ASB Bank Limited v Sgargetta
[2018] NZHC 2061
•17 August 2018
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2017-404-788
[2018] NZHC 2061
BETWEEN ASB BANK LIMITED
Plaintiff
AND
ELLIOT DANIEL SGARGETTA
Defendant
Hearing: 29 May 2018 Appearances:
JJK Spring and A E Simkiss for the Plaintiff Defendant in person (on the papers)
Judgment:
17 August 2018
JUDGMENT OF WOODHOUSE J
(Stay pending appeal)
This judgment was delivered by me on 17 August 2018 at 4:00 p.m. pursuant to r 11.5 of the High Court Rules 1985.
Registrar/Deputy Registrar
……………………………………
Solicitors / Parties:
Mr JJK Spring and Ms A E Simkiss, Minter Ellison Rudd Watts, Solicitors, Auckland Mr E D Sgargetta
ASB BANK LTD v SGARGETTA [2018] NZHC 2061 [17 August 2018]
[1] By judgment dated 13 December 2017 (the substantive judgment), I entered summary judgment for the plaintiff, ASB Bank Limited (ASB), against the defendant,
Mr Sgargetta.1
[2] Mr Sgargetta sought an order staying enforcement of the substantive judgment pending determination of an appeal against it.
[3] Mr Sgargetta elected not to appear at the hearing of his application for stay. Mr Sgargetta has acted on his own behalf throughout. He lives in Australia and was unable to attend the hearing. However, he filed written submissions in support, and a detailed response to submissions for ASB. In addition, and because Mr Sgargetta was unable to attend, a transcript of the oral hearing was completed and has been forwarded to the parties.
Preliminary issue (1): recusal
[4] Mr Sgargetta objected to my determining the application for stay because, in his submission, it is not appropriate that I determine whether there should be a stay pending an appeal against my own judgment. This is not a ground for recusal. Applications for stay pending an appeal, as a matter of practice and for good reason, are generally heard by the Judge who delivered the substantive judgment.
[5] There was also a general submission which, reduced to the particular, sought my recusal from this case if I have any direct or indirect shareholding or other interest in any New Zealand bank and if I have in the past acted as a legal practitioner for any bank. Those matters also do not provide grounds for my recusal.
Preliminary issue (2): withdrawal of judgment issued on 13 August 2018
[6] By 10 August 2018 I had completed a draft of a reasoned judgment to dismiss Mr Sgargetta’s application for stay. On 13 August 2018 I received a copy of a notice from the Court of Appeal that, pursuant to r 43 of the Court of Appeal (Civil) Rules 2005, Mr Sgargetta’s appeal had expired and was deemed abandoned as at 16 June 2018. The notice is dated 9 August 2018.
1 ASB Bank Ltd v Sgargetta [2017] NZHC 3097.
[7] Having received that notice I delivered, to the parties, a brief judgment recording that, given the notice from the Court of Appeal, there were no grounds for making an order for stay and the application was dismissed accordingly with an order for costs in favour of ASB.
[8] Soon after the judgment had been received by Mr Sgargetta, this Court received copies of emails and other documents from and on behalf of Mr Sgargetta to the Court of Appeal objecting to the notice of abandonment of the appeal. When this Court received the documents the brief judgment had not been released for general distribution; that is to say, it had gone to the parties only. The case officer responsibly deferred general distribution. I confirmed his decision and advised the parties, in a minute, that the judgment was not to be acted on by ASB pending any decision by the Court of Appeal in response to Mr Sgargetta’s submissions to the Court of Appeal, or any further direction by me. I made clear that these directions were precautionary only and did not indicate any view on the matters raised by and on behalf of Mr Sgargetta in respect of the proceeding before the Court of Appeal.
[9] Further emails and documents have been sent to this Court on behalf of Mr Sgargetta. One of the documents amounts to further submissions on the application for stay. The filing of further submissions is inappropriate and I do not intend to have any regard to them. However, given what has occurred, I have decided to issue the fully reasoned judgment which had been earlier drafted. I have necessarily added what is contained in this section (paragraphs [6] to [10]), but otherwise the reasons in this judgment which lead to dismissal of the application for stay on the merits are unaltered from the draft.
[10] The brief judgment issued on 13 August 2018 is withdrawn and replaced with this judgment.
The substantive judgment
[11] ASB sought summary judgment against Mr Sgargetta in reliance on an unlimited deed of guarantee and indemnity in respect of loans made by ASB to Sleep Overs Ltd (in receivership and liquidation). The claim was for $598,340.15, and
interest. Judgment was entered for that sum with leave reserved to ASB to file a memorandum relating to the claim for interest and a claim for indemnity costs.2
[12] One of the important factors required to be taken into account on the present application is the apparent strength of Mr Sgargetta’s appeal. Because it was a summary judgment application the onus was on ASB to establish that Mr Sgargetta had no defence to the claim. For reasons set out in detail in the substantive judgment, I concluded that Mr Sgargetta did not have a defence.
[13]Matters of particular relevance to the strength of the appeal are the following:
(a)There was no challenge by Mr Sgargetta to the validity of the guarantees, and related facility agreements.
(b)Mr Sgargetta’s primary grounds for opposition to summary judgment were counterclaims – referred to in the substantive judgment as grounds 1 to 4.3 The appeal is directed to my conclusions on grounds 2 and 4.
(c)It is uncontroversial law that counterclaims do not constitute a defence to an application for summary judgment.
(d)In addition, and in any event, clause 8.1 in the guarantees precludes a claim of set-off, and a counterclaim, in response to a claim by ASB. Every payment due is required to be made “without any deduction or withholding whatsoever (whether in respect of set-off, counterclaim, charges or otherwise)”.4
The appeal – procedural matters
[14] The appeal was lodged with the Court of Appeal out of time because Mr Sgargetta had sent the notice of appeal to the High Court. There was a telephone conference before Brown J in the Court of Appeal on 15 March 2018. ASB did not
2 See ASB Bank Ltd v Sgargetta [2018] NZHC 2066.
3 Grounds 1 to 4, outlined in the substantive judgment at [23]-[28] and dismissed as grounds for refusing summary judgment for the reasons recorded at [37]-[49].
4 The full terms of the clause are recorded in the substantive judgment at [39].
oppose Mr Sgargetta’s application for an extension of time to appeal, but sought conditions. The Judge considered the conditions were appropriate and made an order granting an extension of time subject to the following conditions:5
(a)Mr Sgargetta must file a notice of appeal that clearly and concisely identifies his specific grounds of appeal; and
(b)Mr Sgargetta must pay $6,600 security for costs into Court within 20 working days as required by r 35 of the Rules unless before that period expires he files and serves satisfactory evidence that he has made an application for legal aid; or
(c)if Mr Sgargetta applies for legal aid, and his application is declined, Mr Sgargetta must pay $6,600 security for costs within 10 working days of that decision; and
(d)if security for costs is required and not paid in accordance with and in the time specified by in (b) or (c) above, the appeal is struck out.
[15] There was a further telephone conference on 25 May 2018, presided over by French J. Matters relevant to the present application for stay, recorded in a minute dated 28 May 2018, are:
(a)Mr Sgargetta had not filed a notice of appeal as directed in the minute of Brown J and French J directed that that be done by 18 June 2018 and that there would be no extension of that deadline.
(b)Mr Sgargetta’s application for legal aid had been declined but he had appealed against that decision. Leave was granted to pursue that legal aid appeal.
[16] I understand, from a recent enquiry to the Court of Appeal case officer, that: the legal aid appeal was unsuccessful; Mr Sgargetta is considering judicial review of the legal aid decision; the matter will not be advanced by the Court of Appeal unless security for costs is paid.6
5 Sgargetta v ASB Bank Ltd CA85/2018, minute of Brown J of 15 March 2018.
6 This records advice received before the notice of deemed abandonment was issued.
Evaluation
[17] In the following evaluation of Mr Sgargetta’s application I have taken account of his submissions and documents attached to the submissions which are relevant to the stay application.
The starting point
[18] The Court of Appeal has summarised the starting point for applications such as the present, and the proper approach of the Court, as follows:7
As a starting point, a successful party is entitled to the fruits of its judgment. An appellant who seeks to stop this must make an application and show why the usual consequences of a judgment should not follow. The court will need to balance the competing rights of the party who has obtained judgment against the need to preserve the appellant's position in the event of the appeal succeeding.8
[19] The cases have identified a range of factors as included amongst those to be taken into account in the balancing exercise.9 These factors, and some others raised by Mr Sgargetta, are addressed under the following sub-headings. The primary arguments for Mr Sgargetta and ASB are taken into account under appropriate sub- headings.
Will the appeal be rendered nugatory if there is no stay?
[20] If a successful appeal by Mr Sgargetta would be rendered nugatory because, in the meantime, ASB enforced the judgment against him, this would be a substantial point in favour of granting the application for stay. If a successful appeal will not be rendered nugatory, this would be a telling point against making an order for stay.
[21] For reasons recorded in the following paragraphs, Mr Sgargetta’s right of appeal will not be rendered nugatory if there is no order for stay.
7 Brook Valley Community Group Inc v Brook Waimarama Sanctuary Trust [2017] NZCA 377, (2017) 23 PRNZ 598 at [10].
8 Duncan v Osborne Buildings Ltd (1992) 6 PRNZ 85 (CA) at 87.
9 See Dymocks Franchise Systems (NWS) Pty Ltd v Bilgola Enterprises Ltd (1999) 13 PRNZ 48 (HC) at [9]; upheld on appeal in Dymocks Franchise Systems (NWS) Ptd Ltd v Bilgola Enterprises Ltd (1999) 13 PRNZ 48 (CA). See also Keung v G B Arthur Robert Investments Ltd [2010] NZCA 396, [2012] NZAR 17 at [11].
[22] If the appeal proceeds, and the Court of Appeal concludes that summary judgment should not have been entered, but in the meantime ASB has recovered all or part of the judgment sum, there is no basis for concluding that ASB would not be able to repay the money if directed to do so. I reject Mr Sgargetta’s submissions to the contrary, which are founded on references to the Commission of Inquiry in Australia into banking, including the conduct of ASB’s parent, the Commonwealth Bank of Australia.
[23] ASB submitted that Mr Sgargetta’s appeal would not be rendered nugatory if Mr Sgargetta was adjudicated bankrupt before the appeal was determined, citing Jeffreys v Morgenstern.10 Mr Sgargetta expressly accepted that bankruptcy would not render his appeal nugatory, although he submitted that it would “make the appeal process more convoluted than it already is”. I am satisfied that Mr Sgargetta’s bankruptcy will not render the appeal nugatory, for the reasons noted in Jeffreys v Morgenstern.
[24] In addition, if ASB seeks to enforce the judgment by applying for adjudication in bankruptcy, the application will have to be made in Australia because Mr Sgargetta is resident in Australia. Section 40(1)(g) of the Australian Bankruptcy Act 1966 has a provision which is in substance the same as to s 17(1)(d)(ii) and (vii) of the New Zealand Insolvency Act 2006. Both provisions provide, in effect, that an act of bankruptcy will not have been committed if the debtor satisfies the Court that he or she has a counterclaim, set-off or cross-demand equal to or exceeding the amount of the judgment debt, being a counterclaim, set-off or cross-demand that could not have set up in the action or proceeding in which the judgment or order was obtained. If a bankruptcy proceeding is commenced in Australia before the appeal has been determined, and if Mr Sgargetta seeks to invoke s 40(1)(g) of the Australian Bankruptcy Act then he might argue, albeit contrary to one of his arguments on the appeal, that he could not set up the claims in opposition to the summary judgment application given my conclusion on that application.
10 Jeffreys v Morgenstern [2014] NZHC 671 at [22]-[23].
The apparent strength of the appeal
[25] Mr Sgargetta’s principal ground of appeal is that he has a good claim against ASB for damages in a sum equal to or exceeding the judgment in favour of ASB. This is founded on allegations that ASB took direct steps to market the mortgaged properties which adversely affected the value of the properties, and that receivers appointed by ASB to Sleep Overs Ltd, the owner of the properties mortgaged to ASB, sold the properties at an undervalue. I will address the merit of this ground of appeal under the present heading, together with a new contention that there was fraud by an ASB employee, Ms Natasha Rowe. A third ground of appeal is that I wrongly refused to adjourn the hearing of the summary judgment application. I will deal with that contention below when considering other arguments by Mr Sgargetta that he did not get a fair hearing in the High Court.
[26] The principal ground of appeal amounts to a contention that Sleep Overs Ltd, as the owner of the properties that were sold by the receivers, is entitled to recover damages because the properties were sold at an undervalue. Mr Sgargetta’s document described as ‘Grounds of Appeal’ is in fact a lengthy and discursive argument, but the essence of his contention is that damages are recoverable because of breach of s 176 of the Property Law Act 2007. This ground, expanded in the further arguments in the notice of appeal, do not support a contention that summary judgment was wrongly entered. Reasons for that opinion are recorded in the substantive judgment, but are appropriately summarised here:
(a)The claims are plainly counterclaims. Counterclaims do not provide a defence to an application for summary judgment. I am not persuaded by Mr Sgargetta’s submissions that the matters he advances by way of counterclaim also amount to a defence.
(b)Section 176 prescribes the duty of reasonable care owed by a mortgagee exercising a power to sell mortgaged property. ASB was the mortgagee of the properties, but ASB did not sell the properties. The properties were sold by the receivers of Sleep Overs Ltd, the owner of the
properties. The receivers were not ASB’s agents.11 A contention that ASB has liability for the acts of the receivers is not tenable.
(c)Clause 8.1 of the guarantees is a further high hurdle for Mr Sgargetta.12
(d)Mr Sgargetta took no steps, prior to hearing of the summary judgment application, to plead affirmative defences or claims of set-off, or counterclaims, and has still taken no steps to do so.
[27] Mr Sgargetta in his grounds of appeal, and in submissions, contends that a decision of the Court of Appeal in Robertson v ASB Bank Ltd supports his primary argument.13 This included a submission (in the grounds of appeal), that the Court of Appeal in Robertson “found that a genuinely triable case for a claim that exceeds the amount for which judgment has been given against a debtor under s 176 of the Property Law Act of 2007 is a defence against an application for summary judgment”.
[28] There was no finding to that effect in Robertson, and that case does not otherwise indicate that Mr Sgargetta has a reasonably arguable case on appeal that summary judgment should not have been entered. Robertson was an appeal against a High Court decision refusing to set aside bankruptcy notices. There were two grounds of appeal. One was against the Associate Judge’s refusal to grant an adjournment. That has no present relevance. The second ground of appeal was that the Judge was wrong in refusing an application to set aside the bankruptcy notices on the grounds that they had a qualifying cross-claim that they had been unable to raise in the summary judgment proceedings. The argument on appeal was directed to s 17(1)(d)(ii) and (vii) of the Insolvency Act 2006, the provisions of which were noted earlier. The Court of Appeal did not hold that a claim by a debtor under s 176 of the Property Law Act is a defence against an application for summary judgment.
11 See the substantive judgment at [48].
12 See above at [13](d).
13 Robertson v ASB Bank Ltd [2014] NZCA 597.
[29] The other ground of appeal, to be considered in this section, is that the “summary judgment would allow ASB to profit on fraud by Natasha Rowe”.14 Ms Rowe was an employee of ASB, but there is no merit in this ground of appeal for the following reasons:
(a)Mr Sgargetta’s allegations relate to alleged conduct of Ms Rowe when she was an employee of the Bank of New Zealand, not ASB.
(b)Although Mr Sgargetta made allegations against Ms Rowe in the voluminous documents filed in opposition to the summary judgment application, and in some submissions, the allegations were not identified as grounds of opposition.
(c)No cause of action arising out of these allegations has been identified.
[30] An assessment of the merits of the appeal does not support Mr Sgargetta’s application for stay.
Stay of enforcement has already been declined in this Court
[31] In the substantive judgment, having concluded that ASB had established that there was no defence, I determined, in exercise of the discretion contained in r 12.12(2) of the High Court Rules, that this was not a case warranting stay of enforcement of the summary judgment in favour of ASB. The present application for stay, pending an appeal, arises in a context different from my earlier determination that there should be no stay. It is nevertheless a material factor. The reasons for declining stay under r 12.12(2) bear on the present application and do not support the present application.15
Will the appeal proceed expeditiously to a hearing?
[32] There can be no confidence that the appeal will be prosecuted expeditiously by Mr Sgargetta. This is indicated by Mr Sgargetta’s approach in the High Court.16 It is
14 These allegations are recorded in paragraphs 71-78 of the document filed by Mr Sgargetta as a notice of appeal.
15 See the substantive judgment at [58]-[59].
16 See the substantive judgment at [3]-[5].
reinforced, and in a direct way, by Mr Sgargetta’s conduct of his appeal, as earlier outlined in this judgment. The essence is that judgment in this Court was entered on 13 December 2017. There are rules requiring appeals to be advanced expeditiously to a hearing, but almost nine months after judgment was entered in the High Court the appeal has not been advanced at all. Mr Sgargetta does not even have the necessary leave to appeal out of time.
[33] The factor now being considered is sometimes referred to as the appellant’s bona fides as to prosecution of the appeal. If I am correct in my understanding that Mr Sgargetta is considering judicial review of the decision refusing his application for legal aid, with the original refusal of legal aid having been appealed, there is an indication of a lack of bona fides – diligent pursuit of the appeal in good faith.
[34]This factor also supports dismissal of the stay application.
Did Mr Sgargetta have a fair hearing in the High Court?
[35] As noted earlier, an apparent ground of appeal is that I refused an application to adjourn the hearing of the summary judgment application. This is one of several allegations by Mr Sgargetta that he did not get a fair hearing in the High Court.
[36] Mr Sgargetta expressly contends in his grounds of appeal that in the hearing before me he requested an adjournment and I refused the application (at paragraphs 27 and 28 of the grounds of appeal). Mr Sgargetta did not seek an adjournment at the hearing of ASB’s summary judgment application. Unless Mr Sgargetta has serious problems with his memory, I also find it hard to believe that he mistakenly recollected that he may have sought an adjournment. He had come from Australia for the hearing, presumably at his own expense, and had come fully prepared to oppose the summary judgment application which he did in a hearing, which lasted the entire day, having been set down for a half day.
[37] Based on this incorrect contention, Mr Sgargetta further argued that, had I granted his alleged request for an adjournment, he would have found lawyers to represent him and this was essential to enable him to have a fair hearing because he is not a lawyer and he is also an Australian citizen unfamiliar with New Zealand’s rules
and laws. The expanded argument from the false premise is disingenuous. The proceeding was served on Mr Sgargetta on 15 May 2017. The hearing on 4 September 2017 was set down on 7 June 2017. I agree with ASB’s submission that Mr Sgargetta had ample time to find and instruct a lawyer. Mr Sgargetta did make three applications to adjourn the hearing to other Judges in the course of case management conferences in July 2017. All three were refused. None of Mr Sgargetta’s applications was made on the grounds that he needed time to instruct a lawyer.
[38] In respect of a number of Mr Sgargetta’s claims, I concluded that there was no evidential foundation for them. Mr Sgargetta now claims that the evidential foundation was in documents which he had originally filed in opposition to the summary judgment application, but which had been ruled inadmissible in some of the earlier case management conferences. Mr Sgargetta now claims, apparently as another ground of appeal, that he was unfairly disadvantaged because the documents ruled inadmissible contained the evidential foundation. There is no merit in this argument. The documents were rejected by Court order, and there was no appeal against those decisions. In any event, the material in the documents earlier rejected, or the substance, was in substance repeated in a very large number of documents which I ruled admissible at the commencement of the hearing before me. These matters are summarised in the substantive judgment.17
[39] The Supreme Court of the United Kingdom has held, contrary to the thrust of a number of Mr Sgargetta’s arguments, that a lay litigant’s lack of representation should not justify “a lower standard of compliance with rules or orders of the court” and a lay litigant should “familiarise himself with the rules which apply to any steps he is about to take”.18
[40] In spite of the onus on Mr Sgargetta, substantial indulgences were granted to him to seek to ensure that he did get a fair hearing. In addition, the deficiencies in Mr Sgargetta’s presentation of a very large number of documents which were admitted, for the hearing, were materially rectified by ASB’s counsel who put the documents into a comprehensible form.
17 At [3]-[6].
18 Barton v Wright Hassall LLP [2018] UKSC 12 at [18].
[41] There is no merit in any of Mr Sgargetta’s arguments that he did not get a fair hearing. The content of some of the assertions adds weight to a conclusion that the Court’s discretion on an application for stay should not be exercised in Mr Sgargetta’s favour unless there are strong countervailing factors in support of an order for stay. None of the factors so far considered support stay, a number point against stay, and the remaining matters do not assist Mr Sgargetta.
Will ASB be injuriously affected by a stay?
[42] This is a conventional factor often taken into account. There was no argument for ASB of any particular adverse effect if stay is granted beyond its basic entitlement, to enjoy the fruits of the judgment it has obtained.
The effect on third parties
[43] ASB has not submitted that there are third parties who will be affected by an order for stay. Mr Sgargetta submitted that enforcement of the judgment against him will cause hardship to his family, including, he says, his parents and parents-in-law who he asserts, without evidence from them, invested money in the investments made through Sleep Overs Ltd. This does not provide grounds for stay. Enforcement by ASB of its judgment against Mr Sgargetta will not prevent legal proceedings against ASB, or others, to seek to recover losses alleged to have been caused by wrongful acts of ASB or those others.
The absence of security from Mr Sgargetta
[44] Mr Sgargetta has not supported his application for stay with any proposal to provide security to ASB for any part of the judgment sum. ASB advanced this point as another factor counting against grant of stay. It is a factor that does count against an order for stay, although I do not attach much weight to it.
Is there any novelty or importance in the questions on appeal?
[45] This is a factor conventionally referred to. There is no novelty or importance in the questions for appeal.
Is there any public interest in the proceeding?
[46] This is not a proceeding in which there is any public interest justifying stay. Mr Sgargetta submitted that there is public interest because the receivership and subsequent liquidation of Sleep Overs Ltd, and the sale of the properties, was reported in local media. That does not point to relevant public interest which might lend support to an application for stay.
What is the overall balance of convenience
[47] I am satisfied that, in assessing the matter overall, the weight of the argument is substantially in favour of ASB.
Result
[48] Mr Sgargetta’s application for stay of enforcement of the substantive judgment is dismissed.
[49] ASB is entitled, pursuant to the guarantee and related contractual documents, to its actual legal expenses and disbursements, reasonably incurred, but excluding GST.19 There is an order that expenses, excluding GST, reasonably incurred by ASB with its solicitors for legal fees and disbursements relating to Mr Sgargetta’s application for stay are recoverable from him.
Woodhouse J
19 This entitlement is discussed in the separate judgment dealing with ASB’s claim for additional interest and costs on the summary judgment application.
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