New Zealand Meat Board v Paramount Export Limited (in receivership and liquidation) CA152/03 [2003] NZCA 397; (2003) 16 PRNZ 942 (16 October 2003)

Last Updated: 17 January 2019

IN THE COURT OF APPEAL OF NEW ZEALAND

_CA152/03

BETWEEN NEW ZEALAND MEAT BOARD First Appellant

AND THE NEW ZEALAND MEAT INDUSTRY ASSOCIATION INCORPORATED

Second Appellant

AND PARAMOUNT EXPORT LIMITED (IN RECEIVERSHIP AND IN LIQUIDATION)

First Respondent

AND RONNICK COMMODITIES (NZ) LIMITED (IN RECEIVERSHIP AND IN LIQUIDATION)

Second Respondent

Hearing: 8 October 2003

Coram: Gault P Keith J Anderson J

Appearances: C R Carruthers QC and J E Sutton for New Zealand Meat Board New Zealand Meat Industry Association Incorporated abiding the decision of the Court

G J Judd QC and F M R Cooke for Paramount Export Limited and

Ronnick Commodities (NZ) Limited

D Chan for the Bank of New Zealand abiding the decision of the

Court

Judgment: 16 October 2003

_{JUDGMENT OF THE COURT DELIVERED BY KEITH J}

[1] We have before us two matters, dealt with together in the High Court by Hammond J, relating to a proceeding which is pending before the Privy Council. Paramount Export Limited and Ronnick Commodities (NZ) Limited, both in

_{receivership and in liquidation, (the plaintiffs) obtained judgments against the New}

NEW ZEALAND MEAT BOARD And Anor V PARAMOUNT EXPORT LIMITED (IN RECEIVERSHIP AND IN LIQUIDATION) And Anor CA CA152/03 [16 October 2003]

Zealand Meat Board and the New Zealand Meat Industry Association (the defendants) in the High Court. The defendants' appeal to this Court largely failed ([2003] 1 NZLR 441). The plaintiffs unsuccessfully applied to this Court to recall one part of its judgment. The defendants have appealed to the Privy Council against the substantive judgment and the plaintiffs against the recall decision. The appeals have been consolidated.

[2] Before the hearing in the High Court the plaintiffs were ordered to pay security for costs, first fixed at $180,000 by a Master and reduced on review by a Judge to $100,000. An application for an increase before trial failed. The first matter before us relates to a successful application by the plaintiffs to the High Court in which Hammond J, hearing an application for the review of a Master's decision, authorised the payment out of those funds. The defendants appeal.

[3] The second matter relates to a charging order nisi placed by the plaintiffs over the Meat Board's bank accounts at a specified branch of the Bank of New Zealand. Although the order was sealed and the first defendant's solicitors were informed of that fact in October 2001, three months after the High Court judgment, it was not served on the Bank until July of this year, after final leave to appeal to the Privy Council had been granted. The Bank informed the plaintiffs' solicitors that the sum specified in the charging order nisi in the account had been frozen in an interest bearing account. The plaintiffs applied to have the order made absolute while the defendants applied to have it rescinded and set aside. Both applications failed, Hammond J holding that the High Court had no jurisdiction to entertain the applications. The plaintiffs appeal.

Payment out of the security for costs

[4] Master Gendall had held that the High Court had jurisdiction to order the funds be retained and that in exercise of his discretion he declined to order their release. Hammond J disagreed on both points, holding that the Court has no power to retain the funds if the plaintiff is successful at trial, and that, if it did have that power, he would have ordered the release of the funds.

[5] For the reasons which follow, we agree with the Master that the Court does have power to retain the funds, but we agree with Hammond J that they should be released to the plaintiffs' solicitors. Accordingly, the appeal fails.

[6] The Meat Board submits that the High Court may retain the funds either under its inherent jurisdiction (by way of s16 of the Judicature Act 1908) or under High Court Rule 60(1)(b):

When the Court is satisfied, on the application of a defendant, –

...

(b) That there is reason to believe that a plaintiff will be unable to pay the costs of the defendant if the plaintiff is unsuccessful in the plaintiff's proceeding –

the Court may, if it thinks fit in all the circumstances, order the giving of security for costs.

"Proceeding" is defined as follows in Rule 3:

"Proceeding" means any application to the Court for the exercise of the civil jurisdiction of the Court other than an interlocutory application.

[7] The Master held that the wording of Rule 60 extended until the outcome of the appeals processes and that the principles outlined by Sir Richard Scott VC for the English Court of Appeal in Stabilad Ltd v Stephens & Carter Ltd [1999] 1 WLR

1201 applied. In that case the Court refused to order the payment out of costs to a successful plaintiff where the decision was under appeal. The Master quoted two passages from that judgment. In the first, the Vice-Chancellor said this (at 1206) about the Court's powers:

If an order is made requiring a plaintiff to provide security for a defendant's costs to be lodged, it is of course the defendant's costs of trial that the order is directed to. If the plaintiff's action should succeed at first instance and fail on appeal, it will still be the defendant's costs of trial that may need to be provided for. And the sum lodged in court by way of security for costs will still be security for the defendant's costs of trial, even if the order requiring the plaintiff to pay those costs is made not at trial but after a successful appeal.

It seems to me that an order requiring the sum to stay in court pending an appeal is not in any sense a circumvention of the legitimate scope of the jurisdictional basis on which the order for security for costs was made, whether under section 726(1) or Order 23.

(The reference to s726(1) is to the Companies Act 1985. Under that provision the Court may require sufficient security to be given if there is reason to believe that a plaintiff company will be unable to pay a successful defendant's costs. Order 23 (now replaced) had a similar structure to Rule 60(1), although with a more limited set of grounds for requiring security.)

[8] In the second quoted passage, on the discretion to stay the payment, he said this (at 1207):

But there must, in my judgment, be something more than simply the fact of success below in order to outweigh the result for the defendant of being unable to recover any of its costs of the trial, if it should be able to satisfy the appeal court that it should have won at trial.

[9] Hammond J also referred to the Stabilad judgment, but he favoured the plaintiffs' arguments. First, as a matter of interpretation, security problems have to be reflected upwards to the next level of court. Prejudice to a party can be considered on a stay application. Second, the Rule had historically been read in New Zealand in the manner suggested by the plaintiffs. Even were the court to be persuaded by the logic suggested by the Vice Chancellor, he was not at all sure, for reasons he listed, that the present review was the appropriate vehicle for a "readjustment" of the rule.

[10] The competing submissions made to us concerning the existence of the power are essentially the reasons given by the Master on the one side and the Judge on the other. The plaintiffs add that once the High Court made an order for costs on the judgment in their favour the defendants were required to pay those costs to the plaintiffs. The decision was upheld on appeal. There was no longer a foundation for the continuation of any requirement that the respondents keep the appellants secured for costs they might have been awarded had they succeeded at trial. The security for costs requirement is now redundant as it is inconsistent with the later court orders. No further order of the Court is actually required.

[11] We do not read the High Court's powers, whether inherent or based on Rule 60, in that limited way. The money paid in under the security for costs order remains in the High Court and remains subject to its order. In this particular case,

the High Court made no order in respect of the money paid in when it made the costs order as part of its substantive judgment in July 2001. Nor have any subsequent orders of the High Court or this Court specifically addressed it. Next, payment out is not, as the plaintiffs would have it, a merely automatic ministerial act. A Court order is required to replace or vary the order the Court originally made requiring the payment in.

[12] It is true that Rule 60 does not expressly provide for the payment to be held after trial (although we note the width of the definition of "proceeding"); nor however does it provide for automatic release. The English Rule in issue in Stabilad similarly had no provision providing for the holding or the releasing of the funds. We were referred in a general way to the English Court Funds Rules 1987 but they appear to do no more than regulate the mechanism for making payments out of funds (including those held as security for costs) in the hands of a Court. We see no significant difference between the rules in issue in Stabilad and in the present case. The broad power recognised in that case exists here.

[13] We accordingly turn to the question whether in exercise of that power the sum should be released.

[14] We accept that, in the normal course, release is to be expected to follow a High Court judgment for the plaintiff, but, just as on a defendant's appeal there may be good reason for the execution of a substantive money judgment to be stayed, so too may there be reason for the security for costs payment to be held to secure the High Court costs of the defendant in the event its appeal succeeds. Depending on the circumstances, the defendant may, in terms of the integrity of the Court's process, still properly be entitled to the advantage of that security.

[15] The Master began with the proposition that if the defendants' appeal to the Privy Council succeeds and the $100,000 has been paid out "there seems little doubt that the defendants would receive little or anything to satisfy any award of costs". Little, he said, could be put up on the other side. While counsel for the plaintiffs had said that the money would be used to fund the costs of the Privy Council appeal, the Master also understood from counsel that these costs were in any event covered from

other sources. There seemed little doubt that if the money was released the funds would be dissipated among other creditors, used for the costs of appeal or both. Counsel for the defendants argued that the grounds of appeal are strong. The Master considered that the status quo should be maintained and refused the plaintiffs' application.

[16] Hammond J (on the assumption that he had power) would have ordered release. There was material before the Court from which he could fairly infer that the plaintiffs faced continuing difficulties over the funding of the litigation. They were in liquidation, they said, as a result of the defendants' activities. If there were discretion after trial to retain the security in court the considerations may well differ to some, and perhaps even to a marked, extent. Nothing had changed as to the insolvency of the plaintiffs. Their expenses must have grown greatly notwithstanding two judgments in their favour. The plaintiffs faced real difficulties. Next there is an access to justice issue. It was inconceivable that the plaintiffs would not have the assistance of counsel best versed in the case. It would be quite unfair to cut the ground from under the plaintiffs by depriving them of finance for the appeal. "I consider that the appeal will inevitably be seriously impeded, and could even be imperilled, by the ability to resort to what is in fact the borrowed funds of the plaintiff." Accordingly the $100,000 plus accrued interest was to be paid to the plaintiffs' solicitors.

[17] The defendants contend that the funds should be retained:

• the receiver of the plaintiff companies had indicated in 2001, after the High Court judgment, that he could obtain funding from other sources; what he in fact said was that the funding would be available from the same source and on similar terms to those applying to the initial financing (including the security payment) and that those terms were expensive, reflective of the risks involved;

• there are proper grounds for appeal;

• the Board would not be able to recover any costs if successful;

• the Judge was wrong to suggest that the respondents' case would be seriously impeded, even imperilled.

[18] The plaintiffs submit that the retention of security pending an appeal where the plaintiff has succeeded would be justified only in rare circumstances. The prospects on appeal, the cause of the plaintiffs' impecuniosity (the defendants' actions, if the plaintiffs are right, as two courts have indicated) and the plaintiffs' means are the decisive factors in this case.

[19] We now face a situation which is quite distinct from that existing in 1997 when the payment was initially required. The plaintiffs established their claim in the High Court. They maintained it in this Court, although on the basis of only one of the grounds on which they obtained the High Court judgment. On one critical issue relating to that ground there are concurrent findings of fact (see [2002] NZCA 266; [2003] 1 NZLR 441, paras [30]-[54]). We are a long way removed from the situation in September 1997 when Gallen J in his judgment maintaining the security for costs, although at a reduced level, began from "the point of view that ... it could not be said that there is no merit in the plaintiffs' claim"; "the state of the proceedings is such that it is impossible to regard this aspect as decisive."

[20] Next, while other sources of funding for the appeal do appear to be available to the plaintiffs, the terms are expensive. As their counsel say, they are in a vulnerable position and should not be expected to deal with an appeal on other than a well resourced basis. It is unfair to expect them to stay in this vulnerable position given their success both in the High Court and this Court. Those arguments have considerable force.

[21] There is of course a risk that in the end the defendants will be disadvantaged if the security fund has been released. That is, however, only one factor to be weighed, and the total costs to the defendants so far are, in any event, well in excess of the sum withheld.

[22] We also give considerable weight to the right of access to justice, particularly in the circumstances of impecunious plaintiffs who are seeking to protect a judgment already essentially upheld on appeal.

[23] We accordingly agree with Hammond J that the funds held as security for costs must be released. The defendants' appeal fails.

The charging order

[24] As indicated, Hammond J held that the High Court did not have jurisdiction to deal with the application to rescind the charging order nisi or the cross application to make it absolute. Accordingly, both were dismissed. He went on to indicate that if the Court had jurisdiction he would have rescinded the order nisi. His reason was that the judgment of this Court had put a "blot on the plaintiffs' title" arising from this Court reserving leave to the parties to apply to the High Court for the adjustment of one of the figures used in the fixing of damages (see paras [120] and [131] of the judgment and para (b) of the sealed order set out in para [26] below). For a charging order to stand the plaintiffs had to enjoy complete title to the judgment on which they had purported to execute. They did not.

[25] The High Court judgment, as sealed, reads as follows:

[a] There will be judgment for the plaintiffs against the defendants in the sum of $2,150,400;

[b] There is interim judgment for the plaintiffs against the defendants for the sum of $3,188,901 and there will be an inquiry into the damages under this head, namely the deficiency on liquidation, and the interim judgment sum may be varied either way;

[c] There will be a judgment for the plaintiffs against the defendants for the cost of liquidation and receivership of both plaintiff companies with leave to apply to the Court if required;

[d] There will be judgment for the plaintiffs against the defendants for

$668,449.59 being interest on $2,150,400 at 6% per annum from 13 May

1996 to 17 July 2001 (1981 days at $353.49 per day); and

[e] The plaintiffs are entitled to costs in accordance with Category 3 which will be fixed by the Court if required

[26] The judgment of this Court, as sealed, is as follows:

IT IS ADJUDGED THAT: -

(a) The appeal be dismissed, subject to (b) and (c) below;

(b) Leave be reserved to apply to the High Court in respect of the pre-loss valuation of $3,072,000 which was the basis for the High Court judgment of

$2,150,400 for the loss of the value of the business;

(c) The judgment of the High Court in relation to the deficiency on liquidation be amended by deleting the interim judgment for the amount of

$3,188,901, but leaving the order for an inquiry as to damages;

(d) The respondents are entitled to costs of $20,000 plus reasonable disbursements, including travel and accommodation of counsel, to be fixed by the Registrar in the absence of agreement.

[27] The charging order nisi (Form 41 of the High Court Rules) is in these terms:

It is ordered that, until sufficient cause is shown to the contrary, the interest of the abovenamed First Defendant New Zealand Meat Board in any sums of money held in a banking account or banking accounts and any short term deposits with the Bank of New Zealand, North End Branch, 100 Lambton Quay, Wellington and in particular the monies presently standing to the credit of New Zealand Meat Board in account No.020536 0018890 00.

DO STAND CHARGED with payment of the sum of $2,150,400 together with interest of $668,450.37 together amounting to $2,818,850.30 being part of the amount for which the Plaintiffs have sealed judgment in this proceeding.

[28] It will be seen that the charging order (prepared before the Court of Appeal hearing and served some time after its decision) is based on paras [a] and [d] of the High Court judgment (except that the interest figure is 75 cents higher and the addition is not quite accurate). The blot or qualification to which Hammond J refers arises from para (b) of this Court's sealed judgment.

[29] As indicated in para [120] of its reasons, this Court considered that there might be an inconsistency between the calculations in the High Court of the loss of value of the business (para [a] of the sealed judgment) and of the deficiency on liquidation (para [b]). The latter figure already remained to be resolved in the High Court and leave was reserved by this Court, in effect to the defendants, to permit them to apply to the High Court in respect of the basis of calculation of the former. In practical terms it was thought that that issue might have been handled with the

other issue about the quantification of damages. In fact no such application has been made. Until it is made and the High Court judgment figure is changed, that figure remains unaffected by the judgment of this Court. In terms of para (a) of this Court's sealed judgment the appeal is dismissed subject to paras (b) and (c); and, to repeat, para (b), relevant here, does not of itself change para [a] of the High Court judgment. We accordingly conclude that there is a specific sum (the original figure and the interest on it) which may be the subject of a charging order. It is essentially that sum which is in fact set out in the charging order nisi.

[30] But given that an appeal is pending in the Privy Council does the High Court have jurisdiction to make orders relating to the charging order? Hammond J thought not for the following reasons:

[38] There is no automatic stay of an appeal and there was no application for a stay in this case. Under Rule 6 [of the New Zealand (Appeals to the Privy Council) Order 1910], the Court of Appeal could "when granting leave to appeal" have ordered that "the execution [of the judgment] shall be suspended pending appeal" to the Judicial Committee.

[39] Once final leave has been granted by the Court of Appeal (as here), with very limited exceptions (which do not apply in this case) "responsibility for the case passes out of the hands [of the Court of Appeal] and to the Privy Council" per Richardson P in Valentines Properties Limited v Huntco Corporation Limited [2000] NZCA 377; (2000) 15 PRNZ 6, at page 8 (para 6).

[40] A fortiori, in my view with respect to the High Court. Issues relating to the standing and confirmation of a charging order are patently matters of "execution", and after final leave is given are for the Judicial Committee.

[31] Rule 6 provides:

Where the Judgment appealed from requires the Appellant to pay money or perform a duty, the Court shall have power, when granting leave to appeal, either to direct that the said Judgment shall be carried into execution or that the execution thereof shall be suspended pending the Appeal, as to the Court shall seem just. And in case the Court shall direct the said Judgment to be carried into execution, the person in whose favour it was given shall, before the execution thereof, enter into good and sufficient security, to the satisfaction of the Court, for the due performance of such Order as His Majesty in Council shall think fit to make thereon.

Substantially similar provision was made in the Order in Council of 10 May 1860 providing for appeals from the Supreme Court and in that of 16 May 1871 providing

for appeals from the Court of Appeal (1860 NZ Gazette 164 and 1871 NZ Gazette

400).

[32] The plaintiffs argue that because there is no stay of execution of the judgment given in their favour (the defendants not having applied for a stay when leave to appeal was granted) they should be able to have the judgment executed. There is no reason, they say, for the power under High Court Rule 585 to make the charging order absolute not to be exercised in their favour.

[33] The Board, on the other hand, submits that if this Court gives no direction at the time final leave is granted that the judgment be carried into execution then it cannot be executed, unless an order to that effect is made by the Privy Council. Further, after this Court granted final leave on 6 June 2003 it has no jurisdiction in relation to execution matters. It is functus officio : Valentines.

[34] We consider that Rule 6 is plain in its terms. If the judgment in question requires, as here, the appellant to pay money, this Court has the power when granting leave to do one of two things : it may, as it sees just, either direct that the judgment be carried into execution (by the payment of the damages in this case) or it may suspend that execution (with the money as a consequence not being paid out). If it directs that the judgment be executed (here by paying out the money), the plaintiffs shall, before execution, enter into good and sufficient security, to the satisfaction of this Court for the due performance of the Privy Council decision. That requirement in the second sentence makes plain beyond doubt what the first sentence of Rule 6 has already said : that judgments involving the payment of money may be executed before the Privy Council gives its decision (subject to any order it may make) only if this Court gives a direction to that effect at the time it grants leave; in that event, in terms of the second sentence, the plaintiffs will be required to give security. It cannot be the case that in the absence of this Court giving a direction for execution the plaintiffs would be in a better position than if they had sought a direction and been granted it.

[35] The double role of Rule 6 is also to be seen in the contrast between it and the comparable Rule 9 of the Court of Appeal (Civil) Rules 1997 under which an appeal

does not operate as a stay of execution unless the Court below or the Court of Appeal orders a stay.

[36] The bar on execution created by Rule 6 is subject to two qualifications, among others. The first is that, in terms of the introductory words to the rule, the bar is limited to judgments requiring the payment of money or the performance of a duty. It does not for instance apply to judgments which declare the rights and duties of the parties. Nor does it apply where an unsuccessful plaintiff wishes to have an order preserving the property it claims, pending its appeal to the Privy Council; so in Attorney-General for Hong Kong v Reid (No 2) [1992] 2 NZLR 394, 396, this Court, when granting leave, made a protective order in favour of the unsuccessful plaintiff in exercise of a jurisdiction it had long recognised.

[37] The second relevant qualification in Rule 6 is that it is limited to the carrying into execution of the judgment. That limit is to be related to the applications before the Court. Maintaining the charging order nisi does not of course carry the judgment into execution. The effect of the order nisi is to require the money charged to be held, not that it be paid out. While the order nisi is part of the process of execution, it does not itself, in the words of Rule 6, carry the money judgment into execution.

[38] We accordingly conclude on the face of the Rule that an order nisi can stand but that it may not be made absolute. Do however the decisions of this Court to which we were referred question that conclusion?

[39] In Valentines the Court held that it had no power to adjust the conditions on which the execution of the judgment had been suspended when it granted leave to appeal to the Privy Council. The Court stated that in terms of the 1910 Rules responsibility in relation to the appeal had passed from this Court to the Privy Council, the Court referring to Rule 6 and the powers about suspension exercisable by it "when granting leave to appeal". It mentioned the very limited provisions in the Rules for recourse to this Court once final leave had been granted.

In short, the Rules reflect the principle that with limited exceptions responsibility for the case passes out of the hands of this Court and to the Privy Council after final leave has been obtained.

[40] That case was concerned only with the appeal itself and with the terms on which it was proceeding. The matter before us concerns a step towards execution of the existing judgment. It does not affect in any way the appeal before the Privy Council. It does not "carry into execution" the money judgment, the subject of the appeal to the Privy Council : as already indicated, that matter is excluded from the jurisdiction of this Court by Rule 6 and could be considered only by the Privy Council. We accordingly do not see the Valentines case as affecting the conclusion we have reached on the plain words of Rule 6.

[41] It is the case that in Haines v Carter [2001] NZCA 16; (2001) 15 PRNZ 124 this Court did not require a formal undertaking from the respondent plaintiff imposing conditions on execution of the judgment, but the particular requirement of the second sentence of Rule 6 does not appear to have been brought to its attention.

[42] We accordingly conclude that the order nisi may remain and that the High Court has the power to vary or rescind the order nisi under High Court Rule 570. It does not however have the power to make the order absolute because such an order would provide for execution of the judgment in breach of Rule 6 of the Privy Council Rules.

[43] Should the order nisi be varied or rescinded? The evidence is that the Board will not suffer any disadvantage from the judgment sum being held in a separate interest bearing account. The evidence is plain however that the Board faces a large day to day practical problem if, as the Bank has been advised, the charging order is interpreted as applying to all the funds in the accounts referred to in the charging order nisi.

[44] Those funds far exceed the amount in the order nisi and were the freeze to apply to all of them the Board and others would be seriously prejudiced. Such a broad freeze of course goes far beyond what is required to execute the judgment in favour of the plaintiffs, assuming that it is maintained by the decision of the Privy Council.

[45] The Board does have the power under Rule 583 to pay "any money affected by the order [nisi]" into court to abide the result of the proceeding or the order of the court. The plaintiffs' solicitors have said to the Bank that that action would discharge its obligations, but that freezing the sum specified in the order within the Board's account does not suffice. The Bank, understandably, has asked the court to clarify the ambit of the charging order nisi.

[46] The appropriate action in this case is for the Court to vary the charging order nisi by requiring the Bank to hold the sum identified in the charging order in a separate interest bearing account, subject to further order of the High Court dependent on the resolution of the appeal to the Privy Council.

Result

[47] The defendants' appeals against the order authorising the payment out of the security of costs of $100,000 and accrued interest are dismissed. The funds are to be paid out to the plaintiffs' solicitors.

[48] On the plaintiff's appeal in respect of the charging order nisi, the order is varied in the terms indicated in para [46] above.

[49] The plaintiffs are entitled to costs of $3,000 plus reasonable disbursements including the travel and accommodation costs of counsel, to be fixed by the Registrar in the absence of agreement.

Solicitors:

Izard Weston, Wellington for New Zealand Meat Board

T P Cleary for New Zealand Meat Industry Association Inc, Wellington. Short & Co, Auckland for the Respondents