Dovey Aviation Consulting Limited v Attorney-General
[2021] NZHC 3340
•7 December 2021
IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY
I TE KŌTI MATUA O AOTEAROA TE WHANGANUI-A-TARA ROHE
CIV 2018-485-972
[2021] NZHC 3340
BETWEEN DOVEY AVIATION CONSULTING LIMITED
Plaintiff
AND
THE ATTORNEY-GENERAL OF NEW ZEALAND
First Defendant
JAMES PATRICK RANKIN
Second DefendantWARBIRDS OVER WANAKA AIRSHOWS LIMITED
Third Defendant
EDWARD RICHARD MILES TAYLOR
Fourth DefendantCHRISTOPHER CHARLES LEE
Fifth DefendantRONALD JOHN DAVID LAMONT
Sixth DefendantALLEN VICTOR HOGAN
Seventh Defendant
Hearing: 29 November 2021 Counsel:
C S Chapman for Plaintiff
J A MacGillivray for First and Second Defendants M S Anderson for Third to Seventh Defendants
Judgment:
7 December 2021
JUDGMENT OF MALLON J
(Stay application)
DOVEY AVIATION CONSULTING LIMITED v THE ATTORNEY-GENERAL OF NEW ZEALAND [2021]
NZHC 3340 [7 December 2021]
Introduction
[1] The plaintiff company brought a negligence claim against the defendants for damage sustained to its Yak-3M aircraft at the 2018 Warbirds over Wanaka airshow. It was successful and was awarded damages of $708,975 (inclusive of GST) plus interest in a judgment delivered on 9 March 2021 (the substantive judgment).1 A costs order of $250,014.81 plus interest was made in the plaintiff’s favour in a judgment dated 28 May 2021 (the costs judgment).2
[2] On 7 and 8 April 2021 respectively, the first and third defendants filed an appeal against the substantive judgment. While there is no appeal against the costs judgment, success on the appeal against the substantive judgment may led to a revisiting of the costs judgment. The first and third defendants seek an order staying the execution of both judgments pending the appeal. The plaintiff opposes the application.
[3] At the outset of the hearing, counsel for the first and third defendants advised that their respective clients would consent to there being a condition of a stay that the defendants would jointly and severally indemnify the plaintiff for any increase in repair costs post the date of the substantive judgment. The defendants submit that a stay subject to such a condition provides an outcome that is fair to everyone because it preserves each party’s position. The parties have subsequently agreed the terms of such an indemnity if a stay is to be granted in a consent memorandum dated 2 December 2021.
Principles
Substantive judgment
[4] Rule 20.10 of the High Court Rules 2016 provides the Court with the power to order a stay pending appeal:
1 Dovey Aviation Consulting Ltd v The Attorney-General [2021] NZHC 429.
2 Dovey Aviation Consulting Ltd v The Attorney-General [2021] NZHC 1224.
(a)r 20.10(1) provides that an appeal does not operate as a stay of the enforcement of any judgment or order appealed against; and
(b)r 20.10(2) provides that, despite r 20.10(1), a court “may” on application order a stay of enforcement of any judgment or order appealed against.
[5] The “may” in r 20.10(2) means that the Court has a discretion. It is well- established that, in exercising this discretion, the Court is required to balance the right of the successful party to the fruits of its judgment against the need to preserve the losing party’s position against the prospect of the appeal succeeding. Factors relevant to this balancing exercise are:3
(a)whether the appeal may be rendered nugatory by the lack of a stay (in the present context, this relates to the risk that money paid may not be repaid);
(b)whether the successful party may be injuriously affected by the stay;
(c)the bona fides of the applicant as to the prosecution of the appeal;
(d)the effect on third parties;
(e)the novelty or importance of the issues on appeal;
(f)the strength of the appeal; and
(g)the overall balance of convenience.
[6] In this case, there is no suggestion the defendants do not genuinely intend to prosecute their appeal. They continue to hold the view that the plaintiff was wholly or partly responsible for the accident and the outcome of the appeal will be important to the conduct of airshows going forward. There is no suggestion that there will be an
3 Keung v GBR Ltd [2010] NZCA 396.
effect on third parties if a stay is or is not granted. This means that the relevant factors are (a), (b), (f) and (g).
Costs judgment
[7] In Walker v Castlereagh Properties Ltd, the Court regarded an order for a stay of costs judgments as “requiring consideration beyond that which applies to money judgments generally”.4 This was because:
[43] Those involved in litigation in this Court are subject to a regime whereby costs become payable when they are fixed. Successful parties are intended to have (upon the fixing of costs) the cash flow benefits of the costs to which the Court has found them entitled.
[44] Where the unsuccessful party appeals a substantive judgment, the justice in relation to identifying who should be out of pocket for awarded costs in the interim will most often (albeit not invariably) favour the successful respondent. The respondent has had to bear costs in either suing the other party or defending the other party’s unsuccessful claim. That stage of the litigation is over. If the unsuccessful party elects to embark on a further stage of litigation through appeal it will generally be just that the successful party (through the payment of costs) is reimbursed in the interim for the costs awarded and fixed pursuant to its success.
[45] Such an approach will by the nature of the balancing exercise remain subject to influence by factors of particular relevance in an individual case. One such factor is where the appellant establishes that the successful party may be unable to repay the awarded costs in the event the appeal is successful. But such factors are more likely to inform the Court’s decision on the way in which the unsuccessful party should make any payment in the interim (e.g. by outright payment to the plaintiff or by payment into a stakeholding) rather than on whether the unsuccessful party should be relieved of the requirement to make payment pending the determination of the appeal.
[8] The defendants did not contend that this approach to a stay of a costs order was wrong or should not be applied.
4 Walker as Liquidator of Gibbston Water Holdings Ltd v Castlereagh Properties Ltd [2015] NZHC 907 at [42].
Application
Plaintiff ’s financial position
[9] The defendants submit that the evidence available to the Court suggests there is a real risk that the plaintiff may be unable to repay the substantive and cost judgment sums if the appeal is successful.
[10]The defendants refer to the following:
(a)In the context of a potential security for costs application, in March 2019 the plaintiff provided information to the defendants that it had cash assets of approximately $653,000, comprising a deposit of
$350,000 at Kiwibank and the balance being proceeds of the sale of a Wanaka property invested with Milford Asset Management.
(b)A little more than a year later, in May 2020, Mr Dovey stated in his brief of evidence for the substantive hearing that he had not started repairs to the aircraft because the plaintiff company did not have the funds to do so at that stage. He gave this evidence at the trial in July 2020.
(c)The evidence of Callum Smith at the trial, who repairs and restores vintage aircraft, was that the value of the wreck would be around USD150,000 to USD200,000 but in the current market (2020) there would be a “very limited market of people who would look at purchasing the aircraft in its current condition”.
(d)The evidence of Mr Smith at the trial was that he would be speculating as to the market value of the aircraft once it was restored by him, although the value of Yak 3s had been increasing over recent years and it would probably be in the ballpark of USD695,000.
(e)The plaintiff has not provided information about whether its asset position has changed since March 2019 but it is known that it incurred the substantial costs of proceeding to trial.
[11] The defendants submit that it is reasonable to expect the plaintiff to have provided information about its ability to repay the judgment sum and the costs award if the defendants succeed on appeal. The defendants say that the plaintiff has not been forthcoming about this. This information is only available to the plaintiff and it cannot be correct that a plaintiff can defeat a stay application by refusing to provide information as to its financial position.
[12] Relying on the settled position when an application for security for costs is made, the plaintiff says there must first be an evidential foundation for a risk that it will be unable to repay the judgment sum before an adverse inference should be drawn when a plaintiff fails to provide information about its means.5 The plaintiff says there is no such evidential foundation. It also submits that the defendants failed to ask the plaintiff to provide evidence of its financial position.
[13] I consider that the matters referred to at [10](a) and (b) above provide an evidential basis for legitimate concern that the plaintiff may be unable to repay the judgment sums if the defendants succeed on appeal. Although the plaintiff’s view was that no direct request for evidence of its financial position had been made, it was clear from the correspondence between counsel that it intended to seek a stay because of a concern that the plaintiff may be unable to repay the judgment sum or some part of the judgment sum if the defendants were successful on appeal. It should have been apparent to the plaintiff that, if it was able to provide satisfactory evidence of its financial position, a stay could have been avoided.
[14] Absent updated financial information, I consider this factor favours the stay application. The present asset position of the plaintiff is unknown. The Yak-3M aircraft in its current state has not insubstantial value, but may be difficult to sell. It is
5 Referring to Nev Mellon Electrical Ltd v AAPC NZ Pty Ltd HC Wellington CIV-2005-485-268, 13 December 2005 at [15].
not known whether Mr Dovey has the benefit of a substantial current account for example.
Harm to the plaintiff
[15] A stay denies a successful party the fruits of their success for a period of time. Because this is for a limited period of time and interest will continue to run on the judgment sum, this factor will usually be outweighed by the harm to the defendant if it is successful on an appeal and the plaintiff cannot repay the judgment sum.
[16] In this case there is an additional consideration. The plaintiff had understood that the defendants’ principal concern was that if the judgment sum was paid and spent on aircraft expenditure then the expenditure might exceed the increase in value resulting from that expenditure. The plaintiff offered not to make a start on the work if the defendants indemnified the plaintiff against an increase in the cost of repairs. The judgment sum of $708,975 reflected the cost of repairs as at May 2020. The plaintiff has provided an updated estimate from Mr Smith. As at July 2021 he estimates that the cost of repairs had increased by between $71,000 to $106,000. This well exceeds interest on the judgment sum. That increase could be more by the time the appeal is determined.
[17] It is because of this concern that the defendants now propose that a stay be subject to the condition of an indemnity (in the form the parties have agreed). Because the defendants will provide this indemnity, the prejudice to the plaintiff from increased repair costs if a stay is granted is removed.
Prospects of success
[18] The defendants submit their appeal is arguable. The plaintiff submits the defendants have no realistic prospect of complete success on appeal and a discount for contributory negligence is the best they could hope to achieve. I agree with the plaintiff that the defendants’ prospects on appeal does not point in favour of a stay. It is at best neutral.
Costs
[19] As counsel for the plaintiff puts it, in the 27 months from the 2018 Warbirds over Wanaka airshow to the end of the trial in July 2020, the judgment creditor incurred legal costs and disbursements and is justifiably aggrieved that 16 months after the trial, and despite a sealed judgment for costs and disbursements of $250,014.81 it is yet to receive any payment. That grievance is understandable. I consider the comments in Walker v Castlereagh Properties Ltd referred to above are well made. The plaintiff should be entitled to payment of its costs because, unless and until the judgment is disturbed on appeal, it is the successful party and should have the cash flow benefits of the costs to which the Court has found it entitled.
[20] The defendants say that, if the costs judgment is not to be stayed, then the amount should be held by a stakeholder. This is unnecessary in my view. The concern about whether the plaintiff can repay the costs order if it is revisited and altered following an appeal is much less than in relation to the judgment sum. The amount is much less, the damaged wreck has a not insubstantial value, and there is nothing to suggest that Mr Dovey (through putting his company in funds to do so if necessary) would not repay the defendants if that is what was ordered. Moreover, the prospect of any revisiting of the costs order is not high as, even if on appeal it is found that the judgment sum should be reduced for contributory negligence, that reduction would have to be very substantial to affect the costs order (in view of the level at which the “without prejudice except as to costs” offer was made and the fact that a reduction for contributory negligence would not change who was the successful party for the purposes of costs).
Overall balance
[21]Balancing the various factors, I consider the overall justice:
(a)favours a stay of execution of the substantive judgment subject to the condition set out as an appendix to the consent memorandum dated 2 December 2021; and
(b)does not favour a stay of execution of the costs judgment.
Result
[22] The application for an order staying execution of the Court’s substantive judgment is granted subject to the condition set out as an appendix to the consent memorandum dated 2 December 2021.
[23] The application for an order staying execution of the Court’s cost judgment is dismissed.
[24] Costs on this application are to lie where they fall. The defendants have succeeded in part but subject to a condition that was offered only at the hearing. Overall, both parties have had a measure of success on the application.
Mallon J
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