Love v Auburn Apartments Limited HC Auckland CIV-2009-404-725
[2011] NZHC 511
•23 May 2011
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV-2009-404-725
BETWEEN DOUGALL LOVE, PATRICIA LOVE AND TRUSTS LIMITED
Plaintiffs
ANDAUBURN APARTMENTS LIMITED Defendant
Hearing: 13 April 2011
Appearances: E St John for the Plaintiffs
S Judd for the Defendant
Judgment: 23 May 2011
RESERVED JUDGMENT OF ELLIS J
[Stay of Execution Pending Appeal and Release of Security]
This judgment was delivered by me on 23 May 2011 at 4.30 pm, pursuant to r 11.5 of the High Court Rules
Registrar/Deputy Registrar
Solicitors: Palmer & Associates, PO Box 74062, Auckland
Carter Atmore Law, PO Box 68656, Newton, Auckland
Counsel: E St John, PO Box 105 270, Auckland
SRG Judd, PO Box 3320, Auckland
LOVE AND TRUSTS LIMITED V AUBURN APARTMENTS LIMITED HC AK CIV-2009-404-725 23 May
2011
Introduction
[1] This judgment relates to a number of matters arising following delivery of my judgment dated 28 February 2011.[1] In that judgment I held that the plaintiffs (“the Loves”) were not entitled to cancel a contract between them and Auburn Apartments Ltd (now in receivership) (“Auburn”) for the sale and purchase of an apartment. As a consequence I ordered that the Loves were required to pay Auburn
$330,824 in damages (that sum largely comprising the difference between the purchase price and the price obtained by Auburn on resale). They have now filed an appeal against my judgment.
[1] Love v Auburn Apartments Ltd HC Auckland CIV-2009-404-725, 28 February 2011.
[2] First, the plaintiffs seek a stay of my judgment pending resolution of their appeal against it. That is opposed by Auburn.
[3] Secondly, Auburn seek release of the $25,000 security that was paid by them before the trial pursuant to an order made by Associate Judge Doogue on 16 June
2010. That is opposed by the Loves.
[4] Thirdly, Auburn has applied for the discharge of the interlocutory injunction ordered by Venning J on 9 August 2010 prohibiting Auburn from calling for payment of a $70,750.00 deposit paid by the Loves to New Zealand Home Bonds Limited for the purchase of the apartment. Mr Cregten, for the receivers, has undertaken that any sum received from New Zealand Home Bonds Ltd following discharge will be held in a separate bank account pending the outcome of the pending appeal and will not be paid to any person except in accordance with a direction from the Court. On that basis, the application is not opposed by the Loves.
Stay
[5] The stay application is made in reliance on r 12 of the Court of Appeal (Civil) Rules 2005. Sub-rules 3 and 4 of r 12 provide:
(3) Pending the determination of an application for leave to appeal or an appeal, the court appealed from or the Court may, on application,—
(a) order a stay of the proceeding in which the decision was given or a stay of the execution of the decision; or
(b) grant any interim relief.
(4) An order or a grant under subclause (3) may—
(a) relate to execution of the whole or part of the decision or to a particular form of execution:
(b) be subject to any conditions that the court appealed from or the Court thinks fit, including conditions relating to security for costs.
[6] It is trite that in making a decision under r 12, the Court must weigh the balance between the right of a successful litigant to the fruits of a judgment and the need to preserve the position in case the appeal is successful.[2] The Courts have developed the following non-exclusive list of factors relevant to that exercise:[3]
[2] Duncan v Osborne Buildings Ltd (1992) 6 PRNZ 85 (CA) at 87.
[3] Dymocks Franchise Systems (NSW) Pty Ltd v Bilgola Enterprises Ltd (1999) 13 PRNZ 48 (HC) at [9], approved by the Court of Appeal in New Zealand Insulators Ltd v ABB Ltd (2006) 18 PRNZ 565 at [11].
a) whether the appeal may be rendered nugatory by the lack of a stay;
b) the bona fides of the applicant as to the prosecution of the appeal;
c) whether the successful party will be injuriously affected by the stay;
d) the effect on third parties;
e) the novelty and importance of questions involved;
f) the public interest in the proceeding; and g) the overall balance of convenience.
[7] The apparent strength of the appeal has also been treated as a relevant factor.[4]
[4] Body Corporate No 188529 v North Shore City Council (No 6) HC Auckland CIV-2004-404-3230, 11 February 2009 and Keung v GBR Investment Ltd [2010] NZCA 396.
[8] The Loves filed affidavits in support of their application which disclose that:
a) neither of the Loves is financially in a position to meet the judgment. b) Trusts Limited has no assets in which it has a beneficial interest.
[9] The Loves have paid security for costs in the appeal. At the time of the present hearing before me, the indication was that their appeal might be heard by the Court of Appeal as early as July, although I acknowledge that that timeframe may no longer be feasible.
[10] For these reasons, Mr St John submitted that the interests of justice favour a stay. He said that unless a stay is granted, the pending appeal would be rendered nugatory because the Loves’ inability to pay the judgment sum will likely result in their bankruptcy. He also said that:
a) because Auburn is in receivership and liquidation, there is no prejudice to Auburn in the granting of a stay pending the appeal; and
b) their appeal has merit.
[11] For Auburn’s part, the receivers have undertaken to hold any money received as payment of the judgment sum from the Loves in a separate bank account and that this money will not be paid to any person except in accordance with a direction from the Court. They say that this means that Auburn has given security for repayment of the judgment sum and that there is no basis upon which the Loves can seek a stay for the reason of Auburn being in receivership and liquidation.
[12] Auburn also placed reliance on an affidavit filed by Mr Love in August last year in which he gave an undertaking as to damages in the context of the Loves’ application for the interlocutory injunction in relation to the deposit. Mr Judd submitted that this undertaking was inconsistent with the Loves’ present claim to impecuniousness.
Discussion
[13] In terms of those factors listed at [6] and [7] above which are relevant to the present case I am prepared to proceed on the basis that the appeal is not hopeless. The central basis for my finding against the Loves was that the special condition upon which they sought to rely in cancelling the contract could not be so widely interpreted. As I think my judgment made clear, that issue was not entirely clear cut.
[14] I also record Mr St John’s stated intention to seek to argue on appeal that the Loves were entitled to cancel the contract under other clauses of the contract not yet pleaded. I accept Mr Judd’s submission that that course is not without difficulty. Even if Mr St John is permitted to advance that argument, it is far from clear whether breach of those clauses (if any) would in any event justify cancellation. Nonetheless, I do not entirely disregard this as a factor; the point would not appear to require new evidence and may be arguable. I have little doubt that the Loves wish in good faith to pursue it.
[15] I place little weight on Mr Love’s earlier undertaking as to damages. It related only to potential damage resulting from the retention of the $70,750 deposit. The judgment sum is nearly $400,000 and in the interim the Loves have had to bear the cost of a trial. It follows that I accept that bankruptcy is a real possibility in the event that Auburn seek to enforce the judgment against the Loves now. Although Mr Judd referred to the possibility (in that event) of the Official Assignee taking over the appeal, I agree with Associate Judge Bell in Wiltshire Investments Ltd v
Symons[5] when he said:[6]
[5] Wiltshire Investments Ltd v Symons HC Auckland CIV-2010-404-1011, CIV-2010-404-1572, 8 October 2010.
[6] At [15].
A common response to such a submission is to say that, if a judgment debtor is adjudicated bankrupt, the Official Assignee may be able to take over the appeal. In many cases, that response tends to be a hollow assurance. In particular, I note that in the case of ANZ National Bank v Pillay ... Associate Judge Faire ... at [23] said:
“... the question whether an adjudication order would render the appeal nugatory, one must always appreciate that that is a likely outcome of an order of adjudication because of the fact
that there may not be any incentive on the Official Assignee in
Bankruptcy to prosecute the appeal.”
(citations omitted)
[16] Although the fact that an appeal may be rendered nugatory absent a stay is not determinative[7] it is in my view a clear factor supporting a stay in this case. The risk is not addressed by Auburn’s undertaking not to deal with the judgment sum pending the appeal and indeed that undertaking indicates that the prejudice to Auburn of granting of a stay will not be significant. And as I have stated, I do not consider the appeal to be completely without merit.
[7] Cousins v Heslop [2007] NZCA 377, (2007) 18 PRNZ 677.
[17] For these reasons, I have concluded that the interests of justice are best met in this case by the grant of a stay on conditions that ensure the appeal is progressed expeditiously.
Security for costs
[18] When ordering Auburn to pay security, Associate Judge Doogue did not address what was to happen to the $25,000 after the substantive hearing, and nor have any subsequent orders of this Court addressed it. This Court accordingly has the power to retain the money paid in and it cannot be automatically paid out. A
Court order is required to replace the order that the Court originally made.[8] The
[8] New Zealand Meat Board v Paramount Export Ltd (in receivership and liquidation) (2003) 16 PRNZ 942 (CA) at [11].
question therefore is whether this Court should now order that the sum be released.
[19] One of the reasons security was ordered to be paid by Associate Judge Doogue was because Auburn would not be able to pay costs if an order was made against it. As in the New Zealand Meat Board case, there seems to be little doubt that, if the money is released, the funds would be used by the receivers to pay other creditors. Thus if the money is paid out, but the Loves are successful in their appeal, they would become unsecured creditors for the amount of any costs award in their
favour.
[20] For this reason I accept Mr St John’s submission that the circumstances giving rise to the order for security have not materially changed. While Auburn now has judgment in its favour, that underlying reality remains. And as I have said, I do not consider that the Loves’ appeal is utterly hopeless. For these reasons I consider that the security should remain pending
Orders
[21] I therefore make the following orders:
a) Execution of my judgment dated 28 February 2011 is to be stayed on the condition that the Loves are to apply for a fixture in the Court of Appeal within 10 working days of the date of this judgment;
b) The $25,000 security for costs paid into this Court by Auburn’s
receivers is to remain until further order of the Court;
c) The interlocutory injunction dated 9 August 2010 preventing the defendant from calling for payment of the $70,750 deposit is discharged, on condition that the sum consequently released to the defendant by New Zealand Home Bonds Ltd:
i)will be held in a separate bank account by the receivers pending the outcome of the appeal; and
ii)will not be paid out to any person except in accordance with a further direction of this Court.
Rebecca Ellis J
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