Armitage v Stylo Medical Services Limited
[2023] NZCA 425
•6 September 2023 at 11 am
| IN THE COURT OF APPEAL OF NEW ZEALAND I TE KŌTI PĪRA O AOTEAROA |
| CA200/2023 [2023] NZCA 425 |
| BETWEEN | ROSANNE ARMITAGE |
| AND | STYLO MEDICAL SERVICES LIMITED |
| Counsel: | Appellant in Person |
Judgment: | 6 September 2023 at 11 am |
JUDGMENT OF COURTNEY J
The application for review of the Deputy Registrar’s decision is declined.
____________________________________________________________________
REASONS
This review of a Deputy Registrar’s decision concerns an appeal against Associate Judge Brittain’s decision dismissing an application for orders staying or striking out liquidation proceedings brought by Stylo Medical Services Ltd (Stylo) against Hum Hospitality Ltd (Hum).[1] Stylo and Hum have a long history of litigation arising from a lease by Hum of premises owned by Stylo. The lease has now been cancelled and judgment entered against Hum for rental arrears.[2] That judgment sum forms one of the grounds on which Stylo sought an order placing Hum into liquidation.
[1]Stylo Medical Services Ltd v Hum Hospitality Ltd [2023] NZHC 463 [Strike out judgment].
[2]Stylo Medical Services Ltd v Hum Hospitality Ltd [2020] NZHC 2969 [Liability judgment].
Ms Armitage brings the appeal in her capacity as a creditor and shareholder of Hum. She filed her notice of appeal on 17 April 2023.[3] Security for costs was set at $7,060.[4] Ms Armitage applied for an order dispensing with security for costs or, alternatively, reducing security and deferring the date by which it was payable.[5] Her grounds for seeking a dispensation were that she is impecunious, that the appeal is genuine and reasonably arguable and there is a public interest in the issues raised. A Deputy Registrar of this Court declined the application. Ms Armitage applies for a review of that decision.
[3]The notice of appeal was originally filed in the name of Hum Hospitality Ltd (Ms Armitage as personal guarantor), but an amended notice of appeal filed on 26 April 2023 named Ms Armitage personally as the appellant.
[4]Court of Appeal (Civil) Rules 2005, r 35.
[5]Rule 35(6).
The Deputy Registrar set out the relevant legal principles at some length. Her summary of the principles was correct. There is no need for me to restate them.
It is accepted that Ms Armitage is impecunious. The Deputy Registrar did not, however, consider that the appeal raised any substantive issue of public interest, nor that the grounds of appeal were reasonably arguable. I agree with both conclusions.
The appeal is part of a very long history of litigation between Hum and Stylo and the decision under challenge was one involving the application of established principles to the facts of the case. No issue of public interest arises.
I turn to the Deputy Registrar’s assessment of the merits of the appeal and the question of whether the potential costs and benefits justified requiring Stylo to defend the judgment without the protection of security for costs. There are seven grounds of appeal being advanced.[6] They relate broadly to the Judge’s findings regarding (1) service of the proceedings, (2) advertising of the proceedings, (3) Hum’s rights of set‑off/counterclaim and (4) Hum’s insolvency.
[6]The amended notice of appeal identified 11 grounds, however in her memorandum of 18 May 2023 filed in support of the application for dispensation, Ms Armitage conceded four of the grounds.
As to the issue of service, the Judge held service of the liquidation proceedings had been effected in accordance with s 387 of the Companies Act 1993 and that there was no obligation on Hum to serve other documents such as those connected to advertising of the liquidation of the proceedings.[7] In holding that service had been properly effected, the Judge relied substantially on the decision in Denize Trustee Co Ltd v Waimauri Ltd.[8] Ms Armitage challenges both the reasoning in Denize and the Judge’s application of it to the facts before him. However, I see no error in the Deputy Registrar’s conclusion that this ground of appeal is not reasonably arguable — the Judge was entitled to follow Denize and there is no obvious error in his application of that decision.
[7]Strike out judgment, above n 1, at [40] and [43]–[44].
[8]Denize Trustee Co Ltd v Waimauri Ltd [2020] NZHC 1718, (2020) 21 NZCPR 247.
Nor is there error in the Deputy Registrar’s conclusion regarding the failure to serve other documents such as those relating to the advertising. There was no obligation to serve these documents and the Deputy Registrar correctly concluded that this ground was not reasonably arguable.
The next area of challenge, relating to the advertising of the liquidation proceedings, arises from Stylo’s early publication of the liquidation proceedings to another judgment creditor in breach of r 31.10 of the High Court Rules 2016. However, the Judge had a discretion to cure that procedural defect and did so on the basis that no prejudice had resulted from the breach.[9] Ms Armitage asserts, by reference to other cases on this issue, that the Judge had “stepped away from” expected practice. However, she has not asserted any error of principle, nor any other basis on which the exercise of a discretion can be impugned. The Deputy Registrar was correct to conclude that this ground of appeal was not reasonably arguable.
[9]Strike out judgment, above n 1, at [53].
Next is Ms Armitage’s assertion of error by the Judge in failing to recognise Hum’s right of set-off or counterclaim relating to GST, insurance and rates, which she says may be raised in the context of the liquidation proceedings. The Judge held that these issues had been determined by Brewer J’s in one of the judgments on which the liquidation application was based and it was no longer open to Hum to raise them.[10] Ms Armitage maintains that the issues were not determined by Brewer J. However, in his liability judgment Brewer J held that Hum had underpaid its rent.[11] He was unable to determine the amount of the underpayment and left quantum for determination separately, with the parties to provide further information. In his quantum judgment, Brewer J determined the issue of “how much Hum now owes Stylo”.[12] In these circumstances there is no error in the Deputy Registrar’s conclusion that it is not reasonably arguable that the Judge erred in his approach.
[10]At [58].
[11]Liability judgment, above n 2, at [25].
[12]Stylo Medical Services Ltd v Hum Hospitality Ltd [2021] NZHC 3552 at [5].
Ms Armitage also says that Hum is entitled to raise misrepresentation and breach of quiet enjoyment claims against Stylo by way of set-off. These claims are the subject of extant proceedings brought in 2016. They have not been progressed because Hum requires legal representation to do so and it cannot afford a lawyer. Stylo’s counsel, Mr Parmenter, points out that three trial dates have been adjourned in those proceedings. The Judge did not consider that the existence of the claims should preclude liquidation, noting that the claims could be advanced by the liquidator.[13] Ms Armitage says that this was an error and the fact that Hum cannot obtain legal representation at present was given too much weight. The Deputy Registrar did not consider that this ground was reasonably arguable and considered that it would not be right to allow Hum to avoid liquidation when it is unable to advance its claim.
[13]Strike out judgment, above n 1, at [60].
It must be the case that, in considering whether a company that is insolvent ought to be placed in liquidation, the Judge was entitled to place weight on the fact that the asserted claim — brought some seven years ago — cannot be advanced because of lack of funds. There is no error in the Deputy Registrar’s assessment of the merits on this aspect.
The next ground of appeal is that the Judge erred in concluding that, prima facie, Hum was insolvent. The basis for the Judge’s conclusion was that the judgment debts remained unpaid and there seems to be no dispute that Hum has not paid the judgment debts.[14] Therefore, there can be no error by the Judge. Ms Armitage nevertheless challenges the Judge’s conclusion on the basis that when this Court determined an application by Hum for stay of Brewer J’s quantum decision in 2022 and concluded that Hum was plainly insolvent, it did so on the basis of old draft accounts which showed that Hum was indebted to her for more than $2 million.[15] Ms Armitage says that since it is open to her to forgive that debt Hum should not now be regarded as insolvent. There is no merit in this argument. In any event, it does not overcome the problem that the judgment debts remain unpaid and there was no error by the Judge on the evidence before him. The Deputy Registrar was right to conclude that this ground is not reasonably arguable.
[14]At [63].
[15]Hum Hospitality Ltd v Stylo Medical Services Ltd [2022] NZCA 251 at [7].
Ms Armitage also challenges the Judge’s decision on the basis that he failed to take into account Stylo’s motivation in bringing the liquidation proceedings, which she says is to prevent Hum from pursuing its claim against Stylo. It is correct that the Judge did not appear to consider, as a separate matter, the reasons for Stylo bringing the liquidation proceedings. The Deputy Registrar did not ascribe merit to this ground because the failure to pay the judgment debts entitled Stylo to bring its application, and Hum’s claim against Stylo could still be advanced by a liquidator. In my view, the circumstances of the case generally make it highly unlikely that Ms Armitage’s assertions regarding Stylo’s motivation would alter the outcome. I do not consider that the Deputy Registrar erred.
Finally, the Deputy Registrar considered the benefits to Ms Armitage of the appeal (both pecuniary and non-pecuniary) against the potential costs (estimated as at least $9,560). She noted the benefits to Ms Armitage, recording the efforts she and Hum had made in terms of creating a community space and the perceived wrongs done by Stylo to their reputation, as well as the size of the claim against Stylo. The Deputy Registrar concluded that these benefits did not outweigh the costs.
Consideration of the respective benefits and costs is relevant because the Court needs to assess whether it is it is right to require Stylo to defend the appeal without the protection of security for costs. Ms Armitage wishes to raise a number of arguments that are not tenable. Without detracting from the genuineness of her views, I am satisfied that it would not be right to require Stylo to incur the cost of defending the appeal without security for costs.
Result
The application for review is declined.
Solicitors:
Winston Wang & Associates, Auckland for Respondent
5
0