McDonald v Stanley HC Auckland CIV-2011-404-2623

[2011] NZHC 923

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2011-404-2623

UNDER  the Weathertight Homes Resolution

Services Act 2006

BETWEEN  DARYN PETER MCDONALD Appellant

ANDLUCY NORMA STANLEY AND MELONIE JANE STANLEY Respondents

Hearing:         19 August 2011

Counsel:         J P Scott for Appellant

D J Powell for Respondents

Judgment:      19 August 2011 at 3:00 PM

JUDGMENT OF POTTER J

n application for stay

In accordance with r 11.5 High Court Rules

I direct the Registrar to endorse this judgment

with a delivery time of 3 p.m. on 19 August 2011.

Solicitors:           Martell McKegg, Auckland –  [email protected]

Grimshaw & Co, Auckland – [email protected]

MCDONALD V STANLEY AND STANLEY HC AK CIV-2011-404-2623 19 August 2011

Introduction

[1]      The appellant has appealed a decision of the Weathertight Homes Tribunal (“the Tribunal”)1  (“the decision”) which  gave judgment against  the appellant in favour of the respondents for the sum of $332,897.  The notice of appeal was filed on 27 April 2011.

[2]      By application dated 28 April 2011 the appellant applied to stay enforcement of the Tribunal’s order pending hearing and determination of the appeal.   The respondents oppose the granting of a stay.

[3]      I heard submissions from the parties on 3 August 2011 and issued a minute on that date in which I adjourned the appellant’s application for stay until 18 August

2011 and directed that the appellant address the provision of security in the vicinity of the sum of $250,000.

[4]      The appellant advised by memorandum of counsel dated 18 August 2011 that he has insufficient funds and assets to offer the security indicated by the Court.

[5]      I resumed the adjourned hearing of the application for stay in a telephone conference with counsel today.   Mr Scott for the appellant confirmed that the appellant pursues his application for stay.  Mr Powell for the respondents confirmed that the respondents maintain their opposition to the application.

Decision

[6]      I have determined that the application for stay should be granted.  I advised counsel of this decision in the course of the telephone conference today.

1   Stanley v North Shore City Council [2011] NZWHT Auckland 20, 31 March 2011.

[7]      The brief reasons for my decision follow.

[8]      It is common ground that in considering an application for stay pursuant to r

20.10 of the High Court Rules the relevant factors for the Court to consider in the exercise of its discretion are those set out in Duncan v Osborne Buildings Ltd2  and Dymocks Franchise Systems (NSW) Pty Ltd v Bilgola Enterprises Ltd.3    The Court must balance the right of the successful litigant to have the fruits of a judgment and the need to preserve the position in case the appeal is successful:

1.       If no stay is granted will the applicant’s right of an appeal be rendered

nugatory?

[9]      The respondents have issued and served on the appellant a bankruptcy notice dated 21 April 2011 in CIV-2011-404-002387.   Mr Powell advised at the hearing that the bankruptcy notice expires on 25 August 2011.  If the stay is not granted it is open to the respondents to apply for the appellant to be adjudicated bankrupt.  On adjudication, the appellant’s assets, which his counsel advised are a fifty per cent shareholding in  McDonald  Textures  Properties  Limited,  will  be  forfeited to  the Official Assignee.   This is the only substantial asset the appellant owns.   Counsel advised that the assets of the company comprise real estate, having a valuation as at

27 July 2011 of $1.5m but likely to yield less on a forced sale.  Counsel also advised that the properties are mortgaged to the extent of approximately $1.2m and are therefore unlikely to yield any equity on a forced sale.

[10]     It is clear that if the stay is not granted and the respondents apply to have the appellant adjudicated bankrupt, the appeal is unlikely to proceed and the right of

appeal will essentially be rendered nugatory.

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] 3 NZLR 239.

[11]     Mr McDonald represented himself in person before the Tribunal and filed in person the application for stay and brief supporting affidavit.  However, by notice dated 11 May 2011 he advised that his solicitor is Andrew James Steele of Martelli McKegg  and  the  address  of  that  firm  was  notified  as  the  address  for  service. Counsel who appeared for the appellant at the stay hearing, Mr Scott, assured the Court that Martelli McKegg have instructions from Mr McDonald to pursue the appeal.

3.       Will the successful party be injuriously affected by the stay?

[12]     If  the  respondents  are  successful  on  the  appeal  they  will  be  injuriously affected to the extent that they are being denied the fruits of their judgment while the stay remains in effect.  However, the appeal hearing has an early hearing date on 6

September 2011.  Counsel for the appellant confirmed that security for costs in the sum of $940 ordered by Wylie J on 7 June 2011 has been paid and there is a firm timetable in place to progress the appeal to hearing on 6 September 2011.

4.       The effect on third parties

[13]     There is no evidence that third parties will be injuriously affected by the stay. Counsel for the appellant advised that he is not facing any further insolvency proceedings and does not have any other creditors.   His insolvency arises as the result of the judgment debt under appeal and the illiquidity of his assets being the shares in McDonald Textures Properties Limited.

5.       The novelty and importance of the question involved

[14]     The sole ground of appeal is that the Tribunal was wrong to find the appellant was liable in damages to the respondents because his business was run through a company, McDonald Textures Limited.   There is no novelty or importance in this question.

[15]     There is no public interest in the proceedings.

7.       The overall balance of convenience

[16]     I consider the overall balance of convenience clearly favours the appellant. The appeal is likely to be rendered nugatory if a stay is not granted and bankruptcy intervenes before the appeal comes to hearing.   On the other hand, as far as the respondents are concerned, the delay to hearing of the appeal is minimal.   The bankruptcy proceedings can be adjourned until the appeal is heard and determined. If the respondents are successful on the appeal they will suffer only a comparatively short delay in proceeding to realise the fruits of their judgment.  I therefore consider the balance of convenience lies with preserving the position until the appeal is heard and determined.

[17]     As the respondents have submitted, an additional factor to be considered is whether there is an arguable appeal point and its likely strength.4

[18]     The appeal is based on the appellant’s contention that the work in respect of which he was held liable by the Tribunal was carried out by a company and not by him personally.  This was a factual matter not raised before the Tribunal, where Mr McDonald represented himself.   It is a fact fundamental to the decision.   My discussion with counsel at the hearing of the application for stay suggested Mr McDonald does not have a strong case.   Nevertheless it would be contrary to the interests of justice if because of an innocent mistake, an unrepresented litigant failed to address matters of fundamental importance to his case.  Thus while this factor is relevant, it does not weigh strongly against the appellant in determining where the balance of convenience lies in this case.

[19]     In  order  to  preserve  the  position  of  the  respondents  in  relation  to  the bankruptcy   proceedings   in   CIV-2011-404-002387   against   the   appellant,   the

4   A Person or Persons Unknown v Tea Custodians (Bluestone) Ltd [2010] NZCA 211 at [15]; Body

Corporate No 188529 v North Shore City Council (No 6) HC Auckland CIV-2004-404-3230, 16
February 2009 at [17].

bankruptcy proceedings will stand adjourned until the hearing and determination of

the appellant’s appeal against the decision of the Tribunal set down for hearing on 6

September 2011. [20]    Result

a)        The appellant’s application for stay is granted.

b)The  respondents’  bankruptcy  proceedings  against  the  appellant  in CIV-2011-404-002387 will stand adjourned to be called for mention before the Judge who hears the appeal.

c)        Costs are reserved.