Scargeta v ASB Bank Limited [2024] NZCA 347 (29 July 2024)

Last Updated: 5 August 2024

IN THE COURT OF APPEAL OF NEW ZEALAND I TE KŌTI PĪRA O AOTEAROA

CA575/2023 [2024] NZCA 347

	BETWEEN	ELLIOT SGARGETTA Appellant
	AND	ASB BANK LIMITED First Respondent
	AND	ANDREW JOHN HAWKES AND VIVIAN JUDITH FATUPAITO AS RECIEVERS OF EVERGREEN LODGE LIMITED AND REMARKABLES LODGE LIMITED Second Respondent

Court:	Cooke and Collins JJ
Counsel:	Appellant in person A E Simkiss and J J K Spring for First Respondent No appearance for Second Respondent
Judgment: (On the papers)	29 July 2024 at 10.30am

JUDGMENT OF THE COURT

1. The application for an extension of time to file the case on appeal and apply for a fixture is granted. The case on appeal and application for a fixture should be filed within 20 working days.
2. The application for an extension of time to review the Deputy Registrar’s decision not to dispense with security for costs is granted. We direct the review of the Deputy Registrar’s decision to be heard separately from this application, on the papers. Timetabling directions are set out in [40] of this judgment.

____________________________________________________________________

REASONS OF THE COURT

(Given by Collins J)

Introduction

• [1] Mr Sgargetta applies for an extension of time to file his case on appeal and to apply for a fixture. He also seeks an extension of time to review the decision not to dispense with security for costs.

Background

• [2] In 2017, ASB Bank Ltd (ASB) sought summary judgment against Mr Sgargetta in reliance on an unlimited deed of guarantee and indemnity Mr Sgargetta had given in respect of loans made by ASB to Sleep Overs Ltd (Sleep Overs), a company of which Mr Sgargetta was the director. In the High Court, Woodhouse J granted summary judgment for the sum of $598,340.15,^[1] which was upheld by this Court in 2021.^[2]
• [3] Mr Sgargetta then brought further proceedings against ASB and the receivers of Sleep Overs in the High Court.^[3] These proceedings are the current decision Mr Sgargetta seeks leave to appeal. There were three causes of action:

(a) that ASB breached its statutory duty under s 176(1)(c) of the Property Law Act 2007 to obtain the best price reasonably obtainable;^[4]

(b) that ASB was, before and during the lending, aware of Sleep Overs’ syndication business model and its plans to acquire, redevelop, and sell the secured property, and it was therefore obliged to assist with or not block Sleep Overs’ plans to syndicate the secured properties;^[5] and

(c) that ASB was liable for the alleged breach by the receivers of their duty under s 19 of the Receiverships Act 1993 to obtain the best price reasonably obtainable.^[6]

• [4] The proceedings were struck out by Associate Judge Gardiner. She found that the first and third causes of action were to be struck out as an abuse of process of the Court, as Mr Sgargetta sought to relitigate issues already determined by this Court (in 2021) and because the second cause of action did not disclose a tenable cause of action.^[7]
• [5] On 28 September 2023, Mr Sgargetta filed a notice of appeal against the Associate Judge’s decision. He also applied for dispensation of security of costs, which was declined by the Deputy Registrar on 6 December 2023. He was required to pay security by 16 January 2024. He did not do so.
• [6] In order to maintain his appeal, Mr Sgargetta was required to file his case on appeal and apply for the allocation of a hearing date by 18 January 2024, pursuant to r 43 of the Court of Appeal (Civil) Rules 2005 (the Rules). On 17 January 2024, Mr Sgargetta applied in this Court for an extension of time under r 43, and for security for costs to be dispensed with on the basis he is legally aided.
• [7] ASB did not oppose the application for an extension of time in their initial memorandum. The memorandum noted that there is no need for an order to be made with respect to security for costs under r 36(5) of the Rules.
• [8] ASB emailed the initial memorandum to the case officer and Mr Sgargetta, and sent a carbon copy of the email to Mr Michalik who had been acting as counsel for Mr Sgargetta. Mr Michalik then emailed all involved to clarify that the legal aid grant in which he is involved as Mr Sgargetta’s counsel was directed to other matters and did not encompass acting for him on this appeal.
• [9] ASB then withdrew their initial memorandum by filing a new memorandum. The new memorandum noted that if Mr Sgargetta was not legally aided, the requirement to pay security for costs stood. ASB did not oppose the request for an extension of time, but noted that Mr Sgargetta’s justifications for the application had fallen away.
• [10] On 18 January 2024, Mr Sgargetta applied under r 35(11) of the Rules to have the requirement to pay security for costs revoked on the basis that he has been granted legal aid. The Deputy Registrar then issued a further decision on security for costs on 27 March 2024. The Deputy Registrar stated:^[8]

[7] On 6 March 2024 Legal Aid Services confirmed to the Registry that it had only received a legal aid application for Mr Sgargetta for the High Court proceedings, which had been approved, and that no application had been received for Mr Sgargetta in this appeal.

[8] Given the above information, I am not satisfied that Mr Sgargetta is legally aided in this appeal. There is consequently no basis on which to revoke the requirement to pay security for costs under r 35(11) of the Rules. I accordingly decline the application.

[9] The requirement to pay security for costs in my decision dated 6 December 2023 therefore still stands. Security for costs remains overdue.

Grounds for applications

• [11] In his initial application for an extension of time on 17 January 2024, Mr Sgargetta stated that the extension was requested because he had been granted legal aid and because Mr Michalik was away until 23 January 2024. He stated that the Mr Michalik would address the matter on his return.
• [12] Mr Sgargetta further stated that the requirement to pay for security for costs should be revoked, as he had been approved for legal aid.
• [13] In a further email following ASB’s updating memorandum, Mr Sgargetta stated that:
  • An application for Legal Aid was made in respect to this matter/proceeding in early November 2023, which also included the proceeding that still exists in the High Court. Essentially the application has split in two.
  • Mr Michalik was approved to act for me and after a consultation some variation is looking to occur.
  • I had initially assumed that Mr Michalik would contact the court about this, however I took the liberty of emailing our case manager ... to advise personally.
  • Consultation is occurring with the [Legal Services Commissioner (LSC)] to establish where aid may or can be further applied because as the court and counsel for ASB are aware this documentation and material from the LSC was supplied on 17 January 2024.
• [14] As noted above, ASB initially did not oppose the application for an extension of time, saying that “[they would] abide the decision of the Court”. They subsequently noted however that “as Mr Michalik is not acting for the [appellant], the justification for the delay relied on in Mr Sgargetta’s memorandum of 17 January falls away”. In their most recent submissions, ASB now opposes the application for an extension of time.
• [15] With regards to security for costs, they stated that “Mr Sgargetta must urgently clarify the statement in his memorandum of 17 January that ‘the Appellant has now been granted legal aid’”,^[9] and that if he is not legally aided, the requirement to pay security for costs stands.

The law

Security for costs

• [16] It is clear that security for costs is generally to be dealt with by a Registrar at first instance, rather than by a judge or judges of the court. Once a determination has been made by the Registrar, a judge may then review and confirm, modify, or revoke that decision on an informal application by the person affected.^[10] The application must be made within 20 working days after the date of the Registrar’s decision.^[11]
• [17] However, under r 5(1) of the Rules, the Court may give any directions that seem necessary for the just and expeditious resolution of any matter that arises in a proceeding, whether on application by a party or on the Court’s own initiative. This extends to making orders relating to security for costs.^[12] There is, therefore, jurisdiction for a judge or judges to determine the application made by the appellant concerning security for costs, if the Court wishes.

Extension of time

• [18] The principles in Almond v Read apply to any interlocutory application for an extension of time.^[13] The ultimate question in considering whether to grant an extension of time is what the interests of justice require.^[14] The factors that are likely to require consideration include:^[15]

(a) The length of the delay.

(b) The reasons for the delay.

(c) The conduct of the parties, particularly the applicant/appellant.

(d) Any prejudice or hardship to the respondent or to others with a legitimate interest in the outcome.

(e) The significance of the issues raised by the proposed appeal, both to the parties and more generally.

• [19] The merits of a proposed appeal may be relevant to the exercise of the discretion to extend time, but consideration of merits must necessarily be relatively superficial.^[16]

Submissions

For the appellant

• [20] Mr Sgargetta filed submissions on 3 May 2024 and reply submissions on 24 May 2024.
• [21] In his submissions, he states:
  4. The barrister who was originally engaged for this proceeding then sought to explore other possible directions and evidences ... which are still being pursued to date.
  5. Unfortunately, there has been significant delay in obtaining critical witness statements and material due to conflicts of interest with [ASB]. That is that these parties had previous dealings with [ASB] which now precludes them from being involved in these proceedings.
  6. This issue however has now been finally resolved and material is now to be received from these parties. This is expected in the next coming weeks which includes comprehensive material evidence.
• [22] He submits that an extension of time should be granted as the delays were the result of matters out of his control and so that the barrister can review the material and establish the appropriate course for these proceedings. He further submits that the application for legal aid was granted and security for costs ought to be dispensed with.
• [23] In his reply submissions, Mr Sgargetta states that the information received by the Deputy Registrar from Legal Aid Services (that no application had been received from the appellant in respect of this appeal) was incorrect. He states this was communicated to the Deputy Registrar on 3 April 2024.
• [24] Mr Sgargetta also submits that he has not been neglectful or inactive in pursuing the extension. His application was dated 17 January 2024, which was within the timeframe for filing the case on appeal and applying for a fixture. He also emailed the case officer on 31 January 2024 seeking the temporary suspension of proceedings to allow the barrister to obtain material and directions from the LSC.
• [25] Mr Sgargetta also addresses the merits of the proposed appeal, namely that the bank was negligent in its financing and mortgaging of the properties by giving grossly flawed and inflated valuations, which was a ground that could not be run in previous proceedings as it was not “solidified until the Court of Appeal ... made the determination that the sale prices achieved at the time were the true market prices”. Mr Sgargetta noted that while litigants must put their complete and full case before the court to avoid costs, delays and issues, it is more important that justice is properly done. He says he honestly believed that he had cooperated with the processes of the Court and had not put that ground before a court so as to not waste the Court’s time.

For ASB

• [26] ASB argues that the appeal lacks merit and is an abuse of process. It adopts the reasoning of Gardiner AJ in the decision under appeal, and the Deputy Registrar’s decision in which it was stated that there was “no realistic chance of success on appeal”, that the appeal would not “be pursued by a reasonable and solvent litigant”, and that the findings in the decision under appeal were “robust and based on what seems to be a comprehensive consideration of the evidence put forward by Mr Sgargetta, as well as the clear findings of this Court”. ASB also intends to support the High Court judgment on other grounds, including that the companies were the borrowers, not Mr Sgargetta, who has no standing to bring the second cause of action.
• [27] ASB submits Mr Sgargetta has failed to progress the appeal or explain delay. ASB submits that Mr Sgargetta cannot adequately explain the delay. Further, they submit that his current claim, that the barrister who was engaged for this proceeding has encountered delays due to conflicts of interest with ASB Bank, contains no detail, cannot be substantiated due to a lack of evidence, and is irrelevant to the preparation of a case on appeal and application for a hearing. Further, there is no grant of legal aid, and all justification for the delay falls away.
• [28] ASB further submits that Mr Sgargetta should not be afforded latitude as a lay litigant. He is an experienced litigant, aware of Court rules and knows the requirements placed on litigants to not drag their feet in prosecuting an appeal.
• [29] It is therefore not in the interests of justice to grant an extension of time.
• [30] In relation to security for costs, ASB submits that Mr Sgargetta could have reviewed the security for costs decision made by the Deputy Registrar and is out of time to do so.

Analysis

Security for costs

• [31] There are some procedural quirks in this application to dispense with security for costs. Generally, we would expect a review of a registrar’s decision to take place in a separate process. Instead, Mr Sgargetta appears to raise the review of the Deputy Registrar’s decision in his reply submissions. We consider this is sufficient to constitute an application for review, because the Rules provide for an “informal [review] application”.^[17]
• [32] The Court has broad powers under the Rules to give any directions that seem necessary for the “just and expeditious” resolution of any matter that arises in a proceeding.^[18] This includes the ability to extend or shorten the time appointed by these rules for doing any act or taking any step in a proceeding that the Court thinks is just.^[19] This can be done on the Court’s own initiative, for reasons of urgency or any other reason, and in the case of an extension of time, whether before or after that time has expired.^[20]
• [33] In our assessment, the interests of justice are best achieved if we grant an extension of time for Mr Sgargetta to apply for a review of the Deputy Registrar’s decision and direct that review be heard separately.

Extension of time

• [34] Having regard to the factors in Almond v Read, whether an extension of time should be granted is finely balanced.
• [35] The length of delay is not an issue. The application for a fixture and filing of the case on appeal was due on 19 January 2024. This date of filing was 18 January 2024. Mr Sgargetta has indicated that the reason for the delay is his lack of legal aid and evidence issues caused by ASB, although as noted by ASB, there is no further evidence to substantiate the claims.
• [36] Regarding conduct by the parties, Mr Sgargetta appears to have had issues with time in this Court in the context of a previous appeal.^[21] In that case, Mr Sgargetta’s appeal was filed out of time and an extension was granted. Mr Sgargetta had difficulty obtaining legal aid. He applied for a further extension of time as he had not paid security for costs, nor, as he could not in that situation, filed his case on appeal or made an application for a hearing date within the three-month period as specified r 43(1). The Court was satisfied that, with the main hurdle being security for costs, Mr Sgargetta had taken reasonable steps to address that issue and it was appropriate to grant him an extension of time.^[22] However that conduct is in the context of a separate proceeding to the one at hand.
• [37] It does not appear that an extension of time would cause prejudice or hardship to ASB. The issues to be raised in the appeal do not hold any public interest. Considering that Mr Sgargetta has already previously brought a similar action on the same issue and appealed that up to this Court before bringing the present action, this appeal could be seen as significant to the appellant.
• [38] It does not appear however that the appeal has obvious merit. The Associate Judge used sound reasoning to strike out the appellant causes of action as an abuse of process of the Court and because the second cause of action did not disclose a tenable cause of action. However, we are not satisfied the appeal is obviously hopeless. Given the extension of time relates to procedural requirements Mr Sgargetta sought to fulfil within time, we consider the interests of justice favour granting the extension.

Result

• [39] The application for an extension of time to file the case on appeal and apply for a fixture is granted. The case on appeal and application for a fixture should be filed within 20 working days.
• [40] The application for an extension of time to review the Deputy Registrar’s decision not to dispense with security for costs is granted. The informal application referred to at [31] above is accepted for filing. The application for review of the Deputy Registrar’s decision will be heard separately from this application, on the papers. We direct that:

(a) The appellant’s submissions must be filed and served within 10 working days;

(b) The respondents’ submissions must be filed within 5 working days of service of the appellant’s submissions; and

(c) The application will then be referred to a judge to be determined on the papers.

Solicitors:
MinterEllisonRuddWatts, Auckland for First Respondents

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^[1] ASB Bank Ltd v Sgargetta [2017] NZHC 3097 at [65(a)].

^[2] Sgargetta v ASB Bank Ltd [2021] NZCA 459 at [67].

^[3] Sgargetta v ASB Bank Ltd [2023] NZHC 2413.

^[4] At [37].

^[5] At [69].

^[6] At [68].

^[7] At [85]–[87]; and High Court Rules 2016, r 15.1(1)(d).

^[8] Emphasis omitted.

^[9] Emphasis in original.

^[10] Court of Appeal (Civil) Rules 2005 [the Rules], r 5A(3).

^[11] Rule 5A(3)(a).

^[12] Erwood v Maxted [2009] NZCA 542 at [26].

^[13] Almond v Read [2017] NZSC 80, [2017] 1 NZLR 801 at [38]; and Yarrow v Westpac New Zealand Ltd [2018] NZCA 601 at [4]. This Court in Yarrow explained that the principles discussed by the Supreme Court in Almond v Read in respect of applications under r 29A of the Rules apply to applications under r 43.

^[14] Almond v Read, above n 13, at [38].

^[15] At [38].

^[16] At [39].

^[17] The Rules, r 10B.

^[18] Rule 5(1).

^[19] Rule 5(2).

^[20] Rule 5(3)(a)–(c).

^[21] Sgargetta v ASB Bank Ltd [2018] NZCA 540.

^[22] At [12].