Grimshaw & Co v Body Corporate 207624
[2024] NZCA 119
•19 April 2024 at 10.30 am
| IN THE COURT OF APPEAL OF NEW ZEALAND I TE KŌTI PĪRA O AOTEAROA |
| CA287/2023 [2024] NZCA 119 |
| BETWEEN | GRIMSHAW & CO |
| AND | BODY CORPORATE 207624 |
| CA773/2023 | ||
| BETWEEN | GRIMSHAW & CO | |
| AND | BODY CORPORATE 207624 | |
| Hearing: | 11 April 2024 |
Court: | Mallon and Cooke JJ |
Counsel: | L J Taylor KC and R J Scott for Appellant |
Judgment: | 19 April 2024 at 10.30 am |
JUDGMENT OF THE COURT
A The application for stay is granted on the condition that the judgment sums are paid into an interest bearing trust account of an independent firm of solicitors pending the outcome of the appeals or further order of the Court.
B The costs of the application are reserved.
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REASONS OF THE COURT
(Given by Cooke J)
The appellant (Grimshaws) has appealed from the decisions of the High Court finding it liable in damages to the respondent (the Body Corporate) in the amount of $3,268,201.14,[1] and awarding costs in the Body Corporate’s favour in the amount of $1,019,866.17.[2]
[1]Body Corporate 207624 v Grimshaw & Co [2023] NZHC 979; and Body Corporate 207624 v Grimshaw & Co [2023] NZHC 1155.
[2]Body Corporate 207624 v Grimshaw & Co [2023] NZHC 3381.
By application dated 11 March 2024, Grimshaws applied for a stay of execution of both judgment sums under r 12 of the Court of Appeal (Civil) Rules 2005 (the Rules) on the condition that the judgment sums and accrued interest are paid into the trust account of an independent firm of solicitors, bearing interest, pending the outcome of Grimshaws’ appeals to the Court of Appeal. The application is opposed by the Body Corporate, including on the basis set out in affidavits from Anthony Sissons of the Body Corporate, and Jonathan Woodhams and Michael Stiassny, who are directors of LPF Group Ltd (LPF), the Body Corporate’s litigation funder.[3]
[3]The direct litigation funder for the Body Corporate is SPF No. 27 Ltd, of which LPF Group Ltd is the parent company.
In the High Court, the application for the stay under r 12(3) of the Rules was declined.[4] This Court can make such an order itself under r 12(3) in such circumstances.[5]
Litigation funding arrangements
[4]Body Corporate 207624 v Grimshaw & Co [2024] NZHC 375.
[5]Court of Appeal (Civil) Rules 2005, r 12(5).
The Body Corporate’s claims against Grimshaws are funded under litigation funding arrangements between the Body Corporate and an LPF entity. Each litigation funding project that LPF becomes involved in involves the use of a separate LPF entity for the particular project. Although it has not been outlined in the affidavits, we consider it likely that LPF raises money from investors to fund each project.
The funding arrangements between the particular LPF entity are set out in an agreement with the Body Corporate. Pursuant to that agreement, any damages and costs awarded will ultimately be distributed to the LPF entity and the Body Corporate under that arrangement. The Body Corporate is required to pay the project costs incurred by the LPF entity in funding the litigation, and a service fee which is expressed as a percentage of the damages and costs awarded. The Body Corporate will not receive any such payment until the final determination of the proceedings.
The position of the parties
Grimshaws say that if the stay is not awarded the amounts will be immediately dissipated and that there is a risk on the evidence before the Court that it may not be able to be recovered if the appeals succeed. LPF has offered an undertaking to repay the judgment sums and interest if the appeals are successful. But Grimshaws say that LPF has no significant assets, and it is facing a substantial claim in the High Court at Auckland such that the undertaking does not provide adequate security. Recovery from the Body Corporate itself would be difficult and uncertain.
Grimshaws also says the only possible disadvantage to the Body Corporate arising from a stay is a possible shortfall between what can be earned while the funds are held on trust and the alternative use of the funds if it is not, but there is unlikely to be any such shortfall and no evidence has been provided to demonstrate that such a shortfall exists. It further says that, if and to the extent that the Body Corporate receives any portion of the judgment sums, the prudent step for the Body Corporate to take would be to place the judgment sums on an interest-bearing account pending the outcome of the appeals in any event. In those circumstances a stay should be granted on the terms proposed.
The Body Corporate argues that there is no real doubt that it will be able to repay the judgment sums with interest if Grimshaws’ appeals are successful, and it notes the statutory power to levy unit owners or borrow money, as well as the contractual obligation of the LPF entity to repay amounts received by LPF, now supported by LPF’s undertaking. There is no reason to conclude that LPF cannot meet this undertaking, and the reference to the claim against LPF in the High Court does not raise any real doubt. There is no risk that the appeal will be rendered nugatory, and the overall balance of convenience is against granting a stay.
Assessment
Although counsel for both parties took us to particular authorities, and suggested there were particular features of them that were significant in the present case, in our view the appropriateness of a grant of a stay is heavily dependent on the particular facts and circumstances of each case and no particular authority is decisive here. The principles are well-established. The Court is required to balance the competing rights of the successful party in the High Court to have the fruits of the judgment appealed from against the need to preserve the appellant’s position in the event of the appeal succeeding.[6] A range of factors can be relevant, but the ultimate objective is to do justice in the circumstances of the case.[7]
[6]Duncan v Osborne Buildings Ltd (1992) 6 PRNZ 85 (CA) at 87.
[7]New Zealand Insulators Ltd v ABB Ltd (2006) 18 PRNZ 459 (CA) at [13], citing Minnesota Mining & Manufacturing Co v Johnson & Johnson Ltd [1976] RPC 671 (CA) at 676.
We do not accept there is a very significant risk that Grimshaws would be unable to recover the judgment sums in accordance with LPF’s undertaking if the appeals were to succeed. Whilst there is no detailed financial information before the Court concerning the financial position of LPF, and it appears not to have significant assets, a failure for it to meet its undertaking would essentially involve its failure as a litigation funder in New Zealand. LPF is now well established as a litigation funder and we consider that it is unlikely that this would occur on the information before us, particularly in relation to judgment sums of the kind in issue in this case. Both Mr Woodhams and Mr Stiassny say in their affidavits that LPF would be able to meet the undertaking. That undertaking has been given notwithstanding the current proceedings against LPF in the Auckland High Court and we are not prepared to speculate that those proceedings present such a risk that we should infer that LPF is at risk of financial collapse.
That said, some risk of non-recovery nevertheless exists. We do not have financial details of LPF, any details of the investors nor of the arrangements between LPF and those investors in the event that funds were required to be repaid. We also accept Mr Taylor KC’s point that it may take some time and involve some difficulty for Grimshaws to succeed in obtaining repayment, even if ultimate recovery is likely.
A factor usually in favour of not granting a stay of execution is that the successful party in the lower court is being deprived of the fruits of the judgment. But here, on our understanding of the litigation funding arrangements, the Body Corporate will not receive the fruits of the judgment if a stay is not granted. Rather, some of the judgment sums received by the Body Corporate will then be paid to the LPF entities with the balance held on trust.[8] We do not understand that distributions would be made to the Body Corporate on the receipt of those funds. Rather, there will need to be a final resolution of the proceedings, including any appeals, before an ultimate accounting can be engaged in and distributions are made to the Body Corporate. In those circumstances, it is not really the Body Corporate but its litigation funder that is being deprived of the fruits of a judgment by the grant of the stay.
[8]Clause 4.9 of the agreement. We were not taken to any other clauses that regulated the position in a different way.
We also do not consider that there would be prejudice to the Body Corporate from being obliged to hold the judgment sums on interest-bearing deposit in a solicitor’s trust account pending determination of the appeals. Given that it will not receive the funds if a stay is not granted it is not being deprived of any more beneficial use of them.
It is possible that there may be some cost of this kind to LPF to the extent that there is a difference between what can be earned while the moneys are held on trust and the cost of LPF’s obligations to its ultimate investors. But there is no information before the Court about that cost, and in any event, this is not a cost to the Body Corporate who is the relevant party to the litigation.
We also do not consider that the grant of a stay is adverse to the Body Corporate in other ways. Indeed, the grant of a stay arguably puts the Body Corporate in a more protected position. If LPF was unable to meet its undertaking for any reason, Grimshaws could seek to recover from the Body Corporate notwithstanding the fact that the LPF entities may have received a significant part of the judgment sums. The Body Corporate, or any administrator of the Body Corporate, would then be able to recover from the individual unit holders. In that context the Body Corporate would be taking the risk of LPF not honouring the undertaking as much as Grimshaws if a stay is not granted.
The position of the Body Corporate and the individual members of the Body Corporate, who have been involved in very long-run litigation, is relevant. Whilst an affidavit has been filed in opposition to the application for a stay by Mr Sissons this does not explain how the Body Corporate would be adversely affected by the grant of a stay. He simply explains the frustration and disappointment generally arising from the delays associated with the appeals.
Mr Bigio KC argued that the fact that the Body Corporate had a contractual obligation to pay fees to the LPF entities was immaterial. What mattered was whether the Body Corporate had the means to repay those amounts if the appeals were successful. But the fact that the Body Corporate will not itself receive immediate benefit from payment of the judgment amounts, and will not otherwise be prejudiced by the entry of a stay are nevertheless significant factors. That is so notwithstanding what we accept is a relatively low risk that Grimshaws will ultimately be unable to recover the sums if its appeals are successful.
For these reasons, whilst we generally agree with the assessment of the risk engaged in by the High Court, we consider that the overall justice of this case means that it is appropriate for a stay to be granted on the terms proposed by Grimshaws. In the particular facts of this case, including the litigation funding arrangements, we consider denying LPF some of the fruits of the judgments for a limited period is outweighed by the risk, though small, to Grimshaws if they succeed on appeal, especially when the judgment sums will be held in a secure way pending the ultimate determination of the proceedings and the final accounting that is involved in the litigation funding.
For these reasons the application for stay is granted on the condition that the judgment sums are paid into an interest bearing trust account of an independent firm of solicitors pending the outcome of Grimshaws’ appeals to the Court of Appeal, or further order of the Court.
Costs
In relation to costs, under r 53GA(1) and r 53G(3) of the Court of Appeal (Civil) Rules we consider that the cost of the application should be reserved pending the outcome of the appeals.
The Body Corporate’s opposition to the application was understandable in the circumstances, particularly given the undertaking provided by LPF and the comparatively lower level of risk to Grimshaws. Moreover, that application has been successful largely because of the litigation funding context, which is not an issue that has previously been addressed by the authorities. In those circumstances the question of costs should be assessed in the context of the outcome of the appeals.
Result
The application for stay is granted on the condition that the judgment sums are paid into an interest bearing trust account of an independent firm of solicitors pending the outcome of the appeals or further order of the Court.
The costs of the application are reserved.
Solicitors:
McElroys, Auckland for Appellant
Wilson Harle, Auckland for Respondent
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