Young v Wadman - [2024] NZHC 3751

IN THE HIGH COURT OF NEW ZEALAND HAMILTON REGISTRY

I TE KŌTI MATUA O AOTEAROA KIRIKIRIROA ROHE

CIV-2021-419-000259

[2024] NZHC 3751

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: 4 November 2024

Appearances:

AM Swan for the Judgment Creditor TJP Bowler for the Judgment Debtor

Judgment:

10 December 2024

JUDGMENT OF ASSOCIATE JUDGE SUSSOCK

This judgment was delivered by me on 10 December 2024 at 4 p.m. pursuant to Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar

Date.......................................

Solicitors:
Auckland Property Legal Service, Auckland Neilsons Lawyers, Auckland

YOUNG v WADMAN [2024] NZHC 3751 [10 November 2024]

Introduction

[1] The judgment creditor, Grant Young, applies for an order adjudicating the judgment debtor, Brian Wadman, bankrupt pursuant to s 36 of the Insolvency Act 2006.

[2] Mr Young was substituted as the judgment creditor on 13 August 2024, in place of the original judgment creditor, Graham Smith, pursuant to s 44 of the Insolvency Act. Mr Young relies on a judgment obtained against Mr Wadman in the Disputes Tribunal on 11th August 2021 in the sum of $18,050.

[3] A notice of opposition has been filed on behalf of Mr Wadman by the lawyers who were acting for him in defending the application by the original judgment creditor, Mr Smith, together with an affidavit in support by a law clerk of the firm. In the affidavit, the law clerk deposes:

3. Mr Wadman has been overseas for several months and we have been unable to obtain any instructions from him in relation to accepting service of the proceedings.

4. Mr Wadman has previously instructed us in relation to a counterclaim he has against Mr Young. A copy of that draft counterclaim is attached to this proceeding and marked with the letter "A".

5. The counterclaim Mr Wadman has against Mr Young is in excess of the sum claimed by Mr Young being $18,050.

6. Furthermore, Mr Wadman is solvent as he holds a number of properties (some freehold). Furthermore, we are currently holding funds in our trust account on behalf of Mr Wadman in the sum of $53,000. Please find attached marked exhibit "B" is our trust account printout confirming the funds held on behalf of Mr Wadman.

(bold in original)

[4] The affidavit further records that the notice of opposition was filed without prejudice to the position that Neilsons Lawyers were not authorised to accept service of the bankruptcy proceedings by the substituted creditor, Mr Young.

[5]Essentially, the three grounds of opposition by Mr Wadman are that:

(a)he has not been personally served;

(b)he is solvent; and

(c)he has a counterclaim exceeding the amount of the debt.

[6] I consider each of these grounds below after setting out the principles applying to bankruptcy applications.

Requirements of the Insolvency Act and legal principles applying

[7] Section 36 of the Insolvency Act provides that the Court may, at its discretion,…

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.

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Details

Case: [2024] NZHC 3751
Decision Date: 10 December 2024

CaseChat Overview and Summary

In the High Court of New Zealand, Grant Young, a judgment creditor, applied for an order adjudicating Brian David Wadman, the judgment debtor, bankrupt under section 36 of the Insolvency Act 2006. The application followed a Disputes Tribunal judgment in favour of Mr Young for $18,050. Mr Wadman opposed the application on three grounds: lack of personal service, solvency, and a counterclaim exceeding the debt amount. The court addressed each ground in turn.

The court first examined whether Mr Wadman had been properly served. It found that he had been served through his solicitor, Mr Bowler, who remained on the record without an application to withdraw. The court concluded that service was proper as it was in accordance with Mr Wadman’s current address for service.

Regarding solvency, the court noted that Mr Wadman had previously opposed the application on the basis of solvency but had not provided new evidence to support this claim. The court relied on previous findings that Mr Wadman's financial position could not be determined on the limited information available and held that he had not sufficiently established his solvency.

The court then assessed the counterclaim argument. Mr Wadman sought to rely on a counterclaim exceeding the debt amount, which he claimed related to rental income from a property on Waiheke Island. The court observed that Mr Wadman had not filed a counterclaim despite raising the issue before the Disputes Tribunal and being given opportunities to do so. Given the lack of clear instructions from Mr Wadman and the passage of time, the court decided not to halt the proceedings to allow for a counterclaim.

The court concluded that Mr Young had met the requirements under section 13 of the Insolvency Act, and Mr Wadman had not demonstrated sufficient grounds to prevent the adjudication of bankruptcy. The court granted the application but allowed a one-week period for Mr Wadman to pay the debt, after which the bankruptcy order would take effect.

The final orders included a direction for Mr Wadman to pay the debt by a specified date, with a requirement for the judgment creditor to file a memorandum confirming payment or lack thereof. Costs were to be determined through written submissions if the parties could not agree.

Orders