Torbay Holdings Limited v Napier
[2016] NZHC 536
•24 March 2016
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV-2012-404-007660 [2016] NZHC 536
BETWEEN TORBAY HOLDINGS LIMITED
First Plaintiff
TORBAY REST HOME LIMITED Second Plaintiff
AND
DUNCAN JOHN NAPIER AND SARA ANN NAPIER
First Defendants
DUNCAN JOHN NAPIER, SARA ANN NAPIER AND CHRISTOPHER JOHN DAVIS AS TRUSTEES OF THE NAPIER FAMILY TRUST
Second Defendants
Hearing: 24 March 2016 Appearances:
DPH Jones QC for Plaintiffs
S McAnally for DefendantsJudgment:
24 March 2016
JUDGMENT OF WOOLFORD J [As to stay application]
Solicitors: Sellar Bone & Partners, Auckland, for Plaintiffs
Keegan Alexander, Auckland, for Defendants
Counsel: DPH Jones QC, Auckland, for Plaintiffs
TORBAY HOLDINGS LIMITED & ANOR v NAPIER & ORS [2016] NZHC 536 [24 March 2016]
Introduction
[1] On 9 October 2015 I gave judgment in favour of the plaintiffs, Torbay Holdings Limited and Torbay Rest Home Limited, against the defendants, Duncan and Sara Napier and the Napier Family Trust. I subsequently also awarded substantial costs against the defendants. The sums, including costs, ordered to be paid are as follows:
(a) Duncan Napier: $1,836,233.88; (b) Sara Napier: $1,019,923.60;
(c) Napier Family Trust: $287,801.38
[2] In addition, I imposed a constructive trust over a property at
701A Whangaripo Valley Road, Wellsford, owned by Mr and Mrs Napier to the value of $233,066.68.
[3] Mr and Mrs Napier have filed a notice of appeal in the Court of Appeal, dated
6 November 2015, against my judgment. The Napier Family Trust has, however, not appealed. Mr and Mrs Napier now make application for a stay of execution or enforcement of my judgment under r 12 of the Court of Appeal (Civil) Rules 2005 and/or r 17.29 of the High Court Rules.
Grounds of application
[4] In an affidavit sworn on 5 February 2016, Mr Napier states that the main and only real asset that he and his wife own is their family home at 701A Whangaripo Valley Road, Wellsford. That property secures a number of mortgages totalling
$933,458.21. I am advised during the course of the hearing today that Mr and Mrs Napier are able to meet both principal and interest repayments of those mortgages from their current income. Mr Napier estimates that the property might be lucky to achieve $1.3 million on a forced sale. The Napier Family Trust does, however, have assets in the form of shares and a residential property that does exceed the sum ordered to be paid by the Trust.
[5] Mr Napier states that if their family home is sold they would effectively be left with nothing, even if the appeal is successful and the plaintiffs are required to repay any proceeds they obtained from such sale. Mr Napier states that the value lost as a result of a forced sale would be irrecoverable.
[6] Mr Napier states that they are genuine about the appeal and have now instructed lawyers to act for them. The grounds of appeal are specified as:
(a) The learned High Court Judge’s decision depended heavily upon inferences and conclusions that were not reasonably available to the Court on the admissible evidence;
(b) Due, in part, to the error referred to at (a) above, the learned High
Court Judge:
(i) Gave insufficient weight to the appellants’ evidence as to the
terms and conditions of their employment;
(ii)Gave excessive and undue weight to the contrary evidence given on behalf of the respondents;
(c) Due, in part, to the errors referred to (a) above, the learned High Court Judge failed to give sufficient weight to the evidence produced on behalf of the appellants that demonstrated the extent to which the first named appellant was required, in the interests of the respondents, to make cash payments to suppliers from company funds or, in other cases, from the appellants’ own resources subject to subsequent reimbursement by the respondents;
(d)The learned High Court Judge applied the “maelstrom” principle referred to in Sinclair Investments (UK) Ltd v Versailles Trade Finance Ltd [2011] 3 WLR 1153 to establish liability when such principle is a remedial one to assist tracing only and by extending the
principle as His Honour did the learned Judge reversed the onus of proof that the respondents could not, otherwise, satisfy;
(e) Irrespective of and in addition to the foregoing, the hearing miscarried due to the interlocutory decisions of the Court given on 9 June 2015 that denied the appellants a legally qualified McKenzie Friend to assist at the hearing which assistance would have enabled the appellants to understand the rules of evidence and procedure and present their case more effectively that would, in all likelihood, have had a material bearing on the outcome of the hearing.
[7] On 29 February 2016, the first defendants filed a memorandum in the Court of Appeal recording a further sixth ground of appeal and, that is, that I overstated the losses to the plaintiffs by including the GST component.
[8] Although not lawyer, Mr Napier believes that there is substance in the appeal. He reiterates the plaintiffs’ judgment is secured in so far as they have charging orders over the family home, a residential property owned by the Trust and over the assets of the Trust itself. For that reason, there is no danger of the plaintiffs being less able to enforce their judgment after determination of the appeal, if that is still their right at the time.
[9] When this application was first called at 10:00 am yesterday, Mr Napier appeared on behalf of himself and his wife. Mr Napier had not filed any submissions in support of the application, but complained he had not had the opportunity to respond to the plaintiffs’ submissions, which had been filed the day before. I, therefore, adjourned the hearing of the application to 2:15 pm today for Mr Napier to seek legal advice and assistance. Mr McAnally appears today, having been urgently instructed by Mr Napier.
[10] Mr McAnally has filed helpful submissions in which he has referred to the relevant principles, which are not in dispute. He stresses two factors in particular - Mr Napier’s evidence about the sale of their family home and the novelty and importance of the “maelstrom” principle.
Grounds of opposition
[11] The plaintiffs’ position is that the appeal has no merit whatsoever. The appeal and stay are said to be an attempt by the defendants to continue to avoid liability. As such, the application for stay should not be granted.
[12] As to the grounds of appeal (noted above), the plaintiffs’ submit that the first three grounds challenge the Court’s factual findings and interpretation of the evidence. The factual findings were comprehensive and damming, so it is said, and there is no legitimate basis to challenge these findings and none have (or can) be advanced.
[13] The fourth ground of appeal concerning the application of Sinclair Investments (UK) Ltd v Versailles Trade Finance Ltd is also said to be without merit, according to the plaintiffs, as the case was but one of a number discussed and taken into account when determining the approach to assessing the quantum of loss of unauthorised payments.
[14] As to the fifth ground of appeal, the plaintiffs submit that the issue at trial was a straightforward factual one – did the defendants have authority to take or use the money? Mr Napier’s conduct during the Court hearing showed he quite clearly understood the nature of the issue and felt comfortable presenting evidence on it.
[15] The plaintiffs also submit that if a stay is granted they will, as the successful parties, be injuriously affected. The defendants have had the benefit of the plaintiffs’ money for in excess of 10 years and need to account for it. Their house at Whangaripo Valley Road, Wellsford, could only have been built because of the misappropriation of their money and having that property sold to pay the judgment debt was more than appropriate.
Discussion
[16] Rule 12(3) and (4) of the Court of Appeal (Civil) Rules 2005 provides:
12 Stay of proceedings and execution
..
(3) Pending the determination of an application for leave to appeal or an appeal, the court appealed from or the Court may, on 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.
...
[17] According to McGechan on Procedure an application under r 12(3) requires the Court to balance the competing rights of the party who obtained the judgment appealed from against the need to preserve the appellant’s position against the event of the appeal succeeding. Factors to be taken into account in the balancing exercise include:
(a) Whether the appeal may be rendered nugatory by the lack of a stay; (b) The bona fides of the applicant 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; and
(g) The overall balance of convenience.
[18] McGechan also notes that, while not included on the above list, the apparent strength of the appeal now appears to be generally recognised as an additional factor.
[19] Rule 17.29 of the High Court Rules provides:
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.
[20] McGechan on Procedure states that r 17.29 is a separate and distinct rule from the power to stay execution of a judgment pending an appeal against it under s 12 of the Court of Appeal (Civil) Rules 2005. McGechan states that the onus under r 17.29 is on an applicant for a stay to persuade the court to exercise its discretion. A “substantial miscarriage of justice” must be involved. It is not a substantial miscarriage of justice for a party that has had the use of another’s money to be required to repay that money or for a creditor to be able to take whatever steps it sees fit to pursue recovery. A balancing exercise is, again, involved. McGechan states that the Court must seek to recognise and reconcile the conflicting interests of both parties in such a manner as will best preserve the overall interests of justice.
[21] Rule 17.29 appears to me to impose a higher test than r 12, in that an applicant under r 17.29 has to persuade the court that a substantial miscarriage of justice would be likely to result if the judgment was enforced.
[22] Mr McAnally notes that the second defendants have not appealed and that, therefore, their position can only be protected under r 17.29 as liable parties. Mr McAnally submits that the commonality of issues and findings, the subject of this Court’s judgment are such that if the appeal brought by Mr and Mrs Napier were to succeed, then enforcement action against the second defendants, in the interim, would result in a substantial miscarriage of justice. Mr McAnally submits, however, that the secondary application under r 17.29 may conveniently stand or fall with the application under r 12 of the Court of Appeal (Civil) Rules.
[23] I, therefore, turn to the principles governing applications under r 12.
[24] Looking in turn to those factors. First, I do not believe that the appeal would be rendered nugatory by lack of a stay. If the appeal is successful, the plaintiffs would be in a position to repay and would be required to repay the defendants any money they may have received from a sale of Mr and Mrs Napier’s family home,
which I found had been built by the defendants using, in part, the plaintiffs’ money. Mr and Mrs Napier would then be able to use the repaid money to buy another family home.
[25] Second, I accept that Mr Napier is genuine in wanting to prosecute the appeal, having instructed counsel and filed an appeal.
[26] The plaintiffs say that they will be injuriously affected by a stay in that they will not be able to access the fruits of their litigation. Counsel submits that the defendants have illegitimately had the use of the plaintiffs’ money for many years, causing the rest home business to fall into disrepair as well as bringing the business to the brink of financial failure due to the non-payment of tax. This is, however, not a strong factor in the plaintiffs favour, in my view. The plaintiffs have three charging orders over property and, may, in fact, be able to recover more from the sale of the family home after the Court of Appeal decision because of the steady rise in property values in and around Auckland.
[27] The parties have not shown any affect on third parties. Mr McAnally submits that the novelty and importance of the “maelstrom” principle is a factor, but, in my view, it is not a significant one. I agree that it might be useful for the Court of Appeal to supply guidance as to the parameters of the “maelstrom” principle. But standing back and looking at the matter overall, it will be difficult for counsel to argue that it might affect my primary finding that I had no doubt that Mr Napier had misappropriated company funds to which he was not entitled. I also did not specifically apply the “maelstrom” principle in reaching my findings. Further, the “maelstrom” principle had no relevance to the calculation to salary overpayments of
$281,087.01. There is also no public interest in the proceeding.
[28] As to the overall balance of convenience, Mr and Mrs Napier appear to me to continue to be under considerable financial stress with mortgages totalling
$933,458.21 on their family home, which Mr Napier says is only worth $1.3 million at most on a forced sale. A sale of the family home and the extinguishment of that debt burden may, in fact, be financially beneficial to Mr and Mrs Napier.
[29] Finally, the grounds of appeal do not appear to me to be particularly strong. They rely on persuading the Court of Appeal that factual conclusions I made were not reasonably open to me on the admissible evidence. Assessing the weight of the evidence is, however, normally seen as the province of a trial judge.
Conclusion
[30] Weighing all relevant factors, I am of the view that the application for a stay of execution or enforcement of my judgment should be dismissed. The most important factors in my mind are the fact that the appeal will not be rendered nugatory if a stay is not ordered and the fact that grounds of appeal are, to my mind, not particularly strong. The application is accordingly dismissed.
[31] The plaintiffs are entitled to costs on a 2B basis, both for today’s appearance
and for the initial appearance on Wednesday, 23 March 2016.
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Woolford J
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