121 Limited (in rec) v AAL Holdings Limited
[2024] NZCA 271
•26 June 2024 at 11.30 am
| IN THE COURT OF APPEAL OF NEW ZEALAND I TE KŌTI PĪRA O AOTEAROA |
| CA682/2022 [2024] NZCA 271 |
| BETWEEN | 121 LIMITED (IN REC) |
| AND | AAL HOLDINGS LIMITED |
| AND | PETER JOHN FESLTEAD AITKEN AND PETER LOUIS FELSTEAD |
| AND | XIAOLI DAI |
| Counsel: | B Hudson (Applicant) in person |
Judgment: | 26 June 2024 at 11.30 am |
JUDGMENT OF COURTNEY J
(Review of Registrar’s Decision)
The application for review is granted. The amount held as security for costs plus interest is to be returned to the payer, City Ltd.
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REASONS
Introduction
The appeal in this case was not properly commenced and is not being pursued. The security for costs was paid by a non-party. There is a dispute over who is entitled to repayment of the funds.
In December 2021, 121 Ltd filed a notice of appeal against a decision of Jagose J making orders under s 339(1) of the Property Law Act 2007 in respect of a property owned jointly by 121 Ltd, AAL Holdings Ltd (AAL) and the other respondents in this case.[1] In the High Court, AAL was one of four defendants but the notice of appeal in this Court named AAL as the sole respondent.
[1]AAL Holdings Ltd v Aitken [2022] NZHC 2973, (2022) 23 NZCPR 637.
Security for costs of $7,060.01 were paid by a non-party, City Ltd.
121 Ltd did not file the case on appeal within the prescribed time. It sought an extension of time to do so on the grounds that the second and third respondents had only just been served (although it appeared from a later memorandum filed on behalf of 121 Ltd that they might not, in fact, have been served). AAL neither consented to nor opposed the application.
The matter was referred to Goddard J, who concluded that because the second and third respondents had not been served at the outset, the appeal had not been brought within time, nor properly brought at all in the absence of confirmation that service on the second and third respondents had been completed.[2] In May 2023, the Judge directed that no further steps be taken until an extension of time for bringing the appeal had been obtained. No application for an extension of time was sought. In August 2023, 121 Ltd went into receivership.
[2]Court of Appeal (Civil) Rules 2005, r 31.
In September 2023, a Deputy Registrar sought instructions from 121 Ltd and AAL regarding payment out of the money held as security for costs. The receivers of 121 Ltd and counsel for AAL filed a joint memorandum seeking to have the funds paid to them equally.[3] In December 2023, the Deputy Registrar confirmed that payment would be made on that basis.
[3]The receivers of the 121 Ltd did not engage counsel. The general rule is that a company can only be represented in the conduct of court proceedings by a barrister or solicitor, but the courts have a residual discretion to relax this rule where the administration of justice requires it: see Re G J Mannix Ltd [1984] 1 NZLR 309 (CA); and Commissioner of Inland Revenue v Chesterfields Preschools Ltd [2013] NZCA 53, [2013] 2 NZLR 679 at [34]. The matter at issue here, while novel, is one such case where it is expedient to consider the material filed by the receivers to avoid protracting the matter: see LW354 Ltd v Lepionka & Co Investments Ltd [2020] NZCA 137 at [6] and [7].
A few days later Mr Hudson, at the time a director of 121 Ltd, contacted the Court to advise that he had paid the security for costs and requested that the money be repaid to him. As noted, the security was actually paid by City Ltd. Upon being advised that the Deputy Registrar had already made a decision regarding the payment of the funds to the receivers and the respondent equally, Mr Hudson sought a review of that decision.[4]
Review of Registrar’s decision
[4]Court of Appeal (Civil) Rules, r 5A(3).
Mr Hudson filed a memorandum which described the review application as being “supported by 121 Ltd”. Mr Hudson stated that the security for costs was paid by City Ltd “in trust pending the [a]ppeal proceeding, applied to 121 [Ltd] if it did proceed. The appeal did not proceed …[and so] the funds should be returned to where they came, City [Ltd].”
Mr McLennan, 121 Ltd’s receiver, opposed payment of the funds to City Ltd on the basis that Mr Hudson does not have the power to represent the receivers and that, even if the money had come from City Ltd, it would be an unsecured debt by 121 Ltd to the payer. That position was supported by AAL, whose counsel filed a memorandum asserting that the origin of the payment is irrelevant because it was paid on behalf of 121 Ltd and at best Mr Hudson (or rather City Ltd) is an unsecured creditor of 121 Ltd.
There is no authority of this Court dealing with the status of security for costs paid by a third party in respect of an appeal that has been held not to have been properly brought. Assistance is to be found, however, in Sutherland v North Shore Marine and Industrial Ltd, where Hardie Boys J considered the status of security for costs in the context of a party which had paid security for costs but subsequently went into liquidation:[5]
[Security for costs] was paid into Court pursuant to and as a condition of an order of the Court, to abide the eventual determination of the action. That event not having occurred, the fund is still subject to that order. The company would not be entitled to uplift it had it not gone into liquidation, and for that reason alone its liquidator is not entitled to do so either. That however is an incomplete and rather academic answer to the problem, for it leaves open the real question, which is whether the plaintiff would be entitled to the fund in the event that it is ultimately successful in its claim, notwithstanding that the effect of that would be to give it a preference over other unsecured and non‑preferential creditors. If it would not be, then no purpose at all would be achieved by retaining the fund. It should be released to the liquidator, and the plaintiff left to endeavour to satisfy the liquidator that it should be admitted as an unsecured creditor without having to go to trial at all.
… the money in question is invested with a special character. It comes under the control of the Court and is to be held and applied subject to the direction of the Court, exercised in accordance with the provisions of the rule or other statutory provisions under which it has been paid, or, where it has been paid pursuant to an order made under the Court’s inherent jurisdiction, then exercised in accordance with that jurisdiction. It would defeat the whole purpose for which the payment was made if a liquidator were able to uplift it, and thus put the party for whose protection it was paid into the position of an unsecured creditor.
[5]Sutherland v North Shore Marine and Industrial Ltd (in liq) [1981] 1 NZCLC 98,167 (HC) at 98,170.
The situation here is different because, while 121 Ltd is in receivership, the issue is not whether the money should go to the receivers or the respondent, but whether they should go to a third party. However, the same principle applies: security for costs is held and disposed of at the direction of the Court in accordance with the rule or statutory provisions under which it has been paid.
Rule 35(2) of the Court of Appeal (Civil) Rules 2005 requires an appellant to pay to the Registrar security for the respondent’s costs in the Court. Rule 52B addresses the disposition of amounts held as security for costs, but is only engaged “[a]fter the Court delivers its judgment”. At that point, the Registrar must ask for the parties’ advice on the disposition of the amount held and, if satisfied there is no reason for the amount to be disposed of in any other way, may refund the amount to the appellant if the appeal was successful, or pay it to the respondent if the appeal was unsuccessful. Because there is no judgment in this case, r 52B does not apply.
Rules 35 and 52B suggest that money paid as security for costs is held on trust by this Court for two purposes: first, for the benefit of any respondent on account of a future costs award in their favour; and secondly, for the benefit of the payer in the event no costs award is made against them. The position might be viewed as analogous to a resulting trust. In R v Prestney, this Court, discussing Barclays Bank Ltd v Quistclose Investments Ltd and Twinsecrtra Ltd v Yardley in relation to resulting trusts, made the following observations:[6]
A comparison can be made with Barclays Bank Ltd v Quistclose Investments Ltd [1970] AC 567 in which unused loan moneys advanced on condition that the borrower apply them only for an agreed purpose were found to be held by the borrower on resultant trust for the lender and thus not to be funds available to the borrower's general creditors. The arrangements were said to give rise to a relationship of a fiduciary character or trust notwithstanding that the transaction was one of loan giving rise to a legal action of debt. When the money was advanced the lender also acquired an equitable right to see that it was applied for the designated purpose. Very recently, in Twinsectra Ltd v Yardley [2002] 2 All ER 377, Lord Millett has commented at pp 397 – 398 [at [76] of the official report]:
“The duty is not contractual but fiduciary. It may exist despite the absence of any contract at all between the parties … The duty is fiduciary in character because a person who makes money available on terms that it is to be used for a particular purpose only and not for any other purpose thereby places his trust and confidence in the recipient to ensure that it is properly applied. This is a classic situation in which a fiduciary relationship arises, and since it arises in respect of a specific fund it gives rise to a trust.”
[6]R v Prestney [2003] 1 NZLR 21 (CA) at [27], citing Barclays Bank Ltd v Quistclose Investments Ltd [1970] AC 567 (HL); and Twinsectra Ltd v Yardley [2002] UKHL 12, [2002] 2 AC 164.
Given that the appeal was not properly commenced, and no extension for leave to bring the appeal will be sought, I am satisfied that the purpose for which City Ltd paid the security for costs no longer exists. The funds are correctly viewed as being held by the Court for the benefit of City Ltd and should be paid to it.
Mr Hudson, who sought the review, was not represented, so no issue as to costs arises.
Result
The application for review is granted. The amount held as security for costs plus interest is to be returned to the payer, City Ltd.
Solicitors:
Brown Partners, Auckland for the First Respondent
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