Settlers Honey Limited v First Honey NZ Limited

[2022] NZHC 518

IN THE HIGH COURT OF NEW ZEALAND MASTERTON REGISTRY

I TE KŌTI MATUA O AOTEAROA WHAKAORIORI ROHE

CIV-2021-435-7

[2022] NZHC 518

IN THE MATTER

of an application for stay of enforcement of judgment

BETWEEN

SETTLERS HONEY LIMITED

Plaintiff/Respondent

AND

FIRST HONEY NZ LIMITED

Defendant/Applicant

Hearing:	17 March 2022
Appearances:	N Jessen and A Sinclair for Plaintiff/Respondent S Iorns for Defendant/Applicant
Judgment:	18 March 2022

JUDGMENT OF ASSOCIATE JUDGE JOHNSTON

[Reasons]

[1]                  This is an application by the defendant/applicant, First Honey NZ Ltd, pursuant to r 20.10 of the High Court Rules 2016. First Honey NZ Ltd has applied for a stay of judgment pending the prosecution of an appeal, and possibly the prosecution of an additional claim or claims that it says it has against  the  plaintiff/respondent,  Settlers Honey Ltd.

[2]                  I heard the application on 17 March 2022. At the conclusion of the hearing, I gave a results judgment in which I:

(a)dismissed the application;

SETTLERS HONEY LIMITED v FIRST HONEY NZ LIMITED [2022] NZHC 518 [18 March 2022]

(b)made an order that First Honey pay to Settlers Honey the costs of the application on a 2B basis together with such disbursements as may be allowed by the Registrar; and

(c)directed that within 10 working days counsel confer and file a joint memorandum, or individual memoranda, proposing directions to get the aspects of the claim not already dealt with to trial.

[3]                  I indicated to counsel that I would provide a brief reasons judgment, and I now do so.

[4]                  The factual background to the dispute between the parties and the litigation which was commenced by Settlers Honey in May 2021 is not particularly complex. Both Settlers Honey and First Honey are bee keeping concerns that produce honey for the domestic and international markets. The sole directors of the two companies are well known to each other and have been involved in various business dealings together in the past, as have the companies themselves.

[5]                  In October 2020, Settlers Honey engaged First Honey to act as its agent in negotiating the sale of a substantial quantity of honey to an American company that is related to First Honey by the name of First Honey LLC, based in Nashville, Tennessee. The contract provided that First Honey  LLC would  pay  for  the  consignment  on 18 February 2021. The agreed price was $648,254.01. For reasons which do not emerge clearly from the material before the Court, First Honey LLC paid that amount on or about 18 February 2021. However, instead of paying it to Settlers Honey, the company paid it to First Honey.

[6]                  First Honey did not account to Settlers Honey for the payment. Despite demand First Honey refused to pay anything to Settlers Honey, which is what has given rise to the dispute and the commencement of this proceeding.

[7]                  Settlers Honey pleads two causes of action, the first being constructive trust and the second being money had and received. It sought summary judgment and its application for the same came on for hearing before Associate Judge Lester on

21 September 2021. The judge delivered a judgment on 6 October 2021.1 This was a carefully reasoned judgment. The Judge ultimately concluded that the full

$648,254.01 was payable to Settlers Honey by First Honey on receipt as money had and received. However, the Judge also concluded that there was arguable basis for a cross-claim that First Honey advanced by way of defence.2 The judgment includes a careful analysis of the maximum amount of that arguable claim which he determined to be $155,394.00. On that basis, the Judge entered summary judgment in favour of Settlers Honey against First Honey in the sum of $492,860.01.

[8]                  First Honey has appealed. Before me Mr Iorns explained that on appeal it would be argued that Associate Judge Lester’s analysis of the factual situation was erroneous and that First Honey was entitled to set off a significantly greater sum than

$155,394.00 against the amount payable by it to Settlers Honey.

[9]                  Secondly, Mr Iorns made the unusual submission that First Honey had other potential claims which were not in issue or at least not pleaded at the time of the hearing before Associate Judge Lester which they proposed to pursue. I am not sure what significance can be attributed to that aspect of the argument. It is of course open to First Honey to pursue any claims it feels it has. Whether that can be done in the Court of Appeal is another matter. At this stage the Court can have no view as to their merits of any such claim or claims.

[10]              In those circumstances, First Honey comes to the Court and seeks an order staying execution of the judgment pending at least the prosecution of its appeal.

[11]              As already said, that application is made pursuant to r 20.10 of the High Court Rules which provides as follows:

20.10   Stay of proceedings

(1)An appeal does not operate as a stay—

(a)of the proceedings appealed against; or

(b)of enforcement of any judgment or order appealed against.

1      Settlers Honey Limited v First Honey NZ Limited [2021] NZHC 2650.

2 At [41].

(2)Despite subclause (1), the decision-maker or the court may, on application, do any 1 or more of the following pending determination of an appeal:

(a)order a stay of proceedings in relation to the decision appealed against:

(b)order a stay of enforcement of any judgment or order appealed against:

(c)grant any interim relief.

(3)An order made or relief granted under subclause (2) may—

(a)relate to enforcement of the whole of a judgment or order or to a particular form of enforcement:

(b)be subject to any conditions for the giving of security the decision-maker or the court thinks just.

[12]A party making application for a stay faces a high hurdle.

[13]              As Mr Iorns submitted the leading case is Brook Valley Community Group Inc v Brook Waimarama Sanctuary Trust.3 In that case the Court of Appeal reiterated the well-established principles that an appeal of a judgment does not operate as a stay and that the successful party at first instance is prima facie entitled to the fruits of its judgment. It is a balancing exercise, in which the Court must weigh the positions of both parties.4 Whilst the Court may order a stay it will only do so in rare cases where the circumstances demand it in the interests of justice.5 The Court went on to identify the considerations that generally feature in such applications which Mr Iorns summarised as follows:

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

(b)bona fides of the appellant as to the prosecution of the appeal;

(c)whether the successful party will be injuriously affected by the stay;

3      Brook Valley Community Group Inc v Brook Waimarama Sanctuary Trust [2017] NZCA 377.

4      Duncan v Osborne Buildings Ltd (1992) 6 PRNZ 85 (CA); Dymocks Franchise Systems (NSW) Pty Ltd v Bilgola Enterprises Ltd [1999] 3 NZLR 239, (1999) 13 PRNZ 48 (HC).

5      Brook Valley Community Group Inc v Brook Waimarama Sanctuary Trust [2017] NZCA 377 at [11]; citing Klissers Farmhouse Bakeries Ltd v Harvest Bakeries Ltd [1985] 2 NZLR 140

(CA) at 142.

(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.

[14]              Of those factors it appears to me that only five are potentially of any particular significance in this case and I will address them in the order that seems most appropriate.

Apparent strength of the appeal

[15]              As I said to counsel in the course of the hearing, in situations such as this the Court (and perhaps especially a judge who did not hear the summary judgment application in the first place) can do little more than gain an impression as to the merits of the appeal. With the benefit of Associate Judge Lester’s judgment and counsel’s submissions I am confident that I have a reasonable grasp on the case.

[16]              The impression I have is that there are points that can sensibly be argued in favour of the appeal. However, as the judgment turned largely on the Judge’s assessment of the evidence, and as he appears to have taken considerable care to identify the best possible position from the perspective of First Honey, the prospects of a successful appeal are not strong. I put aside altogether the submission made on First Honey’s behalf that there are other claims, as I am not in a position to reach any view in relation to those.

First Honey’s bona fides in relation to the appeal

[17]              I do not doubt First Honey’s bona fides in this regard. Mr Iorns assures me that it intends to prosecute its appeal as quickly as possible and of course I accept that from him.

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

[18]              There is no basis upon which the Court would be justified in concluding that the appeal would be rendered nugatory by the lack of a stay of judgment. The evidence is that First Honey does not have cash on hand to pay the amount of the judgment debt. However, it has valuable property which could be sold or mortgaged to raise the money. A stay will not render the appeal nugatory provided that First Honey acts responsibly to avoid a catastrophic outcome. If, for example, Settlers Honey were to commence liquidation proceedings it seems clear on the evidence that First Honey would be able to take steps to pay the judgment or secure or compound for the amount.

Whether Settlers Honey will be injuriously affected by the stay

[19]              The evidence is Settlers Honey is a substantial and successful company. Ultimately it does not appear to me that it is likely to be seriously adversely affected by a stay. However, it is certainly the case that it is being denied the fruits of its successful claim and injuriously affected in terms of its cash flow.

The overall balance of convenience

[20]              Mr Iorns went so far in his submissions as to say that this was the critical issue and the one that would determine the application. I agree. In the end he put the case in this way. He submitted that the evidence demonstrated — and in this respect he is no doubt correct — that First Honey cannot pay a half million dollar judgment without either selling assets or raising money (and that raising money was proving troublesome in the current financial climate).

[21]              Whilst he did not go quite this far, Mr Iorns appeared to be suggesting that in the absence of a stay First Honey would have to sell assets in something akin to a fire sale environment, to significant disadvantage. On that basis, he submitted that the balance of convenience favoured the granting of a stay, especially given the financial information before the Court showing that Settlers Honey is a very successful company.

[22]              That argument cannot carry the day. First, it is probably correct to say that the vast majority of unsuccessful defendants will be inconvenienced by having to pay the judgment debt. That is no basis for a stay. As Mr Jessen submitted, the position is really quite straightforward. First Honey received Settler Honey’s money. The only reason that it is not in a position to pay the judgment debt is that it spent the money. In that sense, it has created the situation it now seeks to rely on to justify the stay of judgment by its own actions.

[23]              In the end, the question is whether the amount of the judgment should be paid to the successful party in accordance with the terms of the judgment or held by the unsuccessful party, the judgment debtor. In either case the party who is not holding the funds bears an element of risk. It is not obvious to me that the risk is great in either case here. Both of these companies are successful and possess substantial assets.

[24]              In my judgement, the balance of convenience heavily favours the refusal of a stay.

[25]              It is for those reasons that I have dismissed First Honey’s application in the terms set out at the commencement of this reasons judgment.

Associate Judge Johnston

Solicitors:

CR Law, Palmerston North for Plaintiff/Respondent Upper Hutt Law Ltd, Upper Hutt for Defendant/Applicant