Fugle v Fisk [2022] NZHC 3253 (6 December 2022)

Last Updated: 31 January 2023

IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY I TE KŌTI MATUA O AOTEAROA TE WHANGANUI-A-TARA ROHE

CIV-2022-485-136 [2022] NZHC 3253

UNDER	the Companies Act 1993 and other statutes
IN THE MATTER OF	Vey Group Limited (in receivership and liquidation)
BETWEEN	LESLIE WILLIAM FUGLE First Applicant AOKAUTERE LAND HOLDINGS LIMITED Second Applicant
AND	JOHN HOWARD ROSS FISK and RICHARD JOHN NACEY as liquidators of Vey Group Limited (in receivership and liquidation) First Respondents VEY GROUP LIMITED (in receivership and liquidation) Second Respondent

Hearing:	5 December 2022
Counsel:	J K Mahuta-Coyle for the Applicants R Pinny for First Respondents R L Roff for Trustees of Orana Trust
Judgment:	6 December 2022

JUDGMENT OF GWYN J

(Application for stay of execution of judgment)

FUGLE v FISK & NACEY [2022] NZHC 3253 [6 December 2022]

Application

• [1] This is an application brought by Leslie Fugle and Aokautere Land Holdings (ALHL) for orders staying execution of the Court’s decision in Fisk v Turvey,¹ pending determination of the applicants’ appeal to the Court of Appeal.

• [2] The application is opposed by the first and second respondents and the trustees of the Orana Trust, who were the first interested parties in the judgment. The receiver of ALHL did not appear on the application.

Background

• [3] This matter has a lengthy background, which is set out in detail in the judgment at [1]-[42].

• [4] In summary, Vey Group Limited (in liquidation and receivership) (the Company) was placed into liquidation by the Court on 9 December 2020.²

• [5] Prior to the liquidation, on 12 June 2020 the Court of Appeal appointed John Fisk and Richard Nacey as receivers to the Company.³

• [6] The appointment was made in the context of a proceeding brought by the trustees of the Orana Trust (then a shareholder of the Company) (the Trustees) against the Company and Mr Fugle, under s 174 of the Companies Act 1993. Mr Fugle is the director and sole shareholder of both the Company and ALHL. The Trustees alleged that the Company, through Mr Fugle, was being conducted in a manner that was oppressive, unfairly discriminatory and unfairly prejudicial to Orana as minority shareholder.⁴ There were a range of issues in the conduct of the Company of concern

¹ Fisk v Turvey [2022] NZHC 2462, delivered on 27 September 2022 (judgment).

² Vance (as trustees of Orana Trust) v Vey Group Ltd [2020] NZHC 2592 at [24].

³ Vey Group Ltd v Vance [2020] NZCA 232, [2021] 2 NZLR 541 at [71].

4. The Court of Appeal concluded that “the actions of Mr Fugle amounted to a serious and visible departure from the standards of fair dealing expected in the managment of a company, and that as a result the affairs of Vey have been conducted in a manner that is oppressive, unfairly discriminatory and unfairly prejudicial to the respondents as minority shareholders”: Vey Group Ltd v Vance above n 3, at [53].

to Orana. One of those was a dispute between Orana and Mr Fugle over a debt claimed by Orana against the Company.

• [7] Mr Fisk and Mr Nacey as receivers of the Company produced a report dated 14 August 2020 assessing the liabilities of the Company to include a debt of

$1,041,000 owed to the Trustees.

• [8] Notwithstanding that report, Mr Fugle continued to maintain it was not established that the Company owed the Trustees the sum claimed. The Trustees then applied to the High Court for the Company to be placed into liquidation.

• [9] On 2 October 2020 the High Court ordered that the receivers be appointed liquidators to the Company, but that the order would lie in Court and would not take effect until midday on 9 December 2020, to give the parties a final opportunity to agree alternative orders.⁵

• [10] No agreement was reached and the receivers, Mr Nacey and Mr Fisk, were accordingly appointed liquidators of the Company on 9 December 2020 (the Liquidators).

• [11] Shortly after, on 23 December 2020, ALHL appointed a receiver to the Company, Greg Sherriff of Waterstone Insolvency (the ALHL Receiver). ALHL is controlled by Mr Fugle and is the second-ranking registered mortgagee in relation to the Property.

• [12] On 12 January 2021 Mr Fugle applied to terminate the liquidation of the Company, pursuant to s 250 of the Companies Act 1993 (the s 250 application) (CIV- 2018-485-505).

• [13] The Liquidators provided a report to the Court pursuant to s 250(3) of the Companies Act (the Report) in which they concluded that the Company was insolvent on a balance sheet basis and insolvent on a cash flow basis. The Liquidators also

⁵ Vance (as trustees of Orana Trust) v Vey Group Ltd above, n 2, at [21]-[22].

commented in the Report that they considered the total amount owing to Orana Trust to be $1,225,698.

• [14] Subsequently, Mr Fugle filed an application for leave under s 284 of the Companies Act to review the Liquidators’ decision to admit the claim lodged by Orana Trust in the liquidation (the s 284 application). The s 250 application and the s 284 application were heard together and Mallon J dismissed the s 284 application on 2 February 2022 (the s 284 Decision).⁶ The s 250 application, to terminate the liquidation of the Company, was treated as being discontinued, as Mr Fugle had advised the Court that he would only pursue that application if his s 284 application was successful.

• [15] In March 2022 Mr Fugle sought leave to appeal the s 284 Decision. Justice Mallon declined leave to appeal, finding that the Liquidators’ duty to act in a reasonable and efficient manner when distributing funds to creditors would be frustrated if such an unmeritorious appeal of a liquidators’ decision was permitted to proceed.⁷ Mr Fugle has sought leave from the Court of Appeal to appeal the s 284 Decision.

• [16] Mr Mahuta-Coyle updated the position in relation to Mr Fugle’s application for leave to appeal the s 284 Decision. On 22 November 2022 the Court of Appeal issued a minute noting that there was an issue as to whether the application was interlocutory in nature and therefore whether leave to appeal is necessary. The Court of Appeal has sought submissions from the parties on that question by 9 December 2022.

The Property

• [17] The Property is a three-level apartment building in Webb Street, Wellington. It contains eight residential apartments, a management office and basement carparking. It was constructed by Daryn Turvey between approximately 2009 and 2011.

⁶ Vance v Vey Group Ltd (In Liq and Recs) [2022] NZHC 75.

⁷ David Vance and Ian Millard (as trustees of Orana Trust) v Vey Group Ltd (in recs and in liq)

[2022] NZHC 1861 (Leave to Appeal Decision) at [5].

• [18] The Property is the major and only readily realisable asset of the Company. It comprises a number of apartments, which are tenanted and, on the updating evidence from Mr Nacey earned $112,470 in gross rental income, before operating expenses, for the six months to 30 August 2022.

• [19] There are two mortgages registered against the Property:

(a) A first registered mortgage in favour of Mr Turvey. Mr Turvey took an assignment of BNZ’s rights under the first-ranking mortgage previously held by the BNZ.

(b) A second registered mortgage in favour of ALHL, securing a loan made by ALHL.

• [20] Mr Turvey has lodged a claim in the liquidation of the Company, asserting that he is a secured creditor for $449,348. Mr Turvey claims two interests in the Property, as first-ranking registered mortgagee and as caveator on the basis of an institutional constructive trust. The details of Mr Turvey’s claim are set out in the judgment.⁸

• [21] The Wellington City Council has registered a statutory land charge against the Property relating to unpaid development contributions.

• [22] The Property does not have a Wellington City Council Code of Compliance Certificate. As part of the requirements, as Court-appointed receivers, to investigate and report on the Company’s financial position, the Liquidators instructed Maynard Marks to prepare a report of the likely extent and costs of any remediation works which would be required to obtain a Code of Compliance Certificate for the Property and also instructed Truebridge Property to value the Property, taking into account Maynard Marks’ advice on the extent of the defects.

• [23] The Maynard Marks Report was included in the Receivers’ Report.

⁸ Judgment, above n 1, at [19].

• [24] Maynard Marks gave an estimate of costs of the remedial works required (as at August 2020).

• [25] Truebridge Property’s most recent valuation of the Property, was on an “as is” basis, as at 2 June 2021 (and taking into account the issues identified by Maynard Marks).

• [26] The Property Manager of the Property obtained assessments for each of the apartments against the Healthy Homes Standards in November 2020 to ascertain whether the apartments complied with the Healthy Homes Standards. The assessments identified a range of heating, ventilation and weathertightness issues. The apartments did not comply with the Healthy Homes Standards.

The judgment

• [27] The judgment ruled on an application for orders for sale of the Property brought by the Company as mortgagor, together with an application for procedural orders brought by the Liquidators. The applicants sought orders for the sale of the Property with a two-stage process to follow, in respect of disbursement of the sale proceeds.

• [28] In the judgment, I concluded that, on the particular facts of the case, it was appropriate for the Court to exercise its discretion to direct a sale of the Property pursuant to ss 107 and 108 of the Property Law Act 2007 (PLA) and made orders for sale of the Property by the applicants accordingly.⁹

Steps taken since the judgment

• [29] Mr Nacey’s further evidence sets out the steps taken by the Liquidators since the judgment. The Liquidators requested proposals from three real estate agents for selling the Property. Having evaluated the proposals, the Liquidators engaged Bayleys to sell the Property and decided to sell it by tender rather than auction. The terms of the tender process are the standard terms in the ADLS Particulars and Conditions of Sale of Real Estate by Tender form. Bayleys has been extensively marketing the

⁹ Judgment, above n 1, at [128].

Property since at least 4 November 2022. Tenders close at 4.00 pm on Wednesday 7 December 2022.

• [30] The applicants filed this application for a stay on 24 November 2022.

Jurisdiction for the application

• [31] The application is made in reliance on r 12 of the Court of Appeal (Civil) Rules 2005 and, to the extent relevant, r 17.29 of the High Court Rules 2016.

• [32] 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.

• [33] Rule 12 of the Court of Appeal (Civil) Rules provides:

12 Stay of proceedings and execution

(1) None of the matters referred to in subclause (2) operate as—

(a) a stay of a proceeding in which a decision was given; or

(b) a stay of execution of that decision.

(2) The matters are—

(a) an application for leave to appeal; or

(b) the giving of that leave; or

(c) an appeal.

(3) Pending the determination of an application for leave to appeal or an appeal, the court appealed from or the Court may, on an interlocutory 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.

(5) If the court appealed from refuses to make an order under subclause (3), the Court may, on an interlocutory application, make an order under that subclause.

(6) If the court appealed from makes an order under subclause (3), the Court may, on an interlocutory application, vary or rescind that order.

(7) The Court may, at any time, vary or rescind an order made by it under this rule.

• [34] It is the latter rule that is engaged here. Rule 17.29 applies generally to applications for stays of execution. Rule 12 is specifically directed at applications for stays pending appeal and confers jurisdiction exercisable by both this Court and the Court of Appeal.¹⁰

• [35] The principles applicable are well-settled and agreed by counsel. The leading case is Keung v GBR Investment Limited,¹¹ in which the Court of Appeal approved Dymocks Franchise Systems Limited (NSW) Pty Limited v Bilgola Enterprises Limited.¹²

• [36] Mr Mahuta-Coyle for the applicants summarised the principles involved in the following way:
  5. The relevant legal principles for the exercise of the Court’s discretion under rule 12(3) of the Court of Appeal (Civil) Rules 2005 are well- established:
     • 5.1. the Court will weigh a range of factors in determining, on the whole case, the balance between the successful litigant’s right to the fruits of judgment, and the need to preserve the position should the appeal succeed. Those factors are:
       • 5.1.1. whether the appeal may be rendered nugatory by the lack of stay. This factor is not, however, determinative;
       • 5.1.2. the bona fides of the applicant as to the prosecution of the appeal;
       • 5.1.3. whether the successful party will be injuriously affected by the stay;
         • 5.1.4. the effect on third parties;
         • 5.1.5. the novelty and importance of the questions involved;
         • 5.1.6. the public interest in the proceeding;

¹⁰ Palmerston North City Council v Birch [2012] NZHC 3248 at [17].

¹¹ Keung v GBR Investment Limited [2010] NZCA 396.

12. Dymocks Franchise Systems (NSW) Pty Limited v Bilgola Enterprises Limited (1999) 13 PRNZ 48.
    • 5.1.7. the overall balance of convenience; and
    • 5.1.8. the apparent strength of the appeal.

• 5.2. generally, a stay of a judgment will only be granted on provision of security.

(Footnotes omitted)

Submissions

Whether the appeal will be rendered nugatory

• [37] The issue at the heart of Mr Fugle’s application is that he does not accept the Liquidators’ decision to admit the Orana shareholder current account claim in the liquidation. Hence his application to the Court of Appeal for leave to appeal the s 284 Decision.¹³ Mr Fugle’s aim, if ultimately successful in that appeal, is to resurrect his “rescue proposal” - that is, to reapply under s 250 of the Companies Act to terminate the Company’s liquidation by funding the Company to pay its acknowledged creditors. Mr Fugle’s application for a stay in this proceeding is directed to that ultimate end.

• [38] The applicants say that if the sale of the Property continues then ALHL and Mr Fugle’s appeal in this proceeding, the appeal of the s 284 Decision, and his plan to rescue the Company, will be rendered nugatory. Mr Fugle will suffer the further consequence of the complete loss of the investment of $680,000 in the Company’s share capital.

• [39] There are a number of difficulties with the applicants’ proposal.

• [40] First, the lack of substantive merit of the s 284 appeal. The validity of the debt to the Orana Trust has already been scrutinised four times, in various forums, and upheld.¹⁴

• [41] Second, delay. As the respondents point out, the “rescue proposal” involves Mr Fugle being successful in three separate court applications which cannot be progressed concurrently. If the Court of Appeal grants leave to appeal the s 284 Decision (which appears unlikely),¹⁵ or decides that leave is not necessary, there will

¹³ See [15] above.

¹⁴ Judgment, above n 1, at [101].

¹⁵ See Vance v Vay [2022] NZHC 75 and Vance v Vay [2022] NZHC 1861.

be a considerable delay before a substantive hearing and issue of judgment. Mr Mahuta-Coyle concedes up to six months, but in reality it could well be longer.

• [42] Third, uncertainty. The s 284 appeal, if heard, will determine only the question of how much the Company owes to the Orana Trust. Even if Mr Fugle was successful in the s 284 appeal, his “rescue proposal” relies on him then making a further application to the High Court under s 250 of the Companies Act to terminate the liquidation of the Company. A necessary pre-condition to such an application is that the liquidators’ fees and costs and all creditor claims in the liquidation are paid in full (or unpaid creditors consent to the termination of the liquidation). Mr Fugle says that he would fund the Company to pay these amounts. However, based on the Liquidators’ fees and costs to date, and assuming no allowance for the Orana current account debt, on Mr Nacey’s evidence the amount needed to fulfil this pre-condition is currently in excess of $2,220,000, including the ALHL loan, or $1,037,000 excluding the ALHL loan. The respondents say there is no evidence to suggest that Mr Fugle (or ALHL) would be in a financial position to pay these amounts. If ALHL/Mr Fugle were not in a position to pay those amounts, then any second s 250 application could not succeed. Nor is termination of the liquidation guaranteed, even on payment of all unsecured creditors, given the breadth of the Court’s discretion under s 250.

• [43] Mr Mahuta-Coyle points to Mr Fugle’s affidavit of 25 August 2021 (in the s 284 proceeding) in which he confirmed he had placed $913,923.14 in trust with his solicitors.¹⁶ That does not take the applicants’ submission any further, however, as there is no updating evidence before the Court as to whether that amount remains on trust and available, or of the amounts currently owing in the categories to which Mr Fugle refers.

• [44] I do not accept that the appeal against the s 284 Decision will be rendered nugatory (noting that the impact on an appeal in another proceeding is not in itself covered by the criteria to be considered under r 12). That appeal would remain

¹⁶ Mr Fugle said the amount was intended to cover amounts owing to Inland Revenue, Mr Turvey, the ALHL Receiver’s costs, some capital expenditure on the Property and the Liquidators’ costs, plus an additional $200,000 provisional sum in respect of the Orana Trust claim.

relevant to the question of the amount of the Orana Trust debt to be admitted in the liquidation.

• [45] I accept that if a stay is not granted and the Property is sold, the appeal in this proceeding will to some extent be rendered nugatory, in that while the proceeds of sale will be available, the Property itself will not be. Sale of the Property would mean that Mr Fugle’s “rescue plan” could not proceed as he has proposed. However, the fact of an appeal being rendered nugatory is not determinative under r 12, particularly in the context of an uncertain and protracted proposal for resolution.

Bona fides of the applicants

• [46] Mr Mahuta-Coyle says the bona fides are apparent from the fact that the applicants have filed the appeal, have paid security for costs on appeal and their application in this Court confirms that if a stay were granted they would file a case on appeal within 15 working days and apply for the allocation of a hearing date within the same timeframe.

• [47] The respondents say the applicants are not pursuing the appeal for a bona fide reason. Mr Fugle has no standing to bring an appeal of the decision: he was not a respondent to the proceeding, but an interested party only. An interested party has no standing to appeal a decision.¹⁷ The bona fides must therefore be considered from the perspective only of ALHL, as mortgagee.

• [48] A mortgagee must use its powers for the predominant purpose of obtaining repayment of the secured debt.¹⁸ But, as ALHL acknowledges, it is using its position as mortgagee to prevent a sale of the Property (and therefore prevent prompt repayment of the secured debt), in order to advance Mr Fugle’s personal interests unrelated to the secured debt – that is, to secure strategic advantages for Mr Fugle in the context of his personal challenge to the debt to the Trustees.

¹⁷ See Capital + Merchant Finance (in rec and in liq) v Perpetual Trust Limited [2015] NZAR 228 at [8]; Beneficial Owners of Whangaruru Whakaturia No 4 v Warin [2009] NZCA 60, [2009] NZAR 523 at [27].

¹⁸ Coltart v Lepionka & Company Investments Limited [2016] NZCA 102, [2016] 3 NZLR 36 at [53]- [54], [58], [63] and [66]. See also Downsview Nominees Ltd v First City Corporation Ltd [1993] 1 NZLR 513 (PC).

• [49] If a stay is not granted, the second respondents expect the Property to be sold before Christmas 2022 and the ALHL loan to be repaid. If the stay were to be granted, ALHL will continue to have an ongoing revenue stream from the interest accruing on the ALHL loan, amounting to income of approximately $75,000 per annum. The second respondents submit this is not a bona fide basis for ALHL to pursue an appeal of the sale orders.

• [50] The respondents also suggest that Mr Fugle may perceive additional, personal benefits from a delayed sale of the Property. In their capacity as court-appointed receivers, Mr Fisk and Mr Nacey identified certain claims against third parties that a liquidator could pursue if the Company was placed into liquidation. Those include claims against Mr Fugle for breach of his duties as director under the Companies Act 1993. Immediately upon the first court application being filed, Mr Fugle wrote to the Liquidators setting out his assumption that his court applications would mean the Liquidators would not investigate claims in the liquidation until those applications were finally resolved. Again, the second respondents say, this is not a bona fide basis for ALHL to seek a stay in order to pursue the appeal.

• [51] I accept that the applicants’ bona fides must be considered from the perspective of ALHL and that, on the face of it, ALHL is using its powers to obstruct the sale in order to advance Mr Fugle’s interests. I do not accept Mr Mahuta-Coyle’s submission that ALHL (in its capacity as mortgagee) has a separate interest in resisting the sale of the Property.

• [52] I also accept that the delay inherent in a stay is beneficial only to Mr Fugle and/or ALHL, which will continue to receive interest on its loan. And of course, ALHL and Mr Fugle will ultimately receive all loans, interest and recovery costs from the sale of the Property as a secured creditor, in contrast to the position of the unsecured creditors which I discuss at [66]-[68] below.

Merits of the appeal

• [53] The applicants say that, in directing that the Property be sold on the application of the mortgagor and against the wishes of the mortgagee, the judgment wrongly interpreted s 107 of the PLA. That provision has not been the subject of scrutiny by

the appellate courts in New Zealand. The applicants also submit that the judgment in respect of s 107 runs counter to the way in which the New Zealand appellate courts have interpreted s 176 of the PLA, which provides that the mortgagee has the right to choose the timing and method of any sale of a secured property.

• [54] Mr Mahuta-Coyle also made a subsidiary submission that the appeal is strengthened by the Liquidators’ decision to sell the property by way of tender, rather than auction. The terms of the tender mean that the Liquidators do not have to accept the highest tender. Mr Mahuta-Coyle’s written submissions proceeded on the basis that this was an attempt by the Liquidators to thwart ALHL and Mr Fugle’s ability to buy the Property, despite the possibility of their doing so having been a feature of the Liquidators’ submissions to the Court in the substantive hearing. In the face of Mr Nacey’s evidence, Mr Mahuta-Coyle accepted that the terms of the tender were standard and that he cannot properly make a submission as to any adverse purpose on the part of the Liquidators. He nevertheless says Mr Fugle and ALHL should have been afforded the opportunity to participate in a transparent sale process such as an auction.

• [55] It is correct to say that the judgment was the first to consider ss 107 and 108 of the PLA. However, as the judgment records,¹⁹ s 107 of the PLA is very broad in its terms and plainly broad enough to encompass the facts of this particular proceeding. It appears, on a preliminary view, that the appeal will come down to whether that wide discretionary power under ss 107 and 108 ought to have been exercised on the particular facts of the case. Stricter criteria for an appeal apply in that situation: ALHL must establish either an error of law or principle, taking into account irrelevant considerations, failure to take into account relevant considerations or that the decision is plainly wrong.²⁰ The decision was made on the particular facts of the case, but specifically addresses the interface between the ss 107 and 108 powers and the rights of the mortgagee.²¹

¹⁹ Judgment, above n 1, at [61].

²⁰ Kacem v Bashir [2010] NZSC 112, [2011] 2 NZLR 1 at [32].

²¹ Judgment, above n 1, at [68]-[73].

• [56] I also agree with the submission for the first and second respondents that the effect of the decision is in accordance with well-established legal principles. As discussed above in the context of the applicants’ bona fides, a mortgagee must act in good faith and for the predominant purpose of obtaining repayment of the secured debt; and cannot use its position as mortgagee to procure benefits or advantages unrelated to its functions as mortgagee.²²

• [57] Further, a mortgagee must discharge its mortgage upon repayment of the secured debt.²³ By extension a mortgagee should not be allowed to prevent a sale by the mortgagor of the secured property where such sale is expected to repay the secured debt in full.

• [58] The respondents also point to the provisions of the Companies Act²⁴ which require, first, that the realisation of the assets of a company in a liquidation ought to be conducted in a “reasonable and efficient manner; and, second, a secured creditor cannot hold up a liquidation by refusing to deal with a secured asset.

• [59] In relation to more general implications for a mortgagee determining the timing of any mortgagee sale, the respondents note that this Court is not forcing ALHL to conduct a mortgagee sale or indeed to take any steps. The issue is whether the mortgagor can sell the Property in this particular instance.

• [60] Finally, I do not think the Liquidators’ decision to sell the Property by way of tender, as they were plainly entitled to do (the sale orders in the judgment did not specify a particular means of sale) adds anything to the applicants’ submissions on the merits of the appeal.

• [61] I conclude that, on a preliminary assessment, the merits of the appeal are weak for the reasons set out above.

22. Coltart v Lepionka & Company Investments Limited, above n 18; Downsview Nominees Ltd v First City Corporation Ltd, above n 18.

²³ Property Law Act 2007, s 97.

²⁴ Companies Act 1993, ss 253 and 305.

Effect on third parties; public interest

• [62] The applicants identify potential buyers of the Property who will submit tenders as possibly being affected by a delay. They note the existing tender process gives the Liquidators the right to delay the tender process by 20 working days and that time would allow for the Court of Appeal process.

• [63] However, it is plain that the interests of third parties are not limited to potential purchasers.

• [64] As Ms Roff for the Trustees notes, the debt to the Trustees has been outstanding since 25 June 2018, when they first made demand. It is now two years since the Company was placed into liquidation and no distribution has been made to the Orana Trust in respect of that debt (despite approximately $800,000 of it being unchallenged).

• [65] The Property has weathertightness issues, and health and safety issues,²⁵ and it is likely that the longer those things remain unremedied, the more the Property will continue to deteriorate in condition. Delaying the sale will expose the Property to further deterioration and, potentially, loss in value which will ultimately flow through to any realisations available to unsecured creditors, including the Trustees and the Inland Revenue.

• [66] The Property comprises a series of apartments and the Trustees say that, as the housing market further deteriorates, a delay in sale could see the Property’s potential sale price drop, again to the detriment of the Company’s unsecured creditors.

• [67] The interests of the tenants of the Property are also relevant. Mr Mahuta-Coyle emphasises that any purchase of the Property is likely to be on the basis the purchaser will demolish the building and redevelop the land. In that event the tenants’ interests are not directly compromised by any delay in sale. While that may be so, as Ms Pinny submits, the Court cannot assume what an ultimate purchaser will have in mind for

²⁵ Judgment, above n 1, at [21], [25]-[26].

the Property and, in any event, any demolition and redevelopment will need to go through a consenting and planning phase.

• [68] Insurance of the Property is also relevant. Mr Nacey’s evidence is that the Liquidators are effectively on notice from the insurer of the Property that it does not want to remain on risk if there is no imminent plan to sell or remediate the Property. Mr Nacey notes the difficulty he and Mr Fisk had in arranging insurance when they were first appointed receivers by the Court of Appeal. Mr Nacey anticipates difficulty finding another insurer at this point. The Property is the only readily realisable asset of the Company available to meet creditor claims. That asset will be put at risk if left uninsured.

• [69] Ongoing delay in the administration of the liquidation of the Company not only prejudices the Company’s unsecured creditors, but will also increase the continuing costs of the liquidation. Mr Mahuta-Coyle submits those costs can be limited by the Liquidators confining their activity to the filing of six monthly reports. However, the effect of restricting their activities in that way would be, as Ms Pinny submitted, that the Liquidators would not pursue the claims referred to at [50] above.

• [70] The ALHL Receiver’s costs of the receivership²⁶ and interest on the ALHL loan²⁷ will continue to be paid, in priority to the Liquidators’ costs and the amounts owing to the unsecured creditors. And although the Property generates rental income, Mr Nacey’s evidence is that in the six months to 30 August 2022, the net profit earned by the Company from the rental income was only $11,699.

Delay in bringing stay application

• [71] The stay application was filed on 24 November 2022. The respondents and the interested parties say Mr Fugle’s lawyer was aware on 25 October 2022 that the Property had been listed for sale by tender with a closing date of 7 December 2022. Because the applicants failed to bring the stay application earlier the Liquidators have

²⁶ Mr Nacey’s evidence is that the Receiver’s total fees and costs to 30 August 2022 were $131,188.

²⁷ Interest accrues at the rate of 6.4 per cent per annum, totalling approximately $75,000 per annum.

incurred fees and costs in relation to the sale of the Property which would be rendered unnecessary if a stay were granted.

• [72] In response, Mr Mahuta-Coyle says that any perceived delay in seeking a stay was occasioned by the fact that Mr Fugle and ALHL had undertaken to abandon their opposition to the sale of the Property if the leave application in relation to the s 284 Decision was unsuccessful. The Court of Appeal had indicated that the application was due to be heard in the week of 17 October and Mr Fugle and ALHL were awaiting the outcome to decide whether there was any point in seeking a stay of the judgment in this proceeding. It was not until 22 November 2022 that the Court of Appeal indicated there was an issue as to whether leave is required for the appeal.

• [73] I accept that it must have been apparent to the applicants in late October that the leave application was not being considered on the previously advised timetable.

Overall balance of convenience

• [74] Mr Mahuta-Coyle emphasised that all of the appeals pursued by Mr Fugle and his plan to rescue the Company will become nugatory if a stay is not granted. Conversely, he says the only prejudice to the respondents is some delay in the sale process, without any real evidence that such delay would result in further loss in value to the Property. The Property is the Company’s only asset and its sale will end the possibility of the Company being reinstated as a going concern with funding from its shareholders and secured lenders.

• [75] The respondents say that the risks associated with a delayed sale are entirely borne by the unsecured creditors while Mr Fugle pursues a meritless appeal of the s 284 Decision. The balance of convenience therefore clearly favours the Court refusing a stay.

Conclusion

• [76] The grant of a stay would further frustrate the Liquidators’ duty to administer the liquidation in a reasonable and efficient manner, to the detriment of the Company’s unsecured creditors. Ultimately, I am not satisfied that any of the matters raised by

the applicants bring this case within the category of cases where the Court would be justified ordering a stay of execution, pending appeal.

• [77] The application is dismissed.

Costs

• [78] Costs are reserved. If these cannot be resolved by counsel, as I would expect, they may come back by memorandum in the usual way.

Gwyn J

Solicitors:

Dewhirst Law, Whanganui, for the Applicant

Bell Gully, Wellington, for the First and Second Respondents JAG Legal, Lower Hutt, for the Trustees of the Orana Trust