LEE V THE OFFICIAL ASSIGNEE AND ANOR HC AK CIV 2009-404-3257 [2009] NZHC 1394 (8 October 2009)

IN THE HIGH COURT OF NEW ZEALAND
AUCKLAND REGISTRY
                                                                    CIV 2009-404-3257


                IN THE MATTER OF              the Insolvency Act 1967

                AND

                IN THE MATTER OF  
           the bankruptcy of Shi Shen Lee

                BETWEEN                       SHI SHEN LEE
                          
                   Plaintiff

                AND                           THE OFFICIAL ASSIGNEE
                              
               First Defendant

                AND                           ANZ NATIONAL BANK LTD
                            
                 Second Defendant


Hearing:        8 October 2009

Appearances: Plaintiff in person
             Guy Caro for First
Defendant
             Daniel Vizor for Second Defendant

Judgment:       8 October 2009



                            JUDGMENT
OF HARRISON J




_________________________________________________________________________________

SOLICITORS
Ministry of Economic
Development (Auckland) for First Defendant
Bell Gully (Auckland) for Second Defendant
(copy to Plaintiff in person)



LEE V THE
OFFICIAL ASSIGNEE AND ANOR HC AK CIV 2009-404-3257 8 October 2009

Introduction


[1]     Mr Shi Shen Lee has brought a proceeding
under the Insolvency Act against
the Official Assignee and the ANZ bank. He seeks orders reversing decisions made
by the Official
Assignee, first, not to apply to revive an appeal (CA537/2008) and,
second, to discontinue a counterclaim against the ANZ Bank. He
also seeks orders
directing the Official Assignee to proceed with the appeal and counterclaim.


Jurisdiction


[2]     The statutory
basis for Mr Lee's claim is as follows: s 226 Insolvency Act
2006:

        (1)     A person (including the bankrupt or a creditor)
whose interests,
                monetary or otherwise, are detrimentally affected by an act or
                decision to which
this section applies may apply to the Court to
                reverse or modify the act or decision.

        (2)     This section
applies to--
                (a)     an act or decision of the Assignee; or
                (b)     a decision of a District Court
Judge in carrying out an
                        examination under section 165.

        (3)     The application must be made--

               (a)    within 15 working days of the act or decision; or
                (b)    within the additional time that the
Court allows.

        (4)     The Court may confirm, reverse, or modify the act or decision.

[3]     The principles governing the
exercise of this Court's powers on review were
summarised by Clifford J in Rao v Official Assignee HC WN CIV 2006-485-004
17 October
2007:

        [24]     My view, having reviewed the authorities, is that I am required to
        consider the merits of the application
on a de novo basis and determine, in
        my own assessment, what decision is reasonable under the circumstances,
        based
on the material presented to me at the hearing. In doing so, however, I
        must pay due regard to the decision of the Assignee
and take into account
        the Assignee's functions in administering the estate and giving effect to the
        policy of the
Act. The Act provides for the Assignee to exercise his or her
        discretion in administering the bankrupt's estate and if the
Court interferes
        too readily that statutory policy will be frustrated.

Background


[4]    Before dealing with the substance
of Mr Lee's application, I entertain serious
reservations about certain aspects of it. Mr Lee apparently speaks poor English. He
has addressed me today through the medium of an interpreter, a Mr Lau.                It
transpires that Mr Lau himself is a central
figure in some of the critical dealings
between Mr Lee and the ANZ bank. I have the distinct impression that he is an
interested
party in the result and that he is not only an interpreter but more likely an
advocate and instigator of this application. He should not have been present today.


[5]    With the assistance
of a comprehensive synopsis filed by Mr Guy Caro for
the Official Assignee, I have been able to distil the relevant events as follows:


       (1)     On 26 April 2006 the ANZ filed the subject proceeding against
               Mr Lee seeking summary judgment for
over $400,000.                    The
               application for summary judgment was subsequently withdrawn and
           
   the proceeding was heard on a defended basis;


       (2)     On 15 September 2006 Mr Lee filed a statement of defence and
 
             counterclaim. It is the counterclaim that features prominently in his
               argument today. It purports to
raise two discrete causes of action;


       (3)     On 6 August 2008 Keane J entered judgment for the ANZ on its
             
 primary claim for $299,914 plus interest and costs;


       (4)     On 3 September 2008 Mr Lee filed a notice of appeal. Keane
J
               subsequently ordered a stay of execution of his judgment but
               rescinded that stay on 1 December 2008;


       (5)     On 17 December 2008 Associate Judge Sargisson dismissed an
               application by Mr Lee to set aside the
bankruptcy notice;


       (6)     On 4 March 2009 Mr Lee's appeal was deemed abandoned. The next
               day he was adjudicated
bankrupt.

[6]    Subsequently Mr Lee requested the Official Assignee to proceed with an
appeal and counterclaim. The Official Assignee
sought advice. He received a
succinct but in my view unimpeachable opinion from Mr Caro on 30 April 2009. Its
terms merit repetition
in full:

       Rob MacDuff has asked me to consider your legal referral regarding the
       current litigation involving the bankrupt.

       There are two litigation matters: the counterclaim in CIV 2006 404 2282 and
       the appeal in CA 537/2008. I will discuss
each in turn.

       1. Counterclaim

       In the claim brought by the ANZ, the bankrupt counterclaimed. That
       counterclaim
is yet to be heard and has been bogged down in arguments over
       discovery. Clearly the bankrupt did not advance his counterclaim
with any
       haste and there has been adverse judicial comment to that effect.

       In essence the counterclaim alleges:


      1. Mr Lau (the bankrupt's attorney) opened accounts with ANZ for 10
       Chinese investors.

       2. The ANZ, through the
staff member who opened the accounts, assumed a
       duty of care to the bankrupt by agreeing to be responsible for progressing
the
       bankrupt's business ventures with the 10 Chinese investors.

       3. The ANZ breached that duty by investigating the
conduct of Mr Lau as
       attorney for both the 10 Chinese investors and the bankrupt , closing the
       accounts of the 10 Chinese
investors and lodging a complaint with the SFO.

       4. The ANZ was or should have been aware that investigating Mr Lau,
    
  closing the accounts of the 10 Chinese investors and making the SFO
       complaint would cause great shame to the bankrupt and
the 10 Chinese
       investors.

       The bankrupt claims damages of $1.26 million.

       I do not see any merit in the counterclaim.
The accounts were opened by a
       junior staff member of ANZ over the phone. It is inherently improbable that
       the staff
member agreed to the ANZ being responsible for progressing the
       bankrupt's business ventures with the 10 Chinese investors.
Therefore it is
       likely that the Court would not recognise a duty of care.

       Even if it did, the ANZ was entitled to
close the accounts if it considered
       they were being operated in an unsatisfactory manner. Also, it would be odd
       indeed
if a decision to report suspect transactions by a trading bank to the
       SFO would attract civil liability, at least in the case
where the report was
       made in good faith. There is nothing to suggest a lack of good faith by the
       ANZ here and it is inherently improbable that the
ANZ would make the
       report to the SFO in bad faith.

Doogue AJ considered the counterclaim in the judgment considering ANZ's
application for security for costs. The relevant part of the judgment is
attached. As you can see His Honour saw little merit in
the counterclaim.

Of course the counterclaim was not advanced to the point where the
bankrupt had filed his briefs of evidence.
Nevertheless the whole premise of
the counterclaim appears weak. In the circumstances I do not consider it
appropriate to attempt
to seek to brief the evidence the bankrupt was going
to or was hoping to rely on. That is especially so because the main witness
would have to be Mr Lau. Keane J in the judgment dealing with ANZ's
claim variously described Mr Lau's evidence as vague, outlandish
astonishing and unworthy of belief.

If you agree I will advise the Court and the ANZ's solicitors that the
Assignee will not be
seeking leave to continue the counterclaim and would
have no opposition to the counterclaim being struck out. I will also seek
payment
to the Assignee of the security for costs that the bankrupt had
lodged.

Please advise me of your decision.

2. Appeal

This appeal
is from the judgment of Keane J giving judgment to the ANZ for
its claim. That judgment lead to the bankruptcy.

The appeal is currently
deemed abandoned because the case on appeal was
not filed within 6 months of the filing of the notice of appeal. If the Assignee
does not wish to advance the appeal he does not need to do anything. If he
does wish to advance the appeal he would first have to
seek leave to
continue which, in the circumstances, would probably be granted.

The notice of appeal lists a number of grounds. Most
of the grounds appear
to involve appeals from findings of fact. Appellate Courts rarely overturn
findings of fact and there is no
prospect that it would occur here. In essence I
consider the findings of fact by Keane J were correct.

The notice of appeal does
include a ground that Keane J was wrong to find
there was no estoppel. However I consider Keane J was correct in finding
that the
legal requirements for an estoppel were not satisfied. In particular
there was no representation by the ANZ on which reliance would
be
founded.

The notice of appeal does not directly raise limitation issues but in
correspondence with the OA, the bankrupt's solicitor
indicated that this
would be the main ground of appeal. I have asked ANZ's solicitors for their
comments on whether a limitation
defence is available. Their comments are
attached. In short, I agree with them that there was no limitation defence and
an appeal
on that basis should not be brought. You will note from their
advice that Sargisson AJ did not consider there was a limitation defence
when she considered the adjudication application.

My advice is that the Assignee should not take any steps to revive the
appeal.

[7]     On 29 May Mr Lee filed this proceeding. Shortly afterwards, on 4 June, his
appeal to the Court of Appeal was deemed finally
abandoned.


Decision


[8]     Against this background I can deal with both applications shortly. First, the
Official Assignee has
no power to apply to revive Mr Lee's appeal. The terms of
r 43(3) Court of Appeal Rules are absolute. An appeal is treated as abandoned
if the
appellant does not take two necessary steps within six months after the appeal is
brought. The Court has a power of extension
if an application is made within a
further three months. Mr Lee did not apply and his rights were terminated once and
for all in
June 2009.


[9]     Second, I agree with Mr Caro that Mr Lee carries both the legal and
evidential burden of demonstrating that
the Official Assignee's decision to
discontinue the counterclaim was unreasonable and should be reversed. Mr Lee has
filed a full
affidavit in support of his application. On analysis, however, it is simply
a recitation of steps taken or not taken relating to pursuit of the counterclaim. It fails
to address the counterclaim's
merits.


[10]    It seems that Mr Lee's complaint is simply that a Court has never had an
opportunity to hear his counterclaim.
As he says, `I have not had my day in Court to
pursue the bank for the loss it caused me'. He adds a belief that his counterclaim
`is
a genuine triable claim with the possibility of success provided it is pursued
diligently'.


[11]    Mr Lee's belief is irrelevant.
A moment's reflection on the terms of the
counterclaim exposes its hopeless nature, as summarised in Mr Caro's opinion. Its
first
so-called cause of action does not disclose a jurisdictional basis. Its foundation
appears to be that the bank made a complaint to
the Serious Fraud Office about
Mr Lee's conduct. As a result the bank closed down accounts of a number of
Chinese investors. The
suggestion is made that Mr Lee relied on a statement from
the bank that $112,450 was owed on an account. As a further result, in
apparent

reliance on the statement, Mr Lee advanced $300,000 of the sale proceeds of a
property to three separate Chinese investors.


[12]    However, this allegation bears no relationship whatsoever to the relief
claimed of $53,463 for `unlawful retention' of
funds. It is more in the nature of an
allegation that ANZ retained more than its legal entitlement from the proceeds of
sale of the
property. But if that is the nature of the allegation, there are no particulars
in support. There is no allegation either that the
bank made a misstatement or
misrepresentation to Mr Lee or, if it did, that it was the cause of the loss pleaded.


[13]    The so-called
second cause of action is even more obscure. It is said to be
founded in negligence on the basis that it was reasonably foreseeable
by the bank
that:

        ... clientele of Chinese ethnic background are likely to accept shame and
        disgrace should the
[ANZ] put those clientele in an embarrassing position.

[14]    The document then goes on to purport to raise the existence of a
duty of care.
Again the particulars are obscure, even nonsensical.          The breaches alleged are
equally difficult to follow.
The gravamen of the allegation appears to be the Serious
Fraud Office did not pursue criminal proceedings against Mr Lau and that
three
Chinese investors to whom Mr Lee had advanced $300,000 had refused to repay
money `citing the shame and disgrace that [the
ANZ] had bought on to them by
investigating Mr Lau's affairs'.


[15]    What follows is an allegation that Mr Lee has suffered loss
of investment
income of $100,000 from each investor totalling $1m, a loss of commission of
$20,000 for each totalling $200,000, and
loss of $300,000 invested with three of the
Chinese investors. Judgment is sought for a total of $1.256m.


[16]    I do not need
to dignify the document further by subjecting the relief to a
comparative analysis with the allegations said to give rise to a duty
of care. Plainly
no such duty could ever be owed in the circumstances. Nor is there an apparent
basis for arguing a causal nexus
between an alleged breach and any loss.

[17]   Mr Lee's application should never have been brought. It is regrettable that
the
Official Assignee has had to commit funds from his resources to defend this
claim and that the ANZ has been put to a similar impost.
In the normal course I
would order Mr Lee to pay costs to each of the Official Assignee and the ANZ on a
solicitor/client or indemnity
basis. However, given that he is a bankrupt, an order for
costs would be futile.




                                           
 ________________________________
                                             Rhys Harrison J