Shafik v Makary
[2015] NZHC 2194
•11 September 2015
IN THE HIGH COURT OF NEW ZEALAND DUNEDIN REGISTRY
CIV-2014-412-176 [2015] NZHC 2194
BETWEEN SHERIF SHAFIK
Appellant
AND
NAGY ALBERT MAKARY Respondent
Hearing: 3 September 2015
(Heard at Christchurch)
Appearances:
R S Pidgeon for Appellant
N A Till QC for RespondentJudgment:
11 September 2015
JUDGMENT OF MANDER J
[1] Mr Shafik, who is described as the appellant in respect of this application, seeks the stay of a District Court judgment obtained against him by the respondent, Mr Makary, in the wake of an unsuccessful appeal from both the substantive judgment and costs orders made against him. He does so on the basis of his impecuniosity and his stated objective to pursue a claim in this Court against Mr Makary, which he may otherwise be unable to do in the absence of the District Court judgment being stayed.
Background
[2] Messrs Shafik and Makary, together with one other party, were co-guarantors of two leases. The lessees failed to meet their obligations under the leases and the guarantors were called upon to indemnify the lessor. Mr Makary met the entire costs of indemnification personally.
[3] Mr Makary issued proceedings seeking to recover a one third contribution from Mr Shafik. On 8 September 2014, Judge Crosbie entered summary judgment
SHAFIK v MAKARY [2015] NZHC 2194 [11 September 2015]
in Mr Makary’s favour in the sum of $91,561.28 (to be reduced to $76,672.45 in the event certain funds were released).1 On 8 December 2014 Judge Crosbie ordered costs against Mr Shafik, despite him being legally aided; His Honour considered exceptional circumstances existed to warrant departure from the prima facie position that costs cannot be awarded against a legally aided litigant.2
[4] Mr Shafik appealed the substantive decision on 6 October 2014. Multiple errors of law and fact were advanced. On 22 July 2015, an interlocutory application for special leave to appeal the costs decision was filed, together with “a stay of enforcement” which was described as an application to stay “the judgment this Court on appeal ultimately arrives at, or makes orders which the Court deems just under the High Court Rules 2008, r 20.19(1)(c).”3
[5] After various delays, the appeal was finally heard on 29 July. At this hearing counsel for Mr Shafik, formally advised the Court that the substantive component of the appeal was abandoned and that only the application seeking special leave to extend time for filing an appeal against the costs decision was to be pursued.
[6] Gendall J delivered an oral judgment on the day of the hearing.4 His Honour declined the application for special leave on the basis the view Judge Crosbie came to as to exceptional circumstances was open on the facts. On the appeal, Gendall J awarded costs to Mr Makary on a 2B basis, with a 50 per cent uplift. Mr Shafik then made an oral application, based on r 17.29 of the High Court Rules and the inherent jurisdiction of this Court, to stay the District Court judgment of Judge Crosbie of 8
September 2014, together with his costs judgment of 8 December 2014.
[7] This application was based on Mr Shafik’s contention that he had a legitimate cause of action against Mr Makary under s 174 of the Companies Act 1993, and that a bankruptcy notice had been issued in respect of the substantive judgment that may thwart his prejudiced shareholder claim under the Companies Act. The application
for stay, as with the late original application, were made without sufficient notice to
1 Makary v Shafik DC Dunedin CIV-2013-012-138, 8 September 2014.
2 Makary v Shafik DC Dunedin CIV-2013-012-138, 8 December 2014.
3 Shafik v Makary HC Dunedin CIV-2014-412-176, 29 July 2015 (minute).
4 Shafik v Makary [2015] NZHC 1764.
Mr Makary, and were opposed. This factor, together with Mr Shafik’s indication of his intention to file an amended application with further affidavit evidence, resulted in the matter being adjourned.5 The jurisdictional basis for the modified stay application to this Court was not considered at that time.
The application for stay
[8] A formal application for stay of the District Court judgment has since been filed in this Court. The application for stay is again made in reliance on r 17.29 of the High Court Rules and the inherent jurisdiction of this Court. The bases for the application are that Mr Shafik:
(a) has a bona fide application in the High Court pursuant to s 174 of the
Companies Act 1993 which has merit;6
(b) is impecunious;
(c) has explained the delays in bringing the Companies Act proceeding;
(d)claims that if enforcement were to proceed, a substantial miscarriage of justice could occur;
(e) claims that the interests of justice require the prejudiced shareholder claim to proceed.
Jurisdiction
[9] As previously signalled, a preliminary question arises as to the jurisdiction of this Court to stay a judgment of the District Court.
Rule 17.29 of the High Court Rules
[10] Rule 17.29 is to be found in pt 17 which deals with the enforcement of a judgment. It provides:
5 Shafik v Makary HC Dunedin CIV-2014-412-176, 29 July 2015 (minute).
6 Proceeding CIV-2015-412-81.
17.29 Stay of enforcement
A liable party may apply to the court for a stay of enforcement or other relief against the judgment upon the ground that a substantial miscarriage of justice would be likely to result if the judgment were enforced, and the court may give relief on just terms.
[11] The question that arises under this head is whether the reference to “the judgment” in r 17.29 is able to encompass judgments of courts other than the High Court. In my view, such an interpretation of the High Court Rules is not available. The term “judgment” is, for the purpose of clarification, defined in r 11.1 to include “a decree or order of the court”. The term “Court” is itself defined generally to mean
the High Court.7 It follows that the extended definition of “judgment” is premised
on the judgment being of the High Court.
[12] While judgment is only defined for the limited purposes of Part 11 of the High Court Rules, the overarching objective of the High Court Rules is to “secure the just, speedy, and inexpensive determination” of proceedings in this Court.8 That the High Court rules are the exclusive province of the High Court seems so fundamental a proposition as to require no elaboration. They are not prescribed to govern procedure in any other Court.
[13] Mr Shafik sought to rely on the commentary to Rule 17.29 in McGechan on Procedure.9 However, that commentary further supports the proposition that the rule is aimed at staying judgments entered by this Court, not other Courts. The reference to the concurrent jurisdiction of the High Court and Court of Appeal in relation to appeals, and to counterclaims gives further credence to this proposition.
[14] Rule 17.29 of the High Court Rules was not conceived as a means by which this Court is able to stay the enforcement of the judgments of other Courts. I move
to consider the inherent jurisdiction to stay.
7 High Court Rules, r 1.3.
8 High Court Rules, r 1.2.
9 McGechan on Procedure (online looseleaf ed, Brookers) at [HR17.29.01]–[HR17.29.06].
Inherent jurisdiction
[15] Worthy of greater consideration is the argument that the High Court could, in furtherance of its inherent jurisdiction, stay the District Court judgment in order to further the administration of justice.10
[16] Mr Shafik relied on the observations of Smellie J in Pinson v Pinson, to the effect that this Court has inherent jurisdiction to make any order necessary to enable it to act effectively, even in respect of matters regulated by rules of Court, so long as it does not contravene those rules.11 In that case, the Court was concerned with an application for a stay of execution and ancillary orders pending its hearing of an appeal. Reference was made to the text of a lecture delivered by Master Jacob of the United Kingdom Supreme Court which described the Court’s inherent jurisdiction in the following terms:12
The inherent jurisdiction of the Court may be defined as being the reserve or fund of powers, a residual source of powers, which the Court may draw upon as necessary whenever it is just or equitable to do so, and in particular to ensure the observance of the due process of law, to prevent improper vexation or oppression, to do justice between the parties and to secure a fair trial between them.
[17] More recently, Whata J noted in Stylo Medical Services Ltd v Hum Hospitality Ltd, “[t]he powers conferred by the High Court Rules are in addition to and not in substitution of the powers arising out of the inherent jurisdiction of the Court”.13
[18] While powers arising from the Court’s inherent jurisdiction are wider than
those contained in the rules and are capable of filling gaps that may arise in respect of those rules, where an issue before the Court is already the subject of prescription,
10 See generally Donselaar and Another v Mosen [1976] 2 NZLR 191 (CA).
11 Pinson v Pinson (1991) 5 PRNZ 177 (HC).
12 IH Jacob “The Inherent Jurisdiction of the Court” (1970) Current Legal Problems 23 at 51.
13 Stylo Medical Services Ltd v Hum Hospitality Ltd [2014] NZHC 2723 at [19]. Jacobs has remarked that the powers conferred by the rules of Court are intended to complement the inherent jurisdiction and vice versa; each is a valuable adjunct to the other: IH Jacob “The Inherent Jurisdiction of the Court” (1970) Current Legal Problems 23 at 50. See too Mafart v Television New Zealand Ltd [2006] NZSC 33, [2006] 3 NZLR 18 at [16].
the Court will rarely choose to exercise its inherent powers. The jurisdiction should only be developed and exercised in harmony with relevant legislation.14
[19] The starting point is that this Court will retain an inherent jurisdiction to stay proceedings, where the justice of the case so demands, save where that jurisdiction has been abrogated expressly, or by necessary implication.15 This fundamental position is exemplified by the Court’s jurisdiction to prevent abuses of its own process.16
[20] The thread tying cases involving resort to the Court’s inherent jurisdiction is fairness and the need to avoid a course of action which will inevitably cause injustice to another party in a situation otherwise not governed by a rule of law. The inherent jurisdiction “is a power which is exercisable in any situation where the requirements
of justice demand it”.17
[21] However, statutory provisions read either in isolation or in conjunction with other provisions may virtually exclude the operation of the High Court’s inherent jurisdiction to grant a stay, except in the most extraordinary cases.18 In particular, the special circumstances would need to be such as to defeat the general principle that a person was entitled to the fruits of their judgment from the moment it had been delivered.19
[22] In Guy v Preliminary Proceedings Committee of the Medical Council of New Zealand, Tipping J considered whether there was power to suppress the name of an appellant, who was appealing orders of the Medical Council regarding charges of sexual impropriety.20 There was nothing in the Medical Practitioners Act 1986 touching upon the question, and the only direct statutory provision was r 718 of the
then High Court Rules, which provided this Court with all the powers and discretion
14 R v Moke and Lawrence [1996] 1 NZLR 263.
15 This conclusion is reinforced by comments from several cases. See for example Siemer v
Solicitor-General [2012] NZCA 188, [2012] 3 NZLR 43 at [74] and [90]; Zaoui v Attorney- General [2005] 1 NZLR 577 (CA and SC).
16 Connelly v Director of Public Prosecutions [1964] AC 125 (HL) at 1301, per Lord Morris.
17 Tringali v Stewardson Stubbs & Collett Pty Ltd [1966] 1 NSWR 354 (NSWSC).
18 Sutherland v Southerland [1996] 1 NZLR 251 (HC) at 255.
19 At 256.
20 Guy v Medical Council of New Zealand, [1995] NZAR 67 (HC).
of the tribunal or person whose decision was being appealed, including to make orders prohibiting the publication of any report or description of the proceedings or any part of them.
[23] In the absence of the Medical Council having any power to prohibit the practitioner’s name, the question arose whether it would be appropriate for the High Court to invoke its inherent jurisdiction under s 16 of the Judicature Act 1908. Tipping J observed:21
The inherent jurisdiction may be resorted to, in a manner supplementary to any other jurisdiction, statutory or otherwise, which the High Court may possess. There is no inherent jurisdiction to do anything where it is clear that Parliament has legislated to cover the point and must be taken to have decided that this Court shall not have jurisdiction to do something. In other words, this Court may exercise an inherent jurisdiction, in addition to any statutory jurisdiction which it may possess, but not in a manner which conflicts with the ambit of that jurisdiction.
[24] This Court held that it had no inherent jurisdiction to make a suppression order as r 718 was clearly intended to cover the position. Any inadequacy was for Parliament to remedy and not for the Court acting beyond the scope of the rule. The Court could not exercise its inherent jurisdiction in a manner conflicting with a statutory jurisdiction.
[25] In the absence of any other avenue of redress, this Court pursuant to its inherent jurisdiction retains supervisory jurisdiction over inferior Courts and tribunals. That principle has also been recognised as a power which extends to protect any inferior Court from contempt of its processes, to enable it to administer justice fully and effectively, and to prevent misuse of its procedure and its rules which would be manifestly unfair to a party to litigation before it, or bring the
administration of justice into disrepute.22
[26] This principle has been recognised in other Commonwealth jurisdictions, although not without signalling caution as to when it should be resorted to. In the
unusual case of R v Caron, the Alberta Court of Queen’s Bench (a superior Court)
21 At 97.
22 Quality Pizzas Ltd v Canterbury Hotel Employees Industrial Union [1983] NZLR 612 (CA); Attorney-General v Blundell [1942] NZLR 287; Hunter v Chief Constable of the West Midlands Police [1982] AC 529 (HL) at 536.
made an interim costs order in favour of an accused defending a regulatory prosecution in the provincial Court of Alberta.23 The Supreme Court held:
30 Of course the very plenitude of this inherent jurisdiction requires that it be exercised sparingly and with caution. In the case of inferior tribunals, the superior court may render "assistance" (not meddle), but only in circumstances where the inferior tribunals are powerless to act and it is essential to avoid an injustice that action be taken…
[27] Most directly on point is the judgment of Macfarlane J in Ex parte Farren; Re Austin.24 From the discussion in that judgment, the following reasoning is most pertinent:25
That the Court has power to stay proceedings initiated in it there is to my mind no doubt and I do not think that the contrary was argued. But I also feel no doubt that the inherent power of the Court to stay proceedings extends to all other classes of proceedings and courts in respect of which it is empowered one way or another to exercise jurisdiction by way of appeal or of a supervisory nature. I am inclined to think, and this may be perhaps stating the matter a little further than is required for the purposes of this case, that the power extends to whatever extent may be necessary to prevent any injustice occurring with respect to matters which come within its cognizance. I think in particular that the general power to stay proceedings extends to matters which are proceedings even in another court if the exercise of that power to stay is necessary in order to enable the Supreme Court to exercise its complete powers either by way of appeal or by way of supervision with respect to the proceedings of that other court.
[28] The wider application of the inherent jurisdiction to the functions of the District Court was recognised of by Blanchard J in Samleung International Trading Co Ltd v Collector of Customs, where it was held that if the High Court possesses inherent jurisdiction to do a thing which cannot be done by a District Court, then the
High Court may use its powers in aid of that Court.26
[29] In the circumstances of the present case, it should therefore be noted that a usual prerequisite to the engagement of this Court’s inherent jurisdiction will be the absence of an ability on the part of the District Court to address the issue pursuant to
its own powers. Where legislation expressly provides for or governs the matter in
23 R v Caron 2011 SCC 5, [2011] 1 SCR 78.
24 Ex parte Farren; Re Austin (1960) 77 WN (NSW) 734. See too Hussain v Haynoum
Developments Pty Ltd [2014] NSWCA 173 at [43].
25 At 744.
26 Samleung International Trading Co Ltd v Collector of Customs [1994] 3 NZLR 285 (HC).
the District Court, the inherent jurisdiction ought not be extended to supplement or substitute the powers of this Court over those that lie with the inferior Court.27
[30] Drawing all this jurisprudence together, it is apparent that the circumstances in which inherent jurisdiction may be brought to bear are wide and various, and the responsive capacity of the jurisdiction is not to be unnecessarily or unduly restricted, but there are limitations which will turn on the setting and circumstances of each case.
[31] This Court is clearly seized of a jurisdiction to stay the judgment of an inferior Court or Tribunal. Counsel for Mr Makary did not suggest otherwise but that jurisdiction will be exercised sparingly, as is highlighted by the above comments in R v Caron. It will be necessary to ensure that resort to the inherent jurisdiction is neither inconsistent with, nor cuts across existing prescription, or avenues of statutory recourse. The general position is perhaps best encapsulated by the
observation of Mason writing in the Australian Law Journal:28
It is not surprising that a general concern with the “due administration of justice” has been invoked to justify the Supreme Court creating or enforcing procedural rights applicable to other courts and tribunals. Such helpful intervention has been offered where the other body has been considered powerless to act or where undue expense or delay might be caused if parties were forced to resort to it.
[32] The authorities and the discussion contained therein can for present purposes be distilled as follows:
(a) the inherent jurisdiction of a superior Court remains until and unless abrogated explicitly, or by necessary implication, by Parliament.
(b)the inherent powers of the court are ancillary to its primary functions and are utilised to ensure the Court can meet the needs of justice as
between the parties.
27 Wilkie v Wilkie (1990) 6 FRNZ 554 (HC); Guy v Medical Council of New Zealand [1995]
8 NZAR 67 (HC).
28 Keith Mason “The Inherent Jurisdiction of the Court” (1983) 57 The Australian Law Journal
449 at 456.
(c) the power to stay a judgment in respect of a proceeding initiated in a different inferior Court is available. This is exemplified in the power of an appellate Court to stay a judgment of another Court pending an appeal (indeed, it is provided in rules of Court).
(d)the jurisdiction is a moveable feast and the power to stay a process of another Court is dependent on the particular circumstances of each case and the applicable legislation or rules. It is a jurisdiction that should be deployed sparingly and only where there is an identified need.
Disposition
Stay of District Court judgment
[33] Having reached the conclusion that this Court may have jurisdiction to entertain a stay of the type sought by Mr Shafik, I have reached the equally clear conclusion that this is not an appropriate case for deployment of that residual jurisdiction.
[34] Denial of the relief sought by Mr Shafik will not invariably lead to injustice. He has sought to avail himself of an indulgence in this Court by circumventing the more appropriate course available to him of applying to the District Court for a stay of its judgment, by which course appeal rights to this Court would be triggered.29
[35] By s 65(3) of the District Courts Act 1947, a District Court Judge is vested with jurisdiction to suspend, stay or vary any judgment. That subsection provides:
If at any time it appears to the satisfaction of a Judge that any party to any proceedings is unable from any cause to pay any sum recoverable against him (whether by way of satisfaction of the claim or counterclaim) or any instalment thereof, the Judge may, in his discretion, suspend or stay or vary any judgment or order given or made in the proceedings for such time and on such terms as the Judge thinks fit, and so from time to time until it appears that the cause of inability has ceased.
[36] A more immediate stay is able to obtained under r 19.8 of the District Court Rules 2014, which provides the Registrar with an ability to stay a judgment, order or enforcement until such a stay can be determined by a Judge. Mr Shafik has sought to circumvent this process by coming to this Court praying for assistance by an unnecessarily circuitous procedural route.
[37] The application was, at least initially, associated with Mr Shafik’s ill-fated appeal, and appears to have been viewed as a potential remedy should some success have been achieved as a result of that appeal. The application was renewed but, again, as an adjunct to a now defunct appeal proceeding. Furthermore, the primary basis on which Mr Shafik asks this Court to entertain his stay is because of his impecuniosity and the consequential effect on him of not being able to prosecute what he considers to be a related proceeding against Mr Makary in an effort to again put the judgment debt in issue. Section 65(3) of the District Courts Act is directly concerned with a party’s ability to pay a judgment debt.
[38] On the basis that Mr Shafik has available to him not only an alternative avenue, but also a more appropriate mechanism for achieving the end he seeks, I would decline this application. There would be something unreal about acknowledging the existence of a jurisdiction, which can be exercised in those extraordinary cases that justice and equity demands, but exercising it only because a party considered it a more convenient means to achieve his own objective.
[39] The issue of stay is amenable to expeditious resolution in the District Court. The longstanding principle of judicial or jurisdictional comity requires the question of stay of execution to be put before the Court, from which some reprieve is sought in respect of its judgment. This Court will be slow to intervene by cutting across the prescribed processes provided to that Court.
[40] Mr Shafik sought to rely on New Zealand Apple and Pear Marketing Board v Wallis as authority for the proposition that a stay should be entered where execution of a summary judgment may lead to insolvency and prevent the judgment debtor pursuing his counterclaim.30 The case may well be good authority in support of such
a course, but it also underlines the importance of the Court whose judgment is sought to be stayed determining that issue. It will be seized of the detail of the dispute between the parties, the merits of the application, and best placed to assess the relationship between the summary judgment and the contended for counterclaim.
[41] For these reasons, I am of the view that the application should be declined. Also for these reasons, I consider it would be inappropriate to form any view of the worthiness of the application. If Mr Shafik is to now make application in the District Court, there is the risk of usurping the decision making process of that Court by commenting on the merits.
Stay of Gendall J’s costs judgment on appeal
[42] At the hearing, Mr Shafik raised in oral argument a suggestion that the stay application is appropriately brought before this Court because it can be said to bite on the costs judgment of Gendall J in relation to the appeal from the District Court decision. However, this argument bears little scrutiny:
(a) First, when the application for stay was filed, it plainly related to the District Court decisions, both the substantive decision and as to costs. Originally it was suggested the stay was required so as to not render the appeal against those decisions nugatory, and took the form of an application for a stay pending appeal. The ground subsequently shifted upon the abandonment of the substantive appeal and was now said to be necessary to preserve Mr Shafik’s ability to prosecute the Companies Act proceeding. What is plain is that, until oral submissions, the application was never conceived as being limited to Gendall J’s costs decision in relation to the abandoned appeal and the refusal to extend time for the filing of the appeal against the District Court’s costs award.
(b)Second, even entertaining a stay in relation to the High Court decision would at this point yield no benefit to Mr Shafik. While the possibility of enforcement action remains on foot, as it does as a result of this judgment, then all issues relating to Mr Shafik’s impecuniosity
remain extant irrespective of how that issue might be resolved. Limiting the application for stay to Gendall J’s costs judgment would not affect enforcement of the District Court’s judgment.
(c) Finally, it would be counter-intuitive to make a merits based assessment in relation to Gendall J’s decision, which would necessarily cut across the reasons for declining to do so in relation to the District Court matters. Further, because this issue was raised at the eleventh hour by Mr Shafik, Mr Makary would be required to have some opportunity to meet the case on the altered basis of the application.
[43] For these reasons, I am of the view that the oral application for stay in
relation to Gendall J’s decision ought to be declined.
Outcome
[44] The application is dismissed.
[45] Having succeeded in defending the application, essentially for want of jurisdiction in this Court, Mr Makary is entitled to costs. If the parties are unable to agree, memoranda (not exceeding 5 pages) are to be filed sequentially.
Solicitors:
Pidgeon Law, Auckland
Nicholas Till QC, Christchurch
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