Churchill Group Holdings and Others v Aral Property Holdings Limited and another HC Ak CIV 2001-404-002302

[2010] NZHC 27

IN THE HIGH COURT OF NEW ZEALAND

AUCKLAND REGISTRY

CIV-2001-404-002302

BETWEEN  CHURCHILL GROUP HOLDINGS AND

OTHERS Applicants

ANDARAL PROPERTY HOLDINGS LIMITED & ANOTHER Respondents

Hearing:         25 January 2010

Appearances:  Mr Fava in person for himself and other applicants

R G Simpson for Respondents

Judgment:      27 January 2010 at 2.30 p.m.

JUDGMENT OF VENNING J

on application to stay execution of judgment

This judgment was delivered by me on 27 January 2010 at 2.30 pm, pursuant to Rule 11.5 of the High

Court Rules.

Registrar/Deputy Registrar

Date……………

Solicitors:            Bell Gully, Auckland

Copy to:             P Fava, Auckland

CHURCHILL GROUP HOLDINGS AND OTHERS V ARAL PROPERTY HOLDINGS LIMITED &

ANOTHER  HC AK CIV-2001-404-002302  27 January 2010

Introduction

[1]      In a judgment delivered on 22 December 2009 by Hugh Williams J this Court ordered Churchill Group Holdings Ltd, together with the three other plaintiffs in CIV

2001-404-2302 jointly and Mr Fava severally to pay costs to the respondents in the sum of two million dollars.  The applicants intend to appeal the costs judgment and seek  an  order  from  this  Court  in  the  interim  staying  execution  of  the  judgment pending the hearing of that anticipated appeal.

[2]      Although  the  application  relates  to  a  judgment  of  Hugh  Williams  J,  the application  was  heard  before  me  as  Duty  Judge  during  the  Christmas  vacation. There  is  some  urgency in  the  application  as  the  respondents  have  issued  statutory demands   against   the   four   plaintiff   companies   and   Mr   Fava   anticipates   the respondents will shortly issue a bankruptcy notice against him.

Jurisdiction

[3]      There is an issue as to the jurisdiction for the application for stay. Mr Fava is correct in that if an appeal is lodged with the Court of Appeal then the appropriate rule is r 12 of the Court of Appeal (Civil) Rules 2005 rather than r 20.10 (as referred

to by Mr Simpson) which relates to appeals to rather than from this Court:  r 20.1(1). However, at this stage it does not appear an appeal has been filed with the Court of Appeal against the costs judgment.   In the circumstances the Court of Appeal rules are not engaged.  The jurisdiction for a stay such as that sought by Mr Fava must be

under r 17.29:

Stay of enforcement

A liable party may apply to the court for a stay of enforcement or other relief against  the  judgment  upon  the  ground  that  a  substantial  miscarriage  of justice would be likely to result if the judgment were enforced, and the court may give relief on just terms.

[4]      As both Mr Fava and counsel focused on the general principles applicable to

a stay pending the hearing of an already filed appeal, I deal with those submissions

in this judgment.   I also deal with the alternative considerations under r 17.29.   For

the reasons that follow, whichever rule  applied, be it r 12  of  the Court of Appeal Rules or r 17.29 of the High Court Rules the result would be the same in this case.

Background

[5]      The  costs  judgment  followed  a  costs  hearing  over  six  days  in  March  2009 before  Hugh  Williams  J.             The  application  for  increased  and/or  indemnity  costs against   the   plaintiff   companies   Churchill,   Cachinal   Investments   Ltd,   Matam Investments Ltd and Cleveland Investments Ltd and their former director Mr Fava personally  followed  a   default  judgment  entered  against  the  companies  on  13 December 2006 under r 485 as there was no appearance on behalf of the plaintiffs.

[6]      The circumstances leading to that default judgment were somewhat unusual. They are also relevant to this costs decision and this judgment.  Hugh Williams J set them out in the costs judgment as follows:

[2]         The claim began in 2001.  By the time the substantive hearing began on  25 October  2006  the  plaintiffs’  first  claim  was  for  more  than  $25m against both defendants for what was essentially loss of opportunity for them to buy Aral’s share of a shopping centre at  Whangaparaoa in North Shore City known as Pacific Plaza.  That claim alleged breach of the Fair Trading Act 1986.

[3]      In  a  second  cause  of  action  against  both  defendants  in  deceit,  all plaintiffs  (though  the  losses  were  alleged  only  to  have  been  incurred  by Churchill, Matam and Cleveland) sought the same damages plus exemplary damages of $25m.

[4]      As the litigation proceeded through its multiple interlocutory phases and through trial to the point where judgment was entered, it became, on any measure, very detailed and complex.   It covered a huge spectrum of detail, many thousands of pages of documents and thousands of pages of evidence. Of the four main witnesses, Mr Fava’s evidence-in-chief was 355 pages in extent  with  cross-examination extending over  451 pages  of transcript;   the briefs of the plaintiffs’ two other main witnesses, Messrs Harris and Chong, were  52  and  40  pages  respectively,  with  145  and  153  transcript  pages  of respective cross-examination and Mr Leung’s brief extended over 224 pages followed  by  188  pages  of  cross-examination. The  plaintiffs  called  14 witnesses other than Messrs Fava, Harris and Chong – one by videolink – and  their  evidence  and  cross-examination  was  also  extensive. And  Mr Ronald  of  Hong  Kong  Shanghai  Banking  Corporation  (“HSBC”)  had  just finished reading his 69 page brief of evidence for the defendants when the hearing ended.   The principal documents were assembled into two series of Eastlight  folders,  nearly  19,000  pages  in  one  33 volume  series  and  nearly

5,500  pages  in  another  12  volumes.   Additionally,  there  were  21  volumes

comprising  68  affidavits  filed  during  interlocutory  stages  of  the  claim, another five Eastlight folders relating to the dispute between Mr Philip Fava and   a   brother,   Mr Noel   Fava.  Another   11   Eastlight   files   contained miscellaneous ancillary documents.

[5]      The  substantive  trial  began  with  further  interlocutory  applications but,  by  13 December  2006,  Day  31,  the  hearing  was  well  on  the  way  to completion.   Extensive evidence of all four main witnesses had been given, the plaintiffs’ case was complete, and the defendants’ case was within what would probably have been a day or so of completion.

[6]      However, on 13 December 2006 the case came to an abrupt halt and judgment under the then r 485 was entered for both defendants against all plaintiffs   on   the   basis   that   the   plaintiffs   were   not,   in   formal   terms, “appearing”.

[7]      The reason?  On 6 December 2006 Mr Fava withdrew his opposition

to  an  order  of  adjudication  in  bankruptcy  based  on  his  inability  to  meet  a debt of some $7,000.  In 2007 he characterized that as a “bad judgment call” stemming from his collapse through exhaustion from the strain of this case.

[8]      As  a  result  of  adjudication  he  was  automatically  disqualified  from continuing as director of the plaintiffs and his shares in them passed to the Official Assignee.   As a result of that, neither Mr Judd QC, senior counsel for the plaintiffs, nor his instructing solicitors, were able to continue to get instructions.  As a result of that, on 13 December 2006 Mr Judd was granted leave to withdraw.  As a result of that, the r 485 judgment was entered.

[7]      I interpolate here that a default judgment under r 485 was entered in similar circumstances in Chase Wellington Properties v Hughes (1989) 3 PRNZ 121.

[8]      As Hugh Williams J also noted in the costs judgment the matter did not end

in December 2006.  The Judge went on to note as follows:

[11]     In meeting this claim the defendants incurred some $3.158m in legal fees and disbursements and because of that, the way in which the litigation had been conducted and having been deprived of a judgment which – they hoped – would vindicate their actions, they were determined to seek redress, principally by the route of applying for increased or indemnity costs.

[12]     In early 2007 they applied for such costs against the plaintiffs, Mr Fava   personally   and   Messrs   Yee   and   Thomas   in   their   capacities   as mentioned and as trustees of the Philip Joseph Fava No.1 Trust.   They also sought increased or indemnity costs against Mr Yee’s legal firm, Murdoch Price, for opposing three interlocutory applications.

[13]     That   application   –   amended   on   16   December   2008   –   took   a regrettably  long  time  to  come  to  hearing  but,  after  a  further  flurry  of interlocutory applications were dealt with, it was heard over the 6-day period appearing  in  the  frontispiece.  The  parties  also  produced  a  considerable volume of documentation during the hearing.

[14]     This  judgment  stems  from  that  hearing,  but  it  is  important  to  note that, at the fixture, the defendants only sought judgment against the plaintiffs and Mr Fava.  Depending on the result, their application against Messrs Yee and  Murdoch  Price  may  require  a  further  hearing.   Since  the  hearing,  the claim against Mr Thomas has been settled and discontinued.

[15]     The  course  of  dealing  with  the  costs  application  has  not  been straightforward   in   that,   during   the   hearing,   the   Court   dismissed   an application by Mr Fava under r 9.75 for leave to issue subpoenas and have witnesses – especially Mr Simpson, a partner in Bell Gully, the defendants’ solicitors  -  give  evidence  and  produce  documents. After  the  hearing concluded Mr Fava sought re-call of that judgment.   That matter was dealt with  in  further  hearings  over  the  following  two  months,  and  a  separate judgment  was  in  due  course  issued  dismissing  the  re-call  application. Mr Fava  then  lodged  a  notice  of  appeal  against  that  dismissal.   That  has made  almost  no  progress  towards  a  fixture  and,  as  noted,  on  7  December

2009 Mr Fava applied for an order that delivery of this judgment be delayed until the appeal was heard.  That has been dealt with in a separate judgment

delivered contemporaneously.

[16] It is also to be noted that, as has been commented on in a number of judgments, the claim has been “characterized since its commencement with allegations of bad faith, misleading and deceptive conduct, deceit and fraud” (judgment of 14 December 2006 para [4]). Mutual and vitriolic pleadings and assertions were commonplace. Parties – especially Mr Fava – did not shrink from repeatedly asserting improper motives by opponents. Assertions

of  professional  misconduct  were  frequently  made. The  allegations  not infrequently  included  assertions  of  criminal  conduct  such  as  attempts  to pervert the course of justice.   Though Mr Fava and his solicitors – and, at times,  counsel  –  were  the  main  source  of  such  assertions,  they  were  not alone.

[17]     As a result, the way the parties proceeded on the costs application resulted  in a  hearing where  submissions  were  somewhat  out  of  kilter  with the application.  To explain, though nominally aimed at the requirements of rr 14.6 and 14.7, the parties felt free to deal extensively with the whole of the evidence at the substantive hearing and the strengths and weaknesses of the plaintiffs’   and   defendants’   cases,   notwithstanding   that   the   substantive hearing never concluded and thus was never the subject of full submissions and  a  reasoned  judgment  on  the  merits. Further,  because  one  of  the defendants’ principal grounds of the costs application was that the plaintiffs’ case had been without merit and they improperly pursued a hopeless case, and because Mr Fava denied that and alleged the defendants had engaged in improper behaviour of their own, both groups of parties felt fully justified in continuing   their   assertions   of   improper, unprofessional,   even   criminal, conduct on the others’ part.

[18]     Despite  the  thousands  of  pages  of  documents  and  evidence  in  the case, as has been noted in a number of judgments, the questions at the core of this claim, and critical to the costs application and opposition, are what took place at two series of meetings – in Singapore in October 1998 and in Auckland in March/April 1999 – and, of the four participants, Messrs Fava, Harris, Chong and Leung, who said what to whom and what was agreed at those  meetings. In  respect of  those  meetings, there  were, surprisingly  in

view of the way all other aspects of the relationship between the parties were managed, comparatively few documents.

[19]     Because  the  Court’s  evaluation  as  to  what  took  place  at  those meetings and the credibility and veracity of the participants would have been vital  to  any  judgment  on  the  merits  of  this  case  and  is  also  of  significant importance  in  assessing  the  costs  application  and  Mr  Fava’s  response,  the approach adopted  has  been  to  assess the evidence  of  those four  witnesses. As  will  be  seen,  cross-examination  was  of  vital  importance  in  assessing merits and is of similar importance in assessing such matters as whether the parties  contributed  unnecessarily  to  the  time  or  expense  of  the  claim  or whether  they  may  be  said  to  have  acted  “vexatiously,  frivolously,  or unnecessarily  in  commencing,  continuing,  or  defending  a  proceeding  or  a step  in  a  proceeding”.   Those  issues  are  also  relevant  to  whether  there  is “some other reason” to refuse or reduce the costs sought by the defendants.

[20]     The  approach  to  costs  and  the  broad,  complex  spectrum  of  the substantive proceeding (to say nothing of the time elapsed since it occurred) necessitated  lengthy  re-reading  and  summarizing  almost  the  whole  of  the extensive evidence and reference to large numbers of documents as a prelude to and part of the preparation of this judgment.   Reflection on that material has led to the view that not all needs to be incorporated or referred to in this judgment:  only the more salient issues seem necessary to be covered.  As a result the parties – Mr Fava in particular – will take the view some aspects of the evidence and their submissions have been incorrectly excluded or have been occasioned undue or insufficient prominence and, in a judgment of this length, there may well be minor factual errors, but, at the end of the day, the task  has  been  to  review  the  evidence,  the  documents  and  the  submissions within the confines of rr 14.6 and 14.7 and deal with them accordingly.

[9]      Those  summaries,  which  I  gratefully  adopt  from  the  judgment  of  Hugh Williams  J,  explain  the  background  to  the  proceedings  generally,  the  entry  of  the default judgment under r 485 and the reason for the costs application.

Representation

[10]     The  respondents  take  issue  with  Mr  Fava’s  purported  representation  of the applicant companies on this  application. Two of them, namely  Churchill  and Matam,  remain  under  the  control  of  the  Official  Assignee  following  Mr  Fava’s bankruptcy  in  December  2006. Mr  Fava  is  presently  not  a  director  of  either company.   He is however the sole director of Cachinal and Cleveland, having been reappointed  to  that  position  with  those  companies  following  his  discharge  from bankruptcy on 7 December 2009.

[11]     Mr Fava considers it will only be a matter of time before he is back in control

of  Churchill  and  Matam  as  well.   He  has  applied  to  this  Court  under  s  86  of  the Insolvency  Act  1967  for  orders  that  the  Official  Assignee  disclaim  liability  in relation to shares in various companies which will effectively leave him in a position of control of Churchill and Matam.

[12]     Given the need to deal with this application for stay as a matter of urgency, (the  time  for  compliance  with  statutory  demands  expiring  on  25  January  2010)  I granted leave to Mr Fava, without prejudice to Mr Simpson’s ability to maintain the point, to appear for and make submissions on behalf of the four plaintiff companies for the limited purposes of the application before me.

The decision appealed from

[13]     In the decision appealed from, Hugh Williams J accepted it was appropriate

to make an order for costs against Mr Fava personally and that orders for increased costs on major parts of the litigation and indemnity costs on others were justified.  In the  result,  the  Judge  made  an  order  for  increased  or  indemnity  costs  against  the plaintiff companies jointly and Mr Fava severally in the sum of two million dollars.

The grounds for the stay

[14]     In summary, the grounds of the application for stay are:

a)        The  proposed  appeal  will  be  rendered  nugatory unless  a  stay of  the entire judgment for costs is granted.

b)All  the  plaintiff  companies  and  Mr  Fava  are  impecunious. The respondents will not suffer any injury by the stay because they will be in  no  different  position  if  the  stay  is  granted  and  the  appeal  is ultimately dismissed in six to nine months’ time.

c)        The applicants are bona fide about prosecution of the appeal.

d)Third parties who may have an interest in the fruits of the litigation will be denied such fruits if the plaintiff companies are liquidated.

e)        The  balance  of  convenience  favours  the  status  quo  being  preserved until the appeal is disposed of.

[15]     Mr Fava referred generally to the decisions of Duncan v Osborne Buildings Limited (1992) 6 PRNZ 85 (CA); Minnesota Mining & Manufacturing Co v Johnson and Johnson Ltd [1976] RPC 671 (CA); and Dymocks Franchise Systems (NSW) Pty Ltd v Bilgola Enterprises Ltd (1999) 13 PRNZ  48 in support  of  the application. The authorities Mr Fava referred to are not contentious.   They restate the  considerations  a  Court  should  take  into  account  on  an  application  for  stay pending appeal.   Mr Simpson addressed the same considerations.   It is a matter of application of the considerations to the particular facts of this case.

[16]     In his affidavit in support of the application for stay Mr Fava also submitted that  the  judgment  of  Hugh  Williams  J  incorrectly  recorded  his  submissions  on  an important point which he said would feature large in the proposed appeal.  Mr Fava said  that  occurred  at  [273]  of  the  judgment  (I  note  here  that  was  at  [273]  of  504 paragraphs).  The  Judge  recorded  Mr  Fava  said  in  submission  that  it  was  on  the occasion of a visit to Singapore in late April 1999 that he, Mr Fava first mentioned the “fiction contract”.   Mr Fava submitted on this application that he had not made such a submission.  I note that later in the same paragraph the Judge recorded that in December  2009  Mr  Fava  denied  he  ever  mentioned  the  “fiction  contract”  or  side letter  during the  late  April  1999  Singapore  meeting.   Mr  Fava  confirmed  that  that was his position, namely that he denied he ever mentioned the “fiction contract”.

The practical context to the application

[17]     Now that he has been discharged from bankruptcy, Mr Fava intends to regain control of Churchill and Matam, and to then make an application on behalf of all four companies to set aside the default judgment under r 10.9. If the costs judgment is  enforced  in  the  meantime,  it  is  likely the  plaintiff companies will be  placed in liquidation and Mr Fava will be bankrupted, with the practical consequence that no

steps will be taken to set aside the default judgment.   For that reason Mr Fava (and the  applicant  companies)  seek  the  order  staying  the  costs  judgment  pending  the appeal from that costs judgment.

Decision

[18]         As  noted,  because  an  appeal  has  not  yet  been  lodged  against  the  costs judgment, r 12 of the Court of Appeal (Civil) Rules has not been engaged.   Strictly the application must be regarded as an application under r 17.29.  However, as both Mr  Fava  and  counsel  addressed  the  issues  typically considered  on  a  stay when  an appeal  has  been  lodged,  I  deal  with  the  application  first  on  the  basis  that  the principles applicable to a stay following lodging of an appeal are appropriate.  There is a large degree of overlap of the considerations under r 12 of the Court of Appeal (Civil) Rules and r 17.29 of the High Court Rules in this case in any event, in that the stay is sought to enable the applicants to pursue the appeal and to apply to set aside the default judgment.   If a stay is not granted the appeal may not be pursued. Under r 12 that raises the issue of whether the right of appeal will be nugatory, under r  17.29  it  raises  the  issue  of  whether  a  substantial  miscarriage  of  justice  will  be occasioned.  Both an application under r 12 and an application under r 17.29 require a balancing exercise to be carried out between the position of the applicant and that of the respondent judgment creditor.  Using the words of the Minnesota Mining case, if the applicant in good faith proposes to appeal, and has a genuine chance of success on  appeal,  the  judgment  creditor’s  entitlement  to  a  remedy  cannot  be  regarded  as certain.           If,  under  either  rule,  without  a  stay  a  miscarriage  of  justice  would  be occasioned,   then   a   stay  will   be   appropriate. The   reference   to   a   substantial miscarriage of justice in r 17.29 adds little to that issue in this case.

Will the appeal be rendered nugatory?

[19]     As noted, the principal ground Mr Fava (and the applicant companies) rely on

in support of the application to stay enforcement of the costs award is that absent an order for stay the applicant companies will be placed in liquidation and Mr Fava will

be bankrupted with the result that the  appeal  will  not  be  pursued  and  the  right  of

appeal  itself  will  be  rendered  nugatory. It  is  also  implicit  from  that,  that  the opportunity to apply to set aside the default judgment will be lost, as the proposed application  to  set  aside  the  judgment  will  not  be  pursued  by the  liquidators  of  the companies.

[20]     Underlying  the  submission  is  Mr  Fava’s  acceptance  that  the  four  applicant companies and he have no assets from which to meet any part of the costs judgment. Mr Fava accepted that fact and submitted that, at most, if required to do so by the Court  of  Appeal  he  might  be  able  (over  a  period  of  four  to  six  weeks)  to  earn sufficient to pay a modest sum of security for costs in that Court of some three to four thousand dollars.

[21]     Mr Fava submits it is inevitable that the liquidator of the companies (and the Official  Assignee  if  he  is  placed  back  into  bankruptcy)  will  not  pursue  the  costs appeal  and  the  companies  and  he  will  thus  be  denied  their  constitutional  right  to appeal the costs decision.   Against that he submits the respondents will effectively lose  nothing  because  their  costs  award  is  of  no  value  to  them  at  present  and  if ultimately the appeal is  dismissed by the Court  of Appeal, the position will be no different.  The respondents will still have no prospect of any recovery.

[22]     The  legal  premise  underlying  Mr  Fava’s  principal  submission  is  that  if  an appeal right would be rendered nugatory a stay will be granted.   That, however, is not  inevitably  the  case.    In  Hawkins  v  ANZ  CA  347/90  16  July  1991,  the  Court accepted  the  probable  effect  of  refusing  the  stay  and  Mr  Hawkins’  consequent bankruptcy  would  be  that  the  appeal  would  not  be  prosecuted  unless  the  Official Assignee  decided  to  support  it  and  that  counsel  agreed  that  was  highly  unlikely. Despite  that,  the  stay  was  denied. In  the  more  recent  decisions  of  Petricevic  v Bridgecorp [2008] NZCA 286 at [27] to [29] and Cousins v Heslop [2007] NZCA 377 at [10] and [17]–[19] the Court of Appeal have again confirmed that the fact an appeal may be rendered nugatory by the lack of the stay is not, in and of itself, determinative of the application for stay.

[23]     Next, if the application for stay is declined it is not inevitable, as a matter of law, that the applicant companies and  Mr  Fava’s  right  to  appeal  from  the  costs

decision  will  be  rendered  nugatory. In  the  event  of  liquidation  of  the  applicant companies, it will be for the liquidators of the companies to review the merits of the appeal (and the proposed course of action behind the appeal, namely the application under r 10.9) and determine whether there is any purpose or point in the appeal and the proposed application to set aside the default judgment.

[24]     However,  I accept  that  the  practical consequence  of  declining the  stay  will likely  be  that  the  companies  will  be  liquidated  and  Mr  Fava  will  ultimately  be adjudicated bankrupt  a second time.   It is unlikely the liquidator(s)  will  pursue an application to set aside the default judgment.

[25]     But  what  will  the  applicants  (and  Mr  Fava)  really  lose  if  the  appeal  is  not pursued?   Underlying the application for stay is the expectation that the appeal will succeed, the costs award will be set aside in its entirety and the applicant companies (under Mr Fava’s control) will then be free to pursue the application to set aside the default  judgment.   But  it  is  inevitable,  given  the  background  set  out  above  in  the passages from Hugh Williams J’s judgment and the circumstances which led to the judgment being entered under r 485 (now r 10.8) that even if the proposed appeal against the costs order  were successful it would  only be successful to the extent a reduction in quantum might be achieved.  Scale costs at category 3 for the 31 days of hearing amount to in excess of $520,000 in any event.  On Mr Fava’s admission the applicants could not meet an order for even one hundredth of that.

[26]     Insofar as Mr Fava is concerned, he already has had the stigma of bankruptcy.  There will not be the same stigma attached to a second bankruptcy as a first.  Insofar as there may be any merit in an appeal against the personal costs award made against him (which seems unlikely given his involvement in his principal role in the company plaintiffs) it will be open for him to seek to convince the Official

Assignee of such merits.

[27]     The matter can be approached  another  way.  Even  if  an  application  under

r 10.9 was pursued and the Court could be brought to the point where it was satisfied

a miscarriage of justice had occurred and  the  judgment  should  be  set  aside,  it  is inevitable that it would be set aside  on  terms  including  payment  of  at  least  a

contribution  to  the  respondents’  wasted  costs  of  the  first  hearing.   As  noted,  even without the increased or indemnity award, costs on a category 3 basis amount to a sum  in  excess  of  $520,000.  A  condition  requiring  payment  of  such  costs  would effectively frustrate the applicant companies’ ability to pursue the matter further.  Mr Fava’s proposed course of action would inevitably be stymied at that stage.

[28]     There is thus an air of unreality about Mr Fava’s insistent on the value of the right  to  appeal  and  the  applicants’  proposed  course  of  action. Mr  Fava’s  case essentially amounts to a submission that the applicant companies and he are entitled to pursue all legal avenues available to them without any regard to or responsibility for  the  cost  consequences  to  the  respondents  of  such  a  course  of  action.   Such  an approach ignores the balancing exercise the Court is required to carry out between the interests of the intended appellants and the respondents and, if accepted by the Court, would lead to an abuse of the processes of the Court which would leave the Court open to criticism by objective and reasonable members of the public.

[29]     While the right to appeal and the principle of access to justice are important considerations, the Court is required to consider the interests of the respondents as well  as  the  applicant’s  position. Their  right  to  justice  is  also  important. As  the Judge  recorded,  the  respondents  have  spent  in  excess  of  three  million  dollars defending the proceedings in this Court.  It is apparent from the Judge’s summary of the interlocutory procedures that Mr Fava chose to engage in during the proceedings and  the  proposed  steps  taken  even  since  the  delivery  of  the  judgment  on  22 December 2009 that the respondents will be put to considerable further expense to respond  to  the  various  appeals  and  applications  Mr  Fava  intends  to  pursue. The proposed applications and appeals are by no means straightforward.  There will be a real prejudice to the respondents arising from the further delay, uncertainty and costs associated with the applicants’ proposed course of action.  That would ordinarily be met by an order for costs but on Mr Fava’s own admission there is no prospect of any such order being met.

[30]     Also relevant  to  the  balancing  exercise  in  this  case  are  the  merits  of the proposed appeals against the order for costs. Mr Fava says the Judge misrecorded

his  submission  about  the  fiction  contract. The  costs decision was a  lengthy  and

considered  decision. It  did  not  turn,  as  Mr  Fava  sought  to  suggest,  on  the  point mentioned  at  [273]  of  the  decision. In  his  very  lengthy  and  considered  decision Hugh Williams J reviewed the material evidence of the four main protagonists, Mr Fava, Mr Harris and Mr Chong for the plaintiffs and Mr Leung for the respondents before concluding that while no final judgment on the merits would be appropriate as the case had not concluded, the substantive hearing had proceeded sufficiently far, especially with the completion of the evidence from the four main witnesses, that the emergence  of  further  major  changes or  insights  would  have  been  most  unlikely before  going on to find that inter alia the fiction contract/side letter statement was either not made or, if made, was unimportant.   Importantly the Judge accepted the evidence of Mr Leung where  it  conflicted  with that of Messrs Fava, Harris and Chong and then rejected the plaintiff companies’ assertions of breach of Fair Trading Act. He roundly rejected  the  assertions of deceit  and various other allegations of moral obliquity and criminal conduct finding them as unfounded.

[31]     But  the  short  answer  on  the  merits  of  the  proposed  appeal  is  that  for  the reasons  given  above,  any  success  on  appeal  would  inevitably  be  limited  to  a reduction  in  quantum  which  would  leave  a  judgment  in  the  respondents’  favour which the applicants could not possibly meet.  The applicant companies are on their own admissions insolvent.  They have not traded for years.   They have no assets of value.

The position of third parties.

[32]     To the extent Mr Fava says there are third party interests who may be entitled

to any fruits of judgment (they being parties associated with Mr Fava who hold an interest in the companies) then, if they wished, those parties could seek to reach an accommodation  with  the  liquidator  regarding  the  costs  of  the  proceedings,  and  an indemnity for costs, if they consider there is merit in the proposed application to set aside the default judgment.  The costs of representation would have to be met in any event.     Mr  Fava  accepted  that  the  applicant  companies  would  have  to  instruct counsel and solicitors.

Bona fides

[33]     While I accept Mr Fava intends to pursue the appeal, for the reasons set out, the ultimate aim or purpose of the proposed appeal and application to set aside the default judgment is futile.

Other considerations

[34]     The proposed appeal does not raise any questions of novelty or importance, nor does it engage public interest issues.  The appeal is of interest to the parties only.

[35]     Further  the   appeals  are  in  relation  to  a  monetary  judgment  for  costs. Commonly  monetary  judgments  are  stayed  upon  payment  of  the  judgment  or provision of security.  The appellants are in no position to offer any security for the monetary judgment pending the hearing of the appeals.

[36]     For those reasons the application for stay, were it properly brought under the

r 12 of the Court of Appeal Rules, would be dismissed.

Inherent jurisdiction – r 17.29

[37]     This Court is not minded to grant a stay under r 17.29 in this case either.   It cannot be said that a miscarriage of  justice,  let  alone  a  substantial  miscarriage of justice, would be likely to result if the costs judgment were enforced.  As this Court has said on previous occasions it is not a substantial miscarriage of justice for a party to be required to pay money due to another:  Econotek Construction Limited v Kale HC GIS CP8/87 7 January 1988 Tompkins J;  and Marac Finance v Twilight Trustee Limited HC AK CIV-2008-404-7291, 25 February 2009 Venning J.

[38]     The denial of a stay may well foil Mr Fava’s intention to gain control of the applicant companies and apply to set aside the default judgment.  But for the reasons

set out above it is inevitable that any appeal, even if successful, would only lead to a reduction in quantum and there is no prospect of payment.  Also, for the reasons set

out above, an application to set aside the default judgment, even if successful would

be  granted  on  terms  as  to  costs.        If  the  applicant  companies  are  placed  into liquidation, the decision whether to pursue such an application and seek to re-instate the claim, will rest with the liquidators.   There can be no miscarriage of justice (let alone a substantial one) if the ultimate result of denying the stay is the liquidation of the companies and the review by an independent party such as the liquidator of the prospects of such a course of action.  Mr Fava is not capable of bringing that degree of independent review to the matter.

[39]     Again, as under r 12,  under  r  17.29  the  Court  is  required  to  balance  the interests of the parties:  Enright v Gold Metal Exports Ltd (1989) 3 PRNZ 243, 246. The  respondents  are  entitled  to  expect  the  Court  to  consider  whether  it  is  just  to require them to face a further campaign of litigation by Mr Fava without any cost consequences to Mr Fava or the parties that he seeks to act on behalf of.   For those reasons also there is no miscarriage of justice in denying the stay.  There is no basis for a stay of the judgment under r 17.29.

Result

[40]     The application for stay of execution of the judgment of this Court dated 22

December 2009 is dismissed.

Costs

[41]     For  what  it  is  worth  I  make  an  order  for  costs  on  a  2B  basis  for  the application against the four applicant companies and Mr Fava personally.

Venning J