ZHANG v WESTPAC NEW ZEALAND LIMITED [2021] NZCA 672

ZHANG v WESTPAC NEW ZEALAND LIMITED [2021] NZCA 672 [10 December 2021]IN THE COURT OF APPEAL OF NEW ZEALANDI TE KŌTI PĪRA O AOTEAROACA521/2019[2021] NZCA 672BETWEEN YINGQIU ZHANGAppellantAND WESTPAC NEW ZEALAND LIMITEDRespondentHearing: 4 November 2021Court: Courtney, Duffy and Dunningham JJCounsel: Appellant in PersonB J Upton and L B Harrison for RespondentJudgment: 10 December 2021 at 10 amJUDGMENT OF THE COURTA The appeal is dismissed.B The appellant is to pay the respondent's costs as for a standard appeal ona band A basis with usual disbursements.____________________________________________________________________REASONS OF THE COURT(Given by Duffy J)[1] On 25 September 2019 Associate Judge Paulsen determined four relatedapplications in the High Court at Auckland between Westpac New Zealand Limited(Westpac) and Yingqiu Zhang,1 which resulted in the Associate Judge:1 Zhang v Westpac New Zealand Ltd [2019] NZHC 2422 [High Court judgment].(a) dismissing Ms Zhang's application to set aside Westpac's bankruptcynotice to her;(b) dismissing Ms Zhang's application to set aside a summary judgmentthat Westpac had obtained by default against her;(c) dismissing Ms Zhang's application for discovery against Westpac andnon-parties; and(d) granting Westpac's creditor's application to adjudicate Ms Zhangbankrupt.[2] Ms Zhang, who represents herself, with the aid of a McKenzie friend, nowappeals. Because she is not legally represented the appeal is somewhat unfocussed.Ms Zhang has filed broad-ranging submissions challenging the Associate Judge'sdecisions.[3] Westpac contends that, following her adjudication, Ms Zhang has no standingto appeal against the first three determinations. This is because Ms Zhang's rights inrelation to the first three matters have now vested in the Official Assignee. We agree.It is well settled that following adjudication the right to attack a bankrupt's judgmentdebt, including the very debt on which the adjudication was based, vests in the OfficialAssignee and the bankrupt's powers to contest the debt are gone.2 If there are validreasons for contesting the debt it is the Official Assignee who must do so.3 However,as the decision to adjudicate a debtor bankrupt is at the discretion of the court,4Ms Zhang's arguments about the first three matters remain relevant insofar as theymight relate to the exercise of this discretion (the fourth determination).2 See Re Wilson ex parte UDC Finance Ltd HC Christchurch B348/89, 5 December 1989 at 4;followed in Commissioner of Inland Revenue v Neal HC Auckland B1719/97, 2 October 1998 at[20]; Hunter v Commissioner of Inland Revenue HC Auckland B515-IM99, 28 June 2000 at [48];and De Alwis v Luvit Foods International HC Auckland CIV 2002-404-1944, 24 March 2010.3 Re Wilson ex parte UDC Finance Ltd, above n 2, at 4.4 Insolvency Act 2006, ss 36 and 37.Nature of the appeal and the admission of new evidence[4] Section 13 of the Insolvency Act 2006 (the Act) sets out the requirements forwhen a creditor may apply to have a debtor adjudicated bankrupt. Where thoserequirements are met, a court may either order adjudication5 or refuse to do so.6 Inthis regard the court is given broad discretionary authority to decide whether toadjudicate a debtor bankrupt.[5] Here the Associate Judge decided Westpac met the requirements for seekingadjudication of Ms Zhang pursuant to s 13 and he was satisfied an order foradjudication should be made.7 Ms Zhang has not raised any error by the AssociateJudge on appeal regarding the s 13 requirements being established. Accordingly, allthat remains is for her to appeal against the exercise of the discretion to adjudicate herbankrupt under s 36 of the Act.[6] Appeals against the exercise of discretion are subject to stricter criteria thangeneral appeals. To succeed, Ms Zhang must establish: (a) an error of law or principle;(b) taking account of irrelevant considerations; (c) failure to take account of a relevantconsideration; or (d) the decision is plainly wrong.8[7] The fact that this is an appeal against the exercise of a discretion has furtherconsequences for Ms Zhang. She has sought to adduce new evidence on appealthrough her affidavit dated 6 January 2021 (the new affidavit). The principles relatingto the admission of new evidence on appeal are intended to ensure parties put up theirbest case at trial.9 For general appeals, which proceed by way of rehearing, theadmission of new evidence requires that the further evidence must be fresh (meaningit could not have been obtained with reasonable diligence and produced at the trial),credible, and cogent. Evidence that is not fresh will still be admitted on appeal butonly when the circumstances are exceptional and the grounds compelling.10 The5 Section 36.6 Section 37.7 High Court judgment, above n 1, at [60] and [69].8 Kacem v Bashir [2010] NZSC 112, [2011] 2 NZLR 1 at [32].9 Rae v International Insurance Brokers (Nelson Marlborough) Ltd [1998] 3 NZLR 190 (CA) at192; approved by the Supreme Court in Paper Reclaim Ltd v Aotearoa International Ltd (FurtherEvidence) (No 1) [2006] NZSC 59, [2007] 2 NZLR 1 at [6] n 1.10 Rae v International Insurance Brokers, above n 9, at 192–193.jurisdictional confines that attach to an appeal against the exercise of a discretionnarrow these principles further.[8] Generally, appeals against the exercise of a discretion proceed on the basis ofthe evidence that was before the decision-maker. The rationale being that furtherevidence cannot properly affect the correctness or otherwise of a discretionarydecision made without such evidence.11 However, in Comalco NZ v BroadcastingStandards Authority, which involved an appeal against a decision of the BroadcastingStandards Authority, this Court made orders requiring one of the parties in the appealto produce to the other parties material that was not before the Authority when it madeits decision.12 The order was made on the understanding such material or parts thereofmay be produced as evidence in the appeal. This was despite the appeal proceedingas if it were an appeal against the exercise of the discretion. This Court relevantlystated:13The failure of the Authority to require the production of the pre-broadcastrecords and documents nevertheless meant that the Authority reached itsdecision without having access to all the possibly relevant material. Itsdecision is now the subject of an appeal, and the issues have been clarified inthe course of the argument in this Court. If those issues are to be properlydetermined on the appeal, the High Court will need to have the additionalmaterial before it.Section 18(4) of the Broadcasting Act requires the Court to hear and determinean appeal "as if the decision or order appealed against had been made in theexercise of a discretion". This means that the appeal should only be allowedif the Authority has proceeded on a wrong principle, given undue weight tosome factor or insufficient weight to another, or is plainly wrong: Fitzgeraldv Beattie [1976] 1 NZLR 265, 268 (CA); Havelock-Green v WesthavenCabaret Ltd [1976] 1 NZLR 728, 730 (CA). In the present case the Authoritydid not have possibly relevant material before it, and so could not consider theissue of balance in the selection and editing process. It is appropriate that theCourt should have this material in order to determine the appeal.[9] A similar approach was taken earlier by a Full Court of the High Court inSociety for the Promotion of Community Standards Inc v Waverley International(1988) Ltd where the majority acknowledged the admission of further evidence did11 Zimmerman v Director of Proceedings HC Wellington CIV-2006-485-761, 29 May 2007 at [41];citing Television New Zealand Ltd v Southland Fuel Injection Ltd HC Wellington AP298/94, 16March 1998.12 Comalco New Zealand Ltd v Broadcasting Standards Authority (1995) 9 PRNZ 153 (CA).13 At 161–162.not sit readily with the approach to an appeal against the exercise of a discretion butfound nevertheless that even in those appeals the "interests of justice may occasionallyrequire the admission of further evidence".14[10] It follows that on occasion new evidence can be admitted in an appeal againstthe exercise of a discretion, but it must be directly relevant to proving the discretioncould not have been properly exercised without the benefit of such evidence and theinterests of justice must favour its admission. This will be a high test to satisfy.[11] In the present case the new affidavit evidence of Ms Zhang satisfies none ofthe requirements for the admission of new evidence on appeal. Indeed, much of theaffidavit is in the form of argument and opinion, which therefore would not qualify foradmission at a first instance hearing. Because this new evidence is interwoven withMs Zhang's arguments for allowing the appeal, our reasons for why we find itinadmissible will be given at the same time as we address her arguments on thesubstantive matter.Grounds of appeal[12] On appeal Ms Zhang essentially argues that she was mistakenly adjudicatedbankrupt because the Associate Judge failed to recognise she had valid claims againstWestpac and a third party, Chenjiang Wu, and that these claims exceed and thereforeeffectively extinguish the claims Westpac made against her. She asserts:(a) A claim against Westpac based on alleged failure to discharge the dutiess 176 of the Property Law Act 2007 (the PLA) imposes on a mortgageewhen it sells the secured property. Ms Zhang contends the shortfallbetween the prices the properties sold for and the debt she owed toWestpac results from sales that were not at arms' length and were madeunder value.(b) A claim for breach of contract against Mr Wu based on his failure toperform obligations owed to Ms Zhang including to manage the14 Society for the Promotion of Community Standards Inc v Waverley International (1988) Ltd [1993]2 NZLR 709 (HC) at 715.mortgaged properties on her behalf, to collect rents and pay those toWestpac.[13] The same arguments were advanced before Associate Judge Paulsen. Hecarefully considered and rejected them. We agree with his analysis and theconclusions he reached. Our reasons follow.Ms Zhang's claims against Westpac and its conduct of mortgagee sales[14] Ms Zhang did not oppose the summary judgment application by Westpac toprove the shortfall was a debt she owed. After judgment was entered against her anda bankruptcy notice was duly served on her she took no steps within the allowed timeframe to set the notice aside. By the adjudication hearing it was too late for Ms Zhangto challenge her indebtedness to Westpac. Nevertheless, the Associate Judge carefullyconsidered the arguments Ms Zhang made against Westpac as part of the exercise ofthe discretion to adjudicate her bankrupt.Were the mortgagee sales at arms' length?[15] The Associate Judge considered whether the mortgagee sales were made atarms' length.15 Here Ms Zhang relied on the certificate of title of one of the properties(the Paremoremo property) which showed the purchasers had borrowed funds fromWestpac, secured by mortgage against this property, two months after they wereregistered on the title as proprietors. Ms Zhang also advanced examples of her internetsearches which showed another bank (ANZ Bank) had sold a property to the wife ofone of its executives at undervalue, and another case where a real estate agent sold aproperty in circumstances where there was a conflict of interest.[16] The Associate Judge found there was nothing to prove the purchasers of theParemoremo property were clients of Westpac at the time they purchased this property.Further, the fact they later borrowed from Westpac to complete the purchase could notof itself support a breach of s 176 of the PLA by Westpac. The evidence of the conduct15 High Court judgment, above n 1, at [23].of the other bank and the real estate agent was found to be irrelevant.16 We agree withthese findings, which are self-evident.Were the mortgaged properties sold at undervalue?[17] The Associate Judge found the subject properties were not sold at undervalue.17Westpac had produced expert valuation evidence prepared in October 2017 byregistered valuers, Hollis and Scholefield Ltd (H&S), to support the achieved saleprices. H&S had assessed a market sale value of the Paremoremo property at $800,000and a forced sale value of $650,000–$700,000, including GST). This property sold inFebruary 2018 for $840,000. The other property (the Hillcrest property) was assessedas having a market sale value of $1.4 million and a forced sale value of $1.2 million,including GST. This property sold in February 2018 for $1,622,880.18[18] Ms Zhang relied on earlier valuations given in 2016 from Bayleys Real EstateLtd (Bayleys) which attributed higher values to both properties as well as capitalvaluations for the properties issued in November 2017. Bayleys gave the Paremoremoproperty a market value as at February 2016 of $1,725,000. A capital valuation issuedin November 2017 valued it at $1,275,000. Bayleys' market value assessment for theHillcrest property as at April 2016 was $3,350,000. The November 2017 capitalvaluation valued it at $2,400,000. Ms Zhang told the Associate Judge she had obtainedthis information from a telephone call with Auckland Council.[19] The Associate Judge gave sound reasons why the November 2017 capitalvaluations did not provide an accurate guide to the market value of the subjectproperties.19 He was not critical of H&S for referring to capital valuations dated 2014as these were all that were available in October 2017. He identified errors of approachin the valuations by Bayleys, and found those valuations were out of date by the timethe properties sold.20 Moreover, the Bayleys valuations did not consider a forced saleof either property.2116 At [24]–[27].17 At [52].18 At [30]–[31].19 At [42].20 At [43]–[44].21 At [48].[20] The Associate Judge found there were other problems with the Bayleysvaluation of the Paremoremo property. Bayleys had identified certain improvementsas adding value to this property. However, the improvements were unconsented andunlawful; accordingly, rather than adding value they adversely impacted on theproperty's value.22[21] We are satisfied there was a proper basis for the views the Associate Judgeformed on the available valuations and his preference for relying on those prepared byH&S.[22] The Associate Judge then gave six reasons why he was satisfied Westpac tookall reasonable steps to obtain the best possible price for both properties at the time ofsale in February 2018 and therefore why Ms Zhang had no arguable defence to thesummary judgment.23 We find his reasoning unimpeachable.[23] In short, in relation to the mortgagee sale of the properties we are satisfied theAssociate Judge identified and applied the relevant legal principles.24 He carefullyand properly considered the evidence relevant to Ms Zhang's alleged claim againstWestpac. In our view, his conclusion that this claim had no prospect of success wasthe only available conclusion on the evidence and the law.[24] There is the separate question of Ms Zhang's new evidence on appeal. Weconsider her new affidavit is simply an attempt by her to bolster the arguments shemade before the Associate Judge. The new evidence adds nothing material to whatwas before the Associate Judge. Moreover, in her new affidavit Ms Zhang purports togive opinion evidence to show that the true value of the mortgaged properties washigher than the prices they sold for. She then gives her opinion on how and why theproperties were sold under value, and why the sales were not at arms' length.However, Ms Zhang lacks the necessary qualifications and expertise to give suchevidence. Accordingly, this evidence is inadmissible under s 23 of the Evidence Act22 At [45]–[47].23 At [51]–[52].24 Zhang v Westpac, above n 1, at [21]–[22]. At [40], the Associate Judge found the sale prices ofboth properties were below the values assessed by Bayleys in 2016 and the November 2017 capitalvaluations, but nevertheless higher than Westpac's valuations.2006.25 This necessarily also precludes the new evidence from meeting any of thecriteria for the admission of further evidence on appeal, as discussed above at [8]–[10].The application for discovery[25] The Associate Judge's rejection of Ms Zhang's application for discoveryagainst Westpac has no bearing on the exercise of the adjudication discretion underappeal. The Associate Judge held that, given his finding Ms Zhang did not have anarguable defence or counterclaim against Westpac, the making of a discovery orderwould serve no purpose.26 We agree. The conclusions the Associate Judge reachedon the mortgagee sales of the subsequent properties (with which we agree) renderedMs Zhang's application for discovery otiose.The third party claim against Mr Wu[26] The next question is whether Ms Zhang's alleged claim for breach of contractagainst Mr Wu provides a basis for finding the Associate Judge was wrong toadjudicate her bankrupt. In making his decision, the Associate Judge found thatMs Zhang's claim against Mr Wu was not a ground to refuse or delay Westpac'sadjudication application.27 First, he found this claim had little prospect of success. Inhis view there was little evidence to support the existence of a contract betweenMs Zhang and Mr Wu. Second, Mr Wu was understood to be living in China whichwould make bringing legal proceedings against him in New Zealand difficult. Inaccordance with Ellis v NZI Finance Ltd, the Associate Judge found that a claim thathas no realistic prospect of being heard for a long time should not deprive a creditorof its normal rights, including adjudication of the debtor.28 We agree with thesereasons. Further, we note it would have been open to the Official Assignee to pursuea claim against Mr Wu if satisfied the claim merited pursuit.2925 See discussion in John Katz QC Expert Evidence in Civil Proceedings (Thomson Reuters NZ,Wellington, 2018) at 44.26 High Court judgment, above n 1, at [59].27 At [68].28 Ellis v NZI Finance Ltd CA253/89, 24 July 1990.29 Insolvency Act, sch 1(b) provides that the Assignee may begin, continue, discontinue and defendlegal proceedings relating to the property of the bankrupt.[27] As matters have turned out, the Official Assignee has disclaimed bringing aclaim against Mr Wu on the ground it lacks merit. The new affidavit of Ms Zhang hasattached an email chain of correspondence with the Official Assignee's office relatingto this matter. This circumstance reinforces the wisdom of the Associate Judge'sdecision not to treat the claim against Mr Wu as a ground for refusing adjudication.[28] In her new affidavit Ms Zhang purports to provide opinion evidence on whythe Official Assignee would be unable to pursue a claim against Mr Wu in China.However, she has not established that she has the necessary expertise to provideopinion on matters of Chinese law. Accordingly, her evidence on this topic is alsoinadmissible. Further, we do not understand the Associate Judge to have thought theOfficial Assignee could bring a claim based on Chinese law against Mr Wu in China.[29] Now that the Official Assignee has disclaimed bringing any claim in thiscountry against Mr Wu, Ms Zhang can apply to the High Court pursuant to s 119(2)of the Insolvency Act for the rights to this claim to be vested in her. Thus, theadjudication is not necessarily a bar to her pursuit of the claim against Mr Wu. Insofaras Chinese law may give Chinese nationals the ability to bring claims against eachother for breaches of obligations occurring in foreign countries, that seems to us to bea matter for the Chinese courts to determine. This is not an issue that the AssociateJudge considered, and thus it had no bearing on his decision to adjudicate Ms Zhangbankrupt.[30] It follows that the Associate Judge was right to find the claim against Mr Wuprovided no basis for refusing to adjudicate Ms Zhang bankrupt. His decision in thisrespect cannot be faulted.General considerations relating to conduct of adjudication hearing[31] Ms Zhang also contends that her case before the Associate Judge was rushedand she was not given a proper opportunity to be heard. However, we observe that theAssociate Judge took great trouble to afford Ms Zhang an opportunity to be heard,despite her failure to take legal action at the appropriate times.[32] Ms Zhang also contends that the Associate Judge should have adjourned theadjudication hearing to enable her to apply for legal aid to instruct a lawyer. TheAssociate Judge's initial decision to refuse an adjournment, applied for by Ms Zhangat the beginning of the adjudication hearing, was understandable.30 Ms Zhang hadmany opportunities earlier on to oppose the steps Westpac were taking against her, yetshe failed to act until the very end stage when she was facing a bankruptcy application.By that time, her prior delay and Westpac's entitlement to pursue its remedies againsther provided sound reasons for proceeding. Even so, the Associate Judge permitted athree-day adjournment after the hearing had commenced to enable Ms Zhang toresolve childcare difficulties. He also stood back after considering her variousarguments against adjudication and looked to see if there was anything else standingin her favour.31 He was right to find there was nothing in that regard.[33] Both at the hearing and in her written submissions on appeal Ms Zhang raisedother matters which were outside the notice of appeal, and we find irrelevant to theessential issues raised by her appeal. We see no need to address those other matters.[34] In short, we find no error in the Associate Judge's decision to adjudicateMs Zhang bankrupt.Result[35] The appeal is dismissed.[36] The appellant is to pay the respondent's costs as for a standard appeal on a bandA basis with usual disbursements.Solicitors:Simpson Grierson, Auckland for Respondent30 Zhang v Westpac New Zealand Ltd [2019] NZHC 2319.31 High Court judgment, above n 1, at [69].