Highmark Homes Limited v Watkins
[2025] NZHC 128
•12 February 2025
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2024-404-0800
[2025] NZHC 128
UNDER the Insolvency Act 2006 IN THE MATTER OF
the bankruptcy of N M Watkins
BETWEEN
HIGHMARK HOMES LIMITED
Judgment Creditor
AND
NICOLA MAREE WATKINS
Judgment Debtor
Hearing: 4 February 2025 Counsel:
D Hayes for the Judgment Creditor Judgment Debtor in Person
Date of Judgment:
12 February 2025
JUDGMENT OF ASSOCIATE JUDGE BRITTAIN
This judgment was delivered by me on 12 February 2025 at 12 midday Pursuant to Rule 11.5 of the High Court Rules.
…………………..
Registrar/Deputy Registrar
Solicitors:
Hunwick Law Ltd, Hamilton D Hayes, Hamilton
HIGHMARK HOMES LTD v WATKINS [2025] NZHC 128 [12 February 2025]
Introduction
[1] The judgment creditor, Highmark Homes Ltd (Highmark), seeks an order adjudicating the judgment debtor, Nicola Watkins (Ms Watkins), bankrupt. Ms Watkins was formerly an employee of Highmark. The employment relationship ended acrimoniously in 2017.
[2] During the employment relationship, Highmark provided financial assistance to Ms Watkins for construction of a house (the financial assistance). After the employment relationship ended, Highmark commenced a claim against Ms Watkins in the Disputes Tribunal to recover the financial assistance. Highmark was successful and the Disputes Tribunal ordered Ms Watkins to pay Highmark $23,996 (the Disputes Tribunal order). Ms Watkins unsuccessfully appealed to the District Court.1
[3] Ms Watkins brought a claim against Highmark in the Employment Relations Authority (ERA), claiming an unjustifiable disadvantage during the employment relationship and an entitlement to wage arrears, and an unjustified dismissal. The claim for unjustified disadvantage and wage arrears was unsuccessful.2 The claim for unjustified dismissal could not proceed because it had not been raised within the statutory timeframe.3
[4] Ms Watkins filed a proceeding in the Employment Court seeking to reopen the determinations of the ERA. The Employment Court ordered Ms Watkins to pay security for costs, or alternatively to pay existing costs awards to Highmark,4 before her claim could proceed. The Employment Court awarded costs to Highmark of
$10,396.50.5 Ms Watkins has not complied with the Employment Court orders, and she has appealed those decisions to the Court of Appeal.
[5] In 2022, Highmark enforced the Disputes Tribunal order by serving a bankruptcy notice on Ms Watkins, followed by an application for adjudication (the
1 Watkins v Highmark Homes Ltd [2021] NZDC 16979.
2 Watkins v Highmark Homes Ltd [2022] NZERA 632.
3 Watkins v Highmark Homes Ltd [2020] NZERA 467; Watkins v Highmark Homes Ltd
[2022] NZERA 638.
4 Watkins v Highmark Homes Ltd [2024] NZEmpC 105.
5 Watkins v Highmark Homes Ltd [2024] NZEmpC 167.
first bankruptcy proceeding). The application for adjudication was ultimately heard by Associate Judge Gardiner (as she then was). The Associate Judge determined that it was appropriate to adjudicate Ms Watkins bankrupt but allowed her a final opportunity to pay the Disputes Tribunal order.6
[6] Ms Watkins elected to pay the Disputes Tribunal order. Associate Judge Gardiner subsequently ordered Ms Watkins to pay Highmark’s costs in respect of the first bankruptcy proceeding of $12,786.50 plus disbursements of $1,426.09 (the costs order).7
[7] Ms Watkins has not paid the costs order, and Highmark served a second bankruptcy notice. Associate Judge Gardiner declined to set aside that bankruptcy notice on the ground that Ms Watkins failed to file her application within the prescribed time limit.8 Highmark now seeks an order of adjudication.
[8] In October 2024, Ms Watkins filed a proceeding against Highmark in this Court, alleging defamation. On 21 October 2024, van Bohemen J stayed the proceeding as an abuse of process.9 Ms Watkins has appealed that decision to the Court of Appeal.
[9] Ms Watkins opposes adjudication. She continues to assert that the Disputes Tribunal order should not have been made. Ms Watkins argues that she should not be adjudicated bankrupt until her appeals to the Court of Appeal have been determined, on the basis that her appeals will be successful and this will lead to the reopening of her claims in the ERA and for defamation.
6 Highmark Homes Ltd v Watkins [2023] NZHC 354.
7 Highmark Homes Ltd v Watkins HC Auckland CIV-2021-404-2268, 4 September 2023 (Minute of Associate Judge Gardiner).
8 Highmark Homes Ltd v Watkins [2024] NZHC 2227.
9 Watkins v Highmark Homes Ltd [2024] NZHC 3075.
Legal principles
[10]Section 36 of the Insolvency Act 2006 (the Act) provides:
36 Court may adjudicate debtor bankrupt
The court may, at its discretion, adjudicate the debtor bankrupt if the creditor has established the requirements set out in section 13.
[11] Section 13 requires that the debtor owes the creditor a debt for a certain amount of $1,000 or more, payable immediately or at a date in the future that is certain, and that the debtor has committed an act of bankruptcy within a period of three months before the filing of the application for an order for adjudication.
[12] Highmark has met the jurisdictional requirements of ss 13 and 36 of the Act. Section 37 of the Act confers a discretion on the Court to decline to make an order for adjudication:
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
(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.
[13] The following general principles, extracted from the case law, are relevant to the Court’s discretion to refuse adjudication:
(a)The onus is on the debtor to show why an adjudication order should not be made.10
(b)It is not common practice to engage in an analysis of the correctness or otherwise of the underlying judgment. However, the Court can exercise
10 McHardy v Wilkins & Davies Marinas Ltd (in rec) CA54/93, 7 April 1993 at 3.
its discretion to refuse to adjudicate a debtor bankrupt if there is good reason to doubt the liability established by the underlying judgment.11
(c)In exercising its discretion, the Court may consider, inter alia, the following factors:
(i)the views of all affected parties, including the petitioner, other creditors and the debtor;12
(ii)the wider public interest, including whether adjudication is “conducive or detrimental to commercial morality and the interests of the general public”;13
(iii)the circumstances in which the debt was incurred and whether those circumstances suggest that the creditor is acting unreasonably in pursing adjudication;14
(iv)whether the debtor is able to pay their debts over a reasonable period of time;15
(v)whether adjudication would be pointless in the sense that the creditors are unlikely to receive payment;16 and
(vi)whether adjudication would render the debtor unable to support him or herself.17
(d)Where a creditor is able to obtain payment by execution against the assets of the debtor, an order for adjudication is often not appropriate.18
11 Nightingale v James [2018] NZHC 965 at [5]–[22]; Keung v Official Assignee [2020] NZHC 32 at [51].
12 Re Sturdee [1985] 2 NZLR 627 (HC) at 635.
13 Re Nisbett, ex parte Vala [1934] GLR 553 (SC) at 556.
14 Re Epirosa, ex parte Diners Club (NZ) Ltd HC Wellington B498/91, 6 March 1992 at 6.
15 Body Corporate 68792 v Memelink [2018] NZCA 509, [2019] NZAR 127 at [15].
16 Re Fidow [1989] 2 NZLR 431 (HC) at 444.
17 Re Epirosa, above n 14, at 7.
18 Lawson v Perkins [2009] NZFLR 330 (HC) at [20].
(e)In exercising its discretion, the Court should also remain cognisant of the broader purposes of bankruptcy which include:19
(i)allowing for administration of the debtor’s estate in the interests of creditors;
(ii)holding the debtor accountable for his or her debts;
(iii)punishing or stigmatising the debtor for misconduct;
(iv)protecting the community from a debtor who runs up credit without being able to honour it; and
(v)allowing the debtor to eventually take up commercial activity once freed from his or her liabilities after the discharge of their bankruptcy.
(f)Ultimately, the Court must balance the various considerations relevant to an application when concluding whether the debtor has succeeded in showing that the order sought should not be made.20
Discussion
The defamation proceeding
[14]In his judgment staying the defamation proceeding, van Bohemen J said:21
[17] It is plain that Ms Watkins is using the proceeding to pursue claims she was not able to pursue in the proceedings relating to her employment dispute. It is also plain that Ms Watkins is using this proceeding to try to avoid being adjudicated bankrupt.
[18] In those respects, the proceeding is an abuse of the process of the Court.
19 Sheppard v Blanchett [2012] NZHC 789, (2012) 3 NZTR 22-014 at [35]–[43].
20 McHardy v Wilkins & Davies Marinas Ltd (in rec), above n 10, at 4.
21 Watkins v Highmark Homes Ltd, above n 9, at [17]–[18].
[15] If Ms Watkins possesses a genuine claim of defamation, then she will remain free to pursue it if she is adjudicated bankrupt. A cause of action in defamation is personal to the bankrupt and does not vest in the Official Assignee.22
Ms Watkins’ challenges to the decisions of the ERA and Employment Court
[16] Ms Watkins raised these matters in opposition to the first bankruptcy proceeding.
[17] Underlying Ms Watkins’ dissatisfaction with the decisions of the Disputes Tribunal, the District Court, the ERA and the Employment Court is her belief that all decisions have gone against her because directors of Highmark have perjured themselves in evidence filed in the various proceedings.
[18] Ms Watkins believes that the Disputes Tribunal was wrong to accept jurisdiction to hear Highmark’s claim, on the basis that the ERA had exclusive jurisdiction, relying on the Supreme Court’s decision in FMV v TZB.23 However, the Supreme Court’s decision in that case post-dates the Disputes Tribunal order, and Ms Watkins has not challenged the District Court’s decision upholding the Disputes Tribunal order.
[19]In the first bankruptcy proceeding, Associate Judge Gardiner:
(a)held that this Court does not have jurisdiction to quash the orders of the Disputes Tribunal or the District Court, and that Ms Watkins has exhausted her appeal rights in respect of the Disputes Tribunal order, noting that Ms Watkins has not challenged the District Court decision that upheld the Disputes Tribunal order;24
(b)considered Ms Watkins’ argument that the application for adjudication should be halted until her attempt to reopen the ERA proceeding was
22 Official Assignee v Matete [2014] NZHC 1685, [2014] NZAR 1060 at [14], citing Heath v Tang
[1993] 1 WLR 1421 (CA) at 1423.
23 FMV v TZB [2021] NZSC 102, [2021] 1 NZLR 466.
24 Highmark Homes Ltd v Watkins, above n 6, at [12].
determined,25 noting that Ms Watkins claimed that she had fresh evidence that showed that Highmark committed perjury in the ERA, the Disputes Tribunal and the District Court; and
(c)held that the new evidence referred to by Ms Watkins did not cast serious doubt on the Disputes Tribunal order which formed the basis of the first bankruptcy proceeding, concluding that Ms Watkins was essentially trying to relitigate claims already made in the Disputes Tribunal and the ERA:
[30] Having read her application and heard from Ms Watkins, I conclude that aside from the evidence of the police complaint, she is essentially trying to relitigate claims she has already made in the Tribunal and the ERA. The only new matter she raises is the letter to the police. As she records in her application to the ERA, most of the documents she provides as grounds for a reopening have been provided to the ERA before. The best Ms Watkins can hope for is that this letter persuades the ERA to reopen its investigation, to give her leave to make a claim for unjustified dismissal out of time, and to find that she was unjustifiably dismissed. To provide a reason for deferring or declining the bankruptcy application, I would need to be satisfied that this was a realistic possibility, and that the ERA would award Ms Watkins damages that would come within $1,000 of her debt to Highmark. That is highly improbable in my view.
[31] Also weighing against halting the application pending a decision from the ERA is the fact that the Tribunal ordered Ms Watkins to pay Highmark the judgment sum on 9 October 2020. The District Court determined Ms Watkins’ appeal on 23 August 2021. Highmark has been denied the fruits of the Tribunal decision for over two years. It is unclear how long the ERA process will take, assuming Ms Watkins succeeds in having the investigation reopened. Then there is the possibility of appeals. I do not consider that it is in the interests of justice to deny Highmark the judgment sum to which it is entitled for an indefinite length of time when there is no serious doubt about Ms Watkins’ liability to pay it.
Ms Watkins’ argument in this proceeding
[20] Ms Watkins seeks to relitigate the same matters that she relied on in the first bankruptcy proceeding.
25 At [15]–[16].
[21]In the current proceeding, Ms Watkins relies on four of her affidavits:
(a)dated 31 July 2020, filed in the ERA;
(b)dated 17 March 2024, field in the Employment Court;
(c)dated 22 July 2024, filed in the first bankruptcy proceeding; and
(d)dated 30 September 2024, filed in this proceeding.
[22] I have reviewed all four affidavits. There is no new evidence since the hearing of the first bankruptcy proceeding. I cannot ascertain any evidence which supports Ms Watkins’ submission that the Disputes Tribunal order was obtained by perjury and fraud. Rather, it appears that Ms Watkins is unable to accept that the tribunals and courts have accepted the evidence of the witnesses for Highmark in preference to her own evidence.
[23] There is no tenable basis for a finding that the Disputes Tribunal order was obtained by fraud or by perjury. There is no extant proceeding by Ms Watkins to challenge the Disputes Tribunal order. There is no extant proceeding by Ms Watkins to challenge the costs order that underpins this bankruptcy proceeding. There is no basis for the Court to overturn that costs order. Ms Watkins has no extant challenge to that costs order — it was not appealed. There is no good reason to doubt the liability established by the costs order.
Other factors relevant to the exercise of the Court’s discretion
[24] Ms Watkins has elected to put no evidence before the Court regarding her current financial position. In answers to questions from the Court during the hearing, Ms Watkins stated that she is currently renting her accommodation, and real estate previously owned by her has been sold. Ms Watkins was not prepared to say whether she is in a financial position to pay the costs order.
[25] In addition to the costs order, there are at least two other judgment debts which are outstanding:
(a)The Employment Court’s order that Ms Watkins pay costs to Highmark of $10,396.50.26
(b)A judgment by this Court in favour of Samson Corporation Ltd of
$28,112.15.27 Samson Corporation has commenced a bankruptcy proceeding against Ms Watkins, which is adjourned to await the outcome of this proceeding.28
[26] The evidence before the Court supports a finding that Ms Watkins is insolvent and unable to pay her debts. This is an appropriate case for an order adjudicating Ms Watkins bankrupt.
Orders
[27] The judgment debtor, Nicola Maree Watkins, is adjudicated bankrupt. The order is timed at 12 pm.
[28] The judgment debtor shall pay the judgment creditor’s costs on a 2B basis together with disbursements.
Associate Judge Brittain
26 Watkins v Highmark Homes Ltd, above n 5.
27 Samson Corp Ltd v Watkins [2023] NZDC 25303.
28 Samson Corp Ltd v Watkins HC Auckland CIV-2023-404-2954, 23 October 2024 (Minute of Associate Judge Sussock).
7
1