Application to suspend bankruptcy pending appeal dismissed by the court of appeal

Summary

Mr Bioletti was adjudicated bankrupt on 21 August 2013. A request for suspension of bankruptcy was sought pending appeal. The application was dismissed by the Court.

Impact of decision

The same factors for whether a stay should be granted pending an appeal will apply when considering whether a suspension under section 416 of the Insolvency Act 2006 should be granted pending an appeal.

As with a stay, the application for a suspension should be made to the High Court in the first instance.

Facts

Lang J made an order adjudicating Mr Bioletti ("the applicant") bankrupt on 21 August 2013 (Commissioner of Inland Revenue v Bioletti [2013] NZHC 2131). The order was made on the application of the Commissioner of Inland Revenue ("the Commissioner"). The applicant sought a suspension of his adjudication pending appeal under section 416 of the Insolvency Act 2006. The Court directed that the application should have been made in the High Court (Salem Ltd v Top End Homes Ltd (2005) 18 PRNZ 122 at [115]) but dealt with it as it was already before them.

The Court applied the relevant factors as set out in the application for stay decision of Keung v GBR Investment Ltd [2010] NZCA 396, [2021] NZAR at [11] for convenience.

Issues and decision

The relevant factors are set out below.

Would the applicant's right of appeal be rendered nugatory if no stay is given?

The Court determined that the applicant’s appeal right would not be rendered nugatory but would remain whether or not he is permitted to practice on his own account.

Bona fide

The Court held that there was no suggestion that Mr Bioletti would not pursue his appeal in good faith.

Would the successful party be injuriously affected by the stay?

The Commissioner submitted that due to the applicant’s poor compliance history and increasing debt in the months leading up to the adjudication, the Commissioner would be adversely affected if the applicant could continue to practice free of the constraints imposed by bankruptcy. The Court accepted that there was some risk in that regard.

The effect on third parties

No suggestions of the effect on third parties were made in this case.

Novelty and importance of questions involved

The applicant submitted that the recent changes to the legal aid system had a significant adverse effect on his practice and ability to earn income and therefore bankruptcy should not have been pursued by the Commissioner.

The Court accepted that this was a novel argument but is particular to the applicant’s circumstances and holds no importance beyond the present case. The Court went on to say that there does not appear to be a significant prospect of the argument being accepted.

Public interest

The Court did not see public interest as a factor of particular significance.

Balance of convenience

The balance of convenience was weighted considerably towards the Commissioner. The Court’s considerations were as follows:

1. the applicant had not established any existing prejudice;
2. the amount of debt owed to the Commissioner;
3. the Commissioner should benefit from the decision of the High Court;
4. the increase in debt during the bankruptcy process; and
5. the Commissioner should not be exposed to further increases in debt in the event that the bankruptcy did not take effect until after the appeal.

Strength

The Court referred to its finding at [8] of the judgment that there does not appear to be a significant prospect of the applicant's argument being accepted.