IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE	
CIV-2020-404-000696
[2020] NZHC 2416	

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:	On the papers	
Counsel:	G E Slevin for Applicant
A L Harlowe for Mr Bin Lu, an Interested Party
K G Davenport QC for Ms Weihua Zhang, an Interested Party	
Judgment:	16 September 2020	

JUDGMENT OF WYLIE J
[Application for leave to appeal]

This judgment was delivered by Justice Wylie On 16 September 2020 at 4.00 pm
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 2416 [16 September 2020]

Introduction

[1]	The applicant, Jianping Wang (Mr Wang), seeks leave to appeal my oral ruling of 30 July 2020 declining counsel’s application to treat an originating application filed on 7 May 2020, as also being an application that the estate of Jihong Lu (Mr Lu) be administered as an insolvent estate under Part 6 of the Insolvency Act 2006.

[2]	The application for leave to appeal is opposed by Bin Lu (Mr Lu’s brother and an interested party) and Weihua Zhang (Mr Lu’s mother and also an interested party).

Factual background

[3]	Mr Wang is a substantial creditor of Mr Lu, having obtained summary judgment against him in the sum of $1.5 million together with interest on 6 August 2019. Mr Wang has taken various steps to try and recover the monies owing to him. He has been partially successful but there is still a substantial sum outstanding.

[4]	Mr Lu died in Taiwan on 22 January 2020. He was a New Zealand citizen. He left a will dated 7 January 2020, appointing Bin Lu as his administrator. Alternative administrators were appointed in the event that Bin Lu was unavailable. In his will, Mr Lu made provision for the distribution of his property, which he described as including 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 specific various creditors who he listed. The named creditors included Bin Lu and Weihua Zhang (his mother). There was then provision for the distribution of 50 per cent of the residue of the estate to his son and daughter. The will then read 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.

Eight legatees including Weihua Zhang, his nephews, his aunts, his sister-in-law and one other person, were then listed. The will then stated:

In the event of insufficient amount, the legacy shall be entrusted to the executor for distribution in proportion to the eight individuals listed above.

[5]	Mr Wang is not one of the listed creditors. Nor is he one of the named legatees.

[6]	Bin Lu has not as yet sought to be appointed administrator of his late brother’s estate.

Procedural background

[7]	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’s Estate” on 7 May 2020. Relevantly, Mr Wang applied for an order granting him leave to file the application within four months of death, pursuant to s 381(4) of the Insolvency Act. He also sought orders as to service on Weihua Zhang and Bin Lu. He then sought that Peter Ellis should be appointed pursuant to s 385 of the Insolvency Act to administer Mr Lu’s estate.

[8]	Orders for service were made on Weihua Zhang and Bin Lu, and they filed notices of opposition opposing the application.

[9]	When the application was called before me on 30 July 2020, I discussed with counsel appearing for Mr Wang that the power to appoint the assignee, the Public Trust or some other appropriate person to administer an insolvent deceased’s estate could only be exercised where an application had been filed for an order to administer the estate under Part 6 of the Insolvency Act, and where the Court is satisfied that the estate is likely to be better administered by somebody other than the named administrator.

[10]	Counsel for Mr Wang then made oral application for an order that the application filed on 7 May 2020 should also be treated as an application that the late Mr Wu’s estate be administered under Part 6 of the Insolvency Act.

[11]	The application was opposed by both Ms Davenport QC, for Weihua Zhang, and Mr Harlowe, for 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 legatees named in the late Mr Lu’s will.

[12]	In an oral ruling on the day, I declined the application to treat the application filed as also being an application to administer the estate under Part 6 of the Insolvency Act.

[13]	I gave my reasons for that ruling on the following day.1

(a)	I referred to the relevant statutory provisions, noting that it is the duty of an appointee to immediately proceed to realise, administer and distribute the estate in accordance with the laws and practices of bankruptcy, and that there are various priorities established by the Act. If there is any surplus remaining, it must be paid to the administrator of any property of the deceased which does not form part of the insolvent deceased’s estate, and 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 Court.

(b)	I observed that it is not part of the duty of an appointee to divide any surplus in accordance with the trusts of the deceased’s will and that the operation of the will is suspended during the administration of the deceased’s estate as an insolvent deceased’s estate. I concluded that the consequences of an order directing that an estate be administered of Part 6 of the Act are potentially far-reaching.

(c)	I commented that the High Court Rules require that an application for an order to administer an estate under Part 6 of the Insolvency Act must be by way of originating application, and that normally one would expect that an originating application on notice would be filed, complying with Part 19 of the High Court Rules. Normally the Court would also expect a separate interlocutory application, without notice, for directions as to service.

(d)	I observed that while Bin Lu and Weihua Zhang had been served, directions in that regard were made when the late Mr Lu’s will was not

1	Re Estate of Jihong Lu [2020] NZHC 1894.

available. The will had since become available and it was now clear that there are a number of other persons interested under the will, both creditors and legatees. It was my view that 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’s estate under Part 6 of the Insolvency Act. It was likely that they were unaware of the proceedings. Because of the potential prejudice to them, I declined the oral application to treat the application filed as also being for an order that the estate be administered under Part 6 of the Act.

Submissions

[14]	Mr Slevin, for Mr Wang, submitted that it is arguable that I erred in law in declining the oral application. The late Mr Lu left a will and appointed an executor and administrator, who has been served and has deposed as to his intention to apply for probate. He argued that the estate is accordingly represented by the deceased’s nominee, who is opposing the application on behalf of the estate. He submitted that there is no evidence or demonstrable prospect of any prejudice to any beneficiary or creditor named in the deceased’s will, and that accordingly the oral application to amend should have been granted. He also suggested that Mr Wang is likely to be prejudiced if leave to appeal is declined because he will have to apply afresh, make application for directions as to service, and (assuming that whoever deals with that application agrees with the views I have expressed) then endeavour to locate and serve the persons named as creditors and beneficiaries in the will. Time and resources will be expended in making that effort, and Mr Wang will have to do so, before he can apply for substituted service. Mr Slevin commented that there is no precedent supporting my conclusion that an application under Part 6 of the Insolvency Act should be served on the beneficiaries under a will and on the deceased’s creditors, and that my decision could have a precedential effect, causing unnecessary costs and delay for future creditors who might wish to make application under Part 6.

[15]	Ms Davenport and Mr Harlowe argued that my decision declining the oral application was correct. They noted that Mr Wang could make a fresh originating application, in the correct form, and that as a result any appeal is nugatory. They

suggested that it is unfair on their respective clients that they should incur the expense associated with an appeal because Mr Wang’s initial application was faulty. It was submitted that the estate is not large, and that any appeal will add unnecessarily to the costs that the estate is incurring. Further, they argued that the high threshold for the grant of leave to appeal is not satisfied.

Analysis

[16]	The appeal is brought pursuant to s 56 of the Senior Courts Act 2016. Relevantly, it provides as follows:

56 Jurisdiction

(1)	The Court of Appeal may hear and determine appeals—

(a)	from a judgment, decree, or order of the High Court:

…

(2)	Subsection (1) is subject to subsections (3) and (5) …

(3)	No appeal, except an appeal under subsection (4), lies from any order or decision of the High Court made on an interlocutory application in respect of any civil proceeding unless leave to appeal to the Court of Appeal is given by the High Court on application made within 20 working days after the date of that order or decision or within any further time that the High Court may allow.

…

(5)	If the High Court refuses leave to appeal under subsection (3), the Court of Appeal may grant that leave on application made to the Court of Appeal within 20 working days after the date of the refusal of leave by the High Court.

(6)	If leave to appeal under subsection (3) or (5) is refused in respect of an order or a decision of the High Court made on an interlocutory application, nothing in this section prevents any point raised in the application for leave to appeal from being raised in an appeal against the substantive High Court decision.

[17]	It was common ground that there is a high threshold for the grant of leave to appeal. A bald allegation of error of law or fact will generally be insufficient. Rather, an applicant should raise an arguable error. Further, leave should only be granted where the circumstances warrant the further delay associated with the appeal, or where the alleged error is of general or public importance that requires determination by a

higher Court, is otherwise of sufficient importance to the applicant to outweigh the lack of any general or is of precedential importance.2 The requirement for leave serves as a filtering mechanism, and appeals should only be granted where the significance or implications of an arguable error of fact or law, either for the particular case or for the application or as a matter of precedent, warrants the further delay which the appeal process involves.3

[18]	Normally one would not expect that a decision declining an oral application to amend an originating application would raise an issue of significance or have implications beyond the instant case. One would expect that when such application is declined, the applicant would simply bring a fresh originating application, correcting the omission which necessitated the oral application. That could generally be done promptly and the delays inherent in an appeal would weigh heavily against the grant of leave to appeal the decision declining the oral application.

[19]	Here, however, I declined the oral application for one reason only – that the creditors and beneficiaries named in the late Mr Lu’s will had not been served and because I considered that there could be prejudice to them. If a fresh and compliant originating application is filed, Mr Wang will have to apply for directions as to service and the same issue will arise– should named beneficiaries and creditors be served? In my view, there is precedential value in having that issue resolved. I agree with Mr Slevin’s submission that it is important for creditors considering making an application under Part 6 of the Insolvency Act to know which parties are entitled to receive notice of the application.

[20]	I accept that there is an arguable case that it is not necessary to serve beneficiaries and creditors named in the will. Mr Slevin in his submissions pointed to two authorities – both of considerable antiquity and in the United Kingdom4 – which suggest that, in a claim brought by a creditor for the administration of a deceased’s estate, the personal representative is the only necessary party and that residuary

2	Finewood Upholstery Ltd v Vaughan [2017] NZHC 1679; A v Minister of Internal Affairs [2017] NZHC 887; Li v Chief Executive, Ministry of Business, Innovation and Employment [2018] NZHC 1171.
3	Ngai Te Hapu Inc v Bay of Plenty Regional Council [2018] NZCA 291.
4	Re Watts, Smith v Watts (1882) 22 Ch D 5 (CA); Re Youngs, Doggett v Revett (1885) 30 Ch D 421 (CA).

legatees do not need to be made parties. Unfortunately, but understandably, those authorities were not brought to my attention at the time I made the oral ruling. Whether they apply in New Zealand in 2020 raises arguable issues.

[21]	There will be some delay associated with the bringing of an appeal. That prejudices not only Mr Wang but also those interested under the will. Nevertheless, I suspect that this matter could well be suitable for the Court of Appeal’s fast track procedure, and leave can be granted subject to a condition that Mr Wang applies to the Court of Appeal for a direction that the appeal be dealt with on a fast track basis.

[22]	There is potential cost to the estate, but this can be dealt with by way of a costs order, which can take into account the fact that the appeal is necessitated by omissions in the initial originating application filed.

[23]	Accordingly, I grant Mr Wang leave to appeal to the Court of Appeal my oral ruling made on 30 July 2020, declining the oral application advanced on his behalf. The grant of leave is conditional upon Mr Wang making an application to the Court of Appeal to have the appeal dealt with under the fast track procedure, with such application to be made within 10 working days of the date of this judgment.

Wylie J