Young v Wadman
[2025] NZHC 1746
•1 July 2025
IN THE HIGH COURT OF NEW ZEALAND HAMILTON REGISTRY
I TE KŌTI MATUA O AOTEAROA KIRIKIRIROA ROHE
CIV-2021-419-000259
[2025] NZHC 1746
UNDER
AND
the Insolvency Act 2006 IN THE MATTER
of the bankruptcy of BRIAN DAVID WADMAN
BETWEEN
GRANT YOUNG
Judgment Creditor
AND
BRIAN DAVID WADMAN
Judgment Debtor
Hearing: On the papers Appearances:
AM Swan for the Judgment Creditor TJP Bowler for the Judgment Debtor
Judgment:
1 July 2025
JUDGMENT OF ASSOCIATE JUDGE SUSSOCK
This judgment was delivered by me on 1 July 2025 at 11 am pursuant to r 11.5 of the High Court Rules
Registrar/Deputy Registrar
Solicitors:
Auckland Property Legal Service, Auckland Neilsons Lawyers, Auckland
YOUNG v WADMAN [2025] NZHC 1746 [1 July 2025]
Introduction
[1] In my 10 December 2024 judgment, I made a bankruptcy order in respect of the judgment debtor, Brian David Wadman, but directed that the order was to lie in Court until 18 December 2024, to allow Mr Wadman one final opportunity to pay. 1 Mr Wadman took up this opportunity and paid the debt. I therefore issued a further judgment on 20 December 2024, confirming that the bankruptcy order was not to take effect.2
[2] Counsel for the judgment creditor advised prior to the 20 December judgment that the parties had not agreed on costs and that it seemed likely that the debtor would avoid paying costs given the history of the matter. The judgment creditor therefore requested that the bankruptcy proceedings continue until costs had been determined and paid.
[3] The judgment creditor seeks costs on a 2B basis and disbursements, together amounting to $8,178.50. I recorded in the 20 December judgment that the costs claimed appeared appropriately sought but as the debt on which the bankruptcy proceedings were based had now been paid, there may no longer be a basis for the bankruptcy proceedings to continue. I encouraged the parties to try to reach agreement on costs to avoid further delay and expense and made directions that any costs memoranda were to address the question of whether it was appropriate for the bankruptcy proceedings to continue when only costs remain in issue (confirming that the bankruptcy proceedings were to continue in the meantime).
[4]No agreement was reached and further memoranda have been filed.
[5] In addition to submitting the bankruptcy proceedings should not continue, the judgment debtor submits no costs should be awarded as the judgment creditor has been paid.
1 Young v Wadman [2024] NZHC 3973.
2 Young v Wadman [2024] NZHC 3571.
[6]There are therefore two issues for determination:
(a)Can an order for costs be made where payment of the underlying debt has been accepted?
(b)Can bankruptcy proceedings continue when only costs are outstanding?
Can an order for costs be made where payment of the underlying debt has been accepted?
[7] Counsel for the judgment debtor, Mr Bowler, relies upon Re Peacock to support his submission that no costs should be awarded now that the judgment creditor has been paid.3 Counsel submits the decision in Re Peacock was referred to with approval in Lane v Questnet Limited, where Asher J observed that the decision was consistent with two earlier decisions.4
[8] In my view costs may still be awarded following payment of the underlying debt. The approach in Re Peacock was not followed by Associate Judge Bell in Smith and Partners (a Firm) v Laurenson.5 His Honour questioned the reasoning in Re Peacock, that the creditor is required to make an election between, on one hand, accepting payment of the debt and thereby abandoning a claim for costs and, on the other hand, maintaining the application to keep alive a claim for costs. Associate Judge Bell held that an order for adjudication and an order for costs are not inconsistent and a creditor is entitled to pursue either or both heads of relief.6 His Honour referred to the fact that with electronic transactions, payments may be made unilaterally without the creditor's prior knowledge or assent and that in such circumstances, a creditor has not elected anything.7
[9] Associate Judge Bell was careful to distinguish a case where the creditor has genuinely settled with a debtor on the basis that the creditor will not look for the debtor
3 Re Peacock [1956] NZLR 365 (SC) at 367.
4 Lane v Questnet HC Auckland CIV-2007-404-6164, 5 November 2008 at [35].
5 Smith and Partners (a Firm) v Laurenson [2014] NZHC 389 at [16].
6 At [8].
7 At [13].
for costs. But in the case before him, the creditor had expressly reserved its right to seek payment of costs.8
[10] Associate Judge Bell therefore made orders withdrawing the application for adjudication and for costs. The approach in Smith and Partners has been followed in a number of other decisions.9
[11] I agree with Associate Judge Bell’s reasoning and consider that a costs order can be made where the underlying debt has been paid.
[12] The judgment debtor further submits that costs ought not to be awarded in the unique circumstances of this case as the judgment debtor was overseas when the application for adjudication was served but this is no answer. Abatement of a costs award because of personal circumstances will not be justified in the absence of exceptional circumstances, for example, where the award of costs would prejudice the winning party.10
[13] Costs are sought on a 2B basis in the amount of $7,528.50 plus disbursements of $650 for a total of $8,178.50. Nothing raised had dissuaded me from my preliminary view that they are appropriately claimed. I therefore make an order for 2B costs and disbursements as sought below.
Can bankruptcy proceedings continue if only costs remain outstanding?
[14] The relevant provisions in the Insolvency Act 2006 and the required forms in the High Court Rules 2016 do not support a power to continue the bankruptcy proceedings when only costs remain outstanding, except for the costs of the bankruptcy notice.
8 Smith and Partners (a Firm) v Laurenson , above n 5, at [15].
9 Re Mead, ex parte Prescott [2023] NZHC 1042 at[4]; Greys Avenue Investments Ltd v New Zealand Mint Ltd [2015] NZHC 2633 at [33]; Re Cummins, ex parte Body Corporate 172108 [2025] NZHC 1378 at [125]; Valmont v Chevin [2023] NZHC 2292 at [9]–[11].
10 Foni v Foliaki [2018] NZHC 3126 at [10]–[11].
[15] Section 36 of the Insolvency Act provides that the Court may, at its discretion, adjudicate a debtor bankrupt if the creditor has established the requirements as set out in s 13 of the Act that:
(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.
[16] If costs of the bankruptcy proceedings could be added to the debt owing after the creditor’s adjudication application is filed, ss 13(c) and (d) would not be satisfied as the debt would not be certain or payable on a certain date.
[17] Counsel for the judgment debtor relies on Re Jindal, ex parte Jarden Securities Limited where the judgment creditor was still seeking an adjudication order on several bases, including that the creditor’s costs in the bankruptcy proceedings were yet to be determined. Associate Judge Gardiner (as her Honour then was) held that if the full amount owed to the creditor is paid this “disentitles the creditor from proceeding with an application under section 13, because the debt has been satisfied”.11
[18] Her Honour held in respect of any costs order that as no costs order had yet been made, there was no debt owed entitling the creditor to pursue its application for adjudication, commenting that costs follow the determination.12
[19] In response, the judgment creditor contends that the power to continue bankruptcy proceedings when only costs are outstanding is supported by the content of the judgment creditor's application for adjudication and its summons to debtor. Counsel submits those documents record that costs and disbursements are included in the debt due, at least in the sum of $2,234, and if not paid, a court can adjudicate the debtor bankrupt even if the underlying debt has been paid. The judgment creditor
11 Re Jindal, ex parte Jarden Securities Limited [2021] NZHC 2215 at [35].
12 At [37].
therefore submits that bankruptcy proceedings must be able to remain on foot to enable adjudication where costs are not paid.
[20] I do not accept that submission as the forms required to be used for the bankruptcy notice and the bankruptcy proceedings themselves confirm, consistently with s 13, that there is no power to continue bankruptcy proceedings when only costs remain outstanding, except for the costs of the bankruptcy notice.
[21] The “Notes” that are required as part of the bankruptcy notice expressly record in the penultimate paragraph:13
If you do not pay the costs claimed or dispute the claim for costs, you will commit an act of bankruptcy for which you may be adjudicated bankrupt.
[22] By contrast, the form that is required to be used for the creditor’s adjudication application does not refer to the failure to pay costs as being an act of bankruptcy. I set out the relevant part of the form for the creditor’s application below:14
This document notifies you that—
1The creditor of [full name, address of debtor] will on [date] at [time] ask the court to make orders—
(a)adjudicating [full name of debtor] bankrupt; and
(b)as to costs.
2The creditor claims that—
(a)the debtor has, for the greater part of the past 6 months,
resided at/carried on business at [full address]* [or state other relevant facts under rule 24.13]; and
*Select one.
(b)the debtor owes the creditor [amount and particulars of debt, including when it is payable]; and
(c)the debtor has committed an available act of bankruptcy, as follows: [state particulars, including date, of the act of bankruptcy]; and
(d)the creditor has no security for the debt/is a secured creditor as follows: [state particulars of the security]*.
13 High Court Rules 2016, r 24.8(3) and Form B2 of Schedule 1.
14 Rule 24.11(1) and Form B3 of Schedule 1.
*Select one.
[23] As can be seen above, the “debt owed”, and when it is payable, are required to be set out in paragraph 2(b).
[24] The judgment creditor is also required to file and serve a summons to debtor together with the creditor’s application for adjudication.15 This is required to be in form B5 which relevantly records: 16
…
4If, by the hearing date, you have not paid the amount of $[amount specified in the creditor’s application] to the applicant, either in person or at the address for service of the applicant (or solicitor for the applicant), or you have not paid or disputed the amount of the costs claimed by the applicant in the bankruptcy notice served on you, the applicant is entitled to ask the court to adjudicate you bankrupt.
5The applicant also claims costs against you of $[amount], which includes a fee for filing this summons of $[amount] and a fee of
$[amount] for serving this summons.
6If you do not dispute the claim for costs in paragraph 5, you must, by the hearing date, pay those costs, either in person or at the address for service of the applicant (or the solicitor for the applicant).
7If you dispute the claim for costs, you may,—
(a)before the hearing date, apply to the court to fix costs; or
(b)at the hearing, apply orally to the court to fix costs.
8You are not required to attend the hearing and no warrant will be issued if you do not attend, but if you do not attend the hearing, the court will proceed in your absence.
9If you intend to oppose the making of an order for adjudication you must, by 1 pm on the last working day before the hearing date, file a notice of opposition in the form B 6, together with an affidavit in support of the opposition, and serve a copy of those documents on the applicant creditor.
(emphasis added)
15 High Court Rules 2016, rr 24.11(3) and 24.16.
16 Rule 24.11(3) and Form B5 of Schedule 1.
[25] In my view, paragraph 4 of the summons to debtor makes it clear that the creditor is only entitled to an order for adjudication in terms of unpaid costs if by the hearing date the debtor has not paid the costs claimed in the bankruptcy notice (if any).
[26] I acknowledge that the summons to debtor, like the bankruptcy notice, records at paragraph 6 that if a debtor does not dispute the claim for costs in paragraph 5 then the debtor must pay those costs by the hearing date. But by contrast with the “Notes” to the bankruptcy notice, the required form for the summons to debtor does not record that failure to pay or dispute the costs in paragraph 5 will be an act of bankruptcy. Furthermore, the form for the summons to debtor distinguishes between costs of the bankruptcy notice, referred to in paragraph 4, and costs otherwise, referred to in paragraphs 5 and 6.
[27] In the creditor’s application in this case, the creditor set out at paragraph 2(b) the amount of the judgment debt plus “the sum of costs of and disbursements,” without specifying those costs or when they were owed.
[28] At the time a creditor's application for adjudication is filed, the debtor only owes the creditor the underlying debt and the costs claimed in respect of the bankruptcy notice. Further costs may be sought as part of the orders at paragraph 1(b) of the creditor’s application but are distinct from costs on the bankruptcy notice that constitute a debt owed, non-payment of which can constitute an act of bankruptcy entitling an application for adjudication.
[29] Because the judgment creditor substituted in as the judgment creditor and relied on the failure to comply with the original creditor’s bankruptcy notice, no costs were incurred by the substituted judgment creditor in this case for the bankruptcy notice. No costs were therefore “owed” at the time the creditor’s application was filed and so the creditor’s application should only have referred to costs at paragraph 1(b), and not 2(b).
[30] In his summons to debtor, the judgment creditor correctly recorded at paragraph 4 that if by the hearing date the judgment debtor had not paid to the creditor
$18,050.00 (the amount of the underlying debt), and any costs of the bankruptcy notice
(if not disputed), the creditor was entitled to ask the Court to adjudicate the judgment debtor bankrupt. In the following paragraph of the summons, paragraph 5, it appropriately recorded that the creditor also claims costs and disbursements calculated on a 2B basis totalling $2,234.00, being court costs, filing fee and serving fee. But, in accordance with the required form, failure to pay those costs was not recorded as entitling the judgment creditor to an order for adjudication.
[31] In my view, the wording of the required form for the summons to debtor makes it clear that an adjudication order may only be sought where the underlying debt and any costs of the bankruptcy notice are not paid prior to the hearing date. An adjudication order cannot be sought and the adjudication proceedings cannot therefore continue when the amounts set out in paragraph 4 of the summons have been paid, as they have here.
[32] The judgment creditor submits that it would be absurd and not make commercial sense for the Court to decline to allow the bankruptcy proceedings to continue because each costs award could in theory then form the basis of a further bankruptcy notice and proceeding, leading to repeated bankruptcy proceedings. I acknowledge this risk, particularly in this case given the judgment debtor’s approach of only paying debts once bankruptcy proceedings are served. However most judgment debtors would wish to avoid the further costs award that will follow if that approach is taken. Increased costs awards may also follow if a debtor’s response to further bankruptcy proceedings based on a costs award from previous bankruptcy proceedings justifies such an award.
[33] Furthermore, if the bankruptcy proceedings were instead allowed to continue there may be no end to those bankruptcy proceedings as costs would always be able to be added for the latest memorandum or call in the liquidation list, with an adjudication order threatened for each appearance or memorandum filed.
[34] In the circumstances, I consider that the provisions of the Insolvency Act and the required forms are clear that rather than allowing proceedings to continue, payment of the underlying debt and costs of the bankruptcy notice (if any) brings the bankruptcy proceedings to an end.
[35] I therefore make orders discontinuing this bankruptcy application as the underlying debt has been paid but order 2B costs as sought by the judgment creditor in the amount of $7,528.50 plus disbursements of $650 for a total of $8,178.50.
Result
[36]I order:
(a)these bankruptcy proceedings are discontinued; and
(b)costs are to be paid by Mr Wadman to Mr Young on a 2B basis in the amount of $7,528.50 plus disbursements of $650 for a total of
$8,178.50.
Associate Judge Sussock
0
9
1