Memelink v Body Corporate 81012
[2022] NZCA 581
•29 November 2022 at 10.00 am
| IN THE COURT OF APPEAL OF NEW ZEALAND I TE KŌTI PĪRA O AOTEAROA |
| CA275/2022 [2022] NZCA 581 |
| BETWEEN | HARRY MEMELINK AND CISCA JOHNETTE FORSTER AS TRUSTEES OF THE LINK TRUST (NO 1) |
| AND | BODY CORPORATE 81012, BODY CORPORATE 68792 AND BODY CORPORATE 378945 |
| Court: | Gilbert and Goddard JJ |
Counsel: | S J Fraser for Applicants |
Judgment: | 29 November 2022 at 10.00 am |
JUDGMENT OF THE COURT
AThe application for an extension of time to file the case on appeal is declined.
BThe application for a stay of the appointment of receivers is declined.
CThe applicants must pay one set of costs to the respondents for a standard application on a band A basis, with usual disbursements.
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REASONS OF THE COURT
(Given by Goddard J)
Background
The applicants, Mr Memelink and Ms Forster, are the trustees of the Link Trust (No 1) (the Trust). The Trust was established in 1995. At all relevant times Mr Memelink has been a trustee, and his co-trustee has been either Lynx Trustees Limited (Lynx) or Ms Forster.
The original and current trustees of the Trust have been embroiled in litigation with various bodies corporate in relation to properties held by the Trust. That in turn has led to litigation with a number of other parties. Mr Memelink was adjudicated bankrupt in 2018. Lynx was placed in liquidation on 10 September 2019.
High Court judgment
In April 2022 Churchman J heard three proceedings involving the Trust:
(a)The receivership proceeding: Three bodies corporate sought appointment of receivers over the Trust’s assets in order to recover unpaid levies on Trust properties and related debts.
(b)The liquidation proceeding: The liquidators of Lynx brought a claim against the current trustees to be indemnified out of Trust property for debts arising in respect of certain claims against Lynx as a trustee of the Trust, and their reasonable remuneration. The liquidators sought, among other things, orders for sale of Trust properties to satisfy those debts.
(c)The bankruptcy proceeding: The Official Assignee sought to be indemnified out of Trust property for debts incurred by Mr Memelink in his capacity as trustee. The Official Assignee sought orders for sale of Trust properties to satisfy those debts.
On 31 May 2022 the Judge delivered a judgment appointing receivers of the Trust property.[1] The receivers’ terms of appointment provided for them to realise Trust assets in order to pay levies and costs owing to each of the three bodies corporate.[2] The liquidators’ claim for an indemnity in respect of obligations incurred by Lynx as a trustee, and the Official Assignee’s claim for an indemnity in respect of obligations incurred by Mr Memelink as a trustee, were also successful.[3] Rather than making separate orders for realisation of Trust properties to meet those claims, the receivers were appointed to realise Trust assets in order to meet creditors’ claims generally, and on the basis that creditors were to be treated equally.[4]
The trustees’ appeal to this Court
[1]Body Corporate 81012 v Memelink [2022] NZHC 1244 [High Court judgment].
[2]At [101] and [108]–[111].
[3]At [124] and [162].
[4]At [124].
On 3 June 2022 the applicants filed a notice of appeal from the High Court judgment. They also filed an application seeking a stay of the appointment of receivers. They sought an urgent hearing of the stay application.
The notice of appeal named as respondents the three bodies corporate that sought the order for appointment of receivers before the High Court. The other applicants for relief against the Trust — the liquidators of Lynx and the Official Assignee — were not named as respondents. We return to this below.
This Court heard the stay application on 20 July 2022. It issued a judgment declining the application on 27 July 2022.[5] However the Court accepted that a speedy resolution of the substantive appeal was desirable in the interests of all parties, and allocated a hearing for the appeal on 26 October 2022.[6]
[5]Memelink v Body Corporate 81012 [2022] NZCA 333.
[6]At [6].
Under r 43 of the Court of Appeal (Civil) Rules 2005 (Rules), the applicants were required to apply for a fixture and file a case on appeal by 3 September 2022. Arguably an application for a fixture was rendered unnecessary because a hearing date had already been allocated by the Court. But that did not affect the requirement to file a case on appeal. The applicants failed to do so. The result was that the appeal was deemed to be abandoned pursuant to r 43(1). A notice of result was issued on 6 September 2022.
In response to the notice of result, Mr Memelink filed a memorandum dated 7 September 2022 requesting an extension of time of two weeks for filing the case on appeal. An extension to the timetable for submissions leading up to the hearing scheduled for 26 October was also sought.
Counsel for the respondents filed a memorandum dated 15 September 2022 opposing any extension of time for filing the case on appeal. That memorandum also noted that security for costs remained unpaid. They said that Mr Memelink had failed to provide an explanation for the delay in progressing the appeal and supporting evidence. An extension should not be granted, the respondents submitted, in circumstances where Mr Memelink had failed to prosecute the appeal diligently, had failed to explain why he had not done so, and the appeal lacked merit.
The applicants filed a case on appeal on 19 September 2022. At the same time they filed a second application for a stay in relation to the High Court judgment appointing receivers.
On 20 September 2022 the respondents filed a memorandum of counsel noting that the case on appeal filed by the applicants did not comply with the Rules. In particular, it omitted all of the affidavit evidence before the High Court and the notes of evidence taken during the hearing in the High Court. It also contained a draft affidavit filed in this Court in support of the first stay application, which had not been before the High Court.
On 26 September 2022 the applicants filed a second affidavit of Mr Memelink in support of the application for stay. Although described as an affidavit, the document contains extensive submissions responding to the memorandum of counsel for the respondents of 20 September 2022, interspersed with some evidence. Mr Memelink also filed further memoranda dated 16 October 2022, 2 November 2022, 9 November 2022 and 13 November 2022.
Because the appeal was deemed to be abandoned, the hearing scheduled for 26 October 2022 did not proceed.
The two matters that are now before this Court are the applicants’ application for an extension of time to file the case on appeal, and their second application for a stay. Those applications are opposed by the respondents.
Mr Memelink initially represented himself — and, it appears, Ms Forster — in connection with the appeal. It seems he personally filed the notice of appeal and other documents on behalf of both applicants, and appeared on behalf of both himself and Ms Forster at the hearing before this Court on 20 July 2022. At some point — the exact date is not clear — Mr Fraser was instructed as counsel for the applicants. Mr Fraser has filed submissions on behalf of the applicants in relation to the applications for an extension of time and for a stay.
Application for extension of time
Relevant principles
The principles applicable to an application for extension of time under r 43 of the Rules are the same as those explained by the Supreme Court in Almond v Read in relation to r 29A (extension of time to bring an appeal).[7] The ultimate question when considering the exercise of the discretion is what the interests of justice require. Factors that may be relevant include:[8]
(a)the length of the delay;
(b)the reasons for the delay;
(c)the conduct of the parties, in particular the applicant;
(d)any prejudice or hardship to the respondent or to others with a legitimate interest in the outcome; and
(e)the significance of the issues raised by the proposed appeal, both to the parties and more generally.
[7]Wislang v Attorney-General [2022] NZCA 341 at [9], citing Almond v Read [2017] NZSC 80, [2017] 1 NZLR 801.
[8]Almond v Read, above n 7, at [38].
The merits of the proposed appeal may, in principle, be relevant to the exercise of the discretion to extend time. But a decision to refuse an extension of time based substantially on that ground should be made only where the appeal is clearly hopeless.[9]
Submissions for the applicants
[9]At [39(c)].
Mr Fraser submits that in this case the delay was several days. The extension sought was only two extra weeks to file a casebook. This would still have been ample time before the scheduled hearing date of 26 October 2022. Mr Fraser says there was a “slip up” in handover to counsel.
The reason for the delay, Mr Fraser says, included issues with a pending complex application for legal aid and finding counsel at short notice. This was not a case of indecision on the part of the applicant.
There would have been no prejudice to the respondents if the original date of 26 October had been kept. There has been no prejudice to the receivers, who have continued to conduct the receivership, or to other parties. The orders have been, and are being, implemented.
Mr Fraser submits that the issues raised by the appeal are significant. He identifies two legal issues which he says are raised by the appeal:
(a)Whether there is a “pay now argue later” principle which means Body Corporate levies are unable to be disputed until they have been paid.
(b)Whether the High Court granted relief and made decisions about issues that were not pleaded before it, without involvement of affected parties. The order made by the Judge appointing the receivers in respect of all Trust property, to deal with claims by all creditors of the Trust, had not been sought as a remedy by the bodies corporate, the Official Assignee or the liquidators. This relief went significantly beyond the limited appointment sought by the bodies corporate in relation to the levies payable to them. Other creditors were not named as parties in the proceeding. The High Court was not in a position to adjudicate on such matters.
Discussion
We do not accept the submission that this is a case where the relevant delay was short and did not cause any relevant prejudice, for four main reasons.
First, Mr Memelink’s position before this Court in July 2022 was that he was ready to proceed immediately with his appeal, and would welcome an early fixture. A fixture was allocated in late October. It was incumbent on the applicants to do everything necessary to enable that early fixture to proceed. But they failed to take the basic steps necessary to enable the substantive appeal to be resolved promptly and efficiently. They failed to file a case on appeal on time. They failed to either pay security for costs or make a proper application for waiver of security, supported by relevant evidence, well in advance of the allocated hearing date. In the context of an accelerated path to hearing the substantive appeal, the delay involved was significant. It derailed the timetable, resulting in the appeal being deemed abandoned and the allocated fixture not proceeding.
If the delays had not occurred, the appeal would already have been heard and a decision could be expected before the end of 2022. As matters now stand, if an extension of time is granted a hearing is unlikely to be available before mid-2023, with a result in the second half of 2023. As this Court said, it was “in everyone’s interests for the appeal to be heard swiftly”.[10] That opportunity has been lost.
[10]Memelink v Body Corporate 81012, above n 5, at [6].
Second, the delay continues. The case on appeal filed by the applicants was, as the respondents submit, seriously deficient. It did not include any of the evidence before the Judge in the week-long hearing before the High Court. In his reply submissions Mr Fraser argues that the case on appeal was compliant because none of the evidence is relevant to the two issues he has identified as the issues on appeal. But the notice of appeal raises wider issues about receivership being a “last resort” that was not justified in this case, and about the terms of receivership that were justified. Those are questions that are fact-specific, and require reference to the evidence. Nor is it open to an appellant to unilaterally decide to omit material from a case on appeal. An appellant is required to prepare the case on appeal in consultation with the respondent.[11] If there is disagreement about the inclusion of a document, it must be included but the fact of the disagreement must be noted (as potentially relevant to costs).[12] The respondents consider that the evidence should be included in the case on appeal. In those circumstances, a compliant case on appeal had to include the evidence.
[11]Court of Appeal (Civil) Rules 2005, r 39(1).
[12]Rule 39(4).
It is therefore very clear that r 43 has not been complied with. The applicants were on notice of this issue. But they have not fixed it.
Third, even if time is extended to file a compliant case on appeal, the applicants’ failure to pay security for costs would mean the appeal is liable to be struck out under r 37(1) of the Rules. No application to dispense with security, properly supported by evidence about both applicants’ means, was ever filed. So the question of security would also need to be resolved.
Fourth, this litigation needs to be seen in a wider context of delay on the part of the trustees of the Trust in pursuing resolution of proceedings on their merits. The trustees of the Trust have in the past commenced proceedings in relation to body corporate levies, then failed to progress them satisfactorily. In April 2021 proceedings brought by the trustees against one body corporate were struck out for want of prosecution.[13] The trustees appealed to this Court. The appeal was dismissed.[14] This Court considered that the High Court Judge was entitled to conclude that there had been inordinate delay, which was inexcusable. The excuses Mr Memelink offered for his failure to progress the proceeding were not relevant impediments.[15]
[13]Memelink v Body Corporate 68792 [2021] NZHC 835.
[14]Memelink v Body Corporate 68792 [2021] NZCA 640.
[15]At [37].
The receivership was itself a response to protracted delays on the part of the Trust in meeting claims against it, even where those claims had been determined by the courts or where there had been ample opportunity to pursue any challenges to the debts in question but those opportunities had not been taken. Further delay means further prejudice. The need for a prompt resolution of the challenge to the receivership was recognised by this Court in July 2022 when it allocated an early fixture for the appeal. There are real difficulties for the respondents and other creditors of the trust, for the receivers, and for third parties dealing with the receivers, if the challenge to the receivers’ appointment remains alive for a further substantial period.
The trustees’ conduct in commencing this appeal, then failing to progress it, then seeking extensions of time is indicative of the use of proceedings to delay and frustrate claims against the Trust, rather than a genuine desire to resolve issues on the merits promptly. This points strongly against granting an extension of time.
We also accept the respondents’ submission that the reasons for the (continuing) delay in complying with the Rules have not been adequately explained. There are references in the extensive material filed by Mr Memelink to an application for legal aid. But the details of that application and the steps taken to advance it have not been disclosed. And in circumstances where the applicants had obtained an urgent fixture, they could not then sit back and wait to see if legal aid might at some future date be granted: they needed to take the basic steps required to comply with the Rules and keep the appeal on track. Mr Memelink is an experienced participant in litigation who could have taken the necessary steps himself. And it seems the applicants have now managed to obtain legal representation: they have not explained why they did not do so more promptly following the allocation of a fixture by this Court in late July 2022.
We do not consider that the appeal raises any issues of wider significance. The High Court judgment did not proceed on the basis that a Body Corporate levy has the same status as a judgment debt. The judgment did proceed on the basis that a levy gives rise to an immediate debt. That is plainly correct. And a receiver can be appointed to ensure the payment of debts: it is not necessary for judgment to have been entered on those debts before the Court can appoint a receiver. Mr Memelink had opportunities to pursue his challenges to the various levies to which he objects, but as noted above he did not seek to resolve those issues in a timely way.
Nor is there any issue of wider significance in relation to the scope of the relief granted. The prospect of receivers being appointed was squarely on the table at the hearing. That was the primary relief sought by the bodies corporate. In addition, access to Trust assets to meet claims was sought in both the liquidation proceeding and the bankruptcy proceeding. The prospect that the Court would make orders for realisation of Trust assets to meet claims by multiple creditors was squarely on the table. Against that backdrop, it is not surprising that the orders appointing the receivers were generalised to apply to other creditors before the Court, rather than making separate orders in each of the three proceedings and then attempting to address how those orders interacted. Nor is it surprising that the receivers were given responsibility for realising assets to meet the claims of all creditors, in order to ensure that all Trust creditors would be treated equally.
We have not undertaken a detailed analysis of the merits of the appeal: that is neither necessary nor appropriate. But nothing in the material filed by the applicants or their counsel suggests to us that the appeal has any particular merit, and certainly none that outweighs all the factors identified above.
In those circumstances, and in particular having regard to the applicants’ failure to progress the appeal in a timely way to enable the allocated fixture to proceed, we consider that it would be contrary to the interests of justice to grant an extension of time to file a compliant case on appeal.
That view is reinforced by another difficulty with this appeal. As explained above, the relief that was granted was not confined to the claim by the bodies corporate. The appointment of receivers on the basis that creditors are to be treated equally was also expressly identified as relief granted in the liquidation proceeding.[16] The terms of appointment reflected submissions made by the Official Assignee in relation to the appropriate scope of any appointment of a receiver, and effectively superseded the orders sought by the Official Assignee in relation to access to Trust property to satisfy the right of indemnity.[17] All three sets of plaintiffs were heard on the terms of appointment of the receiver, at the original hearing and at a teleconference on 3 June 2022 which resulted in a judgment approving for sealing a draft order appointing the receivers.[18] A successful appeal by the applicants would have a material effect on the interests of the liquidators of Lynx, and of the Official Assignee.
[16]High Court judgment, above n 1, at [124].
[17]At [98].
[18]Body Corporate 81012 v Memelink (No 2) [2022] NZHC 1312.
In those circumstances the liquidators of Lynx and the Official Assignee should have been named as respondents in any appeal in relation to the appointment of the receivers. The need to add them as parties, and provide them with a proper opportunity to participate in the proceedings, would add materially to the further delays that would be caused if an extension were now to be granted.
Application for stay of receivership
Because the appeal is deemed abandoned, and we have declined an extension of time under r 43 of the Rules, no question of granting a stay pending appeal arises.
But we would not in any event have granted a stay. The trustees’ earlier application for a stay was declined. They had the opportunity to bring their substantive appeal on for hearing in October, but failed to do so. Nothing in the material filed by Mr Memelink suggests that there is any proper basis for reconsidering the earlier decision to decline a stay, especially against that backdrop.
We add that although Mr Memelink has filed extensive material raising concerns about the conduct of the receivership, that is not a basis on which a stay could be granted. Any issues in relation to the conduct of the receivers are properly the subject of an application for directions to the High Court. Indeed we understand that there are live applications before that Court in relation to the terms of appointment of the receivers, and the conduct of the receivership. That is the proper forum for dealing with those issues.
Result
The application for an extension of time to file a case on appeal is declined.
The application for a stay of the appointment of receivers is declined.
Costs should follow the event in the normal way. Although there are two applications before the Court, they were effectively dealt with as a single application, so only one set of costs is justified.
The applicants must pay one set of costs to the respondents for a standard application on a band A basis, with usual disbursements.
Solicitors:
Kevin Smith Law, Wellington for Applicants
Steve Gill Law, Lower Hutt for Respondents
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