IN THE HIGH COURT OF NEW ZEALAND HAMILTON REGISTRY

I TE KŌTI MATUA O AOTEAROA KIRIKIRIROA ROHE	
CIV-2019-419-000230
[2021] NZHC 510	

UNDER	The Insolvency Act 2006	
IN THE MATTER OF	The bankruptcy of RUSSELL STUART WARD	
BETWEEN	CHRISTOPHER ALLAN WARD and DIANE LORRAINE JAMES
Substituted Judgment Creditors	
AND	RUSSELL STUART WARD
Judgment Debtor	

Hearing:	8 March 2021	
Appearances:	L Hunt, as agent for A Kalinowski, for Substituted Judgment Creditors
Judgment Debtor in Person	
Judgment:	15 March 2021	

JUDGMENT OF ASSOCIATE JUDGE P J ANDREW

Introduction

[1]	This is a bankruptcy proceeding with a lengthy history.

WARD v WARD [2021] NZHC 510 [15 March 2021]

[2]	On 30 November 2020, the then supporting creditors, Mr Christopher Allan Ward and Mrs Diane Lorraine James (the siblings of the judgment debtor), were substituted as judgment creditors. They seek to have their brother, Mr Russell Ward, adjudicated bankrupt on the basis that he has failed to pay them costs in the sum of
$13,145.

[3]	Those costs were awarded to the substituted judgment creditors in the judgment of Gault J in proceedings CIV-2018-419-374 and CIV-2019-419-81 of 30 April 2020.1
[4]	In his substantive judgment of 14 January 2020 (dealing with both proceedings),2 Gault J made an order by way of summary judgment that Mr Russell Ward vacate a property at Vardon Road. He dismissed Mr Russell Ward’s application as plaintiff for summary judgment against his siblings.

[5]	These proceedings were called before me in the Bankruptcy List on Monday, 8 March 2021. I stood the matter down and later in the day heard argument from the parties as to whether the Court should, as Mr Russell Ward seeks, grant a stay of these bankruptcy proceedings pending the determination of what is said to be a set-off in the unresolved proceedings CIV-2018-419-374 and CIV-2019-419-81.

[6]	This is my judgment on the issue of a stay.

Relevant legal principles

[7]	Section 38 of the Insolvency Act 2006 reads:

Court may halt application

(1)	The Court may at any time halt the creditor's application for adjudication.

(2)	The Court may halt the application on the terms and conditions (if any), and for the period, that the Court thinks appropriate.

[8]	Section 38 does not set out the particular matters that the Court must take into account when considering whether to halt an application. Associate Judge Bell held

1	Ward v Ward [2020] NZHC 844.
2	Ward v Ward [2020] NZHC 11.

in Re Koroniadis, ex parte Bank of New Zealand3 that it seems clear Parliament intended the discretion provided by s 38 to be flexible and it would be inappropriate for the courts themselves to formulate fixed rules as to the exercise of the discretion.

[9]	I agree with Bell AJ that the section allows the Court to take into account the varying circumstances of each case.

Analysis and decision

[10]	The critical issue I must determine is whether there is any real merit in the set- off proceedings that Mr Ward relies upon, namely CIV-2018-419-374 and CIV-2019- 419-81.

[11]	As Ms Kalinowski, for the substituted judgment creditors, submitted in her memorandum dated 5 March 2021 that the causes of action are not properly pleaded but appear to suggest fraud, theft, breach of trust and negligence.

[12]	In those proceedings (CIV-2018-419-374) Mr Russell Ward alleges that his siblings, Diane and Allan, persuaded their mother, June Ward, to settle property in a trust, appoint them as trustees, and to change her Will removing Russell as a beneficiary. The relief sought includes compensatory damages in the amount of $5m (in relation to the loss of Mr Russell Ward’s farm) and $800,000 for emotional stress.

[13]	Gault J, in proceedings CIV-2018-419-374, has already outlined the real legal difficulties that Mr Russell Ward faces in prosecuting his claims. They include the following:4
(a)	The claims are largely against the estate and not against his siblings, the substituted judgment creditors;

(b)	The claims may be time barred; and

(c)	The right to bring the claim occurred during Mr Russell Ward’s previous bankruptcy from 2014 to 2018 and are therefore not likely his to make; rather, they were vested in the Official Assignee.

3	Re Koroniadis, ex parte Bank of New Zealand [2013] NZHC 2865.
4	Above n 2, at [36].

[14]	Gault J also noted that even if Mr Russell Ward could overcome those difficulties, evidential difficulties remain.5

[15]	As to proceeding CIV-2019-419-81 (in which the substituted creditors are the plaintiffs) I fail to see how  that  proceeding  can  possibly  provide  a  set-off  for  Mr Russell Ward. He is a defendant in an action brought by his siblings against him for his alleged non-performance of a promise to pay the outgoings on the property at Vardon Road. Even if he is successful in defending that proceeding, such outcome could not constitute a set-off.

[16]	Apart from the issue of the merits (or otherwise) of the alleged set-off proceeding, there are very real questions about whether Mr Russell Ward will prosecute the “set-off” claims in a timely fashion.

[17]	Mr Ward is self-represented. He also represented himself in the proceedings before Gault J.

[18]	These bankruptcy proceedings have been ongoing since late 2019. The first call was on 9 December 2019.

[19]	Mr Ward claims that there is an outstanding application for legal aid and in the event that a stay is granted, a grant of legal aid will allow him to pursue the set-off in CIV-2018-419-374. However, the position with legal aid is far from clear and I have little confidence that Mr Ward will in fact be able to secure legal representation.6
[20]	I also understand from Mr Hunt, that there is an outstanding application by his clients, the substituted creditors, for security for costs in those proceedings CIV-2018- 419-374.

[21]	On 2 June 2020, Associate Judge Smith issued a minute granting “one further opportunity” to Mr Russell Ward, to obtain legal assistance. Associate Judge Smith adjourned these proceedings on the basis that if Mr Ward had not either obtained legal

5	Above n 2, at [37].
6	In my minute of 16 November 2020, I noted that Mr Ward had obtained legal aid and had instructed Mr Dillon in relation to “other proceedings”. However, I also recorded that Mr Dillon had no instructions in relation to these bankruptcy proceedings. Furthermore, there is no indication from the file CIV-2018-419-374 that Mr Russell Ward has been granted legal aid and there is no document on that file from Mr Dillon advising that he is acting.

aid or paid security for costs which he had been ordered to pay in his claim against the then-judgment creditor’s company by the time of the next hearing, there would be a high likelihood of a bankruptcy adjudication.

[22]	On 27 August 2020, I issued a minute in which I found that it would be wrong to adjudicate Mr Russell Ward bankrupt in advance of the direction that he could obtain legal aid or make a payment by instalment before 30 September 2020. In that minute I noted that Mr Hunt was at that stage appearing for the supporting creditors.

[23]	In his minute of 5 October 2020, Associate Judge Smith noted that the substituted creditors had again appeared as supporting creditors ready to substitute in the bankruptcy proceedings.

[24]	In my minute of 16 November 2020, I noted the very lengthy history of these proceedings and that Mr Russell Ward had had significant opportunity to challenge the basis for the bankruptcy and/or obtained legal aid. I made an adjudication order that would lie in Court and take effect if the original judgment creditors’ debt was not paid within 14 days. If paid, I directed that the current judgment creditors would be substituted.

[25]	The original judgment creditors’ debt was then paid and the then-supporting creditors became the substituted judgment creditors (i.e. Allan Ward and Diane James).

[26]	Weighing all of these factors, I conclude, and as a matter of discretion, that the application by Mr Russell Ward for a stay should be declined. There are very real doubts about the merits of his proposed set-off, which could in any event, only extend to proceeding CIV-2018-419-374. I also have very real doubts about Mr Russell Ward’s ability, absent legal representation, to prosecute the proposed set-off claim in a timely fashion and in a way which would fairly and properly dispose of the issues without incurring significant extra cost in relation to irrelevant matters.7

7	See for example the “special affidavit of Russell Stuart Ward” sworn 3 March 2021 which contains substantially irrelevant material and his document entitled “Hierarchy of Laws” filed with the Court on 8 March 2021. See also Ward v Ward [2020] NZHC 844.

[27]	I further note, as advised by Mr Hunt, that there is another party who will seek to be substituted as a judgment creditor in the event that the current debt is paid. That debt is a further costs award made against Mr Ward in the proceedings Ward v Altranz (2008) Ltd (CIV-2019-419-172).

[28]	In my view, Mr Ward has been granted numerous and extensive opportunities by the Court to defend the bankruptcy proceedings and it is now time that they were brought to a conclusion. I acknowledge that he has paid the original judgment debt, albeit very late in the process, but the current judgment creditors have been waiting for payment of their costs for well over 12 months. As substituted creditors, they are entitled to rely on the act of bankruptcy committed in September 2019 (s 44(2) of the Insolvency Act 2006).8
[29]	Accordingly, I find that the application for a stay should be dismissed. I am, however, prepared to give Mr Russell Ward a final opportunity to pay the outstanding judgment debt plus costs incurred by the substituted judgment creditors on this application. In the event that those costs are not paid by 30 March 2021 – see below at [32] – then orders of adjudication will take effect.

[30]	This is yet a further indulgence granted to Mr Russell Ward. In making that further indulgence I have had regard to Mr Russell Ward’s age and to the particular, family circumstances giving rise to these proceedings. Having said that, it is unlikely that the Court will make any similar order in the event that further creditors are substituted.

Result

[31]	The application by Mr Russell Ward for a stay of these adjudication proceedings is dismissed.

[32]	If Mr Russell Ward does not pay to the substituted judgment creditors the sum of $13,145 together with costs as sought, in the sum of $2,084 (total $15,229) by 4.00 pm on 30 March 2021 then Mr Russell Ward will be adjudicated bankrupt.

8	I acknowledge that Mr Russell Ward challenged the original bankruptcy notice, but it has never been set aside.

[33]	The solicitors for the substituted creditors are to advise the Court by memorandum by noon on 31 March 2021 as to whether Mr Russell Ward has paid the outstanding sums, as I have directed. Upon receipt of the memorandum and in the event that Mr Russell Ward has not made payment, the orders of adjudication will take effect on 31 March 2021 at 3.00 pm.

[34]	If the outstanding costs of $15,229 are paid in accordance with my directions at [32] above, then these bankruptcy proceedings will be called in the Bankruptcy List on 12 April 2021 at 10.00 am.

[35]	I further direct that the solicitors for the substituted creditors are to advise   Mr Russell Ward as soon as reasonably practicable as to the bank account details for payment of the outstanding cost of $15,229 (or to provide details of the physical address where a cheque can be delivered.) In the event that Mr Russell Ward chooses to pay by cheque, the funds will need to have been cleared by 4.00 pm on 30 March 2021 if he is to avoid adjudication.

Associate Judge P J Andrew