L.E.A.D Training Trust Ltd v Evans HC Hamilton CIV 2010-419-832

[2010] NZHC 1891

IN THE HIGH COURT OF NEW ZEALAND HAMILTON REGISTRY

CIV 2010-419-832

BETWEEN  L.E.A.D TRAINING TRUST LTD Appellant

ANDLEAH MARIE EVANS Respondent

Hearing:         21 September 2010

Counsel:         C Fletcher and D Delic for Appellant

K Cornege for Respondent

Judgment:      21 September 2010

(ORAL) JUDGMENT OF HEATH J

Solicitors:

Fletcher Law, PO Box 29, Hamilton

Tompkins Wake, PO Box 258, Hamilton

L.E.A.D TRAINING TRUST LTD V EVANS HC HAM CIV 2010-419-832  21 September 2010

[1]      L.E.A.D Training Trust Ltd seeks a stay of a costs judgment issued in the District Court at Hamilton.   The judgment followed an unsuccessful proceeding brought by L.E.A.D against Ms Evans on a guarantee.

[2]      The parties have co-operated to have the appeal ready for hearing promptly. Judgment was given in the District Court on 18 June 2010.  The appeal has been set down for hearing on 20 October 2010.  The amount for which a judgment for costs has been sealed is approximately $26,000.

[3]      L.E.A.D’s position is that it has good grounds to appeal and should not be required to pay the costs judgment pending its appeal, which has been brought promptly.  Ms Evans’ position is that if no security were given or the costs judgment was not paid into a trust account pending the outcome of the appeal. there is a real risk that she would not be able to recover the costs awarded in the District Court.

[4]      In relation to the point raised by Ms Evans, I record that an offer has been made by her solicitors to the solicitors for L.E.A.D saying that no steps will be taken to enforce the judgment if the amount in issue were paid into their trust account pending the outcome of the appeal.  That offer has not been accepted.

[5]      The principles on which an application for stay should be considered were discussed in Dymocks Franchise Systems (NSW) Pty Ltd v Bilgola Enterprises Ltd.[1]

In the High Court decision, Hammond J identified a number of factors relevant to the exercise of the discretion.   In particular, he noted that the bona fides of the prosecution of the appeal and the novelty and importance of any question involved were  factors  to  be taken  into  account.    However,  factors  such  as  that  must  be balanced against the presumption that a party is entitled to receive the fruits of a judgment, once given in its favour.

[1] Dymocks Franchise Systems (NSW) Pty Ltd v Bilgola Enterprises Ltd [1999) 13 PRNZ 48 (HC and

CA).

[6]      The threshold question is whether there is a tenable basis for the appeal.  The judgment  under  appeal  was  delivered  orally  by  Judge  Wolff,  after  a  defended hearing over three days in which the Judge had the opportunity to see and hear the

witnesses.  However, there are legal as well as factual issues to be raised on appeal, in particular, in relation to questions of undue influence and s 9 of the Fair Trading Act 1986.

[7]      In the case of the former there is a factual issue to which the Judge apparently did not refer, namely whether Ms Evans did in fact receive independent legal advice. In the judgment under appeal, Judge Wolff suggested that L.E.A.D ought to have ensured Ms Evans was acting free from any influence over her “by making sure that she took independent advice on the contract that she was about to sign” including legal and financial advice.

[8]      In relation to the question under s 9 of the Fair Trading Act, the Supreme Court has now ruled on the approach; in Red Eagle Corporation Ltd v Ellis.[2]   Judge Wolff referred to the Court of Appeal’s decision in that case.  It is arguable whether, in the circumstances of this case, the approach adopted by the Supreme Court could lead to a different outcome on that issue.

[2] Red Eagle Corporation Ltd v Ellis [2010] 2 NZLR 492 (SC).

[9]      The third point is that in dealing with allegations of false pre-contractual representations, the Judge appeared to take account of the undue influence issue.  It is unclear to what extent, at least from a preliminary reading of his judgment, that was determinative of his finding on that point.

[10]     In those circumstances, without expressing any view about the prospects of success, I am satisfied that there are tenable grounds to appeal.

[11]     If no stay were granted, Ms Evans would need to take steps immediately to execute the costs judgment.  In all likelihood, that would be done through the issue of a statutory demand following which, assuming non-compliance, an application to liquidate L.E.A.D would be made.  There would also be the possibility of an interim dispute on an application to set aside the statutory demand, based on the fact that an appeal was pending.   Hearing time would be needed if any such application were made.

[12]     If the statutory demand procedure could be undertaken on the basis that no application to liquidate the company could be brought until final disposition of the appeal, that would safeguard both parties rights.   Ms Evans could start the enforcement process and put to one side the possibility of a defended application to set aside the statutory demand based on the existence of the appeal.  It is unlikely that there would be any significant differences in timing in relation to the hearing of any liquidation application.

[13]     From L.E.A.D’s perspective, a stay of that type would mean that it was under no obligation to pay the costs judgment pending determination of its appeal.   If it were unsuccessful on its appeal, it is very unlikely that there would be any further stay even assuming an application to bring a second appeal might be made.

[14]     In  those  circumstances,  I  consider  that  the  competing  interests  are  best addressed by an order of that type, with leave reserved for either party to apply in the event that any unforeseen problems arise.   One such problem could arise if the appeal were part-heard and could not be completed until next year.   In those circumstances, it would be entirely appropriate for both parties to have the opportunity to relitigate the issue.

[15]     I make an order staying enforcement of the costs judgment to this extent: Ms Evans is entitled to issue a statutory demand to claim the amount for which judgment has  been  sealed  for  costs.    But,  she  is  restrained  from  filing  any  liquidation application in consequence of non-compliance with the statutory demand, pending the outcome of the appeal to this Court, to be heard on 20 October 2010.  Leave to apply to either party to vary or rescind that stay is reserved.

[16]     Questions of costs in relation to the application for stay are reserved, to be determined by the Judge who hears the appeal.

[17]     I thank counsel for their assistance.

P R Heath J