Bank of New Zealand v Lee

[2018] NZHC 2901

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2018-404-1651 [2018] NZHC 2901

UNDER	the Insolvency Act 2006
IN THE MATTER	of the bankruptcy of JUNHO LEE
BETWEEN	BANK OF NEW ZEALAND Judgment Creditor
AND	JUNHO LEE Judgment Debtor

Hearing:	8 November 2018
Appearances:	Mr Nolen for the Applicant Debtor Mr Embling for the Respondent Creditor
Judgment:	8 November 2018

ORAL JUDGMENT OF ASSOCIATE JUDGE SMITH

This oral judgment was delivered by me on 8 November 2018 at 3.00pm, pursuant to r 11.5 of the High Court Rules

Registrar/Deputy Registrar

Solicitors / Counsel: MinterEllisonRuddWatts, Auckland K3 Legal Ltd, Auckland

BANK OF NEW ZEALAND v LEE [2018] NZHC 2901 [8 November 2018]

[1]      The respondent (the Bank) issued a bankruptcy notice against the debtor (Mr Lee) on 31 July 2018. On 18 October 2018 Mr Lee applied to set aside the Bank's bankruptcy notice.

[2]      The Bank has filed a notice of opposition, in which it contends that the Court does not have jurisdiction to approve a proposal made by Mr Lee in his application. The Bank says that Mr Lee's ability to comply with the proposal if approved would in any event be uncertain, and is unsupported by any evidence.  Nor does the proposal comply with the Insolvency Act 2006 (the Act). No cross claim, of the kind described in s 17 of the Act, has been pleaded in Mr Lee's application.

[3]      Returning to the application to set aside the bankruptcy notice, Mr Lee says that he has no assets of any value exceeding $1,000, and the Bank will receive no money towards the judgment debt if he is bankrupted. He currently has no guaranteed income, but has the opportunity to secure employment with a family business if he does not commit an act of bankruptcy.

[4]      Mr Lee says that he was unaware that the Bank had obtained judgment against him until he received the bankruptcy notice.

[5]      In an affidavit filed in support, Mr Lee said that he wants to pay the debt, but presently has limited means to do that.  He said that he would be able to pay $1,000 a month initially, but that he was confident that he could pay the debt over time and believed that he would be well placed to increase the monthly payments within approximately six months.  He said that he also wanted more time to discuss with his family the prospect of borrowing from them to pay some of the debt in larger amounts than he could presently afford.

[6]      The case was called before me for the first time this morning, and Mr Nolen initially asked for timetable orders to be made for a defended hearing.

[7]      However, I indicated my view to Mr Nolen that the application as formulated appeared to have no prospect of success. I referred him to the Court of Appeal decision

in Commissioner of Inland Revenue v Wilson,1 and I stood the matter down to allow him time to consider the case.

[8]      The principal effect of Commissioner of Inland Revenue v Wilson for present purposes is that the Court has no power to approve a compromise put forward by a debtor in an application to set aside a bankruptcy notice, where the creditor has not accepted that proposal.  As the Court of Appeal put it in Commissioner of Inland Revenue v Wilson:

[30]      We summarise thus far.  The meaning of the words in s 29(1)(b)(iii) of the Insolvency Act is that the option of compromising the debt to the satisfaction of the Court or the creditor (as the case may be) must be spelt out to the debtor in the bankruptcy notice.  But these words do not confer on the Court power to approve a compromise. That power resides in s 333 in subpt 2 of pt 5 of the Insolvency Act.

[9]      Mr Lee does not challenge the judgment on which the bankruptcy notice is based, and he has not advanced any cross-claim which might provide grounds for an order setting aside the bankruptcy notice under s 17 of the Act. Nor has he raised any grounds on which the bankruptcy notice might be set aside as an abuse of process, or otherwise in the Court's inherent jurisdiction.

[10]     Mr Nolen conceded when the case was re-called that Commissioner of Inland Revenue v Wilson appears to provide an insurmountable obstacle to the application. He asked the Court to adjourn the matter for one week, to see if some arrangement could be worked out with the creditor.  Mr Embling opposed any adjournment.

[11]     In my view, and having regard to Commissioner of Inland Revenue v Wilson, the application to set aside the bankruptcy notice has no prospect of success, and I am not prepared to adjourn it. The application is dismissed accordingly.  I make an order for costs to the judgment creditor on a 2B basis, with disbursements to be fixed by the Registrar.

Associate Judge Smith

1      Commissioner of Inland Revenue v Wilson [2017] NZCA 100.