Yu v Bradley

[2021] NZHC 1098

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2017-404-1125

[2021] NZHC 1098

BETWEEN

JING JUN YU

First Applicant

AND

ANDREW INVESTMENTS (2004) LIMITED

Second Applicant

AND

DALE GORDON BRADLEY AND JILLIAN ANNE BRADLEY

Respondents

Hearing:

30 March 2021; further materials and submissions on 1 and 9 April 2021

Appearances:

EJ Watt for the Applicants

JWH Little and JK Grimmer for the Respondents

Judgment:

17 May 2021

JUDGMENT OF FITZGERALD J

This judgment was delivered by me on 17 May 2021 at 3.30pm, pursuant to Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar

Date………………………….

Solicitors:Carson Fox Legal, Auckland Powle & Hodson, Auckland

To:L Taylor QC, Auckland E Watt, Auckland

J Little, Auckland

H Lanham, Auckland J Grimmer, Auckland

YU v BRADLEY [2021] NZHC 1098 [17 May 2021]

Introduction

[1]    The applicants (who for convenience I will refer to collectively as Mr Yu) apply for a stay of execution of a judgment delivered by Palmer J on 28 June 2020.1 In his judgment, Palmer J dismissed Mr Yu’s claim, granted the respondents’ (the Bradleys’) counterclaim and awarded the Bradleys damages. These were subsequently agreed by the parties to be $449,635.85, including approximately $71,000 in costs (the Judgment Sum).

[2]    Mr Yu has appealed against Palmer J’s judgment and his appeal is to be heard by the Court of Appeal on 14 October 2021. Mr Yu has deposited the Judgment Sum into his solicitors’ trust account pending resolution of his appeal. Mr Yu applies for a stay of execution of the judgment because he says that the Bradleys have not provided sufficient security that the Judgment Sum will be repaid in the event his appeal is successful. 2

Factual and procedural background

[3]    The dispute between the parties arose out of an agreement for sale and purchase of the Bradleys’ lifestyle property in Whitford to Mr Yu (the Agreement). Mr Yu’s case was that prior to settlement, he became aware that not all of the property he had thought formed part of the Bradleys’ property in fact did so, and wanted to carry out a further inspection to assess the resulting effect on the property’s views.

[4]    Palmer J found that the day before settlement was due to occur (15 February 2017), Mr Bradley prevented Mr Yu (and his lawyer and valuer) from inspecting the property. Mr Yu claimed compensation pursuant to (then) cl 8 of the 9th edition of the REINZ/ADLS standard form terms and conditions for the sale of real estate (ADLS standard terms), which formed part of the Agreement. He issued a settlement notice on 16 February 2017, and was able to inspect the property on 20 February 2017. The

1      Yu v Bradley [2020] NZHC 1822.

2      Mr Yu’s application was originally for a stay of execution pending determination of the appeal to the Court of Appeal, and pending final determination of any appeal to the Supreme Court. Counsel for Mr Yu, Ms Watt, confirmed at the hearing before me, however, that the stay is now only sought pending determination of the appeal in the Court of Appeal.

following day, the Bradleys issued a settlement notice of their own, but settlement still did not occur. On 10 March 2017, Mr Yu purported to cancel the Agreement, and on 13 April 2017, the Bradleys did the same. Mr Yu accepted that step as a repudiation by the Bradleys of the Agreement. The Bradleys retained Mr Yu’s deposit of $230,000. Mr Yu sued for the return of his deposit (plus interest) and as noted, the Bradleys counterclaimed for damages.

[5]    Palmer J concluded that there had been a misrepresentation as to the boundaries of the Bradleys’ property (by the Bradleys’ real estate agent), but that had been corrected prior to the Agreement being entered into. Mr Yu’s claim on that ground accordingly failed. Given Palmer J found that Mr Bradley had denied Mr Yu his right to inspect the property prior to the agreed settlement date, he concluded that Mr Yu was not required to settle on that date. Palmer J went on to find, however, that while Mr Yu did have a claim for compensation pursuant to cl 8 of the ADLS standard terms, he did not make that claim unconditionally, as required by cl 8. Accordingly, after inspection of the property had been facilitated, the Bradleys were ready, willing and able to settle but Mr Yu was not. He insisted on deduction from the purchase price the claim for compensation that he had not validly made. This meant his cancellation of the Agreement was invalid. Palmer J therefore upheld the Bradleys’ counterclaim for losses they had suffered as a result.

[6]    I was informed that all aspects of Palmer J’s judgment have been appealed. This accordingly includes the various factual findings made by the Judge, but also his findings on the proper interpretation and application of cl 8 of the ADLS standard terms.

[7]    Mr Yu filed his notice of appeal with the Court of Appeal on 24 August 2020. He filed his case on appeal on 24 November 2020 (the last day for doing so) and applied for a hearing date. As noted, the appeal will now be heard on 14 October 2021. It is of course not known when the Court of Appeal will deliver its judgment, but I assume for present purposes that it could be some months after the appeal hearing. This could therefore be in late 2021 or perhaps more likely, sometime in early 2022.

[8]    In light of Palmer J’s findings, the parties also corresponded in September and October 2020 about payment of the Judgment Sum pending the appeal, and what security or assurances the Bradleys could give for repayment in the event Mr Yu’s appeal was successful. But by November 2020, no agreement had been reached. On 13 November 2020, the Bradleys’ solicitor wrote to Mr Yu’s solicitor noting that unless the Bradleys’ latest proposal was accepted, or Mr Yu applied for a stay of execution of Palmer J’s judgment within seven working days, the Bradleys would issue a statutory demand for the Judgment Sum. This letter was inadvertently overlooked by Mr Yu’s solicitor, and the Bradleys therefore issued a statutory demand on 3 December 2020. In response, on 11 December 2020, Mr Yu filed the present application for a stay of execution and also an application to set aside the statutory demand. On the same day, he deposited the Judgment Sum into his solicitors’ trust account.

[9]    Finally, Ms Watt notes that while the application for a stay of execution can only relate to the Judgment Sum, if a stay of execution is not granted and Mr Yu’s appeal is successful, Mr Yu will have paid $230,000 to the Bradleys (being the deposit) plus the Judgement Sum, both of which would need to be repaid to him.

The Bradleys’ financial position

[10]   The Bradleys’ principal asset is a shareholder loan owed to them by a family held company named Wakawaka  Ltd  (Wakawaka).  The  Bradleys  together  own 50 percent of the shares in Wakawaka,3 with the other 50 percent owned by their daughter and son-in-law (the Carrs). Each of the Bradleys and the Carrs are directors of Wakawaka. Wakawaka’s financial statements have been produced on the present application.

[11]   Wakawaka owns the Bradleys’ family home in Brookby (the Family Home). The most up to date valuation (as of March 2021) states it has a current market value of $2,050,000. Until recently, Wakawaka also owned a rental property (the Rental Property) though that has since been sold.4 The sales proceeds from the sale of the Rental Property were used to pay off the mortgage on that property, and also to pay

3      25 percent each.

4      It had a book value of $1.2 million, and was sold for a little under that, namely $1.15 million.

down some of the mortgage on the Family Home. As at 1 April 2021, the amount due by Wakawaka to Westpac and secured by a mortgage over the Family Home is approximately $1,100,000. Wakawaka accordingly holds approximately $950,000 equity in the Family Home. There is no information before the Court as to how the Westpac mortgage is being serviced. As far as I am aware, the Bradleys are retired,5 though it may be that either or both of their daughter and son-in-law work.

[12]The shareholder loan due from Wakawaka to the Bradleys is approximately

$850,000. The loan is repayable on demand. The Carrs have a similar shareholder loan, but in the much smaller amount of $12,140. Counsel for the Bradleys submit that if the Family Home were sold, the net proceeds after repayment of the mortgage and the Carrs’ shareholding loan would allow Wakawaka to repay at least $845,000 of the Bradleys’ shareholder loan.

[13]   Mr Bradley has deposed that the only significant debts or liabilities owed by himself and his wife are:

(a)an overdue income tax bill due by Mr Bradley to the Inland Revenue Department (IRD) totalling approximately $251,000 (as of 15 January 2021), which continues to accrue interest and penalties; and

(b)loans taken out by the Bradleys to fund their legal fees in these proceedings. Mr Bradley has confirmed that as of 1 April 2021, these total approximately $21,000 owed to one finance company (with interest accruing at 16.95 percent) and approximately $4,700 to another finance company (with interest accruing at 29.95 percent).

[14]   There is no dispute that in the event the Judgment Sum is paid by Mr Yu to the Bradleys, it will be dispersed. Mr Bradley says in his affidavit that they want to use the Judgment Sum to pay his overdue tax bill, and also to pay down some more of the mortgage on the Family Home. To the extent the Judgment Sum is used to pay down more of the Westpac mortgage (and on the assumption that the Family Home is not

5      Mr Bradley says in his affidavit that he and his wife sold the Whitford property “in order to downsize and ease into retirement”.

further encumbered in the interim), this will obviously increase the equity available to Wakawaka.

The Bradleys’ proposals for security in the event a stay is not granted

[15]   The Bradleys propose the following undertakings are given by way of security for repayment of the Judgment Sum.

[16]First, each of the Bradleys offer to undertake to the Court as follows:

(a)   We will not, as shareholders in Wakawaka Limited, make demand or require repayment of $800,000 of our shareholder loan to the company, until determination of the appeal in this proceeding, or (if leave is granted) any subsequent appeal to the Supreme Court.

(b)   We will not, as shareholders in Wakawaka Limited, take any steps to wind up or remove the company from the Register until determination of the appeal in this proceeding, or (if leave is granted) any subsequent appeal to the Supreme Court.

[17]   The Bradleys also propose that they and the Carrs, as directors of Wakawaka, each provide the following undertakings:

(a)   They will not further encumber 129 Ara-Kotinga with any bank or third-party debt pending the outcome of the appeal.

(b)   In the event the applicants’ appeal is successful, they will within a reasonable time period cause Wakawaka to repay the respondents’ shareholder loan to the extent of the Judgment Sum and Costs and any judgment the Court of Appeal makes in favour of the applicants.

Applicable legal principles

[18]The applicable legal principles are not in dispute.

[19]   A court determining an application for a stay of execution of judgment pending appeal is required to strike an appropriate balance between a plaintiff enjoying the fruits of the judgment in its favour, and a defendant’s rights in the event their appeal is successful but they have paid over the judgment sum in the interim. The following factors will typically taken into account in determining the appropriate balance:

(a)if no stay is granted, whether the appellant’s right of appeal will be rendered nugatory;

(b)whether the appellants are acting in good faith in pursuing their appeal;

(c)whether the successful party will be arduously 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 proceedings;

(g)the overall balance of convenience; and

(h)the apparent strength of the appeal.

[20]   These factors are drawn from a range of Court of Appeal decisions, including Keung v GBR Investment Limited.6 The Court in Keung emphasised that the overall approach is a balancing exercise, with all relevant factors to be weighed by the Court.

[21]   While the strength or otherwise of the appeal may be relevant, as Rodney Hansen J emphasised in Loktronic Industries Limited v Diver, “it is not the task of the Court to embark on a premature determination of the appeal and an assessment of the strength of the appeal should not weigh significantly, if at all, in the scales.”7 I interpolate to note that in the present case, it was common ground that the strength or otherwise of Mr Yu’s appeal is not a material factor. Counsel for the respondents responsibly accept that they cannot suggest the appeal is in the “truly hopeless” category.

[22]   In Wiltshire Investments Limited v Symons, Associate Judge Bell referred to what he described as “the general approach” to applications for a stay of execution of

6      Keung v GBR Investment Limited [2010] NZCA 396, [2012] NZAR 17 at [10].

7      Loktronic Industries Limited v Diver HC Auckland CIV-2008-404-4657, 1 June 2011 at [7], citing

New Zealand Insulators Limited v ABB Limited (2006) 18 PRNZ 459 (CA) at [19].

money judgments, being that an order staying execution will be granted upon payment by the defendant to the plaintiff of the money in question, but “with the plaintiff giving security for [re]payment”.8 Williams J’s decision in McLeod v NZ Pine Company Limited, is often referred to as the source for this approach. In McLeod, Williams J stated that:9

The judgment of Lord Justice Bowen in The Annot Lyle 11 PD 114, seems to show what the principle is. He says:

There is no reason why we should make a practice of depriving a successful litigant of the fruits of his litigation and locking up funds to which prima facie he is entitled for a long time because they are secured by the bail bond. We cannot assume that it is a matter of small importance to a successful party to go without his damages for a long time.

The right of plaintiff in the present case is an absolute right to have his money at once. The right of defendants is the right of appeal, and the right in some way or other to have it made certain by this Court that that appeal shall not be fruitless. The duty of this Court is, I think, to reconcile as far as possible the conflicting rights of the plaintiff and the defendants. The way to do that is to follow the English cases, and to say that an order staying proceedings shall be made on payment by the defendants to the plaintiff of the money in question, the plaintiff giving security for the repayment.

[23]   It is important to recognise, however, that there is no general or rigid rule. As the Court of Appeal stated in Haines v Carter:10

[12] In [McLeod] Williams J saw the reconciliation of the competing rights as achieved by saying that an order staying the proceedings would be made only on payment by the defendants to the plaintiff of the money in question subject to the plaintiff giving security for the repayment in the event of the appeal being successful. That approach by the High Court is not uncommon in cases in which, faced with an appeal to this Court, the successful plaintiff seeks immediate payment of the judgment sum. Indeed where there are grounds to believe a successful party may not be able to repay or otherwise restore the position if the appeal succeeds, security is ordinarily required by the High Court: Julius Harper Limited v FW Hagedorn & Sons Limited [1989] 2 NZLR 471, 501 per Tipping J. Nevertheless each case must be decided on its own circumstances within which sufficient justification must always be found before the Court acts to protect the defendant’s position by granting a stay or imposing conditions on a successful plaintiff who wishes to execute a judgment.

(emphasis added)

8      Wiltshire Investments Limited v Symons HC Auckland CIV-2010-4040-1572, CIV-2010-404-1011, 8 October 2010 at [10].

9      McLeod v NZ Pine Company Limited (1892) 11 NZLR 492 (SC) at [494] – [495].

10     Haines v Carter (2001) 15 PRNZ 124 (CA).

[24]   In Haines, the judgment sum due from the appellant to the respondent was in the order of $1.77 million. The respondent’s affidavit satisfied the Court that her present net worth was in the order of $1.98 million. That figure included interests the respondent held in a company, but did not include certain beneficial interests in trust property. The Court noted that the respondent was not in a situation where she appeared to carry undue debt. The Court also declined to accept the appellant’s suggestion that there might be a deliberate dissipation of assets by the respondent in the event the stay was not ordered. The Court stated:11

Overall, although the judgment is for a large sum relative to the respondent’s worth, we see force in Mr Stewart’s submission there is little basis for the contention that the respondent may not be able to repay the appellant if he is successful on appeal.

[25]   The Court in Haines noted that a court determining a stay application will often be assisted by an undertaking from the party wishing to execute its judgment that it deal in a particular way with the proceeds pending resolution of the appeal.12 In the circumstances of the case before the Court, however, including that the appellant had already secured a substantial benefit from the respondent’s performance of the agreement in issue in the proceedings, no such undertaking was required.

[26]   Counsel for Mr Yu also referred me to Loktronic Industries Ltd v Driver as an example of the various forms of security which can be put in place in the context of a stay application. In Loktronic, Rodney Hansen J considered the competing prejudice between the applicant and the respondent. His Honour noted that the fact there would be only minimal prejudice to a respondent to an application for a stay if the application were granted is not a decisive consideration, no doubt reflecting the starting point that a successful plaintiff is entitled to the fruits of their judgment. Rodney Hansen J therefore considered the critical question was whether the applicants for the stay in that case had been able to establish that the prejudice to them was such that the interests of justice required a stay.

11 At [13].

12 At [15].

[27]   In Loktronic, a concern was raised as to whether at least some of the defendants/appellants would be the subject of bankruptcy or liquidation proceedings were they required to pay the judgment sum pending their appeal. It was also agreed that Loktronic (the successful plaintiff) had not traded in the years prior to the application and had no assets. In the circumstances of that case, Rodney Hansen J concluded it was appropriate to grant a stay, but on the basis that the applicants (i.e. the defendants/appellants) provided a bank bond for the judgment sum. The Judge noted:13

While this will not permit Loktronic access to the funds, it will provide the applicants the security to which they are entitled against eventual success in their appeals. As noted earlier, it is a solution which Loktronic accepts as reasonable in the circumstances.

(emphasis added)

[28]   Ms Watt also referred me to Carr v Humphries as an example of when undertakings offered by a respondent will not be considered sufficient security. In Carr, the impecunious respondent offered to give various undertakings if the shares to which he was entitled under the judgment were transferred to him in advance of determination of the appeal. The Judge took into account the respondent’s precarious financial position, noting that counsel for the applicant’s submission that there could be no confidence that the undertakings would be complied with “is arguably an understatement.”14 The Judge also noted that in the event the appeal were successful, it was the respondent’s own case that he would have to borrow the entire purchase price of the shares and would then have to fund the interest. The Judge accepted it was likely that the respondent’s financial position was going backwards. The Judge therefore concluded there was a “distinct likelihood” that impediments to the return of the property would arise if a person in the respondent’s financial position had ownership of the shares pending the outcome of the appeal. There was therefore a “strong risk” that the appeal would be rendered nugatory if a stay was not granted.

[29]   Counsel for the Bradleys also referred me to a number of authorities, including Downs J’s decision in Zheng v Deng.15 In that case, Downs J relied on evidence that

13 At [30].

14 At [71].

15     Zheng v Deng [2020] NZHC 2387.

the respondent to the application for a stay was a sole director and shareholder of a company which owned two properties, and that he and his wife were also trustees and beneficiaries of a trust owning a family home. This was considered a sufficient financial position in the event the applicant’s appeal of the substantive judgment was successful.

[30]   For completeness, I note that I was referred to a number of other authorities, but they, like those just discussed, provide little direct assistance in my view, other than confirming the adoption of the general principles outlined earlier. As noted, each case will turn on its own facts.

[31]   Finally, part of the Judgment Sum (approximately $71,000) relates to costs. In a detailed discussion of the approach to applications for a stay of execution of money and costs judgment, Associate Judge Osborne (as he then was) in Walker v Castlereagh Properties Ltd said this about costs judgments:16

[42]      I view costs judgments as requiring consideration beyond that which applies to money judgments generally.

[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. One such factor is where the appellant establishes that the successful party may be unable to repay the awarded costs in the event the appeal is unsuccessful. 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 (e.g. by outright payment to the plaintiff or by payment in to a stakeholding) rather than on whether the unsuccessful party should be relieved of the requirement to make payment pending the determination of the appeal.

16     Walker v Castlereagh Properties Ltd [2015] NZHC 907.

The parties’ submissions

Submissions for the applicant

[32]   Ms Watt submits that there is no concern as to Mr Yu’s ability to pay the Judgment Sum, evidenced by the fact that he has already deposited it into his solicitors’ trust account. She submits there is also no doubt about the bona fides of his prosecution of the appeal, having filed both his notice of appeal and case on appeal in time, and a hearing date having now been allocated.

[33]   Conversely, counsel submits there is a real and substantial concern about the Bradleys’ ability to repay the Judgment Sum in the event Mr Yu’s appeal is successful. Ms Watt notes that there is no doubt that pending determination of the appeal, the Judgment Sum will be dissipated, given Mr Bradley’s confirmation that it will be used to pay his overdue tax bill and to pay down some of the Westpac debt. And in relation to Mr Bradley’s tax bill, Ms Watt submits that not having access to the Judgment Sum to pay that bill cannot qualify as prejudice, given Mr Bradley ought to have been in a position to meet his tax liabilities irrespective of the outcome of the hearing before Palmer J.

[34]   As to the undertakings proposed by the Bradleys, Ms Watt says that these simply do not give sufficient certainty of repayment of the Judgement Sum in the event the appeal is successful. Counsel submits that given Wakawaka’s financial position, there is doubt as to whether liquidation of the company’s only asset would provide sufficient funds to repay the Bradleys’ shareholder loan (and that of the Carrs). In this context, counsel submits that the net proceeds of the sale of the Family Home (assuming a sale at the assessed market value) would not be sufficient to meet Wakawaka’s debt, being the Bradleys’ and Carrs’ shareholder loans, plus the mortgage debt due to Westpac. Counsel further notes that as matters presently stand, the Carrs have not provided any undertakings as to Wakawaka’s repayment of the Bradleys’ shareholders loan, nor sworn any affidavits that they will do so. Ms Watt says that there is also nothing to prevent Wakawaka being wound up before the appeal is determined. She further submits that the price at which the Family Home might be sold is unknown, and given it is a lifestyle property, there is particular uncertainty. The timing of any sale is also unknown, and could take months if not years. Counsel

also submits that at least in relation to the Carrs, there would be no incentive for them to agree to a prompt sale of the Family Home.

[35]   Ms Watt also referred me to various company records of companies with which Mr Bradley has been associated (in his profession as a film director). She submits that the fact a number of them have gone into liquidation casts further doubt on his financial management and the comfort to be drawn from the proposed undertakings.

[36]   Standing back, Ms Watt suggests that the security or assurances the Bradleys propose for repayment of the Judgement Sum are simply too opaque and uncertain, compared to the certainty provided by Mr Yu’s deposit of the Judgment Sum into his solicitors’ trust account.

The Bradleys’ submissions

[37]   Counsel for the Bradleys emphasis that the starting point is that the Bradleys are entitled to the fruits of their judgment. And despite the matters raised by Mr Yu, they say there is no realistic risk of the Judgment Sum not being able to be repaid in the event the appeal is successful.

[38]   Counsel refer to the fact that the Bradleys have access to some $850,000 of the equity in the Family Home, being almost double the amount of the Judgment Sum. And to access that equity, counsel submits that all that would need to occur would be for the Bradleys to make demand on their shareholder loan, and for Wakawaka to take steps to sell the Family Home (if required) in order to repay that debt. Counsel point to the evidence that even on a conservative basis, the net proceeds from the sale of the Family Home would enable repayment of the vast majority of the Bradleys’ shareholder loan.

[39]   Counsel submits that Wakawaka’s financial position must be looked at in context, in that it is a family owned company which is essentially a holding company for the Family Home. There is no evidence it trades, and its only “external” liability is to Westpac and there is more than enough equity in the company to repay that debt. Counsel emphasise that the Bradleys’ rely on the balance sheet position of Wakawaka,

and Mr Yu’s (apparent) focus on profit and loss is inappropriate, given the nature of the company and the issues arising on the present application.

[40]   Counsel further submit that many of the matters raised by Mr Yu (such as Wakawaka being wound up or removed from the Companies Register) are wholly speculative. There is also uncontested valuation evidence of the Family Home’s value. Further, counsel note that Mr Bradley had intended to use the proceeds of the sale of the Whitford property and now the Judgment Sum to pay the IRD tax debt, but the dispute with Mr Yu has prevented this. This, it is submitted, qualifies as relevant prejudice in the context of the present application. Mr Bradley also refers to an (oral) indication from IRD (on 13 January 2021) that it intends to initiate bankruptcy proceedings against him. I interpolate to note that Mr Bradley does not suggest this has been communicated in writing, and in his updating affidavit of 1 April 2021, there is no reference to any actual steps yet being taken by the IRD.

[41]   As to timing, counsel accept that the Bradleys would not have $449,000 cash immediately on hand or held on trust to repay the Judgment Sum if the appeal were successful. But counsel submit that the authorities do not require that. Counsel suggest that the focus is appropriately the respondent’s overall ability to repay in the event an appeal is successful, and it would be a perverse outcome if the test focused only on a respondent’s cash or other liquid assets.

[42]   Finally, the Bradleys note that there is no suggestion Mr Yu’s appeal will be rendered nugatory if a stay is not granted.

Discussion

[43]   In my view, it is important the courts approach an application for a stay of execution of judgment with an appropriate degree of flexibility, rather than adopting rigid notions of a “normal” or “general” approach. As already emphasised, each case will turn on its own facts.

[44]   I have concluded that the application for a stay ought to be declined in relation to the majority of the Judgment Sum. But I consider it appropriate that a portion of the Judgment Sum remains in Mr Yu’s solicitors’ trust account, so that in the event his

appeal is successful he will have prompt access to those funds. I accordingly decline the stay in relation to $300,000 of the Judgment Sum. The balance of the Judgment Sum is subject to a stay of execution and thus may remain in Mr Yu’s solicitors’ trust account. My reasoning for adopting this approach follows.

[45]    First, the resolution of an application for a stay of execution is to be considered in the context of this Court having already concluded that the Bradleys are entitled to the Judgment Sum, a not insignificant part of which relates to costs. There is therefore certainty at this point in time as to the Bradleys’ entitlement to the funds. And the Bradleys have been entitled to those funds for some nine and a half months.17 Assuming the Court of Appeal’s decision is delivered in, say, February 2022 and the Court dismisses Mr Yu’s appeal, the Bradleys will have been deprived of the Judgment Sum for approximately 19 months.

[46]   Conversely, whether Mr Yu will be entitled to a refund of the Judgment Sum (and if so when) is presently uncertain. It is important in my view, that determination of an application for a stay does not become “blinkered” by an assumption that the appeal will succeed, which in turn drives an outcome designed to provide absolute certainty of prompt repayment. This risks watering down the proposition that the starting point is that a successful plaintiff is entitled to the fruits of their judgment, as well as the Court of Appeal’s guidance in Haines that there must always be “sufficient justification” for denying a successful plaintiff the remedy they have been granted.

[47]   In my view, the position is sufficiently clear that if the Bradleys were later required to repay to Mr Yu $300,000 of the Judgment Sum, they would be able to access sufficient funds in order to do so.18 A clear asset belonging to them is the shareholder loan owed by Wakawaka. And it is sufficiently clear in my view that Wakawaka has access to assets which exceed, by some margin, $300,000 (namely the equity in the Family Home). I also accept counsel for the Bradleys’ submission that a number of the concerns raised by Mr Yu are speculative; for example, there is no evidence or basis to suggest that Wakawaka is about to be wound up or removed from

17     Following sealing of Palmer J’s judgment on 28 July 2020.

18     I deal with the timing issue raised by Mr Yu further below, at [49]-[51].

the Companies Register.19 Wakawaka also has no creditors external to the Bradleys’ family other than Westpac, and there is sufficient equity in the Family Home vis-a-vis the amount owed to Westpac. Ms Watt raised a concern as to how the loan is presently being serviced, but again, that is somewhat speculative in nature. There is no suggestion in the evidence that there are any particular issues in this regard. In addition, the Wakawaka directors will each undertake that the Family Home will not be further encumbered pending resolution of Mr Yu’s appeal. I do not consider the submission made that this might give rise to a breach of directors’ duties to be material, given part of the undertakings offered will be given in the Bradleys’ capacity as shareholders, coupled with the nature of Wakawaka as a holding company for the Family Home. There does not seem to be anyone who might realistically initiate such a claim in any event.

[48]   I am also unpersuaded that the evidence relating to other companies in which Mr Bradley has been involved alters the position. The financial performance of those companies is not relevant to the ability of the Bradleys to call up their shareholder loan with Wakawaka. It is also not relevant to the timing and price at which the Family Home might be sold (if required). Further and in any event, many of the Companies Office records indicate that the liquidation concerned was voluntary, though I accept some were initiated by the IRD. This was apparently due to unresolved disputes between the investors and IRD about the tax treatment of losses. But there would have needed to be far more  information  before  me  concerning  these  companies  and Mr Bradley’s role in relation to them before they became a material factor in determining the present application.

[49]   I am also satisfied that there is some qualifying prejudice on Mr Bradley’s part in the event the stay were to be granted to the full extent of the Judgment Sum. I do not have precise details of when his IRD debt was incurred, but there is no doubt that the inability to access the Judgment Sum is resulting in interest and penalties continuing to accrue. I do not consider the Court requires a “counsel of perfection” in the context of a stay application, in terms of what might amount to qualifying prejudice. In other words, I do not consider the mere fact that Mr Bradley might have

19     And the proposed undertakings address removal from the Companies Register.

had a pre-existing debt that he intended to repay using the Judgment Sum as negating any qualifying prejudice. Many individuals will have pre-existing debts that they intend to pay with funds hoped, or expected, to come their way. Conversely, there is no suggestion that Mr Yu will be unable to prosecute his appeal if a stay of execution is not granted. Further, there can be no suggestion that Mr Yu will be prejudiced by being “out of funds” to the extent of $300,000, given he has already put the full Judgment Sum into his solicitors’ trust account.

[50]   In terms of any remaining factors relevant to the present application, I accept that Mr Yu is properly progressing his appeal within the relevant time limits. The fact he took the maximum period within those time limits to file his notice of appeal and case on appeal does not carry much weight in my view. He filed the relevant materials within the time periods allowed by the Court of Appeal Rules. The parties also agreed that no particular weight attaches to the “public interest” factor. I was informed that a new version of cl 8 of the ADLS standard terms now addresses many of the issues arising in this case. And as already noted, it was also common ground that no particular weight attaches to the merits or otherwise of the appeal.

[51]    Finally, on the question of the timing of repayment, I accept that if it is necessary to sell the Family Home in order to repay the $300,000, some time will no doubt pass pending that sale. But there is no requirement under the Rules that a respondent in the Bradleys’ position must immediately repay funds paid to them pending determination of the appeal. Rather, the likely time to effect repayment will be a matter the Court will need to take into account in its overall assessment of the stay application. Plainly if it is clear, for example, that it would take some years to access funds in order to make repayment, this would weigh in favour of granting a stay of execution. But in this case, and if Wakawaka is not able to draw down further on the Westpac loan in order to pay back $300,000 of the Bradleys’ shareholder loan, the sale of the Family Home would be required. I accept that the time within which that would occur is uncertain, but I proceed on the basis it would likely be weeks or months, rather than years. I also reiterate the point that in the present case, the Bradleys have not had access to funds this Court has found they are entitled to for some nine and a half months. There was no suggestion on Mr Yu’s behalf that he

would suffer any particular financial prejudice were he required to wait, say, a few months for repayment in the event the Family Home had to be sold.

[52]   Nevertheless, the fact there is a degree of uncertainty as to when the Bradleys would be in receipt of cash funds to enable repayment to Mr Yu leads me to conclude that the appropriate balance to be struck is for some of the Judgment Sum to remain in Mr Yu’s solicitors’ trust account so that, if his appeal is successful, he will have immediate access to those funds. Release of part of the Judgment Sum now will, however, enable Mr Bradley to stem the interest and penalties accruing on his IRD debt, as well as to pay down some of the mortgage on the Family Home. That second application of the funds will, as noted, result in Wakawaka having additional equity in the Family Home.

[53]   The orders that I make will be conditional upon each of the Bradleys and the Carrs providing the undertakings that have been proposed. They will be undertakings to be given to the Court and to Mr Yu. I accept Ms Watt’s point that as the debt due to Mr Yu (in the event his appeal is successful) will not be a debt of the Carrs, they would have no personal incentive to fast-track sale of the Family Home. But nevertheless, the Carrs will have given an undertaking to the Court to the effect of enabling Wakawaka to repay the Bradleys’ shareholder loan (or that part of it necessary to enable repayment to Mr Yu).  The Court proceeds on the basis that the Carrs will wish to fully comply with a formal undertaking given to the Court. Overall, therefore, I consider the undertakings to be adequate security in the circumstances of this case.

Result and costs

[54]The application for a stay of execution is granted, but only to the extent of

$149,000 of the Judgment Sum. The balance of the Judgment Sum ($300,000) is not subject to the stay of execution.

[55]   Payment of the $300,000 to the Bradleys is conditional on each of the Bradleys and the Carrs first providing to the Court and to Mr Yu the undertakings set out at [9] and [10] of Mr Bradley’s affidavit sworn on 1 April 2021, save that the undertakings are:

(a)to refer to the sum of $300,000 rather than the “Judgment Sum and Costs”; and

(b)the undertakings are to remain extant until the determination of Mr Yu’s appeal by the Court of Appeal.

[56]   As noted by counsel for the Bradleys, if Mr Yu wishes to take the matter beyond the Court of Appeal, it will be open for him to apply for further orders at that time.

[57]   Leave is reserved to the parties to apply for any further orders or directions required in relation to the orders made at [54] and [55] above, or if any formal orders are required in relation to the statutory demand. I would expect, however, that in light of this judgment, the parties can come to a suitable arrangement in relation to the statutory demand.

[58]   The parties are encouraged to agree costs. If they are unable to do so, any party claiming costs may file a memorandum within 15 working days of the date of this judgment, with any memorandum in response to be filed within a further 10 working days. No memorandum is to be longer than three pages in length.

Fitzgerald J