Andrews Property Services Limited v Auckland Council
[2016] NZHC 1644
•20 July 2016
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV 2011-404-004890
CIV 2016-404-000948 [2016] NZHC 1644
IN THE MATTER OF the Companies Act 1993 and an
application made to set aside a statutory demand issued under s 290 of that Act
BETWEEN
ANDREWS PROPERTY SERVICES LIMITED
Applicant
AND
AUCKLAND COUNCIL Respondent
Hearing: 19 July 2016 Appearances:
J McBride and J San Diego for Applicant
B Martelli for RespondentJudgment:
20 July 2016
JUDGMENT OF ASSOCIATE JUDGE CHRISTIANSEN
This judgment was delivered by me on
20.07.16 at 3:00pm, pursuant to
Rule 11.5 of the High Court Rules.
Registrar/Deputy Registrar
Date……………
ANDREWS PROPERTY SERVICES LIMITED v AUCKLAND COUNCIL [2016] NZHC 1644 [20 July 2016]
Background
[1] The applicant (APS) applied on 5 May 2016 under s 290 of the Companies
Act 1993 to set aside a statutory demand served on it by Auckland Council on 20
April 2016. The demand was for $727,518.03 being the amount of the judgment for contribution ordered in a building remediation proceeding.
[2] APS has appealed that decision and that appeal is to be heard in the Court of
Appeal on 29 and 30 August 2016.
[3] The basis for the present setting aside application by APS is that it ought not to be required to pay the amount of the judgment until its appeal has been determined.
[4] On 26 May 2016 APS also applied for a stay of execution.
[5] Associate Judge Bell held the two applications be heard together stating he was satisfied that the setting aside application would stand or fall with the application for stay of execution; that if APS persuaded the Court there should be a stay then clearly the Auckland Council would not have a basis on which to require payment of the contribution judgment and therefore that the statutory demand would be ineffective.
[6] Hence, the submissions of counsel focussed mainly upon the application for stay of execution.
[7] The judgment in question is that of Whata J which issued on 31 July 2015. By that judgment APS was found liable for 20 per cent of the sum that the Court held was payable by APS, Auckland Council and another to the purchasers of accommodation units. It was not until 7 December 2015 that the quantum judgment issued. The plaintiffs demanded payment in full of $3,637,590 from Auckland Council and the Auckland Council paid that sum.
[8] APS says the first it learned of Auckland Council’s calculation of APS’ contribution amount was when it was served with Auckland Council’s statutory demand on 20 April 2016.
[9] Before then APS filed an appeal of Whata J’s judgment. Its central contention is that the Learned Judge was wrong to conclude that the over clad system installed in the building development was not code compliant and was also wrong to conclude that an initial survey would have revealed that the underlying substrate was inadequate, when the expert evidence was entirely to the contrary.
[10] If the Court of Appeal agrees then Auckland Council will not be able to recover any judgment contribution from APS.
[11] Subsequent to service of the statutory demand counsel for Auckland Council filed a memorandum with details of Auckland Council’s claim of contribution from APS.
The application for stay
[12] Mr McBride submits for APS that Auckland Council will be minimally impacted by a relatively short interlude before the Court of Appeal’s judgment will issue; that no prejudice will occur because APS is solvent and whilst unable presently to pay the judgment amount it will be able to access funds by borrowings in due course.
[13] Meanwhile interest on the judgment debt (five per cent) continues to accrue at a rate well in excess of commercial deposit rates.
[14] APS says its appeal is bona fide. Over the course of an hour during submissions Mr McBride explained where and in what regard issues were taken with the findings of Whata J. At the conclusion I informed Mr McBride that the Court considered he was well prepared for the forthcoming appeal; that the appeal was being brought in good faith and, it is clear, with a degree of confidence.
[15] APS has provided uncontested affidavit evidence to the effect that having to raise the money from its bank or its shareholders will place considerable financial and emotional stress on its director and on APS at a time when APS is trying to manage its cash flow to ensure it continues to operate profitably and can continue to employ staff.
Opposition to the application
[16] Mr Martelli counsel for Auckland Council opposes the application because: (a) APS admits it can raise the money to pay the debt;
(b) Therefore APS’ position to benefit from a successful appeal is not in
jeopardy; and
(c) If the application is granted, there is a risk to Auckland Council of assets being dissipated.
[17] Much of Mr Martelli’s focus for the Auckland Council concerns whether the appeal may be rendered nugatory by lack of a stay, noting by reference to case authority that even where an appeal will be rendered nugatory, a stay may not necessarily be granted.
[18] In support of his case for dismissal Mr Martelli submits:
(a) APS does not anywhere claim that the appeal will be rendered nugatory without a stay being granted; indeed, he notes APS admits it could pay the debt from its borrowings or its director’s family assets; and that therefore the key prejudice concerns APS having to raise finance in due course.
(b) That APS’ focus upon having to raise funds to pay the judgment is not
what the present application should be about.
(c) The Court should adopt the approach taken in the Advantage Computer case1 in which the Appeal Court acknowledged that although the hearing date may be close, the issue of a judgment may take many months and therefore the Court said it would stay execution only until the day of the hearing.
(d) That if a stay is to be granted then it should only be until 29 August
2016 when the appeal hearing commences, because in the interim, Auckland Council will be deprived of money owed to it “and at risk of realisable assets being dissipated”.
(e) Insufficient evidence has been given to the Court regarding APS’
claims of being able to meet payment of its debt.
(f) That given APS’ assertion it can raise the finance to pay the debt and the work required to do so would not be particularly onerous.
Considerations
[19] The stay application is made in reliance on Rule 12(3) of the Court of Appeal (Civil) Rules 2005. The principles are well known. As Mr McBride submits the purpose of that rule is to provide a mechanism to ensure that there will be no developments following the judgment that prevent justice ultimately being done between the parties when the appeal is heard.
[20] It is not immediately apparent when the date of appeal was fixed but it appears that occurred long before Auckland Council’s statutory demand was served.
[21] Mr Martelli’s submissions challenge claims that APS’ appeal would be rendered nugatory. The focus of those submissions is upon the fact that APS said it would, albeit not without some delay, be able to pay Auckland Council if its appeal
is unsuccessful. It would seem to follow from Mr Martelli’s submission that
1 Advantage Computer Ltd v Advantage Group Ltd, HC Auckland CP269-AS02, 19 July 2004.
therefore if APS will be able to pay then it loses nothing by being required to pay that amount now.
[22] In Duncan v Osborne Building Limited2 the Court stated the principles upon which stay applications ought to be considered.
[23] In that case and following a successful application for summary judgment the respondent issued a writ of sale in respect of the appellant’s house. The appellant’s appealled against the summary judgment on the ground that further evidence was available, and applied for a stay of execution.
[24] The Court held that without an order for stay a judgment may be enforced notwithstanding an appeal and considered in that case a stay of execution would not render the right of appeal nugatory since the subject matter of the appeal was not the house itself but the contract sum payable. A stay was not therefore granted.
[25] The Court held:3
We make no finding as to the bona fides of the applicants in bringing their appeal but record that lack of diligence in advancing it to-date and the history of the lapse of time before satisfactory evidence of their claims has emerged cannot carry weight in their favour.
[26] Factors which the Court may take into account in the balancing exercise include:4
(a) Whether the appeal may be rendered nugatory by the lack of a stay; (b) The bona fides of the applicant as to the prosecution of the appeal; (c) Whether the successful party will be injuriously affected by the stay;
(d) The effect on third parties;
2 (1992) 6 PRNZ 85 (CA).
3 At p 87.
4 (1999) 13 PRNZ 48 at [9].
(e) The novelty and importance of questions involved; (f) The public interest in the proceeding; and
(g) The overall balance of convenience.
[27] Undoubtedly a Court needs to consider whether if a stay is granted rights of appeal will be rendered nugatory. Mr Martelli submits that will not occur because, if forced to do so, APS will, through the efforts of its principal, borrow the funds needed to pay the debt. However that submission ignores the difficulties APS will have in that regard. In part those issues have been caused by the belated actions of Auckland Council to claim their contribution sum at a time so close to the hearing of the appeal. No explanation has been provided as to why a claim for payment contribution was not sooner made when the opportunity for such was available.
[28] An overall balance of convenience is also important. The Court is satisfied the appeal is being properly pursued and not for any other reason. Also the Court’s view of matters is influenced by what it considers was the belated approach and timing of Auckland Council’s demand.
[29] Some security is provided to Auckland Council because the judgment will accumulate interest at 5 per cent until it is paid.
Result
[30] The Court orders a stay be granted. It follows that Auckland Council’s
statutory demand shall be set aside.
[31] Costs upon both applications will be considered upon any request for those and any response thereto received within seven days thereafter.
Associate Judge Christiansen
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