Palmerston North City Council v Birch [2012] NZHC 3248 (29 November 2012)

Last Updated: 13 January 2013

IN THE HIGH COURT OF NEW ZEALAND PALMERSTON NORTH REGISTRY

CIV-2012-454-670 [2012] NZHC 3248

BETWEEN PALMERSTON NORTH CITY COUNCIL Plaintiff

AND VANYA BIRCH First Defendant

AND RICHARD BERGHUIS Second Defendant

AND APRIL SUN ON CUBA LIMITED Third Defendant

AND VANYA BIRCH Fourth Defendant

Hearing: 29 November 2012

(Heard at Palmerston North)

Counsel: J. Maasen - Counsel for Plaintiff

V.M. Birch - First and Fourth Defendants

Judgment: 29 November 2012

Reasons: 4 December 2012

_{REASONS FOR DECISION OF ASSOCIATE JUDGE D.I. GENDALL}

Under r 11.5 of the High Court Rules I direct the Registrar to deliver these reasons for decision at 3.30 pm on 4 December 2012.

_{Solicitors: Cooper Rapley, Lawyers, PO Box 1945, Palmerston North}

PALMERSTON NORTH CITY COUNCIL V V BIRCH & ORS HC PMN CIV-2012-454-670 [29 November

2012]

Introduction

[1] Before the Court is an application by the defendants who seek an order staying the execution of a judgment I gave in this proceeding dated 13 November

2012. That judgment granted an order for possession to the plaintiff over the property at 107, 107A and 107B Cuba Street, Palmerston North (“the property”) and required the defendants to vacate the property by 4.00 pm on 27 November 2012. Subsequently the plaintiff consented to an extension of time for possession to be given to 4.00 pm on 30 November 2012.

[2] The application for stay was opposed by the plaintiff and came on for hearing before me on 29 November 2012. At that time I gave an oral decision dismissing the application for stay and requiring the defendants to vacate and deliver up vacant possession of the property by 4.00 pm on 30 November 2012.

[3] In giving that oral decision I indicated that my more detailed reasons for the decision would follow. I now give those reasons.

Background

[4] The defendants’ application for a stay was filed on 22 November 2012 and relied on r 17.29 High Court Rules. In arguments before me on 29 November 2012

Mr Maasen who appeared as counsel for the plaintiff, however, also dealt with r

20.10 High Court Rules although this was not pleaded by or effectively argued on behalf of the defendants by Ms Birch who appeared on their behalf.

[5] I will now turn first to consider the application in terms of the r 17.29 High

Court Rules relied on by the defendants and will then go on to briefly address r 20.10

High Court Rules.

Rule 17.29 High Court Rules

[6] Rule 17.29 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.

[7] Under this rule the onus is on the defendants to persuade the Court that a substantial miscarriage of justice is likely to result if the judgment is enforced – Bay Cities Real Estate Limited v Remax New Zealand Limited, High Court, Napier, CIV-

2010-441-134, 8 June 2011 at [9].

[8] It is clear too that a substantial miscarriage of justice must be “likely to result” if the judgment were enforced, meaning that this is probable rather than possible (Crawford v Odin Enterprises Pty Limited [2009] NZCA at [29]). A miscarriage must be substantial meaning “something more than minor or insubstantial” – Bay Cities Real Estate at [9]. A balancing exercised is required to reflect the conflicting interests of both parties – Enright v Gold Metal Exports Limited (1989) 3 PRNZ 243.

[9] In the present case the defendants have filed no evidence in support of their application. This is despite r 7.20 High Court Rules which requires an affidavit in support of any such application to be filed at the same time as the application itself.

[10] From what material has been filed by the defendants and submissions advanced to me by Ms Birch for the defendants, it would seem that the “substantial miscarriage of justice” the defendants appear to be relying on here is simply the fact that if the judgment is enforced, their business will be forced to relocate from the property as a result of the order for possession, notwithstanding that this judgment is the subject of an appeal to the Court of Appeal filed 21 November 2012.

[11] As to this, however, I am of the clear view that the defendants have known for some time of their need to relocate their business consequent upon their refusal to negotiate the terms of a new lease which the plaintiff had endeavoured to do, and that therefore no miscarriage of justice will occur here. And, in this regard in particular:

(a) The second defendant, Mr Berghuis was in arrears with his mortgagee, Mortgage Holding Trust Company Limited, which held a first mortgage over the property for some considerable time prior to

2012.

(b) Mr Berghuis and indeed all the defendants were fully aware the property was being sold by the mortgagee by way of mortgagee sale well prior to May 2012.

(c) The defendants entered into a number of transactions which have been variously described as “sham” transactions it would appear for no other reason than purely in order to endeavour to defeat a mortgagee sale of the property. Those various sham transactions are described in detail and annexed to the 28 September 2012 affidavit of Mr John Brenkley filed in this proceeding.

(d) The plaintiff purchased the property in question at mortgagee sale in May 2012 and became the registered proprietor on 14 June 2012. It advised the occupiers of the property that it was the new owner and registered proprietor on 6 July 2012.

(e) The plaintiff then offered to negotiate a new lease of the property to the defendants but the defendants effectively rejected this offer to negotiate a lease arrangement.

(f) Accordingly, the plaintiffs advised the defendants of its right to possession of the property in July 2012 and asked the defendants to vacate in August 2012. Clearly the defendants have had since that time to vacate but have taken no steps to do so, merely continuing their existing business with no regard to the plaintiff’s rights as owner.

(g) In the period July-August 2012 the defendants were legally represented by a solicitor Mr David Brett in their dealings with the plaintiff. They have elected however not to engage legal representation with respect to the present proceeding and were unsuccessful in their attempts to defeat the mortgagee sale of the

property by the series of what were described earlier as “sham

transactions”.

[12] This Court granted by way of summary judgment an order requiring vacant possession of the property to be provided to the plaintiff before 4.00 pm on 27

November 2012. The defendants made no effort to comply with this order but instead on 21 November 2012 filed with the Court of Appeal their appeal against this summary judgment decision.

[13] Before me the plaintiff contended that the 14 days allowed in the earlier summary judgment orders to vacate the property represented more than enough time for the defendants to make alternative tenancy arrangements for their business under all the circumstances prevailing here. The plaintiff suggests there are a number of available tenancies in Palmerston North and the defendants in the two weeks provided were quite able to remove their chattels from the property including those that were necessary for the carrying on of their business.

[14] A similar situation to that prevailing in the present proceeding arose in

Trustees Executors Limited v Smith, HC, Auckland, 8 June 2011, CIV-2011-404-

1377 (Toogood J.). In that case the plaintiff Trustees Executors Limited held a mortgage over properties in Remuera which were owned by the defendants’ family trust. The Trust fell behind in payments under the mortgage which was personally guaranteed by the defendant. Trustees Executors applied to the Court for an order for vacant possession and the Court gave judgment accordingly.

[15] The defendant Mr Smith applied to stay the order for vacant possession under r 17.29 High Court Rules on the grounds that he was attempting to sell the property himself, that he was in ill-health and that he wished to leave the property in dignity. In declining Mr Smith’s application, the Court held at [14] and [15]:

(a) The plaintiff has statutory and contractual rights to act as it has in light of the default under the mortgage and the defendants’ obligations as guarantor;

(b) It is by no means uncommon that a mortgagor will be placed in the difficult position of having to find alternative accommodation, but that is not a ground to hold that a substantial injustice will occur if a mortgagee sale is not prevented or delayed; and

(c) Mr Smith has had well over a year to come to terms with the possibly serious consequences of the continued default under the mortgages. The time has come for him to accept that reality; and

(d) I do not think that hardship can be equated with injustice in the present circumstances. The plaintiff has a right to vacant possession; it is a matter for the plaintiff and not the Court to determine when the right should be exercised.

[16] In the case before me the defendants are the former mortgagor of the property and related parties. The plaintiff is the owner and registered proprietor having purchased the property from the mortgagee. The plaintiff clearly has a statutory right to possession and, like the defendant Mr Smith in the Trustees Executors decision, the defendants here have had plenty of time to come to terms with the reality of the mortgagee sale and likewise, the time has come for the defendants to accept that reality. In addition, the defendants effectively for months have paid no rent or occupancy costs for the business premises they occupy. Clearly the plaintiff here has a right to vacant possession and a stay of execution as suggested would only delay the inevitable.

[17] These submissions advanced for the plaintiff, in my view, are compelling. Rule 17.29 High Court Rules is clearly a separate and distinct rule from the power to stay execution of a judgment pending an appeal against it. Here, the defendants have appealed against the summary judgment in question to the Court of Appeal. The present application, however, says that it relies solely on r 17.29. That rule is concerned with the risk of substantial injustice resulting from the enforcement of the judgment not from the judgment itself and therefore on its face the appeal to the Court of Appeal is of little or no relevance to the present application.

[18] In addition, it is appropriate at this point to repeat and note certain matters which were outlined at paras [6], [7], [8] and [9] of my oral decision of 29

November 2012 as follows:

[6] At the conclusion of that argument, which focused not only on r 17.29 High

Court Rules relied upon by the defendants in their application, but also on r

20.10 High Court Rules (which was carefully addressed by Mr Maasen for the plaintiff), I put to counsel for the plaintiff and the defendants a possible scenario. This was to the effect that a possible stay of this proceeding might be contemplated on the basis that some form of security was provided by the defendants and in addition certain imposed conditions met.

[7] In that regard, the plaintiff, in my view helpfully, put forward as a proposition that it might be prepared to contemplate a stay if the defendants were able to confirm that they could meet the following conditions:

(a) Payment of $5,000.00 by way of back rent for the premises within the next 48 hours.

(b) Provision of a bond for up to $15,000.00 for payment of future rent, this bond to be provided also within the next 48 hours.

(c) The defendants entering into a lease of the commercial portion of the property on the standard Auckland District Law Society lease form terms, this lease to be for a term expiring on delivery of the Court of Appeal decision and to be at a rental to be set by an independent registered valuer.

(d) In addition to rent, the defendants as tenants would pay a pro-rata contribution to operating costs for the premises for their period of occupation.

(e) The defendants would enter into a commitment that no fixtures or fittings would be removed from the premises without the consent of the plaintiff.

[8] Having adjourned this matter at 1.30 pm today for some thirty minutes to enable the defendants to consider and take some instructions on whether or not these conditions might be met, when the Court reconvened at 2.00 pm, Ms Birch on behalf of the defendants stated that regrettably they would be unable to meet those suggested conditions.

[9] That said, the position with the current application before me appears clear.

Although the refusal of the stay sought by the defendants may well necessarily here mean that their appeal to the Court of Appeal against the earlier judgment of this Court will be rendered nugatory, the failure by the defendants to offer or put forward any reasonable conditions or security for such a stay (and in this regard the conditions advanced by Mr Maasen for the plaintiff noted at [7] above I consider under all the circumstances here not to be unreasonable) must mean that the stay sought by the defendants should be refused.

[10] In saying that, I note in passing that as long ago as July or August 2012 the plaintiff (after attempts to negotiate a new lease of the premises with the defendants which it was offering at the time but which attempts were by the defendants) had indicated to the defendants that they required possession of the premises. At no time since has any attempt been made by the defendants to provide that possession to the plaintiff which is the registered proprietor of the property having purchased it at mortgagee sale.

[19] For all the reasons outlined above I find that the application for a stay, based here as it is in reliance on r 17.29 High Court Rules, must be dismissed.

[20] For the sake of completeness, however, I will now turn to consider the alternative argument addressed principally by Mr Maasen for the plaintiff before me based upon r 20.10 High Court Rules.

Rule 20.10 High Court Rules

[21] Rule 20.10 High Court Rules provides:

20.10 Stay of proceedings

(1) An appeal does not operate as a stay—

(a) of the proceedings appealed against; or

(b) of enforcement of any judgment or order appealed against.

(2) Despite subclause (1), the decision-maker or the court may, on application, do any 1 or more of the following pending determination of an appeal:

(a) order a stay of proceedings in relation to the decision appealed against:

(b) order a stay of enforcement of any judgment or order appealed against:

(c) grant any interim relief.

(3) An order made or relief granted under subclause (2) may—

(a) relate to enforcement of the whole of a judgment or order or to a particular form of enforcement:

(b) be subject to any conditions for the giving of security the decision-maker or the court thinks just.

[22] Addressing this r 20.10, McGechan on Procedure at para HR 20.10.01 states in part:

The general rule is that a party is entitled to enjoy the fruits of a judgment in its favour. A party seeking a stay would accordingly have to persuade the Court that, if it were not granted, its appeal rights would be rendered nugatory:

Phillip Morris (NZ) Limited v Liggett & Myers Tobacco Co (NZ) Limited [1977]

2NZLR 41 (CA).

In exercising its discretion, the Court will engage in a balancing exercise, weighing up the position of both parties:

Duncan v Osborne Buildings Limited (1992) 6 PRNZ 85 (CA); Dymocks Franchise Systems (NSW) Pty Limited v Bilgola Enterprises Limited [1999] 3 NZLR 239, (1999) 13PRNZ 48 (HC).

[23] Before me Mr Maasen for the plaintiff accepted that if the present application for stay is refused then the defendants appeal to the Court of Appeal would be rendered largely nugatory. But he contended that the Court needed to take into account all the competing interests and prevailing factors in considering this application. This included the fact that the plaintiff simply wants to enjoy the fruits of its legal tenure rights over the property and to use and protect that property in an appropriate way, given that the defendants on a number of occasions have simply rebuffed attempts made by the plaintiff to negotiate a new lease arrangement to enable the defendants to continue their business in the premises.

[24] It is the plaintiff ’s position that the defendants have brought the present position entirely on themselves. As to this, I accept that there is no evidence before the Court of any positive engagement of any sort made by the defendants with the plaintiff, in fact quite the contrary. The attempts by the plaintiff to discuss and conclude a possible lease of the property with the defendants and a new rental whether fair or not have met with little response from the defendants.

[25] And, in so far as prejudice which might be caused to the plaintiff if a stay of the possession order is granted might be concerned, the following matters in my view are important to take into account here:

(a) The plaintiff has been the registered proprietor and owner of the property since 14 June 2012. In that 5½ month period the plaintiff has received virtually no rent for the property and continues to be denied possession by the defendants who, as I see it, remain in unlawful occupation.

(b) The plaintiff notes that it has already been put to significant and unnecessary expense by the defendants due to their continued occupation of the property with no payment of rent of any kind or outgoings payments other than one initial payment of about $900.00. The defendants continue to refuse to vacate the property or to pay rent to the plaintiff and the plaintiff says it will be out of pocket for approximately $30,000.00 after the present application is dealt with, both by way of unpaid rent, outgoings and costs.

(c) Before me, Mr Maasen for the plaintiff signalled a real concern the plaintiff has regarding insurance over the building on the property. He noted that, with the defendants as unlawful occupiers, there may be serious insurance issues in the event of damage or destruction, and this situation simply cannot be allowed to continue.

(d) The plaintiff states that the defendants have previously damaged portions of the property (though the defendants dispute this). Nevertheless the plaintiff has serious concerns that further damage will be caused should the application be granted and the defendants remain in possession indefinitely. This is more so the plaintiff says because it contends that the defendants are impecunious and it is unlikely they will be able to pay compensation for damage to the property or an account of profits in the event their appeal is unsuccessful.

[26] The stay application before me does not specify any period for which the stay is likely to be required. Given that the appeal before the Court of Appeal may well not be heard for a period of a further 6-12 months, the stay could be for some considerable time. So far as that appeal is concerned, the plaintiff contends also that the chances of success on the appeal are remote in the extreme.

[27] Finally, as I have noted at para [8] above, what I consider to be an entirely reasonable offer from the plaintiff was made to the defendants to support a possible stay of the summary judgment orders pending the outcome of the appeal. This was

rejected by the defendants however. In doing so, before me Ms Birch for the defendants stated quite clearly that the conditions required “raised the bar too high” and the defendants were quite unable to meet the suggested payment of $5,000.00 by way of back rent and provide the $15,000.00 bond for future rent for the property within the period suggested or even within any slightly extended period. This is notwithstanding that no rent or occupancy costs of any kind other than the initial

$900.00 odd payment noted at para [25](b) above have been made by the defendants or their business. They have effectively been occupying the property as their business premises for some 5½ months free of rent or any other payment and under these circumstances one would have thought that they would have put aside certain amounts to cover occupancy costs which at some point the business would clearly be required to pay.

[28] Under all these circumstances in undertaking the balancing exercise required to weigh up the position of both parties here, I am left in no doubt that the balance must fall heavily on the side of the plaintiff. Although the defendants’ appeal is likely to be rendered nugatory here if their present application fails as noted above, given the many attempts by the plaintiff to provide reasonable alternative solutions for the defendants to enable them to remain in occupation until their appeal is heard, there is no doubt in my mind that the present stay application must be dismissed.

[29] It is for these reasons that the order dismissing the defendants’ stay application was made in my oral decision of 29 November 2012. That order is confirmed.

Costs

[30] In that decision I reserved costs. So far as costs are concerned, I see no reason why the plaintiff here as the successful party in opposing the present application should not be entitled to an order for costs in the usual way.

[31] Costs are therefore awarded on this application in favour of the plaintiff on a category 2B basis together with disbursements as fixed by the Registrar.

‘Associate Judge D.I. Gendall’