Highmark Homes Limited v Watkins [2024] NZHC 2227 (9 August 2024)

Last Updated: 13 September 2024

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2024-404-000800 [2024] NZHC 2227

BETWEEN	HIGHMARK HOMES LIMITED Judgment Creditor
AND	NICOLA MAREE WATKINS Judgment Debtor

Hearing:	25 July 2024
Appearances:	B Martelli on instructions from D Hayes for the Judgment Creditor / Respondent N M Watkins, Judgment Debtor / Applicant in Person
Judgment:	9 August 2024

JUDGMENT OF ASSOCIATE JUDGE GARDINER

This judgment was delivered by me on 9 August 2024 at 10.30 a.m. pursuant to Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar

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

Solicitors:

Hunwick Law Ltd, Hamilton D Hayes, Hamilton

Copy to: N M Watkins

HIGHMARK HOMES LTD v WATKINS [2024] NZHC 2227 [9 August 2024]

• [1] This judgment concerns the validity of an application to set aside a bankruptcy notice the judgment creditor, Highmark Homes Limited (Highmark Homes) served on the judgment debtor, Nicola Watkins. The application has its origins in earlier bankruptcy proceedings brought by Highmark Homes against Ms Watkins.

• [2] The earlier bankruptcy proceedings arose after Ms Watkins did not comply with a bankruptcy notice demanding that she pay Highmark Homes $23,996.16 pursuant to an order of the Disputes Tribunal. Her appeal of that decision was dismissed by the District Court on 23 August 2021.¹

• [3] In a judgment delivered on 1 March 2023, this Court refused to halt the bankruptcy proceedings and indicated that an order would be made adjudicating Ms Watkins’s bankrupt if she did not pay the judgment debt.² In a minute dated 16 March 2023, the Court warned Ms Watkins that even if she paid the judgment debt Highmark Homes was likely to seek an order that she pay its costs because it had been put to the expense of issuing the bankruptcy notice and bringing the proceedings.³ The Court encouraged Ms Watkins to attempt to agree a position on costs.⁴

• [4] The bankruptcy proceeding was dismissed on 23 March 2023 because Ms Watkins had paid the judgment debt (on 8 March 2023). Highmark Homes sought costs. On 4 September 2023, the Court ordered Ms Watkins to pay Highmark Homes’ costs (on a 2B scale) of $12,786.50 and disbursements of $1,640 because she had opposed the application for adjudication and had not paid the judgment debt until after the judgment was issued following a full hearing.⁵

• [5] Ms Watkins did not pay the costs order. On 11 April 2024, Highmark Homes obtained a bankruptcy notice against Ms Watkins. It is not apparent from the file when the bankruptcy notice was served on Ms Watkins, but Ms Watkins says in her application to set aside that it was served on her on 12 April 2024.

¹ Nicola Watkins v Highmark Homes Ltd [2021] NZDC 16979.

² Re Watkins, ex parte Highmark Homes Ltd [2023] NZHC 353.

³ Highmark Homes Ltd v Watkins CIV-2021-404-002268, 16 March 2023.

⁴ The Court was unaware that Ms Watkins had already paid the judgment debt on 8 March 2023.

⁵ Highmark Homes Ltd v Watkins CIV-2021-404-003368, 4 September 2023.

• [6] On 22 April 2024, Ms Watkins filed an application to set aside the bankruptcy notice. It is unclear when she served the application on Highmark Homes. Highmark Homes does not take issue with the date of service.

• [7] Ms Watkins did not file an affidavit in support of the application, and none were served with the application. In the body of her application to set aside she sought leave to file an affidavit in support of the application out of time. Ms Watkins filed an affidavit on 22 July 2024.

• [8] Highmark Homes opposes the application to set aside the bankruptcy notice, on the grounds that it is a nullity because it was not accompanied by an affidavit.

• [9] The issue arises because s 17 of the Insolvency Act 2006 provides that a debtor commits an act of bankruptcy if the debtor does not comply with the requirements of the bankruptcy notice within 10 working days after service (if served in New Zealand). The relevant parts of s 17 are:

(1) A debtor commits an act of bankruptcy if —

...

(d) the debtor has not, within the time limit specified in subsection (4), –

(i) complied with the requirements of the notice; or

(ii) satisfied the court that he or she has a cross claim against the creditor.

...

(4) The time limit referred to in subsection (1)(d) is,—

(a) if the debtor is served with the bankruptcy notice in New Zealand, 10 working days after service ...

(emphasis added)

• [10] The bankruptcy notice must be in the prescribed form.⁶ The prescribed form is Form B2, sch 1 of the High Court Rules 2016.⁷ This notice is required to state in the notes to the judgment debtor:

⁶ Insolvency Act 2006, ss 17(2) and 29(1)(a).

⁷ High Court Rules 2016, r 24.8(3).

If you consider you have a counterclaim, set-off or cross-demand against the judgment creditor that comes within paragraph 1(c), or you wish to seek the court’s approval of terms of payment, you must, within 10 working days from the date of receiving this notice, apply to the High Court. Your application must be supported by affidavit.

You must, within the same time, also serve a copy of the application and supporting affidavit on the judgment creditor.

(emphasis added)

• [11] The bankruptcy notice served on Ms Watkins followed the prescribed form and included these notes.

• [12] The Court has no discretionary power to extend the time for complying with the bankruptcy notice, nor does the Court have any discretionary power to extend the time for applying to set aside the bankruptcy notice.⁸

• [13] If an application to set aside a bankruptcy notice is made within the stipulated time, the time to comply with the notice is extended until the application has been determined.⁹

• [14] However, if an application to set aside a bankruptcy notice is not accompanied by the required affidavit in support, then there is no valid application.¹⁰ In Re Memelink ex parte SANCO (NZ) Limited, Associate Judge Gendall said:

[13] In my view, from the wording of the Insolvency Act 2006 and the provisions in the required Form B2 for bankruptcy notices, it is clear that a judgment debtor has only 10 working days from the date of service upon him of the bankruptcy notice to apply to this Court to set it aside and this application must be supported by affidavit. In addition, within this same 10 day working period the judgment debtor is required also to serve “a copy of the application and supporting affidavit on the judgment creditor”.

(emphasis added)

• [15] Late filing and/or service of the supporting affidavit cannot undo the act of bankruptcy that has already occurred.¹¹

⁸ Re Reynolds, ex parte Bartlett [2014] NZHC 447 at [16].

⁹ High Court Rules 2016, r 24.10.

10. Re Murray, ex parte West Coast Holdings Ltd [2019] NZHC 2913 at [6]; and Re Memelink ex parte SANCO (NZ) Ltd HC Wellington, CIV-2008-485-2691, 10 March 2009 at [13].

¹¹ Prescott v Auckland Council [2017] NZHC 2698.

• [16] In this case, it is not disputed that the application to set aside the bankruptcy notice was not filed or served with the required accompanying affidavit. An affidavit was not filed until three months later. The Court has no jurisdiction to deal with Ms Watkins’s application to set aside the bankruptcy notice. Accordingly, the application is dismissed.

• [17] Ms Watkins raised several issues at the hearing. These related to Highmark Homes’ actions that led to the original Disputes Tribunal award. Ms Watkins spoke about her concerns that Highmark Homes committed perjury. She said that she is taking steps to reopen proceedings in the Employment Court.

• [18] Ms Watkins will be able to address the Court on these concerns, and any other matters relevant to the Court’s discretion, at the hearing of any bankruptcy proceedings that follow.

• [19] Costs are reserved to be dealt with on final disposal of any such bankruptcy proceedings.

Associate Judge Gardiner