Yoonwoo C & C Development Corporation v Huh

• Jurisdiction: New Zealand
• Judge: R M Bell
• Judgment Date: 11 November 2019
• Neutral Citation: [2019] NZHC 2986
• Court: High Court
• Docket Number: CIV-2018-404-664
• Date: 11 November 2019

Under the Insolvency Act 2006

In the Matter of the bankruptcy of Jae Ho Huh

Between

Yoonwoo C & C Development Corp

Plaintiff

and

Jae Ho Huh

Defendant

Between

Yoonwoo C & C Development Corp

Judgment Creditor

and

Jae Ho Huh

Judgment Debtor

[2019] NZHC 2986

CIV-2018-404-664

CIV-2019-404-608

IN THE HIGH COURT OF NEW ZEALAND

AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA

TĀMAKI MAKAURAU ROHE

Bankind & Finance — recognition of foreign judgments which recorded settlement agreements-definition of “judgment” — application to have summary judgment set-aside

Appearances:

B Saldanha for the Plaintiff/Creditor

O Collette-Moxon and E Boshier for the Defendant/Debtor

Counsel:

O V Collette-Moxon, Barrister, Auckland

ORAL JUDGMENT OF ASSOCIATE JUDGE R M Bell

1 On 20 November 2018 Davison J gave summary judgment to Yoonwoo C & C Development Corporation against Mr Huh by formal proof. 1 I am dealing with two matters:

• (a) Mr Huh's application to set aside that judgment; and

• (b) Yoonwoo's application to adjudicate Mr Huh bankrupt.

2 The parties are Korean. Yoonwoo is a corporation which has never carried on business in New Zealand. Mr Huh comes from Korea. He now has New Zealand permanent residence. In Korea he ran a group of companies called the Dae Joo Group, which was involved in property development and construction. In 2006 to 2007 the annual turnover of the group was in the order of $NZ7 billion and it employed about 35,000 staff. He was president of many of the companies. The businesses failed. He got into tax disputes with the Korean government. In January 2008 he was no longer involved in day-to-day operations of the company and turned over managerial responsibility for the Dae Joo Group to another man. He claims that his companies went bankrupt because the Korean Government blocked certain bank accounts. He has lived more or less permanently in New Zealand since 2009 while travelling overseas from time to time. He will not return to South Korea because the government may take action against him for alleged breaches of its tax laws. Other creditors have taken action against Mr Huh. I dealt with him in an earlier proceeding – CIV-2014-04-3372 where he was examined as a judgment debtor.

3 Mr Huh was one of four defendants Yoonwoo sued in two proceedings in a District Court in Korea. The other defendants were companies in the Dae Joo Group. The proceedings went to a form of conciliation which resulted in agreed outcomes. The District Court recorded those outcomes. In the first proceeding, the defendants agreed to pay Yoonwoo ₩890 million and, in the second, ₩1,050,000,000. The judgment debts come to ₩1,940,000,000 Korean won. The judgment debts also carry interest. ₩1,940,000,000 is about $NZ2.127 million.

4 In CIV-2018-404-664, Yoonwoo sued Mr Huh on these judgments. He was served by substituted service. He took no steps to defend the proceeding. Davison J heard the summary judgment application on a formal proof basis and gave judgment for Yoonwoo. Mr Huh accepts that the judgment was regularly obtained. Yoonwoo issued a bankruptcy notice based on the judgment. Mr Huh applied to set aside the bankruptcy notice but that application failed for a procedural mishap. While the application to set aside was filed in court within ten working days of service, it was not served on the creditor's address for service within time.

5 Yoonwoo followed with its application to adjudicate Mr Huh bankrupt, and he has applied to set aside the summary judgment under r 12.14 of the High Court Rules:

12.14 Setting aside judgment

A judgment given against a party who does not appear at the hearing of an application for judgment under rule 12. 2 or 12.3 may be set aside or varied by the court on any terms it thinks just if it appears to the court that there has been or may have been a miscarriage of justice.

6 Where a plaintiff has regularly obtained judgment by default and the defendant applies to set aside the judgment complaining that there has been a miscarriage of justice, the courts have noted that three factors are regularly taken into account:

Two authorities commonly cited for these propositions are Patterson v Wellington Free Kindergarten Association and Russell v Cox. 2 Where a defendant applies to set aside a summary judgment decision given on formal proof, there is guidance in the Court of Appeal's decision in Equiticorp Finance Group v Cheah: 3

It was ever the case that a defendant seeking to set aside a judgment regularly obtained needed to show an actual or possible miscarriage of justice. One, indeed a common way of doing so, is to show an actual or arguable defence. In the case of a summary judgment regularly obtained, it will normally be necessary for a defendant seeking to set aside judgment to adduce material which leads the Court to the conclusion that the plaintiff has not satisfied the court that there is a defence to the claim.

• (a) Whether the defendant has a substantial ground of defence;

• (b) Whether the delay is reasonably explained; and

• (c) Whether the plaintiff will suffer irreparable injury if the judgment is set aside.

7 For this decision I intend to focus mainly on whether Mr Huh has an arguable defence to the claim for summary judgment. The other factors, delay and injury to the plaintiff, are less important. There is another reason for focussing on the defence that arises out of bankruptcy law. For the bankruptcy application, I have to decide whether Yoonwoo is in truth and reality a creditor of Mr Huh. For that, although the judgment is evidence of indebtedness, indeed it is prima facie evidence, it is not conclusive. Doctrines as to the merger of a cause of action in a judgment and res judicata do not apply on a bankruptcy application. This rule is of long standing. In Ex parte Bryant Lord Eldon said: 4

Proof upon a judgment will not stand merely upon that, if there is not a debt due in ‘truth and reality’ for which the consideration must be looked to.

A case illustrating the point is Re Fraser ex parte Central Bank of London, where Lord Esher MR said: 5

The mere fact that there is a judgment for the debt does not prevent the Registrar from saying that there is no good petitioning creditors' debt. The Court of Bankruptcy can go behind the judgment, and can inquire whether, notwithstanding the judgment, there was a good debt. In so doing, the Court of Bankruptcy does not set aside the judgment. If I may use the expression, the court goes round the judgment, and enquires into the subject matter.

…

That this is so was determined by this court in Ex parte Lennox 16 QBD 315, which shows that though there is a judgment which the judgment debtor cannot set aside, he may nevertheless ask the court of bankruptcy to enquire whether the debt on which the judgment was founded was a good debt, and that if the court is satisfied that it was not, it may refuse to make a receiving order in respect of the debt. The decision was based on the highest ground – viz., that in making a receiving order the court is not dealing simply between the petitioning creditor and the debtor, but it is interfering with the rights of the creditors, who, if the order is made, will not be able to sue the debtor for their debts, in that the court ought not to exercise this extraordinary power unless it is satisfied that there is a good debt due to the petitioning creditor.

The existence of the judgment is no doubt prima facie evidence of a debt; but still the court of bankruptcy is entitled to enquire whether there really is a debt due to the petitioning creditor.

That case is striking because the judgment debtor had applied to set aside the judgment against him. His application failed. His appeal to the Court of Appeal against that decision failed. Nevertheless, on the bankruptcy petition a receiving order (an adjudication) was refused and the Court of Appeal upheld that on appeal. Two decisions of the High Court of Australia helpfully explain the power of a bankruptcy court to look behind a judgment: Corney v Brien and Ramsay Healthcare Australia Pty Ltd v Compton. 6

8 In my judgment the same approach applies under New Zealand's Insolvency Act 2006. Under s 13(a) of the Insolvency Act, a requirement for a creditor's application is that the debtor owes the creditor $1,000 or more. Under s 36, the Court may, at its discretion, adjudicate the debtor bankrupt if the creditor has established the requirements in s 13. Just as the Australian courts have emphasised the need for the court to be satisfied as to the fact of indebtedness, a New Zealand court is also required under ss 13 and 36. Accordingly, regardless of the application to set aside the judgment, I have to be satisfied that Mr Huh is in truth and reality indebted to Yoonwoo.

Suing on a foreign judgment

9 At common law, a person is liable to pay a foreign judgment if that foreign judgment is binding on them. That obligation is enforceable by ordinary proceedings. The judgment is binding on them if it is final and conclusive, if it is for a fixed sum of money, and if the foreign court had jurisdiction under New Zealand's jurisdiction recognition rules. The Court of Appeal outlined the jurisdiction recognition rules in Von Wyl v Engeler. 7 In this case there are two relevant jurisdiction recognition rules. Where the claim is based on a judgment in personam, New Zealand's jurisdiction recognition rules include:

• (a) whether the debtor was present or resident in the foreign country when the proceeding was instituted, and

• (b) whether the debtor submitted to the jurisdiction of the foreign court by voluntarily appearing in the proceedings.

The Court of Appeal said: 8

The foundation of the jurisdiction in personam is service of the writ or other originating process. Personal service on a defendant present within the jurisdiction and, where it is impracticable to serve the proceeding in the...