IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE	
CIV-2024-404-000369
[2024] NZHC 3380	

BETWEEN	DOWN UNDER DEVELOPMENTS LIMITED
Judgment Creditor	
AND	EE KUOH LAU (also known as Augustine Lau)
Judgment Debtor	

Hearing:	11 November 2024	
Appearances:	M Singh for the Judgment Creditor Judgment Debtor in Person (via VMR)
R Parmenter for HND Holding Ltd, creditor in support M Singh for Jianzhong Zhu, creditor in support	
Judgment:	15 November 2024	

JUDGMENT OF ASSOCIATE JUDGE GARDINER

This judgment was delivered by me on 15 November 2024 at 11.45 a.m. pursuant to Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar Date.......................................

Solicitors:

Glaister Ennor, Auckland Copy to: Ee Kuoh Lau

DOWN UNDER DEVELOPMENTS LTD v LAU (also known as Augustine Lau) [2024] NZHC 3380 [15 November 2024]

Introduction

[1]	The judgment creditor, Down Under Developments Ltd (DUD), sought the adjudication of the judgment debtor, Ee Kuoh (Augustine) Lau, relying on an unsatisfied bankruptcy notice based on an order for costs made by this Court.

[2]	Mr Lau opposed the application on the grounds that he did not receive the bankruptcy notice or creditor’s application because he has been on remand in prison since 1 March 2024; he intended to apply to set aside the costs judgment; he had a cross-claim against DUD; and/or he was able to pay the judgment debt.

[3]	Two other creditors supported DUD’s application, also relying on unsatisfied costs orders. They are HND Holding Ltd (HND Holding)1 and Jianzhong Zhu.2

[4]	As the statutory criteria for bankruptcy are met, the issue was whether the Court should exercise its discretion to refuse to adjudicate Mr Lau bankrupt.

[5]	After hearing  submissions  from  Mr  Singh,  Mr  Parmenter,  and  Mr  Lau,  I decided not to exercise the discretion to refuse to make an order. I made an order adjudicating Mr Lau bankrupt. This judgment gives my reasons.

Background

[6]	Mr Lau registered a caveat against a property owned by DUD. DUD was required to apply for the caveat to be removed. The caveat was eventually removed by consent, but Associate Judge Brittain ordered Mr Lau to pay DUD’s costs. The Associate Judge’s minute dated 13 February 2024 records that:3
[2]	Counsel for the applicant advises that the caveat was removed by consent, and the applicant has been able to complete its sale of the property in question.

[3]	The applicant seeks costs, on the grounds that there was no basis for the respondent to lodge the caveat against the title. The affidavit evidence filed

1	Appearance in Support of Application to Adjudicate Bankrupt, dated 13 June 2024.
2	Notice of Appearance in Support of Creditor’s Application for Adjudication Order, dated 30 July 2024.
3	Down Under Developments Ltd v Lau HC Auckland CIV-2024-404-255, 13 February 2024 (Minute).

in support of  the  application  for  removal  of  the  caveat  confirms  that  Mr Lau had no caveatable interest in the property.

[4]	On that basis, I order Mr Lau  to  pay  the  applicant’s  costs  on  a 2B basis together with a 50% uplift, and disbursements as fixed by the Court.

[7]	A costs order for $12,062.00 was sealed on 13 February 2024.

[8]	On 9 April 2024, DUD applied without notice for orders for substituted service of a bankruptcy notice, a creditor’s application for adjudication, and associated documents on Mr Lau. Mr Singh explains that at the time, DUD did not know that Mr Lau was on remand.

[9]	On 10 April 2024, Associate Judge Sussock made orders for substituted service.4

[10]	On 23 April 2024, DUD served a bankruptcy notice dated 23 February 2024 on Mr Lau pursuant to the orders for substituted service.5 The notice required Mr Lau to pay the amount due under the sealed costs order.

[11]	On 29 May 2024, DUD filed a creditor’s application for adjudication, an affidavit in support, and a summons to debtor with the Court. These documents were served on Mr Lau on 19 June 2024, also in accordance with the substituted service orders.6

[12]	On 29 July 2024, Mr Lau (through a solicitor assisting him, Mr Han of Essence Law) wrote to the Court and counsel, advising that Mr Lau had been on remand since 29 February 2024 and the adjudication application had only come to his attention “last week”. Mr Han requested that DUD agree to a ten-day adjournment. DUD refused.

[13]	On 31 July 2024, Mr Han advised that Mr Lau was arranging for payment of the costs order by 2 September 2024.

4	Down Under Developments Ltd v Lau HC Auckland CIV-2024-004-369, 10 April 2024 (Minute); Sealed interlocutory orders for substituted service dated 10 April 2024.
5	Affidavit of Yawetorah Milo Faifai Kamuta as to Service, dated 26 April 2024; and Affidavit of Jordan Peter Quintal as to Service, dated 1 May 2024.
6	Affidavit of Jordan Peter Quintal as to Service, dated 20 June 2024; and Affidavit of Yawetorah Milo Faifai Kamuta as to Service, dated 26 June 2024.

[14]	On 1 August 2024, at the first call of the application, Mr Lau appeared by AVL. He had filed several handwritten documents and requested an adjournment. Associate Judge Sussock granted the adjournment and ordered Mr Lau to file any notice of opposition and affidavit in support by 9 August 2024.7 The Associate Judge also set down the application for a hearing if payment was not made by 2 September 2024.

[15]	On 2 August 2024, DUD’s counsel supplied Mr Han with relevant documents in the proceeding, including Associate Judge Brittain’s minute, copies of the bankruptcy notice, and the sealed costs order.

[16]	On 8 August 2024, Mr Lau filed a typed notice of opposition and affidavit through Mr Han. His reasons for opposing the application were:

(a)	He was not served with the bankruptcy notice or creditor’s application because he was held on remand in prison from 1 March 2024. He said Mr Han had only received the documents on 30 July 2024, and he did not receive them until two days later.

(b)	He would either pay the debt by 2 September 2024, or apply to the Court to set aside the costs judgment as it was made without him being present or represented by counsel.

(c)	To pay the judgment debt, he would refinance the mortgage over a property in Half Moon Bay he shared with his ex-partner, or obtain money from a family member overseas.

Legal Principles

[17]	The criteria for when a creditor may apply for the debtor’s adjudication are set out in s 13 of the Insolvency Act 2006 (the Act):

13	When creditor may apply for debtor’s adjudication

A creditor may apply for a debtor to be adjudicated bankrupt if—

7	Down Under Developments Ltd v Lau HC Auckland CIV-2024-404-369, 1 August 2024 (Minute).

(a)	the debtor owes the creditor $1,000 or more or, if 2 or more creditors join in the application, the debtor owes a total of
$1,000 or more to those creditors between them; and

(b)	the debtor has committed an act of bankruptcy within the period of 3 months before the filing of the application; and

(c)	the debt is a certain amount; and

(d)	the debt is payable either immediately or at a date in the future that is certain.

[18]	Under s 17, a debtor commits an act of bankruptcy (as required under s 13(b)) if a creditor has obtained a final judgment or final order against the debtor for any amount, the execution of which has not been halted by a court, and the debtor, having been served with a bankruptcy notice, has not complied with the requirements of the notice or otherwise satisfied the Court that he or she has a cross-claim against the creditor within the required timeframe.

[19]	Section 36 provides that the Court may, at its discretion, adjudicate the debtor bankrupt if the creditor has established the requirements set out in s 13. It has been said that once the formal requirements for adjudication (now set out in s 13) are made out, the judgment creditor is prima facie entitled to an adjudication order.8 This Court has said:9
Whilst the petitioning creditor does not have an automatic right to obtain an order of adjudication, nevertheless the onus in those circumstances is on the debtor to persuade the Court that an order should not be made…

[20]	The Court may, in its discretion, refuse adjudication for the reasons set out in s 37 of the Act. Section 37 provides:

37	Court may refuse adjudication

The court may, at its discretion, refuse to adjudicate the debtor bankrupt if—

(a)	the applicant creditor has not established the requirements set out in section 13; or

(b)	the debtor is able to pay his or her debts; or

8	See Baker v Westpac Banking Corp CA212/92, 13 July 1993 at 3, 4 and 5–6; and Re Epirosa HC Wellington B498/91, 6 March 1992 at 5 and 8.
9	Kiwibank Ltd v Hutchin [2015] NZHC 1518 at [26].

(c)	it is just and equitable that the court does not make an order of adjudication; or

(d)	for any other reason an order of adjudication should not be made.

[21]	The Court of Appeal has observed that s 37 confers a “wide discretion” informed by various factors.10 Relevant factors include:11

(a)	the interests of those directly concerned, including the petitioner, other creditors, and the debtor;

(b)	the wider public interest, including the public interest in exposing and controlling the insolvent debtor;

(c)	whether adjudication is conducive or detrimental to commercial morality; and

(d)	the potential for further investigation procedures to be made available to creditors by the bankruptcy.

Are the requirements of s 13 met?

[22]	The requirements of s 13 of the Act are met in this case:

(a)	Mr Lau owes DUD a debt of $12,062.00; namely the costs order this Court made against him on 13 February 2024.

(b)	Mr Lau committed an act of bankruptcy within the period of three months before DUD filed its application on 29 May 2024 by not complying with the bankruptcy notice deemed to have been served on him on 23 April 2024 pursuant to the orders for substituted service.     I consider Mr Lau’s claim that he did not receive the bankruptcy notice

10	Body Corporate 68792 v Memelink [2018] NZCA 509, [2019] NZAR 127 at [15], citing Re Epirosa, above n 8, at 5–8.
11	Re Fontein, ex parte Bank of New Zealand HC Auckland CIV-2009-404-7769, 22 November 2010 at [8], citing Eide v Colonial Mutual Life Assurance Society Ltd [1998] 3 NZLR 632 (HC) at 4–5.

when it was served pursuant to these orders as a matter going to the Court’s discretion, below.

(c)	The debt is for a certain amount.

(d)	The debt is immediately payable.

[23]	Consequently, the issue is whether the Court should exercise its discretion to refuse to adjudicate Mr Lau bankrupt. As noted above, the onus is on Mr Lau to persuade the Court that an order should not be made.

The Court’s discretion

[24]	Mr Lau’s original grounds for why an order ought not to be made are set out above at [16]. On the day before the hearing, Mr Lau filed written submissions and a further affidavit that addressed different grounds. These are that:

(a)	he intends to apply to set aside the costs judgment once he receives information he has requested from DUD;

(b)	he has commenced proceedings against DUD in the District Court;

(c)	he has commenced proceedings in this Court against the creditors in support; and

(d)	he will be able to pay the judgment debt from the proceeds of litigation against third parties or from his income when he is released from prison.

[25]	I now address each point raised by Mr Lau.

Not served with bankruptcy notice or creditor’s application

[26]	Mr Lau says that service of these documents was ineffective as he has been on remand in prison since 1 March 2024. He says that he did not receive or become aware

of the bankruptcy notice or the creditor’s application until 30 July 2024 when Mr Han received the documents.

[27]	As noted, this Court made orders dispensing with personal service of the bankruptcy notice, creditor’s application and related documents. The Court ordered that service of the documents could be effected by affixing the documents, together with a copy of the orders, to the driveway gate at the residence Mr Lau gave as his address for service on the caveat instrument; and by sending the documents and the orders to Mr Lau at the email address he had used to communicate with the Court and DUD’s counsel about the caveat. The orders provided that the documents were deemed to be served one working day after completion of the latter of these events.

[28]	The orders for substituted service have not been appealed or set aside. DUD effected service according to the orders. Accordingly, the bankruptcy notice is deemed to have been served on Mr Lau on 23 April 2024. The creditor’s application is deemed to have been served on him on 19 June 2024.

[29]	However, I must consider whether Mr Lau has been prejudiced if he did not become aware of the documents until 29 or 30 July 2024, as he contends.12

[30]	Any prejudice to Mr Lau if he did not receive the creditor’s application when it was served upon him was addressed by the Court at the first call on 1 August 2024 by granting an adjournment and giving Mr Lau leave to file a further notice of opposition and supporting affidavit (by 9 August 2024). On 2 August 2024, DUD’s counsel sent Mr Lau, through Mr Han, a complete bundle of the documents in the proceeding. Mr Lau has had 14 weeks since then to pay the debt (as he indicated he would do), or to prepare for this hearing.

[31]	Mr Lau might have been prejudiced by not receiving the bankruptcy notice when it was served on 23 April 2024 if he had grounds for having the bankruptcy

12 Mr Han sent an email to the Court and DUD’s counsel on 29 July 2024 advising that Mr Lau had been on remand and that the adjudication application did not come to his attention until “last week”. In his notice of opposition and affidavit, Mr Lau states that Mr Han sent him the documents on 30 July 2024, and that the operations of Mt Eden Corrections Facility meant he was likely to receive these about two working days later.

notice set aside. The Court may set aside a bankruptcy notice if a debtor satisfies the Court that they have a genuine, triable cross-claim (a counterclaim, set-off or cross- demand) that is equal to or greater than the judgment debt or amount the debtor has been ordered to pay, and that could not have been used as a defence in the action in which the relevant judgment was given.13 Any such application must be made within 10 working days of service of the bankruptcy notice.14

[32]	In his written submissions and further affidavit, Mr Lau says that he has filed proceedings in the District Court against DUD as first defendant and a company called ArchPoint Ltd (Archpoint) as second defendant. This raises the question: is this a genuine, triable cross-claim that would have provided a basis to have the bankruptcy notice set aside?

[33]	It is unclear whether this proceeding has been accepted for filing by the District Court. Mr Lau has put in evidence a handwritten statement of claim bearing a stamp indicating that it was filed electronically on 20 August 2024. However, correspondence from the District Court Registrar confirmed that the Court rejected the statement of claim on 29 August 2024. In his updating affidavit, Mr Lau includes an email from Mr Han dated 30 October 2024 purporting to file a further statement of claim and application for a fee waiver with the District Court.

[34]	In the statement of claim, Mr Lau pleads that DUD owed ArchPoint fees under a service agreement and that ArchPoint assigned the service agreement to Mr Lau in February 2024. Mr Singh confirms that DUD, which buys and on-sells properties, engaged ArchPoint to prepare resource consent plans for it and that a dispute arose between DUD and ArchPoint about ArchPoint’s fees.

[35]	The claim pleads that Mr Lau lodged the caveat against the title of DUD’s property relying on the assigned service agreement between DUD and Archpoint, and that two days before the hearing of DUD’s application to have the caveat removed, Archpoint’s lawyers asked him to assign the service agreement back to Archpoint and to remove the caveat. Mr Lau claims that DUD is liable “to pay all the damages under

13	Insolvency Act 2006, s 17(7); and Clark v UDC Finance Ltd [1985] 2 NZLR 636 (HC) at 637.
14	High Court Rules 2016, r 24.8(2), 24.10 and Form B 2.

the service agreement” and that ArchPoint owed him a “duty of care” after he assigned the service agreement back to it. In his prayer for relief, he seeks judgment against DUD and Archpoint for “debt in sum similar to costs [ordered against him in the caveat proceeding] or related files”, and exemplary damages of $20,000.

[36]	This statement of claim does not disclose a recognisable cause of action against DUD. The Court awarded DUD increased costs on its application to remove the caveat lodged by Mr Lau because it was apparent from the evidence that Mr Lau did not have a caveatable interest in the property. The award was to compensate DUD for the legal costs it incurred in applying to have the caveat removed. Mr Lau’s claim in the District Court that DUD is now liable to pay him an amount equivalent to these costs is obviously without merit.

[37]	Therefore, I am satisfied that Mr Lau was not deprived of the opportunity to have the bankruptcy notice set aside because he has a genuine, triable cross-claim against DUD for an amount equal to or greater than the costs judgment.

[38]	Further, the statement of claim does not present a reason for the Court to refuse to adjudicate Mr Lau bankrupt.

Will apply to set aside the costs judgment

[39]	Mr Lau says that he intends to apply to set aside the costs judgment once he receives information from DUD about its litigation with ArchPoint. He refers to a written request he made to DUD’s counsel on 3 October 2024 for copies of the discovery in the litigation between DUD and ArchPoint, and for information relating to the caveat proceeding involving one of the creditors in support, Ms Zhu, which led to the costs order against him.

[40]	Mr Lau submits that if DUD was the successful party in the litigation with ArchPoint, that will provide him with grounds to have the costs judgment set aside or have the award against him reduced to costs on a 2A basis. He says this result follows from the fact that the caveat was withdrawn voluntarily. He submits that if ArchPoint was the successful party, then he was entitled to lodge the caveat and that will provide him with grounds to have the costs judgment set aside or to appeal the judgment.

[41]	The Court will not investigate the underlying judgment when considering an application for adjudication.15 It will not embark upon an exercise akin to a rehearing of the matter which gave rise to the underlying judgment or engage in a process akin to an appeal. However, if the debtor persuades the Court that there is a sound reason to doubt the validity of the underlying judgment, the Court may respond by allowing time for reconsideration of the judgment elsewhere, or by exercising its discretion not to make an adjudication order.16

[42]	Mr Lau has not persuaded me that there is a sound reason to doubt the validity of the costs judgment underlying DUD’s application. The costs order was made at the call of the caveat application in the Caveats List on 13 February 2024 after the caveat was removed by consent. As above, the Associate Judge ordered Mr Lau to pay DUD’s costs on a 2B basis with a 50 per cent uplift and disbursements. He did so after concluding that “[t]he affidavit evidence filed in support of the application for removal of the caveat confirms that Mr Lau had no caveatable interest in the property”.17

[43]	Mr Lau says that he did not attend the call because he was feeling unwell and assumed that costs would lie where they fell because he had agreed to the caveat being removed. The Court record confirms that Mr Lau attended the call of the matter by VMR.

[44]	The Court sent a copy of the minute making the costs order to Mr Lau at the email address he had used to correspond with counsel for DUD about the caveat.   Mr Lau  had  the opportunity then to appeal  or  apply to set aside the  costs order.  Mr Lau did not do so, despite not entering remand for another two weeks.

[45]	Mr Lau’s claim that he will have grounds to appeal or set aside the costs order or have the order reduced when he receives information about the outcome of the dispute between DUD and ArchPoint is misconceived. On his own evidence, the dispute between DUD and ArchPoint concerned unpaid fees under a service agreement. The terms of the settlement of that dispute were not relevant to the

15	Re James, ex parte Nightingale [2018] NZHC 965 at [22].
16	At [22].
17	Down Under Developments Ltd v Lau HC Auckland CIV-2024-404-255, 13 February 2024 (Minute) at [3].

Associate Judge’s costs order, which turned on the finding that Mr Lau had wrongly lodged a caveat when he did not have a caveatable interest in the relevant property, causing DUD to incur legal costs to have the caveat removed.

Proceedings against supporting creditors

[46]	Mr Lau spent considerable time describing the claims he says he has against the supporting creditors, and the reasons why he considers he will be able to have the costs orders underlying their appearances set aside. Mr Lau relies on a statement of claim in which he is named the plaintiff and HND Holding and others are named as defendants. In a further statement of claim, he is the plaintiff, and Ms Zhu and others are defendants. Mr Lau says Mr Han sought to file these proceedings with the Court on 31 October 2024, together with an application for a fee waiver. It is not known whether the fee waiver has been granted and the documents accepted for filing.

[47]	In any event, potential proceedings against the supporting creditors or applications to set aside the costs orders in their favour do not present a reason for the Court to refuse to adjudicate Mr Lau bankrupt. The criteria for adjudication are met based on DUD’s application alone.

Will pay the debt

[48]	In his notice of opposition, Mr Lau indicated that he would pay the debt by   2 September 2024. He did not do so.

[49]	Mr Lau now says that he will be able to pay the judgment debt when he is released from prison, from the proceeds of litigation against third parties or from income from various sources. He says that he can generate $2,000–$3,000 a week as a translator, and USD100,000–500,000 from marketing, tai chi, gua sha and filming work. Mr Lau has not presented any compelling evidence to support these asserted sources of income.

[50]	Mr Lau has attached to his affidavit an unfiled notice of proceeding/interlocutory application for summary judgment against  a third party.  He attaches another application for summary judgment against a different third party

for $6 million, which he says has settled. He says that when he is released from prison, he will travel to Australia to recover these funds.

[51]	I am not convinced that payment is  imminent  from  any  of these sources. Mr Lau has had over eight months to pay the judgment debt and he has not done so. DUD is entitled to the fruits of its costs judgment, recalling that the judgment compensates DUD for its costs caused by Mr Lau’s actions. Mr Lau has not paid (or applied to set aside) the supporting creditors’ costs orders. The HND Holding costs order dates to August 2023.

[52]	This is a case where it is in the public interest for the Official Assignee to be appointed to investigate Mr Lau’s affairs. If any of the claims Mr Lau describes have merit, the Official Assignee can determine whether to progress them. If Mr Lau can earn the kind of income he describes when he is released from prison, he will have the opportunity to pay his debts and have the bankruptcy annulled.

Conclusion

[53]	Mr Lau committed an act of bankruptcy by not complying with the bankruptcy notice deemed to have been served on him on 23 April 2024 pursuant to orders for substituted service.

[54]	Mr Lau has not persuaded the Court that an order adjudicating him bankrupt ought not to be made.

[55]	An order was made at the conclusion of the hearing adjudicating Mr Lau bankrupt. The time of the order was 12:24 pm.

Associate Judge Gardiner