Mills v Dalzell
[2023] NZHC 1530
•20 June 2023
IN THE HIGH COURT OF NEW ZEALAND PALMERSTON NORTH REGISTRY
I TE KŌTI MATUA O AOTEAROA TE PAPAIOEA ROHE
CIV-2022-454-9
[2023] NZHC 1530
BETWEEN LYNETTE JOY MILLS
First Plaintiff
CARL JAMES PETERSON
Second PlaintiffAND
KELLY DALZELL
First Defendant
TRACY LEVENBACH
Second Defendant (Deceased)ASB BANK LIMITED
Third Defendant
GRAHAM HOWARD MILLS
Fourth DefendantJOHN LEVENBACH
Fifth DefendantCAROL KRAMMER
Sixth Defendant
Hearing: On the papers Appearances:
Plaintiffs in Person
S C Gollin and S L Michelsen for First and Third Defendants No appearance for Second Defendant
J R Sparrow and S T Hartley for Fourth Defendant K B Perrett for Fifth and Sixth Defendant
Judgment:
20 June 2023
JUDGMENT OF ASSOCIATE JUDGE SKELTON
[Application for stay of costs award pending appeal]
MILLS v DALZELL [2023] NZHC 1530 [20 June 2023]
[1] In a substantive judgment dated 23 September 2022, Associate Judge Johnston struck out the plaintiffs’ claim in this proceeding in its entirety.1
[2] In a costs judgment dated 23 November 2022, Associate Judge Johnston ordered that the plaintiffs are to pay each of the three groups of defendants scale costs at a 2B rate increased by 33 per cent.2 Costs orders have been sealed for the first and third defendants in the sum of $17,007.50 (costs and disbursements); for the fourth defendant in the sum of $16,647.67; and for the fifth and sixth defendants in the sum of $28,202.00. The second defendant has died and her personal representative or representatives have not entered any appearance.
[3] On 12 October 2022, the plaintiffs lodged a notice of appeal against the substantive judgment of Associate Judge Johnston dated 23 September 2022. The plaintiffs have not appealed the costs judgment.
Current application
[4] The plaintiffs now apply by way of interlocutory application to stay the costs orders of Associate Judge Johnston dated 23 November 2022 until the appeal has been determined. The application is dated 14 December 2022 and is supported by an affidavit of Carl James Peterson dated 13 January 2023, a memorandum in support of the application dated 13 January 2023 and a memorandum concerning a stay of costs application dated 20 April 2023.
[5] Counsel for the fifth and sixth defendants filed a memorandum in which they state that the fifth and sixth defendants do not consider there to be grounds for a stay of enforcement but do not formally oppose the plaintiffs’ application and will abide the decision of the Court. This is primarily due to the desire to avoid incurring further costs. Counsel for the fourth defendant has filed a memorandum to the same effect. The fourth defendant also reserves his rights in respect of, and would seek to be heard in relation to, any application by the plaintiffs for costs on this application.
1 Mills v Dalzell [2022] NZHC 2439.
2 Mills v Dalzell [2022] NZHC 3067.
[6] The first and third defendants have filed a notice of opposition dated 19 December 2022 and a memorandum of counsel in support of that notice of opposition dated 10 March 2023.
[7]The parties are content for the matter to be dealt with on the papers.
Legal principles
[8] The plaintiffs’ application is made under rr 1.5, 15.1 and 20.10 of the High Court Rules 2016 and r 12(3) of the Court of Appeal (Civil) Rules 2005.
[9]Rule 12 of the Court of Appeal (Civil) Rules provides:
12 Stay of proceedings and execution
(1)None of the matters referred to in subclause (2) operate as—
(a)a stay of a proceeding in which a decision was given; or
(b)a stay of execution of that decision.
(2)The matters are—
(a)an application for leave to appeal; or
(b)the giving of that leave; or
(c)an appeal.
(3)Pending the determination of an application for leave to appeal or an appeal, the court appealed from or the Court may, on an interlocutory 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.
(5)If the court appealed from refuses to make an order under subclause (3), the Court may, on an interlocutory application, make an order under that subclause.
(6)If the court appealed from makes an order under subclause (3), the Court may, on an interlocutory application, vary or rescind that order.
(7)The Court may, at any time, vary or rescind an order made by it under this rule.
[10] The plaintiffs also rely on r 20.10 of the High Court Rules. However, that rule applies only to appeals to the High Court, not appeals to the Court of Appeal.
[11] The starting point is that a successful party is entitled to the fruits of its judgment.3 Therefore, the plaintiffs must show why the usual consequences of the costs judgment should not follow.4 As the Court of Appeal explained in Brook Valley Community Group Inc v Brook Waimarama Sanctuary Trust:5
[10] … The court will need to balance the competing rights of the party who has obtained judgment against the need to preserve the appellant’s position in the event of the appeal succeeding. The factors to be taken into account in the balancing exercise when a stay or interim order are sought include:
(a)whether the appeal may be rendered nugatory by the lack of a stay;
(b)the bona fides of the appellant 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;
(g)the overall balance of convenience; and
(h)the apparent strength of the appeal.
3 Brook Valley Community Group Inc v Brook Waimarama Sanctuary Trust [2017] NZCA 377 at [10].
4 At [10].
5 At [10] (footnotes omitted); and Keung v GBR Investment Ltd [2010] NZCA 396, [2012] NZAR 17 at [11].
[12] In SKIDS Program Management Ltd v McNeill,6 Woodhouse J emphasised that these factors are amongst the factors that the Court is likely to consider. The list is not determinative.7 Ultimately each case must be determined on its own circumstances.
[13] With regard to the stay of costs orders, Associate Judge Osborne (as he then was) in Walker v Castlereagh Properties Ltd said:8
[43] Those involved in litigation in this Court are subject to a regime whereby costs become payable when they are fixed. Successful parties are intended to have (upon the fixing of costs) the cash flow benefits of the costs to which the Court has found them entitled.
[44] Where the unsuccessful party appeals a substantive judgment, the justice in relation to identifying who should be out of pocket for awarded costs in the interim will most often (albeit not invariably) favour the successful respondent. The respondent has had to bear costs in either suing the other party or defending the other party’s unsuccessful claim. That stage of the litigation is over. If the unsuccessful party elects to embark on a further stage of litigation through appeal it will generally be just that the successful party (through the payment of costs) is reimbursed in the interim for the costs awarded and fixed pursuant to its success.
[45] Such an approach will by the nature of the balancing exercise remain subject to influence by factors of particular relevance in an individual case… . But such factors are more likely to inform the Court’s decision on the way in which the unsuccessful party should make any payment in the interim
… rather than on whether the unsuccessful party should be relieved of the requirement to make payment pending the determination of the appeal.
[14] In this case, the plaintiffs have appealed the substantive judgment but not the costs judgment. The question arises whether a party can apply to stay a judgment under r 12 that they have not appealed. This situation arose in Sullivan v Wellsford Properties Ltd.9 After considering authorities with regard to this Court’s inherent jurisdiction, Gordon J found:10
Without deciding whether r 12 in fact applies, I proceed either under r 12 or if it does not apply, under the Court’s inherent jurisdiction. In any event, I apply the relevant Brook Valley factors.
6 SKIDS Program Management Ltd v McNeill HC Auckland CIV-2010-404-1696, 20 December 2011.
7 At [9].
8 Walker (as liquidator of Gibbston Water Holdings Ltd) v Castlereagh Properties Ltd [2015] NZHC 907, [2015] NZAR 944 at [43]–[45] (footnotes omitted).
9 Sullivan v Wellsford Properties Ltd [2018] NZHC 708.
10 At [13]–[19].
I adopt the same approach in this case.
Plaintiffs’ submissions
[15] The plaintiffs’ main point seems to be that there is no financial risk to the defendants arising from a stay of execution at this stage because the plaintiffs own two properties (the Ruatiti property and the Porangahau property) with a combined capital value of $1,327,800. The plaintiffs say that any risk to the defendants can be mitigated with a forced sale of either property should the plaintiffs fail on appeal. The plaintiffs are willing to submit to a further mortgage, caveats or sale of at least one property to satisfy costs awards arising upon the final determination of their appeal.
[16] However, the plaintiffs submit that a forced sale before the final determination of this proceeding effectively sabotages their long-term plans for the properties and would cause unnecessary loss and harm resulting in a miscarriage of justice.
[17] The plaintiffs say that these properties are their only realisable assets, and the ongoing court proceedings preclude any financial organisation providing bridging finance.
[18] With regard to the merits of their appeal, the plaintiffs refer to affidavits provided by the fifth and sixth defendants in July 2022 which the plaintiffs say give rise to new claims. The plaintiffs submit that claims that have been struck out by unclear pleadings are open to amendment and repleading providing the supporting evidence exists to support improved pleadings.
[19] With regard to the Porangahau property, the plaintiffs say that they are aged beneficiaries and reside in this property and it would be unjust if they were required to sell the property at this stage and relocate elsewhere.
[20] In their further memorandum dated 20 April 2023, the plaintiffs say they have been actively attempting to sell the Ruatiti property for some time, but there are issues relating to the ownership and/or participation under the Emissions Trading Scheme and the carbon units attached to that property which must be resolved before any sale to prevent sale at well below market value.
First and third defendant’s submissions
[21] The first and third defendants submit that the plaintiffs have not provided any evidence of their financial position to support the contention that the only way they could meet the current costs orders would be by way of sale of one of their properties. The first and third defendants note that the plaintiffs have not claimed to be insolvent.
[22] The first and third defendants say that the applicants have not made any payments to the third defendant in line with their mortgage obligations for a significant period of time and have therefore had the benefit of reduced living expenses.
[23] The first and third defendants also say that, in any event, the possibility that the applicant may suffer financial hardship if the stay is not granted would not be sufficient grounds to displace the usual position.11 There are no special circumstances that justify deviation from the usual position that costs should be available to a successful party. The plaintiffs can be put back in the position they were in before execution by being repaid costs paid by them if their appeal is successful.
Discussion
[24] In relation to the Brook Valley factors referred to above, some clearly do not apply here. It is not contended that there are any third parties who would be affected by the stay. There are no general or public interests at play. There is no claim that the questions on appeal are novel or important. Nor is it contended that the defendants will be injuriously affected by the stay, other than being out of their money on costs.
Will the lack of a stay render the appeal nugatory?
[25] The plaintiffs suggest that if the costs award were to be enforced this would force them to abandon their appeal, but it is not clear on what basis this contention is made. The plaintiffs say that the Ruatiti and Poranaghau properties are their only realisable assets and that they are unable to obtain any bridging finance from any financial organisation due to the ongoing litigation. However, the plaintiffs have not put any financial information before the Court, and they have not claimed insolvency.
11 Dunstan v District Court at Manukau [2021] NZHC 1320 at [10].
The bona fides of the applicant as to prosecution of the appeal
[26] The notice of appeal was filed in October 2022. There has been no further information put before this Court in relation to the prosecution of the appeal. On 12 December 2022, the plaintiffs lodged an “Informal Application for Review of the Court of Appeal Ruling Concerning Costs Security Dated 29 November 2022”.12
[27] The first and second defendants rely on the finding of Associate Judge Johnston that “… it is difficult indeed to see any genuine motivation for the proceeding other than an attempt to avoid the contractual commitments they [the plaintiffs] had made in the deed.”13
Strength of the appeal
[28] The apparent strength of the appeal is a factor to consider but caution is required at this stage.14
[29] I go no further than to note the finding of Associate Judge Johnston that the plaintiffs’ claims have been struck out:15
… in their entirety … on the grounds that they disclose no arguable cause of action against any defendant, and that the proceeding is otherwise an abuse of process having regard to the terms of the settlement agreement between the plaintiffs and the third and fourth defendants that applies also to the first and second defendants, and that all claims are in any event time barred.
[30] In his costs judgment, Associate Judge Johnston accepted the submission that the plaintiffs’ case was “hopeless” and that the plaintiffs “were, or should have been aware that this claim could not succeed”.16
Overall balance of convenience
[31] I acknowledge the general principle that the defendants are entitled to the fruits of the costs judgment and that there are additional risks for the defendants if a stay is
12 This application was declined by the Court of Appeal, see Mills v Dalzell [2023] NZCA 68.
13 Mills v Dalzell, above n 2, at [15].
14 Gillibrand v Swanepoel [2018] NZHC 2700 at [8].
15 Mills v Dalzell, above n 1, at [85].
16 Mills v Dalzell, above n 2, at [13]–[14].
granted in terms of the potential recovery of costs, including that they would be kept out of their money for longer.
[32] On the other hand, it is apparent that there is a risk of unnecessary hardship for the plaintiffs if either of their properties is required to be sold at this stage, but they succeed on their appeal. In the circumstances, it may not be possible to put the plaintiffs back into the position they were in before execution. In the case of sale of the Ruatiti property, a sale at this stage may be at a significant undervalue. In the case of sale of the Porangahau property, the plaintiffs would lose the home in which they are residing for good.
[33] While the plaintiffs have not provided any detailed evidence of their financial position, they submit that the two properties are their only realisable assets and that they are unable to obtain any financial support in the interim pending the outcome of the court proceedings.
[34] In the circumstances, I have considered the approach taken by Associate Judge Bell in Gillibrand v Swanepoel.17 In that case, Associate Judge Bell determined that there was a risk of unnecessary hardship with the potential sale of the Gillibrand’s property, and a risk of unnecessary hardship if the Gillibrand’s were adjudicated bankrupt in that the appeal may not be pursued.
[35] Associate Judge Bell adjourned the application to stay execution. That allowed enforcement steps to be continued but on the basis that the Gillibrands should not have their property sold or be adjudicated bankrupt if they prosecuted their appeal with due diligence. If the enforcement steps reached any of those stages, a stay of execution or a halt of any bankruptcy application could be ordered depending on the progress or results of the appeal.
[36] I adopt a similar approach in this case with regard to the potential sale of the plaintiffs’ properties to satisfy the costs orders. The defendants should be able to take steps towards enforcement. However, if the enforcement steps reach the stage of sale of either of the plaintiffs’ properties, then a stay of execution could be ordered
17 Gillibrand v Swanepoel, above n 14, at [28]–[30].
depending on the relevant circumstances at that time including the progress of the appeal.
Result
[37] Accordingly, I adjourn the plaintiffs’ application for stay of execution of the costs orders made by Associate Judge Johnston. That allows any of the defendants to take steps towards enforcement, but leave is reserved to bring the application on again if any enforcement steps will result in the sale of either of the plaintiffs’ properties before the result of the appeal is known.
[38] My provisional view is not to order costs on this decision. If any party seeks costs, then that party may file a memorandum (not exceeding five pages). Any other party may file a response memorandum (not exceeding five pages). I will then determine costs on the papers.
Associate Judge Skelton
Solicitors:
MinterEllisonRuddWatts, Auckland for First and Third Defendants Holland Beckett, Tauranga for Fourth Defendant
Morgan Coakle, Auckland for Fifth and Sixth Defendants
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