bankruptcy notices.[18] Section 17(5) of the Insolvency Act 2006 (the Act) provides that for thepurposes 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 atthe time he claimed he was entitled to do so when he applied for the bankruptcynotices.[20] I add here that when I put this issue to Mr Xing, he claimed that the purporteddeed of assignment dated 23 December 2022 on its cover sheet, at the top of the firstpage, and on the signature page, was a translation of an earlier version in Chineseentered 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'sstanding to enforce Green Land's debt from the start, the obligation was on Mr Xingto 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 thebankruptcy notices as a number were applied for on 7 December 2022 and12 December 2022.[22] Accordingly, the position is as follows:(i) The specific basis upon which Mr Xing claimed to be able to enforcethe Green Land judgment in his request for the issue of a bankruptcynotice was not maintained by him and not subject to any evidence.(ii) Mr Xing did not in evidence, establish any other basis upon which heis entitled to enforce Green Land's judgment, either at the timehe applied for the bankruptcy notices or subsequently.(iii) The only basis informally put before the Court is the deed ofassignment dated 23 December 2022 which does not assist Mr Xing asit postdates his requests for the issue of bankruptcy notices.[23] In my view, the bankruptcy notices should not have been issued and should beset aside. As Mr Xing did not and could not satisfy s 17(5) of the Act, I find the noticesare 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:3The person who is for the time being entitled to enforce a final judgment orfinal order is, for the purposes of s 17 of the Act, deemed to be a creditor whohas obtained the final judgment or final order.4 It follows that an assignee ofa judgment debt, whether legal or equitable, may request the issue ofa bankruptcy notice,5 but must first obtain leave of the court pursuant tor 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 thejudgment; or[26] As the footnote to the above passage sets out below, there has been debate asto whether Master Venning's (as he then was), view in Jenkins v Jenkins that theissuing of a bankruptcy notice was an enforcement process requesting leave wascorrect.[27] The predecessor to r 17.9 was r 556 of the Judicature Act 1908. That ruleprovided that no execution process should issue in the circumstances now covered byr 17.9.[28] Associate Judge Gendall (as he then was), distinguished Jenkins v Jenkins asthe case before Associate Judge Gendall concerned the issue of a bankruptcy noticemore than six years after the entry of judgment. Referring to Miller J's decision inRiddiford, Judge Gendall said: "As Miller J noted in Riddiford, the bankruptcy process3 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 MasterVenning held that the issue of a bankruptcy notice was an "enforcement process" for the purposesof the predecessor of r 17.9(2)(c) of the High Court rules 2016 (being r 556(2)(c)); compare withRiddiford 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 2008at [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 noticewas sought by the original judgment creditor, albeit more than six years afterjudgment.[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 inr 17.3. The issue of a bankruptcy notice is not one of the listed methods of enforcingjudgments 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 ofInsolvency in New Zealand, concerned r 556 which referred to execution process.Rule 17.9 is concerned with enforcement processes. Bankruptcy is an accepted meansof enforcing a judgment. In my view, the change in the wording of the Rules goessome way to providing an answer to the different approach to this issue.[31] Rule 17.1 defines "judgment creditor" as meaning: "The party entitled toenforce 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 whorequests a bankruptcy notice to establish they are a party entitled to enforce thejudgment.[33] The absence of leave under r 17.9 in this case reinforces the view I havereached 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 toenforce the judgment they now control will mean they have to establish their status asa person entitled to enforce the judgment relied on. They will have to do that in orderto apply for a bankruptcy notice in any event. The Court should only issuea bankruptcy notice to a party claiming to be a creditor by assignment if they haveprovided evidence they satisfy s 17(5) of the Act.[34] The above issues, while appearing to be technical in nature, in fact go toMr Xing's right to enforce the judgment and therefore his right to obtain a bankruptcynotice. I have already found Mr Xing has not demonstrated that he had the right toenforce the judgment at the time he claimed to have the status of judgment creditor asper 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 theirsections. If they obtain orders for specific performance, then they may well be entitledto penalty interest against Green Land and in each case that penalty interest will exceedthe liability a purchaser had under the trespass judgment. In the event that specificperformance is not available then presumably the purchasers, who I understand are nototherwise in breach of their agreements for sale and purchase, would be entitled to thereturn of their deposits and/or damages. It is at least arguable that these potentialclaims by the purchasers could not be raised in the liability hearing as the exact natureof the purchasers' rights against Green Land will not be known until the remedyjudgment is released. If there has been an assignment of the trespass judgment toMr Xing, that assignment would not deprive the purchasers of the benefit of claimsthey 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 thebankruptcy notices and are nullified, I need not expand on this point albeit it is onewhich appears to have merit.Costs[37] Mr Parmenter sought costs on behalf of Mr Wang on a 2B basis, based ona quarter day hearing. In respect of all other applicants, he sought costs on a 2A basisin relation to the applications that were filed on their behalf, together with the sealingfee of the order setting aside the bankruptcy notice, again on a 2A basis. I considerthat a proper and reasonable basis for the assessment of costs given it made sense forthe 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 togetherwith the filing fee of $200 on the application, the sealing fee of $50, the schedulingfee 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 theirapplications and costs on a 2A basis in relation to the sealing of a judgment togetherwith a $200 filing fee, a $50 sealing fee and a scheduling fee. I order accordingly.__________________________________Associate Judge Lester