Ranolf Company Limited (in liquidation) v Bhana

[2017] NZHC 2872

IN THE HIGH COURT OF NEW ZEALAND ROTORUA REGISTRY

I TE KŌTI MATUA O AOTEAROA TE ROTORUA-NUI-Ā-KAHU ROHE

CIV-2014-463-000201 [2017] NZHC 2872

UNDER

Part 20, Subpart 3 of the High Court Rules

2008

IN THE MATTER

of a stay of enforcement

BETWEEN

RANOLF COMPANY LIMITED (IN LIQUIDATION)

Applicant

AND

ASHOK DENNIS BHANA, JASU MATI BHANA AND STEPHEN BHANA

First Respondents

GEYSERLAND LIMITED Second Respondent

Hearing:	15 November 2017 (heard at Tauranga)
Appearances:	A Botterill for the Applicant S Bhana and J Bhana in person for the Respondents
Judgment:	22 November 2017

JUDGMENT OF WOOLFORD J

[on application for stay of judgment of Gilbert J pending appeal]

This judgment was delivered by me on 22 November 2017 at 11:30 am pursuant to Rule 11.5 of the High Court Rules.

Registrar/ Deputy Registrar

Date:

Counsel:            A S Botterill, Waterstone Insolvency, Auckland

RANOLF CO LTD (In liquidation) v BHANA & ORS [2017] NZHC 2872 [22 November 2017]

Introduction

[1]      On 12 June 2017, Gilbert J ordered that a property situated at 90-92 Ranolf Street, Rotorua, consisting of 12 residential flats held in the name of Ashok Dennis Bhana and Jasu Mati Bhana as trustees of the Ranolf Trust (the first respondents), was to stand charged with payment of the debts due to the creditors of Ranolf Company  Limited   (in   liquidation)   (the  applicant)   totalling  $128,204.66   and

liquidator’s costs and disbursements totalling $159,744.25.1    These sums together

totalled $287,948.91.

[2]      Gilbert J also ordered that in the event that these sums were not paid within

30 days  of the date of his judgment, the property was to be sold and that the outstanding sums were to be paid to the applicant out of the net sale proceeds.2

[3]      The sums were not paid within 30 days and the applicant therefore initiated the court-ordered sale process. An auction date of 9 November 2017 was set.

[4]      The respondents appealed to the Court of Appeal against Gilbert J’s decision

and later, on 9 October 2017, applied for a stay of his judgment.

[5]      On 25 October 2017, Jagose J directed that the stay application be set down for hearing on 15 November 2017, being the earliest possible date for a hearing, noting that the sale of the property by way of auction on 9 November 2017 could proceed, there being no judgment or court order to the contrary.

[6]      The applicant subsequently informed the first respondents that if they paid the judgment sum, interest and costs into court, they would instruct the Court to cancel the sale of the property.   On 3 November 2017 the solicitor for the first respondents lodged a cheque for $306,337.20 in court unconditionally. According to the applicant this left a shortfall of $2,067 to satisfy the judgment sum, interest, costs and disbursements relating to the sale of the property.   The solicitor for the first

respondents then undertook to pay the shortfall of $2,067 into court.

1      Ranolf Company Ltd (in liq) v Bhana [2017] NZHC 1183; [2017] NZAR 1047 at [50].

2 At [51].

[7]      On 7 November 2017 the applicant filed a notice of discontinuance of the court-ordered sale process initiated at its request.  The sole issue remaining on the respondents’ application for a stay is whether the funds paid into court unconditionally should now be disbursed to the applicant or retained in an interest- bearing account pending determination of the appeal.

Application for Stephen Bhana to be added as a respondent

[8]      At the outset of the hearing on 15 November 2017, the first respondents applied for Stephen Bhana to be added as a respondent.   Although opposed by counsel for the applicant, Stephen Bhana was added as an appellant in the appeal to the Court of Appeal by minute dated 25 August 2017.   In the Court of Appeal minute, Cooper J stated:

[3]       …A further issue raised concerns the fact that the appeal has been signed by Stephen Bhana, not named in the intituling of the appeal nor apparently a party in the High Court.

[4]       The respondents reject Mr Stephen Bhana’s involvement, claiming that he has no standing to participate in the appeal.  This is apparently on the basis that he was not a trustee of the Trust during the relevant period: they note that he purports to have been appointed as a trustee only from 26

September 2016, well after the proceeding commenced and after the period for which the company claimed to be indemnified.

[5]       Effectively, Mr Stephen Bhana seeks to be added as an appellant. He was apparently added as a trustee prior to the hearing in the High Court. It is unclear why he did not seek leave to be added as a party in that Court. However, any judgment affecting the assets of the Trust is of concern to him as a trustee and I consider that his status as trustee should be recognised accordingly.  I make a direction that he be added as an appellant accordingly.

[9]      I  will   adopt   the  approach   taken   by  the  Court   of  Appeal   and   add

Mr Stephen Bhana as another first respondent to the High Court proceeding.

First respondents’ application

[10]     At  the  hearing  before  me,  the  first  respondents  effectively  sought  three orders.  First, that the funds paid into court unconditionally should be retained by the Court until disposition of the appeal filed in the Court of Appeal.  Secondly, that the Court should order that the caveat lodged by the applicant over the property at 90-

92 Ranolf Street, Rotorua, should be removed under s 143 of the Land Transfer Act

1952.  Thirdly, that the Court terminate the liquidation of Ranolf Company Limited (in liquidation).   The funds paid into court comprise judgment sum directed to be paid by Gilbert J, interest on the judgment sum and the costs and disbursements retaining to the sale of the property, which was cancelled by the notice of discontinuance filed by the applicant after payment of the funds into court.

[11]     In an affidavit opposing the disbursement of the funds paid into court, the first respondents refer to a mathematical error in calculation by Gilbert J as well as querying some of the costs and disbursements of the sale process.  They say that the costs and disbursements should be carefully scrutinised by the courts and submit that the disbursement of the funds should be determined by the Court of Appeal.

[12]     The applicant refers to the statements of principle in Dymocks Franchise Systems (NSW) Pty Ltd v Bilgola Enterprises Ltd and Keung v GBR Investment Ltd pertaining to the factors relevant in determining whether funds paid into court should be retained pending determination of an appeal.3    Counsel submitted that the Court should have regard to the following relevant factors:

(a)       Whether the appeal may be rendered nugatory by the lack of a stay;

(b)      The bona fides of the first respondents as to prosecution of the appeal; (c)     Whether the applicant would be injuriously affected by the stay;

(d)      The effect on third parties;

(e)       The novelty and importance of the questions involved; (f)     The public interest in the proceeding; and

(g)      The overall balance of convenience.

3      Dymocks Franchise Systems (NSW) Pty Ltd v Bilgola Enterprises Ltd (1999) 13 PRNZ 48 (HC)

at [8]; Keung v GBR Investment Ltd [2010] NZCA 396 at [11].

[13]     In addition to the above factors counsel submitted that the Court should also consider the apparent strength of the appeal.

[14]     Looking at these factors, I am of the view that the appeal will not be rendered nugatory if the funds paid into court are disbursed to the applicant.   There is a difference between monetary judgments and judgments where, due to the nature of relief, damage to a party cannot be remedied in a meaningful way.   The first respondents are unable to demonstrate that without a stay they will be deprived of a result of any success on appeal.

[15]     Although the applicant questions the bona fides of the first respondents as to the prosecution of the appeal, I am not prepared to make any adverse finding as to their bona fides.  They are, however, self-represented and would clearly benefit from competent legal representation.

[16]     I am, however, of the view that there will be substantial prejudice to the applicant if the funds paid into court are not disbursed to them.  The applicant has pursued and funded this proceeding for more than three years.  As to the effect on third parties, creditors have been out of funds for substantially longer.  There have been substantial delays in the proceedings to date, which to some extent is due to the fact that the first respondents have, in large part, been unrepresented throughout.

[17]     There  is  no  novelty  or  importance  of  the  questions  involved  that  might support an order that the funds paid into court be retained in court pending determination of the appeal.  There is also no public interest in the proceeding while the overall balance of convenience favours the applicant.  They should not be denied the fruits of their judgment any longer.

[18]     As to the apparent strength of the appeal, counsel for the appellant submits that the notice of appeal and affidavit in support are meritless.  The appeal fails to take issue with any specific point of law and introduces no new evidence. The notice alleges that the judgment is “totally wrong in facts and law”.  The appeal lodged by the  respondents  also  alleges  that  the  affidavit  evidence  given  by  one  of  the

liquidators, Damien Grant, was false.  I agree such bold and blanket assertions are

inappropriate and considerable refinement of the appellant’s case will be required.

[19]     Counsel  for  the  applicant  submitted  that  the  liquidators  are  prudent, professional and solvent.  In the event that the judgment of Gilbert J is overturned, they would be in a position to repay the funds disbursed to it.

[20]     As a matter of caution, counsel for the applicant also advised the Court that the liquidators would retain the caveat over the property if the funds paid into court were not disbursed.   The liquidators feared that the first respondents may seek to have the sum paid into court returned to them, in which case the applicant would be left without security if the caveat were removed.

[21]     In discussions with counsel for the applicant, he advised the Court that the liquidators would be prepared to provide a personal undertaking that if the funds paid into court were disbursed to them they would repay that sum in the event that the Court of Appeal allowed the appeal against Gilbert J’s decision.  Counsel also advised the Court that the applicant would remove the caveat from the property if the funds paid into court were disbursed to them.

[22]     In those circumstances, I requested the liquidators to provide the necessary advice and undertakings in person.  I have now received those undertakings.  They are as follows:

(a)      The  liquidators  undertake  to  the  Court  that  in  the  event  the respondents’ appeal under CA381/2017 is successful in full or in part the liquidators will repay the judgment sum and interest or lesser amounts as ordered by the Court of Appeal.  For avoidance of doubt, the liquidators do not undertake to repay the approved enforcement costs.

(b)The liquidators undertake to the Court that once the lodged funds are transferred  and  cleared  in  the  applicant’s  trust  account  they  will

instruct their solicitor to remove caveats lodged on Lot 6 DP2850, CT SA1C/734 and Lot 7 DP 2850, CT SA935/191.

[23]     There will accordingly be an order that the funds paid into court by the first respondents are to be disbursed to the applicant on the recorded undertakings.  I also advised the first respondents that I was not in a position to make an order terminating the liquidation of Ranolf Company Limited (in liquidation) and that if they wished to pursue  that  application  they  needed  to  make  a  formal  application  under  the

Companies Act 1993 with supporting affidavit evidence.

Woolford J