Calvert v Reynolds
[2015] NZHC 1469
•29 June 2015
IN THE HIGH COURT OF NEW ZEALAND DUNEDIN REGISTRY
CIV-2012-412-000910 [2015] NZHC 1469
BETWEEN HILARY JANE CALVERT and HGW
TRUSTEES LIMITED as Trustees of
Frongopoulos TrustCHRIS JAMES Applicants
AND
GRANT BRUCE REYNOLDS Respondent
Hearing: 18 June 2015 (By way of telephone conference) Appearances:
M J McCartney QC for Respondent
M R Sherwood King for ApplicantsJudgment:
29 June 2015
JUDGMENT OF DUNNINGHAM J
[1] The applicants, Hilary Jane Calvert and HGW Trustees Limited, as trustees of the Frongopoulos Trust, and Chris James, apply for a stay of enforcement of the judgment against them given in my decision of 9 March 2015, pending resolution of the applicants’ appeal to the Court of the Appeal and the respondent’s cross-appeal to
that Court dated 2 April 2015 and 17 April 2015 respectively.1
[2] The respondent, Grant Reynolds, opposes the application and, in addition, has made an interlocutory application for interim relief pending the appeal. Specifically he seeks an order striking out the defendant’s appeal to the Court of
Appeal unless:
1 Reynolds v Calvert [2015] NZHC 400.
(i)by 31 May 2015, or such other date as ordered by the Court, the defendants pay to the plaintiff’s solicitors Whitlock & Co., the judgment sum of $740,000 together with interest on condition that Whitlock & Co hold the sum in the name of the plaintiff, to abide the outcome of the appeal to the Court of Appeal;
(ii)by 31 May 2015, or such other date as ordered by the Court, the defendants pay to the plaintiff, Grant Bruce Reynolds, the sum of
$137,961.22, being the costs awarded to the plaintiff in accordance with the judgment of the Court of 29 April 2015, on condition that the plaintiff provides an undertaking to the Court to reimburse the sum to the defendants if the defendants’ appeal is successful;
(iii)the defendants undertake to prosecute their appeal by getting a fixture as soon as possible and before the end of 2015 (if available), including seeking entry to Fast Track as prescribed in Practice Note – Fast Track as soon as possible.2
[3] Matters have evolved through the exchange of supporting affidavits and the position is now that the applicants have provided a bank guarantee in the sum of
$1,150,000, which is a sum sufficient to cover the judgment sum and costs, plus the interest which it is anticipated will accrue during the appeal process.
[4] In those circumstances the applicants say that the concerns the respondent had about securing payment are addressed. They also say the case on appeal is prepared and is close to filing so there is no need to involve the Fast Track process, nor is the appeal one which the Court of Appeal would normally direct through that process. As a consequence they say there is no need to grant the interim relief which
is sought by the respondent.
2 Practice Note – Fast Track [2012] 1 NZLR 269.
Legal principles
[5] The principles the Court must take into account in determining a stay application such as this are as follows:3
In determining whether or not to grant a stay, the Court must weigh the factors “in the balance” between the successful litigant’s right to the fruits of a judgment and “the need to preserve the position in case the appeal is successful”. Factors to be taken into account in this balancing exercise include:
(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 affect on third parties;
(e) the novelty and importance of the questions involved; (f) the public interest in the proceeding; and
(g) the overall balance of convenience.
[6] The strength of the appeal is also a factor to be considered.4 The applicant for the stay, of course, has the onus.
The applicants’ argument
[7] Given the various proposals which emerged over the course of filing the applications, the supporting affidavits and the submissions, I will focus only on those concerns which were still extant at the time I heard this application.
[8] The applicants say, in support of the application for a stay:
(a) they are bona fide in their intention to prosecute the appeal;
(b)the respondent will not be injuriously affected by the stay particularly now they have provided the ANZ Bank guarantee for $1,150,000;
3 Keung v GBR Investment Limited [2010] NZCA 396, [2012] NZAR 17a at [11] (footnotes omitted).
4 At [11].
(c) third parties are likely to be affected by enforcement proceedings should the stay not be granted;
(d)the applicants’ appeal and the respondent’s cross-appeal include matters of novelty and importance;
(e) There is public interest in the proceedings as evidenced by recent press coverage of the decision;
(f) the overall balance of convenience favours the granting of the stay because the sole asset of the Frongopoulos Trust is the family home of Mr James and that might need to be sold as part of the enforcement process. That should not have to occur before the appeals challenging the judgment are resolved, and when there is adequate security for payment of the judgment sum. Furthermore, to protect the applicants’ ability to seek repayment if they are successful, the judgment sum should not be distributed to creditors before the appeals are resolved in any event.
The respondents’ argument
[9] The respondent, in response, says:
(a) his concerns would, in part, be met if payment of the judgment sum and interest was adequately secured;
(b)it is reasonable to require this because of the history of dishonesty and of deliberate attempts to defeat the liquidator’s attempts to recover monies;
(c) he has doubts about the clarity of the drafting of the ANZ guarantee so also seeks a written undertaking by the applicants jointly and severally, and by the bank, to pay the judgment sum to the respondent within five working days of delivery of the judgment of the Court of Appeal;
(d)the security supplied by the bank guarantee should not extend to the hearing of any appeal in the Supreme Court. The matter should be considered afresh at that stage;
(e) he still seeks payment of the costs, as without that, the funding creditor, Mana Property Trustee Limited, must continue to fund the costs of the appeal;
(f) he has offered a personal written undertaking to repay the costs of the appeal if the applicants’ appeal is successful;
(g)his proposal provides a fair balance between the rights of the respondent to the fruits of judgment and the concerns of the applicants that they can be certain of receiving monies back in the event they are successful.
Discussion
[10] On applications for relief such as sought in the present case pending appeal, the dictum of Buckley LJ in Minnesota Mining and Manufacturing Co v Johnson and Johnson is often referred to guide the Court’s decision-making:5
The object, where it can be fairly achieved, must surely be so to arrange matters that, when the appeal comes to be heard, the appellate court may be able to do justice between the parties, whatever the outcome of the appeal may be.
[11] I start with a consideration of the reasons that a stay of enforcement of the judgment sum is sought by the applicants. The judgment was entered against the trustees of the Trust. Affidavit evidence shows that the only asset they hold as trustees to meet the judgment sum is the home in which Mr James and his partner,
Ms Cockburn, reside.
5 Minnesota Mining & Manufacturing Co v Johnson & Johnson Ltd (No.3) [1976] FSR 139 at
144.
[12] While, technically, the judgment is against the trustees in their personal capacity and is not limited to the assets of the Trust, in the normal course of events it is reasonable to expect that a judgment against them in their capacity as trustees should be met by first having recourse to the assets of the Trust. It would be unjust to require payment to be made when it could involve sale of that asset and when the respondent accepts he would not distribute it to the creditors in any event until the appeals are resolved.
[13] The real issue, as the respondent accepts, is whether payment of the judgment sum is adequately secured by the ANZ bank guarantee now proposed. Mr Sherwod-King submits the guarantee is in standard terms, and is clearly sufficient security for the payment of the judgment to the respondent.
[14] The guarantee explains the underlying relationship between the parties as follows:
The Applicant6 is the Judgment Debtor and the Beneficiary7 is the Judgment Creditor for an amount of $740,000.00 together with interest at 5 per cent per annum from 26 June 2012 down to the time of payment and costs and disbursements pursuant to a judgment of Her Honour Justice Dunningham delivered on 9 March 2015 in case Number CIV-2012-412-00910 in the High Court at Dunedin SUBJECT TO an appeal against that judgment by the Applicant to the Court of Appeal in case Number CA 713/2015 and any further appeal that the applicant may make to the Supreme Court should its appeal in CA 713/215 be unsuccessful.
[15] The guarantee then provides an irrevocable undertaking to pay the respondent sums up to the maximum amount of $1,150,000, and which expires only on the first to happen of:
(a) ANZ receiving written notice from the respondent at the ANZ’s office that the guarantee is no longer required; or
(b) ANZ receiving written notice from the applicant at the ANZ’s office
that the guarantee is no longer required due to the final Court
6 Which is defined as Hilary Jane Calvert and HGW Trustees Limited both of Dunedin as trustees of the Frongopoulos Trust.
7 Which is defined as Grant Bruce Reynolds of Auckland as liquidator of James Developments
Limited (in liquidation), being the respondent in the present application.
judgment being in the applicant’s favour. A copy of the final Court judgment in the appeal process referred to in the underlying relationship above must accompany such written notice from the applicant; or
(c) ANZ having paid the maximum amount.
[16] It is clear from this document that the respondent is entitled to payment of the amount owing under the final judgment up to the maximum amount of the guarantee, being its entitlement if:
(a) he is successful in retaining a monetary judgment in his favour in the Court of Appeal and leave to appeal to the Supreme Court is declined; or
(b)where the matter proceeds to the Supreme Court and he retains, or obtains, judgment for a monetary sum in his favour.
[17] Of course, if he is unsuccessful in the Court of Appeal and leave to appeal to the Supreme Court is declined, or if he is unsuccessful in the Supreme Court and does not retain a judgment for a monetary sum in his favour, then the guarantee will expire.
[18] I am satisfied that by provision of this guarantee the applicants have provided satisfactory security for payment of the judgment sum, interest and costs, and see no need for the imposition of any further requirements for undertakings, as sought by the respondent, to secure the respondent’s position.
Should the stay of enforcement of judgment extend to any Supreme Court appeal?
[19] The applicants say it is only sensible that the application for stay (and therefore the security provided) extends to cover all rights of appeal, including to the Supreme Court. It is illogical to distinguish between the first stage of appeal and the second stage if a stay is granted, as the same considerations apply.
[20] I accept that there is no obvious reason to distinguish between the first and second stage of appeal in determining this application for a stay of enforcement of judgment. If the security extends only to the Court of Appeal decision, and if leave is granted to appeal to the Supreme Court, exactly the same issues will have to be relitigated as are being dealt with now. That is an inefficient way of proceeding, particularly in a proceeding that has already seen significant legal costs incurred through a large number of interlocutory applications.
[21] For these reasons, I accept that the stay of enforcement of judgment should extend to the completion of the appeal process. However, I will reserve leave to the respondent to seek a review of the stay, including under r 12 of the Court of Appeal (Civil) Rules 2005 or r 30 of the Supreme Court Rules 2004, if there is any change in circumstances, including if there is delay by the applicants in pursuing any subsequent appeal.
Should the stay cover payment of costs?
[22] The respondent has sought to separate out payment of costs from payment of the judgment sum and interest on that. The respondent says that the creditor funding the litigation has incurred significant costs to date and should have some repayment now to fund further stages of the litigation. The applicants’ position will be protected by the respondent’s personal undertaking to repay the costs if the judgment in his favour is overturned on appeal.
[23] While I accept that the personal undertaking of the respondent is sound security for repayment of the costs judgment, I see no reason to differentiate between a stay of the judgment sum and a stay of the costs judgment, when both would have to be met by the trustees from the sole asset of the Trust, or their personal resources.
[24] In the circumstances, and having regard to achieving a fair balance between the competing interests of all parties, I see no reason to decline the stay in relation to the costs judgment when it is granted on the substantive judgment.
Should the applicants be required to seek fast tracking of the appeal?
[25] The next condition sought by the respondent is that the applicants apply for an early hearing in the Court of Appeal, including by seeking entry to Fast Track as prescribed in Practice Note – Fast Track as soon as possible.8
[26] The applicants respond by saying, in the circumstances of this appeal, such conditions are neither necessary or appropriate. Security for costs have been paid and the case on appeal is in final form ready to be paginated and bound so they are progressing the appeal without delay. They also say the appeal, at present, is likely to take two days. The Fast Track system, however, is regarded as suitable for matters scheduled to last half a day or less as confirmed by the Practice Note itself and by communications with Court of Appeal Registry staff.
[27] I accept that the Practice Note states that “[i]n general, the fast track is intended for appeals expected to take no more than half a day’s hearing time”.9
While there is provision for appeals which are expected to take up to two days hearing to be entered on the Fast Track process, that is clearly an exception and unlikely to be relevant to an appeal such as this which involves an appeal and cross- appeal on a number of issues. I also note that under the Practice Note, either party can apply to the Court of Appeal to fast track an appeal and if the respondent thinks this case is suitable, he can also make such application himself.
[28] In the absence of evidence to suggest the appellant is delaying the process, I see no reason to impose this as an additional condition on the grant of a stay, particularly when it is not obvious to me that the case is suitable for fast tracking.
Orders
[29] Accordingly, I order that:
8 Practice Note – Fast Track, above n 2.
9 Practice Note – Fast Track, above n 2 at (3)(1).
(a) enforcement of the judgment in these proceedings dated
9 March 2015 is stayed pending final resolution of the applicants’
appeal and the respondent’s cross-appeal of that judgment;
(b)leave is reserved to the respondent to apply for review of the stay, including under r 12 of the Court of Appeal (Civil) Rules 2005 or r 30 of the Supreme Court Rules 2004, if there is any change in the circumstances of the parties, including if there is delay by the
applicants in pursuing their appeals.
Costs
[30] The applicants have effectively sought and obtained an indulgence from the Court and would not normally be entitled to costs. Indeed, costs could be awarded against them. However, the respondent has also made an application which has been largely unsuccessful, although it did elicit appropriate security to be offered by the applicants.
[31] In all the circumstances, I consider this an appropriate case where no costs award should be made. Costs are to lie where they fall.
Solicitors:
Whitlock & Co. Auckland
MacKay & Gilkison, Wellington
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