IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY

I TE KŌTI MATUA O AOTEAROA TE WHANGANUI-A-TARA ROHE	
CIV-2020-485-743
[2021] NZHC 1678	

UNDER	the Insolvency Act 2006	
IN THE MATTER	of the bankruptcy of Yu Hung Chang	
BETWEEN	L F KENNA TRUSTEE LIMITED
Judgment Creditor	
AND	YU HUNG CHANG
Judgment Debtor	

Hearing:	6 July 2021	
Appearances:	D Bleier for judgment creditor P Barrett for judgment debtor	
Judgment:	6 July 2021	

EX TEMPORE JUDGMENT OF ASSOCIATE JUDGE JOHNSTON

[1]	This is an application pursuant to pt 2, sub-pt 2 of the Insolvency Act 2006 by the judgment creditor, LF Kenna Trustee Ltd for an order bankrupting the judgment debtor, Yu Hung Chang.

[2]	On 23 March 2020 in the District Court at Lower Hutt summary judgment was entered by default in favour of the judgment creditor against the judgment debtor for
$104,765.11 (inclusive of costs and disbursements).

[3]	At the judgment creditor’s request, this Court issued a bankruptcy notice on 15 December 2020.

L F KENNA TRUSTEE LIMITED v CHANG [2021] NZHC 1678 [6 July 2021]

[4]	On 18 February 2021 this Court granted the judgment creditor leave to serve the bankruptcy notice (and other documentation required to be served) other than by personal service. The method of service authorised involved fixing a copy of the relevant document or documents to the front door of the property at the judgment debtor’s last known address, emailing copies of the same to the judgment debtor and delivering copies at his place of business.

[5]	By this means, between 19 and 24 February 2021, the judgment debtor was served with the bankruptcy notice and the sealed order for directions as to service.

[6]	The judgment debtor took no steps in response to the service of the bankruptcy notice.

[7]	Between 28 and 29 August 2020 the judgment debtor was served with the originating documentation in this proceeding — creditor’s application; affidavit in support; summons to debtor.

[8]	The affidavit of service of the originating documentation appears to contain an error relating to the date the documentation was served on the judgment debtor at his place of business, but nothing turns on this as the judgment debtor does not question receipt of the originating documentation.

[9]	By notice dated 31 May 2021, and filed and served the same day, the judgment debtor gave notice of his intention to oppose the judgment creditor’s application, the sole stated ground of opposition being that it would not be just and equitable for him to be adjudicated bankrupt.1

[10]	The judgment debtor’s affidavit in support of his opposition describes the background to the underlying District Court proceeding in which judgment was entered against him, and which is therefore the basis for this bankruptcy proceeding. In the end, the thrust of the judgment debtor’s evidence is that he was distracted by a range of things at the relevant time such as the looming global pandemic, running his business and caring for his family. Although he does not say so directly, I infer that

1	Insolvency Act 2006, s 37(c).

he was so distracted that he did not give sufficient attention to the documentation served on him in the proceeding and that had he done so he would have been in a position to resist the application for summary judgment and successfully defend the substantive claim.

[11]	That, as far as I can see, is the basis for the judgment debtor’s opposition to the judgment creditor’s application. In the course of his submissions Mr Barratt indicated that the judgment debtor’s decision not to oppose the summary judgment application or defend the proceeding involved taking a conscious risk. If so, it was not a wise decision.

[12]	The difficulty for the judgment debtor is two-fold.

[13]	First, and most importantly, not only did he not oppose the summary judgment application or defend the proceeding, he did not challenge the default judgment by moving to set it aside.2 Whilst, even at this stage, under s 37 of the Insolvency Act it is open to this Court to consider the merits of the underlying judgment, there needs to be a proper basis for doing so.3 Although the categories of cases where a court will go behind a judgment are not exhaustively defined, it has been said there should be circumstances suggesting fraud, collusion, or miscarriage of justice.4 There is no such basis here.

[14]	Second, in any event, although Mr Barratt said everything that could possibly be said on the judgment debtor’s behalf in this regard, and reviewed the defences that he said may have been available to the judgment debtor, I am not convinced that the judgment debtor could have resisted the judgment creditor’s summary judgment application or successfully defended the substantive proceedings.

[15]	In the end, the judgment debtor asks the Court for an indulgence, having regard to his personal circumstances.

2	He also failed to take any steps in relation to the service of the bankruptcy notice prior to the commencement of the bankruptcy notice of this proceeding of course.
3	Keung v Official Assignee [2020] NZHC 32 at [51].
4	Re Flateau ex p Scotch Whisky Distillers Ltd (1888) 22 QBD 83 (EWCA) at 85.

[16]	There is perhaps one feature of this case which might be viewed as out of the ordinary. It is fair to say that at least since early last year the judgment debtor, as a restauranteur, will have been facing unprecedented difficulties within his business which must have been distracting to say the least. It may therefore be more understandable than usual that he did not respond to the judgment creditors’ bankruptcy notice. To that extent, his plea for an indulgence may justify some sympathy. I propose to grant some indulgence to the judgment debtor in the order made.

[17]	On the application of the judgment creditor there will be an order bankrupting the judgment debtor, Yu Hung Chang. The judgment creditor will have its costs of this proceeding on a 2B basis, together with such disbursements as may be allowed by the Registrar.

[18]	The order at [17] above will come into effect at 4.00 pm on Tuesday 20 July 2021, but only if, by that time and date, the judgment debtor has not paid to the judgment creditor’s solicitor’s trust account, in cleared funds, the full sum of the judgment debt as referred to earlier, together with the full amount of scale costs and disbursements in this proceeding.

Associate Judge Johnston

Solicitors:
Carter Chung, Wellington for judgment creditor Morrison Kent, Wellington for judgment debtor