White Island Tours Limited v Wislang

[2021] NZHC 1386

IN THE HIGH COURT OF NEW ZEALAND DUNEDIN REGISTRY

I TE KŌTI MATUA O AOTEAROA ŌTEPOTI ROHE

CIV-2021-412-000001

[2021] NZHC 1386

IN THE MATTER

of the Insolvency Act 2006

AND

IN THE MATTER

of the Bankruptcy of Miles Roger Wislang

BETWEEN

WHITE ISLAND TOURS LIMITED

Judgment Creditor

AND

MILES ROGER WISLANG

Judgment Debtor

Hearing:

3 and 11 June 2021

Appearances:

R A Idoine for Judgment Creditor

Mr Wislang, Judgment Debtor, in person

Judgment:

11 June 2021

JUDGMENT OF ASSOCIATE JUDGE PAULSEN

This judgment was delivered by me on 11 June 2021 at 4.30 pm pursuant to Rule 11.5 of the High Court Rules

Registrar/Deputy Registrar Date:

WHITE ISLAND TOURS LTD v WISLANG [2021] NZHC 1386 [11 June 2021]

[1]                  The judgment creditor, White Island Tours  Ltd (WIT), seeks an order under  s 36 of the Insolvency Act 2006 (the Act) that the judgment debtor, Dr Miles Roger Wislang, be adjudicated bankrupt.

[2]In response, Dr Wislang has filed:

(a)a notice of opposition to WIT’s creditor’s application for an adjudication order; and

(b)an application for stay of the proceeding.

[3]                  These competing matters came before me on 3 June 2021. After hearing submissions I reserved my decision until 11 June 2021. The adjournment was to give Dr Wislang an opportunity to consult with his sons as to their willingness to provide him with financial assistance to settle with WIT.

Background

[4]                  Dr Wislang is indebted to WIT in respect of an unpaid costs award made by Grice J on 2 December 2020 (the costs order) for $62,240.50. Dr Wislang had commenced judicial review proceedings against the Attorney-General, WIT and WorkSafe New Zealand (Worksafe). He abandoned his claim against WIT partway through the hearing in the Wellington High Court on 31 August 2020. He continued with the claims against the Attorney-General and Worksafe. The claims against them were ultimately unsuccessful. The substantive judgment was issued on 1 October 2020.1

[5]                  Following the dismissal of Dr Wislang’s proceeding, orders for costs were made in favour of all three respondents.2 As far as WIT is concerned, Grice J awarded it costs on a 2B basis with a 50 per cent uplift due to the failure by Dr Wislang to heed judicial warnings about the difficulties faced in the application for judicial review.  Dr Wislang takes strong objection to the fact of the uplift in the costs award.

1      Wislang v Attorney General [2020] NZHC 2588.

2      Wislang v Attorney General (Costs) [2020] NZHC 3172.

[6]                  On 29 October 2020, Dr Wislang lodged an appeal against the substantive judgment, purportedly in relation to Worksafe only. This appeal was not pursued diligently and was deemed abandoned on 2 February 2021.

[7]                  Dr Wislang did not lodge an appeal in relation to the costs order by the date provided in the Court of Appeal (Civil) Rules 2005.

[8]                  On 22 December 2020, WIT made demand on Dr Wislang for payment of the costs order. Dr Wislang did not make payment or otherwise respond to the demand.

[9]On 11 February 2021, WIT served a bankruptcy notice on Dr Wislang.

[10]              On 22 February 2021, Dr Wislang filed an application for a stay of the costs order pending the determination of his appeal of the substantive judgment (even though that appeal had been deemed abandoned). Dr Wislang did not serve his application on WIT at that time, but the Court provided it to WIT and the other respondents on 31 March 2021.

[11]              On 23 February 2021, Dr Wislang committed an act of bankruptcy by failing to comply with WIT’s bankruptcy notice.

[12]              On 10 March 2021, WIT served an application for an adjudication order and summons to debtor on Dr Wislang.

[13]              On 22 April 2021, Dr Wislang filed an application with the Court of Appeal seeking leave to extend time to appeal against the costs order. The Court of Appeal provided a copy of this application to WIT on 23 April 2021. The application for leave to extend time is opposed and is yet to be determined by the Court of Appeal.

[14]              On 29 April 2021, Dr Wislang filed an amended notice of appeal against the substantive judgment.

[15]On 4 May 2021, Dr Wislang filed his:

(a)notice of opposition to WIT’s creditor’s petition for adjudication; and

(b)application for stay of bankruptcy proceedings.

[16]              On 6 May 2021, this proceeding was called before Associate Judge Lester. He adjourned the proceeding to 3 June 2021, pending the outcome of Dr Wislang’s application for a stay of the costs order.

[17]              On 6 May 2021, Grice J issued her decision in relation to Dr Wislang’s application for a stay of the costs orders (the stay decision).3 Dr Wislang’s application was declined. In refusing the application Grice J made findings:

[17]      In summary, I have concerns about the bona fides of Dr Wislang as to prosecution of the appeal. He has already filed and been deemed to abandon a substantive appeal in relation to WorkSafe. The present appeal against costs appears to have been precipitated by White island Tours attempting to enforce its costs judgment rather than any other reason.

[18]      The parties, particularly White Island Ltd, have incurred substantial costs in relation to the judicial review proceedings. Dr Wislang abandoned the proceedings against that operator partway through the hearing. The effect on White Island Ltd on granting the stay would be that it would be left without the ability to enforce its costs orders until the application for extension of time and any appeal was heard.

[19]      There is no public interest in the proceedings, and the factors I have considered relevant to the application weigh against the grant of a stay.

[18]   On 28 May 2021, Dr Wislang filed an appeal to the Court of Appeal from the stay decision. He received a letter from the Court of Appeal that he would require the leave of the High Court to pursue such an appeal. Dr Wislang advised me at the hearing on 3 June 2021 it was his intention to seek leave of the High Court to appeal the stay decision.

[19]Be that as it may, the current position is:

(a)there is no extant appeal against the costs order; and

(b)no stay of the costs order.

3      Wislang v Attorney-General [2021] NZHC 993.

[20]   On 8 June 2021, Dr Wislang sent to this court a copy of a memorandum he has filed with the Court of Appeal. He asked the Court of Appeal to consider the memorandum before ruling on his application for an extension of time to appeal from the costs order. He set out arguments for contending the costs awarded to WIT were excessive. He considered the matters raised would reduce his liability to WIT both as to the “base award” and the 50 per cent uplift.

[21]At the hearing today, Dr Wislang advised me primarily of the following:

(a)He has made an application for leave to appeal the stay decision, although it appears he may not have served WIT with it. Whether the application was served or not, nothing turns on that matter for present purposes.

(b)He has spoken to a son who is not prepared to provide financial assistance at the present time, apparently because the quantum of the costs order is challenged by Dr Wislang and first needs to be resolved.

(c)Dr Wislang accepts that an adjudication order may be made today but he will continue his challenges both to the substantive judgment and to the costs order.

Legal Principles

[22]Section 36 of the Act provides:

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.

[23]Section 13 of the Act provides:

13       When creditor may apply for debtor’s adjudication

A creditor may apply for a debtor to be adjudicated bankrupt if---

(a)the debtor owes the creditor $1,000 or more or, if 2 or more creditors join in the application, the debtor owes a total of $1,000 or more to those creditors between them; and

(b)the debtor has committed an act of bankruptcy within the period of 3 months before the filing of the application; and

(c)the debt is a certain amount; and

(d)the debt is payable either immediately or at a date in the future that is certain.

[24]   Dr Wislang does not contend any of the matters in s 13 of the Act are not made out in this case.

[25]   Even when a creditor satisfies the requirements under s 13 of the Insolvency Act, adjudication does not follow automatically. Section 37 of the Act sets out grounds upon which the Court may exercise its discretion and decline to make an order adjudicating a debtor bankrupt as follows:

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.

[26]   A leading authority on the exercise of the Court’s discretion is the Court of Appeal’s decision in Baker v Westpac Banking Corporation which, although decided under former legislation, is still applicable:4

The principles governing the exercise of the discretion under s 26 to grant or refuse an order of adjudication in bankruptcy are well settled and have been discussed by this court in recent years in Ellis v NZI Finance Ltd and McHardy v Wilkins & Davis Marinas Ltd (in receivership). It is proper for the court to consider not only the interests of those directly concerned — the petitioner, other creditors, the debtor — but also the wider public interest. A creditor who establishes the jurisdictional facts set out in s 23 is not automatically entitled to an order. On the other hand, it is for an opposing debtor to show why an order should not be made. The court will give proper weight to the commercial judgment of the petitioner but the oppressive use of the bankruptcy process may be a ground for refusing an order. Another ground may be the undoubted

4      Baker v Westpac Banking Corporation CA212/92, 13 July 1993 at 4 cited in Re Commissioner of Inland Revenue, Ex Parte Brown [2016] NZHC 1232 at [14].

absence of assets but that will not necessarily preclude an order given the range of interests involved including the public interest in the continuing oversight of a bankrupt’s affairs and the disqualifications that go with bankruptcy. In the end the court must balance the various considerations relevant to the case and determine whether the debtor has succeeded in showing that an order ought not to be made.

[27]   In Re Tootell, ex parte Rabobank Australia Ltd,5 Associate Judge Osborne referred to the decision of Master Williams QC in Re Epirosa, ex parte Diners Club (NZ) Ltd.6 In that case, factors considered relevant to the exercise by the Court of its discretion were:

·What are the wishes of all affected parties, including the applying creditor, other creditors and the debtors?

·Does the debtor have the ability to meet his or her debts over time and, if so, does that meet the requirements of achieving finality within a reasonable period?

·What were the circumstances in which the debt was incurred, and do those circumstances suggest that the creditor is acting unreasonably in pursuing adjudication?

·Will adjudication be pointless?

·Will the debtor, if adjudicated, be rendered unable to support himself or herself?

·Does the debtor have such a standing in the community that significant issues of stigma or embarrassment will result?

[28]Relevant in this case also is Re Fidow, where Fisher J noted:7

… it does appear that as a matter of legal authority one should not necessarily decline a bankruptcy merely on the ground that there are no obvious assets for the creditors. Clearly that must be a powerful factor to consider. But there are several other considerations which may be of equal importance.

One of these is the potential for further investigation. A bankruptcy makes available to creditors an array of procedures for investigating the financial circumstances of the debtor. Those procedures are likely to prove more effective than an investigation conducted by other means. I have previously adverted to the possibility that some investigation in this case might be rewarding. I intend no reflection upon Mr Fidow by that comment. In the finish, investigation may reveal nothing that is not already known. But I cannot entirely rule it out as a possible avenue of benefit for the creditors.

5      Re Tootell, ex parte Rabobank Australia Ltd [2013] NZHC 2975 at [8].

6      Re Espirosa, ex parte Diners Club (NZ) Ltd HC Wellington B498/91, 6 March 1992.

7      Re Fidow [1989] 2 NZLR 431 (HC) at 444.

The next matter to be borne in mind here is that on a bankruptcy petition the Court must have regard to the public interest in a way which transcends the interest of the immediate parties to the proceedings … The public interest in exposing and controlling an insolvent debtor is one which exists quite independently of the separate question of debt collection by his immediate creditors.

[29]   With respect to a debtor’s ability or otherwise to pay his or her debts, the Court has held that evidence of sufficient weight and clarity must be provided by the debtor (including as to timing).8

[30]Relevant also is s 42 of the Act which provides:

Halt or refusal of application when judgment under appeal

(1)This section applies if the creditor’s application for adjudication relies on 1 of the following acts of bankruptcy:

(a)the debtor failed to comply with a bankruptcy notice (see section 17):

(b)a judgment against the debtor for non-payment of trust money is not satisfied within 5 working days after the date of the judgment (see section 28).

(2)If the debtor has appealed against the judgment or order underlying the bankruptcy notice or the judgment for nonpayment of trust money, as the case may be, and the appeal is still to be decided, then the Court may—

(a)halt the creditor’s application for adjudication; or

(b)refuse the application.

[31]   A creditor’s application can therefore also be halted under s 42 of the Act if the judgment on which a bankruptcy notice is based is under appeal and yet to be decided.

Submissions

[32]   Dr Wislang filed written submissions. He also presented oral arguments which went beyond the written submissions. I will deal with what I understand were his arguments under the headings below.

8      Re Clarke, ex parte Commissioner of Inland Revenue HC Whangarei B151/95, 1 October 1996.

The appeals

[33]   Dr Wislang says he is appealing the substantive decision, the costs order and the stay decision. He argues it would be premature to make any order of adjudication until the appeals are determined. I do not accept this submission.

[34]   Any appeal from the substantive decision does not concern WIT. As far as the costs order is concerned, Dr Wislang has not been granted an extension of time to pursue an appeal. As to the stay decision, he has not been granted leave to appeal.9

[35]   Leaving aside those fundamental matters, even if Dr Wislang was granted an extension of time to appeal the costs order and achieved some success, he accepts that WIT was entitled to an award of costs and all that is in issue is the quantum of the award. There would remain a significant sum owing to WIT which Dr Wislang has not and cannot pay immediately. That sum would be sufficient to found WIT’s creditor’s application.

[36]   I note at this juncture, I have considered Dr Wislang’s latest memorandum to the Court of Appeal of 8 June 2021. I also discussed that memorandum with him at the hearing today. He considers fees charged by WIT’s lawyers in the substantive proceeding to be staggering. However, WIT was not awarded costs on an indemnity basis. Even on Dr Wislang’s own assessment, WIT’s 2B scale costs and disbursements of the substantive proceeding total $39,177. With a 50 per cent uplift the total is

$58,655.50. There is really little difference between this last figure and the amount WIT was actually awarded of $62,240.50.

Dr Wislang’s ability to pay

[37]   Dr Wislang does not suggest he personally has the means to pay WIT either immediately or over a reasonable period. He has provided an affidavit of assets and liabilities. He says he owns personal property of very limited value but has no vehicle, shares, bonds, interests in trusts or real estate. He is apparently reliant upon

9 Senior Courts Act 2016, s 56(3).

superannuation at the present time being unable to work due to the COVID-19 pandemic (to which I shall refer shortly).

[38]   Dr Wislang holds out the prospect that his sons may pay his debts. At the hearing on 3 June 2011, Dr Wislang argued his “well-resourced” sons would assist him to make periodic payments at a reasonable rate to WIT and other creditors. He had email correspondence with WIT’s lawyers about this. However, WIT has not agreed to accept periodic payments. Further, the correspondence contained a proposal in principle only. Dr Wislang did not state the amount of payments, when they will commence or the frequency with which they would be made. None of this is surprising because as at the time of the 3 June 2021 hearing, Dr Wislang had not even talked to his sons about the matter. Since then Dr Wislang has spoken to a son and he will not provide him with financial assistance at this time.

An order of adjudication will serve no purpose

[39]    Dr Wislang argues that making an order adjudicating him bankrupt would be pointless. I do not agree with that submission.

[40]   Dr Wislang advises for many years he has taught medicine in several universities overseas. He says he has been prevented from obtaining work due to the COVID-19 pandemic but it is his intention to return to Israel and work there.

[41]   It is difficult to reconcile Dr Wislang holding such senior positions and his disclosed financial circumstances. There is no explanation for this. Dr Wislang’s financial circumstances are incongruent also with him pursuing High Court litigation against three parties, given the obvious financial risks to him and the parties which that entailed.

[42]   I consider the making of an adjudication order would serve useful purposes. It would allow for an investigation into Dr Wislang’s financial circumstances and may reveal undisclosed assets here or overseas.

[43]   It would also ensure that if Dr Wislang is able to obtain further employment his creditors benefit from that. There would be no incentive for him to make any payments to WIT or his other creditors if he works unrestricted overseas.

[44]   Furthermore, if one takes Dr Wislang’s statement of financial position at face value it is hard to avoid an inference he was most imprudent putting three parties to very considerable cost on a matter that lacked merit, did not concern him personally and in respect of which Grice J considered there was no public interest when he had no ability to pay any costs award that might be made against him. Like Grice J, I have doubts as to Dr Wislang’s bona fides in pursuing his appeals which appear to lack any obvious merit.

Issues of stigma or embarrassment?

[45]   Dr Wislang says as he has held prominent academic positions, an order of adjudication will cause him embarrassment. There is no evidence of Dr Wislang’s academic reputation in New Zealand or overseas, nor what embarrassment he will experience beyond what can be expected by any person adjudicated bankrupt.

[46]   Dr Wislang has provided nothing like the evidence that was before the Court in Barron-Afeaki v Commissioner of Inland Revenue where a Barrister, Notary and Senior Counsel in Tonga was unable to avoid bankruptcy despite the Court’s acceptance of the prospect of material prejudice and stigma within the Polynesian community of Auckland and Tonga. Of course each case must be determined on its own facts, but Dr Wislang has failed to put before me any evidence to support this ground.

The innocent losers

[47]   Dr Wislang argues if he is adjudicated bankrupt the Attorney-General and Worksafe will be “innocent losers” as they will not receive any payments in satisfaction of their debts. I do not accept this submission.

[48]   On what Dr Wislang has provided there is no prospect Dr Wislang’s other creditors will receive any payment whatsoever, whether or not he is adjudicated bankrupt. There is some irony in Dr Wislang’s submission that the creditors might in fact be better off if he is not adjudicated bankrupt when he does not accept he has any liability to them and seeks to pursue an appeal from the substantive decision which will, if allowed to proceed, result in them incurring further substantial costs.

Other matters

[49]   There is nothing about the manner in which the debt to WIT was incurred that would suggest WIT is acting unreasonably in pursuing adjudication.

[50]   Dr Wislang has not adduced any evidence as to the wishes of his other creditors. No creditors have provided support for Dr Wislang.

[51]   As a final matter, Dr Wislang has raised the fact he suffered an accident as a reason he has not acted promptly in respect to the appeals and applications he has made to the Court. I do not consider this is material.  It appears Dr Wislang suffered a fall in early March 2021 by which time his appeal from the costs order was already out of time. It does not appear his fall prevented him from taking any steps in this proceeding.

Result

[52]   There is no basis to order a stay of the creditor’s application. Dr Wislang’s application is dismissed.

[53]   WIT has satisfied me that the grounds for making an adjudication order are made out. Dr Wislang has failed to satisfy me there is any proper basis for me to exercise my discretion to refuse making such an order.

[54]   There shall be  an  order  under  s  13  Insolvency  Act  2006  adjudicating  Dr Wislang bankrupt. The order is timed at 4.00 pm on 11 June 2021.

[55]   WIT is entitled to costs on a 2B basis plus disbursements in accordance with Sch A to counsel’s memorandum of 11 June 2021.

O G Paulsen Associate Judge

Solicitors:
Anthony Harper, Auckland

Mr Wislang, Judgment Debtor, in person