Court finds no error in High Court’s exercise of discretion under Insolvency Act
The Court of Appeal of New Zealand has dismissed an appeal against a bankruptcy order arising from unpaid legal fees owed to Turner Hopkins Lawyers Limited, finding no error in the High Court’s refusal to exercise its discretion against adjudication.
In Verappan v Turner Hopkins Lawyers Limited [2026] NZCA 479, the court granted the self-represented appellant an extension of time to appeal but upheld the bankruptcy order. It also set aside the stay and awarded Turner Hopkins $19,800 in appeal costs, plus $69 in disbursements.
Turner Hopkins acted for the appellant in a Family Court matter in 2019 but stopped acting in January 2020 after outstanding fees remained unpaid despite multiple promises of payment. The firm later demanded $11,141.28 for its work.
The appellant subsequently complained to the New Zealand Law Society Lawyers Complaints Service about the lawyer who had acted for him. The NZLS Standards Committee considered allegations concerning competence, instructions, treatment of the appellant, legal aid information, and the reasonableness of the fees. It found none of the alleged failures established and took no further action.
Turner Hopkins later commenced proceedings to recover its fees. The Disputes Tribunal found the $11,141.28 in fees proved and awarded interest at 12 percent per annum, together with filing costs, producing a total judgment debt of $18,302.24. The Disputes Tribunal decision was not appealed.
The firm served a bankruptcy notice in June 2024 and subsequently commenced bankruptcy proceedings. Although the District Court ordered the appellant to make weekly payments of $400 towards the judgment debt, he made no payments.
The appeal centred on whether the High Court had erred in its 27 November 2024 decision by declining to exercise its discretion under s. 37(c) and (d) of the Insolvency Act 2006 to refuse adjudication. The Court of Appeal said the subsequent decision to adjudicate the appellant bankrupt was a direct consequence of that decision.
The Court of Appeal found the High Court had correctly understood its jurisdiction and the appellant’s obligation to satisfy the court that it should not make an adjudication order.
It rejected the appellant’s procedural fairness argument concerning the refusal to summon his former lawyer. The court said bankruptcy proceedings were not the appropriate forum to re-examine factual matters underlying the judgment debt. Neither the Law Society decision nor the Disputes Tribunal order was under appeal.
The court also rejected an argument that Turner Hopkins relied on inadmissible hearsay through an affidavit from one of its employees. It found the employee was authorised to produce the firm’s documents and that the affidavit produced documents, including relevant correspondence leading to the judgment debt, that Turner Hopkins relied on to support the bankruptcy application.
The court further found that the delay between non-payment of the fees and the firm’s recovery action did not establish oppressive conduct. It accepted that the decision to pursue the outstanding amount and, when it was not paid, seek to have the appellant adjudicated bankrupt was, without more, legitimate commercial behaviour.
It also upheld the refusal to direct preparation of a transcript of an earlier High Court hearing, finding the transcript could make no difference to the appeal.
The court dismissed the appeal and set aside the stay of the bankruptcy order. It remitted the issue of High Court costs to that court for determination and ordered the appellant to pay Turner Hopkins $19,800 in appeal costs and $69 in disbursements.
