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 Court with a discretion to grant interim relief. The discretion is broad, and interim relief includes directions regarding what is to happen pending determination of an appeal.

Discussion

[8]    Counsel for Mr Wadman, Mr Bowler, argues that the appeal will be rendered nugatory unless a stay is granted and that if the application for adjudication is allowed to proceed, Mr Wadman would be at risk of being adjudicated bankrupt, when he is solvent and able to pay his debts. Mr Bowler says that if Mr Wadman is adjudicated bankrupt, he will be prevented from bringing a claim against one of his judgment creditors relating to one of the judgment debts that was the subject of the condition.

[9]    Mr Swan, counsel for Mr  Smith,  argues  that  there  is  no  evidence  that  Mr Wadman is solvent.

[10]   The appeal raises questions relating to the extent of the Court’s discretion under ss 36 to 38 of the Insolvency Act 2006 (the Act), including:

3      Keung v GBR Investment Ltd [2010] NZCA 396, [2012] NZAR 17 at [11].

(a)Did Mr Wadman adduce sufficient evidence to establish that he is solvent and that he has assets amenable to an execution process?

(b)What weight should be given to evidence that a judgment creditor can obtain payment by execution against assets of the judgment debtor?

(c)Does the discretion under s 38(2) of the Act extend to imposition of a condition requiring a judgment debtor to pay judgment debts of judgment creditors who are not petitioning creditors?

[11]   I accept that these are genuine questions, and Mr Wadman’s expressed intention to prosecute his appeal appears, at this stage, to be bona fide.

[12]   Regarding the apparent strength of the appeal, there is no authority from the Court of Appeal on:

(a)whether this Court’s discretion under ss 36 to 38 of the Act extends to the imposition of the type of condition that I imposed in the  judgment; and

(b)the appropriate approach to the exercise of this Court’s discretion where there is evidence that a judgment creditor can obtain payment by execution against assets of the judgment debtor (if that factor is engaged on the evidence).

[13]   Although there is no public interest in the proceeding, some of the questions raised in the appeal are of general application. However, I note that if the appeal proceeds then any guidance the Court of Appeal might give may be limited by the facts of this case, and particularly whether Mr Wadman adduced sufficient evidence to prove his solvency.

[14]   If a stay is granted, Mr Smith and the other judgment creditors will be prejudiced because it is inevitable that there will be further delay.

[15]   I consider that the prejudice to Mr Smith and the other judgment creditors is outweighed by the prejudice to Mr Wadman that will arise if the adjudication proceeding is not stayed.

[16]   Overall, the balance of convenience supports a stay,  on the condition that   Mr Wadman pursues his appeal diligently.

Result

[17]   This proceeding is stayed pending determination of CA706/223, on the condition that Mr Wadman pursues his appeal diligently.

[18]   Leave is reserved to Mr Smith to apply for the stay to be lifted if Mr Wadman fails to pursue his appeal diligently.

[19]Costs are reserved.

Associate Judge Brittain