Smith v Wadman - [2024] NZHC 42

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV CIV-2021-419-000259

[2024] NZHC 42

UNDER the Insolvency Act 1993

IN THE MATTER OF

the bankruptcy of BRIAN DAVID WADMAN

BETWEEN

GRAEME SMITH trading as GS

ELECTRICAL AND FIRE SERVICES
Judgment Creditor

AND

BRIAN DAVID WADMAN

Judgment Debtor

Hearing: On the papers

Appearances:

A M Swan for the Judgment Creditor T J P Bowler for the Judgment Debtor

Date of Judgment:

31 January 2024

JUDGMENT OF ASSOCIATE JUDGE BRITTAIN

This judgment was delivered by me on 31 January 2024 at 3 pm, pursuant to r 11.5 of the High Court Rules

Registrar/Deputy Registrar Date:

Solicitors/Counsel:
Neilsons Lawyers, Auckland
Inland Revenue Legal Services, Hamilton Durham West Chambers, Auckland

SMITH v WADMAN [2024] NZHC 42 [31 January 2024]

Introduction

[1] On 1 November 2023, I ordered a halt on Mr Smith’s application for an order adjudicating Mr Wadman bankrupt on the condition that Mr Wadman pay the judgment debt that was the basis of the application, together with other specified judgment debts to other creditors, by 24 November 2023 (the judgment).1

[2] Mr Wadman did not comply with the condition, so the halt on Mr Smith’s application for adjudication is no longer operative.

[3] On 24 November 2023, Mr Wadman appealed the judgment to the Court of Appeal. Mr Wadman applies for a stay of the judgment and the adjudication proceeding pending determination of his appeal. The application for a stay is supported by a memorandum of counsel for Mr Wadman. Mr Smith opposes a stay.

[4] I directed Mr Wadman to file any further evidence and submissions in support of his application for a stay by 11 December 2023. No evidence or submissions were filed by that date, and on the Court’s own motion the date for compliance was extended to 14 December 2023. Mr Wadman has elected not to file any further evidence or submissions.

Legal principles

[5] The bringing of an appeal does not operate to stay the effect of any judgment being appealed. The general rule is that a successful party is entitled to enjoy the fruits of a judgment.

[6] In deciding whether to grant a stay, the Court must balance the successful litigant’s rights to the fruits of the judgment and any need to preserve the unsuccessful litigant’s position should the appeal succeed.2 The relevant factors to consider are:

(a)whether the appeal may be rendered nugatory by the lack of a stay;

1 Smith v Wadman [2023] NZHC 3085.
2 Duncan v Osborne Building Ltd (1992) 6 PRNZ 85 (CA) at 87.

(b)the bona fides of the applicant as to the prosecution of the appeal;

(c)whether the successful party will be injuriously affected by the stay;

(d)the effect on third parties;

(e)the novelty and importance of questions involved;

(f)the public interest in the proceeding;

(g)the overall balance of convenience; and

(h)the apparent strength of the appeal.3

[7] Rule 20.10(2)(c) of the High Court Rules 2016 provides the…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

Continue reading Smith v Wadman

Details

AGLC: Smith v Wadman [2024] NZHC 42
Case: [2024] NZHC 42
Decision Date: 31 January 2024

CaseChat Overview and Summary

This matter involves a bankruptcy adjudication proceeding between Graeme Smith, trading as GS Electrical and Fire Services, and Brian David Wadman. Mr Smith sought to have Mr Wadman adjudicated bankrupt based on an outstanding judgment debt. In response, Mr Wadman appealed a previous judgment halting Mr Smith’s application on the condition that Mr Wadman paid specified debts. Mr Wadman applied for a stay of the judgment and the adjudication proceeding pending the determination of his appeal. The primary legal issues revolved around the discretion of the court to grant a stay of a bankruptcy adjudication proceeding and the factors to consider in making such a decision. The court needed to balance the rights of the successful litigant to enforce the judgment against the potential for prejudice to the appellant if the appeal were to proceed without a stay. Key considerations included the likelihood of the appeal succeeding, the impact on third parties, the novelty and importance of the questions raised, and the overall balance of convenience.

The court considered the factors outlined in precedent and the discretion provided by the High Court Rules. It noted that while an appeal generally does not stay the effect of a judgment, there are circumstances where a stay may be warranted. The court assessed the bona fides of Mr Wadman's intention to prosecute his appeal, the potential for prejudice to Mr Smith and other judgment creditors, and the apparent strength of the appeal. The appeal raised significant questions about the court's discretion under the Insolvency Act 2006, particularly concerning the conditions that can be imposed on a judgment debtor and the weight to be given to evidence of a judgment creditor's ability to execute against the debtor's assets.

After weighing the relevant factors, the court concluded that the balance of convenience favoured granting a stay. It determined that the potential prejudice to Mr Wadman if the adjudication proceeding were to continue outweighed the prejudice to Mr Smith and other judgment creditors. The court also noted that the questions raised in the appeal were of general application and had the potential to provide valuable guidance. Consequently, the court granted a stay of the adjudication proceeding, on the condition that Mr Wadman diligently pursued his appeal. Additionally, it reserved leave to Mr Smith to apply for the stay to be lifted if Mr Wadman failed to prosecute the appeal diligently.

The court also reserved the matter of costs. The stay of the adjudication proceeding and the conditions imposed on Mr Wadman aimed to balance the interests of all parties while allowing the appeal to proceed without undue delay or prejudice.

Orders