Harnish v Bruce - [2014] NZHC 302

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV2012-404-006723 [2014] NZHC 302

BETWEEN OWEN CECIL ERIC HARNISH Plaintiff

ANDROBERT IAN BRUCE Defendant

Hearing: 26 February 2014

Appearances: W Endean for the Plaintiff
A Gilchrist for the Defendant

Judgment: 26 February 2014

JUDGMENT OF GILBERT J

This judgment is delivered by me on 26 February 2014 at 5:30pm pursuant to r 11.5 of the High Court Rules.

..................................................... Registrar / Deputy Registrar

HARNISH v BRUCE [2014] NZHC 302 [26 February 2014]

Introduction

[1] The defendant, Mr Bruce, applies for a stay of enforcement of two judgments obtained by the plaintiff, Mr Harnish. The application was filed yesterday and must be dealt with immediately because a public auction of shares held by Mr Bruce in Whitford Properties Limited, a company of which he is a 50 per cent shareholder, is scheduled to take place tomorrow at 10am. The auction has been arranged by the Sheriff of this Court pursuant to a sale order made in this proceeding on 15 January
2014.

[2] Mr Bruce seeks a temporary stay of enforcement of the judgment until

10 April 2014 pursuant to r 17.29 of the High Court Rules on the grounds that a substantial miscarriage of justice would be likely to result if the judgments are enforced in the meantime. He contends that there is a real risk that, if the auction proceeds, the shares will be sold at a significant undervalue causing him to suffer a substantial capital loss. On the other hand, Mr Bruce argues that Mr Harnish will suffer little or no prejudice if the temporary stay is granted.

[3] Alternatively, Mr Bruce contends that Mr Harnish agreed not to pursue any enforcement process until the end of February 2014. In these circumstances he applies for an order setting aside the enforcement process in reliance on r 17.30.

Should the enforcement process be stayed?

[4] Rule 17.29 of the High Court Rules is concerned with the risk of a substantial miscarriage of justice resulting from enforcement of the judgment, not from the judgment itself. Relief may be granted under this rule whether or not there is any challenge to the underlying judgment. The rule provides:

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.

[5] Mr Bruce is a director and 50 per cent shareholder of Whitford Properties Limited which owns an 8.7 hectare block of land at Whitford. The current rating valuation of the property, which is in two titles and zoned Rural, is $2,585,000.

There is a proposed change to the zoning which, if it proceeds, will allow the land to be subdivided and used for residential purposes. Mr Bruce and the other 50 per cent shareholder, Mr Allen, have been pursuing the prospect of a multi-unit residential subdivision on…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

Continue reading Harnish v Bruce

Details

AGLC: Harnish v Bruce [2014] NZHC 302
Case: [2014] NZHC 302
Decision Date: 26 February 2014

CaseChat Overview and Summary

In the High Court of New Zealand, the plaintiff, Mr Harnish, brought an application against the defendant, Mr Bruce, for a stay of enforcement of two judgments. Mr Bruce sought a stay of enforcement until 10 April 2014, arguing that a substantial miscarriage of justice would result if the judgments were enforced immediately. Mr Bruce contended that if the auction of his shares in Whitford Properties Limited proceeded, the shares would be sold at a significant undervalue, causing him substantial capital loss, while Mr Harnish would suffer minimal prejudice. Alternatively, Mr Bruce claimed that Mr Harnish had agreed not to pursue any enforcement process until the end of February 2014, and therefore sought an order setting aside the enforcement process.

The court examined the risk of a substantial miscarriage of justice resulting from enforcement of the judgment, not from the judgment itself. The court considered Mr Bruce's position as a director and 50% shareholder of Whitford Properties Limited, which owns an 8.7-hectare block of land with a current rating valuation of $2,585,000. Mr Bruce had produced a valuation indicating that if the land could be subdivided into 123 household units, the underlying land value could be as high as $24,786,000. Whitford Properties Limited had granted a first mortgage to the ANZ Banking Group, which secured an outstanding balance of approximately $8,700,000. On this basis, Mr Bruce assessed the value of his 50% shareholding in the company as being in excess of $7,000,000. Mr Bruce believed that the only realistic buyer for his shareholding in the company was his partner, Mr Allen, who had pre-emptive rights in relation to any sale of Mr Bruce's shares. Mr Bruce was concerned that Mr Allen would be able to buy his shares at a substantially discounted value, destroying the value of his equity in the property through his shareholding.

The court concluded that the application for a stay of enforcement should not be granted. Mr Harnish had been waiting for a number of years for repayment of the underlying debt giving rise to the judgments. The debt arose in the context of the sale by Mr Harnish in March 2007 of another property at Whitford to a trust associated with Mr Bruce. Mr Harnish provided vendor finance in excess of $1,000,000, which was due for repayment on 24 September 2009. Mr Bruce personally guaranteed the amount due under this loan. Mr Harnish finally obtained a summary judgment in February 2013 in the sum of $942,963 being the principal sum outstanding under this loan. Summary judgment was entered in July 2013 for the additional sum of $722,822.00 in respect of interest and costs. Mr Harnish took steps to enforce the judgments over Mr Bruce’s principal asset, being his shares in Whitford Properties Limited. The court found that Mr Bruce's application for a stay was very late, and the evidence did not support his claim that he would be able to refinance the ANZ debt and raise sufficient monies to repay Mr Harnish within the given timeframe. The court declined to make any order for a stay under r 17.29.

The court also considered Mr Bruce's claim that an agreement was reached in November 2013, precluding Mr Harnish from enforcing the judgments. The court found that the terms of the suggested agreement were uncertain, and there was no evidence to support the claim that a binding agreement was reached. Furthermore, Mr Bruce had no prospect of complying with the terms of any such agreement, and there was no hope of the money being paid by the end of February 2014. The court rejected Mr Bruce's contention that Mr Harnish acted in bad faith by enforcing the judgments.

The application was dismissed, and the plaintiff was entitled to costs assessed on a 2B basis.

Orders