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High Court of New Zealand Decisions |
Last Updated: 3 May 2016
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV-2012-404-007660 [2016] NZHC 536
BETWEEN
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TORBAY HOLDINGS LIMITED
First Plaintiff
TORBAY REST HOME LIMITED Second Plaintiff
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AND
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DUNCAN JOHN NAPIER AND SARA ANN NAPIER
First Defendants
DUNCAN JOHN NAPIER, SARA ANN NAPIER AND CHRISTOPHER JOHN DAVIS AS TRUSTEES
OF THE NAPIER FAMILY TRUST
Second Defendants
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Hearing:
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24 March 2016
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Appearances:
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DPH Jones QC for Plaintiffs
S McAnally for Defendants
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Judgment:
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24 March 2016
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JUDGMENT OF WOOLFORD J [As to stay
application]
Solicitors: Sellar Bone & Partners, Auckland, for Plaintiffs
Keegan Alexander, Auckland, for Defendants
Counsel: DPH Jones QC, Auckland, for
Plaintiffs
TORBAY HOLDINGS LIMITED & ANOR v NAPIER & ORS [2016] NZHC 536 [24 March 2016]
Introduction
[1] On 9 October 2015 I gave judgment in favour of the
plaintiffs, Torbay Holdings Limited and Torbay Rest Home Limited,
against the
defendants, Duncan and Sara Napier and the Napier Family Trust. I subsequently
also awarded substantial costs against
the defendants. The sums, including
costs, ordered to be paid are as follows:
(a) Duncan Napier: $1,836,233.88; (b) Sara Napier: $1,019,923.60;
(c) Napier Family Trust: $287,801.38
[2] In addition, I imposed a constructive trust over a
property at
701A Whangaripo Valley Road, Wellsford, owned by Mr and Mrs Napier to the
value of $233,066.68.
[3] Mr and Mrs Napier have filed a notice of appeal in the Court of
Appeal, dated
6 November 2015, against my judgment. The Napier Family Trust has, however,
not appealed. Mr and Mrs Napier now make application
for a stay of execution
or enforcement of my judgment under r 12 of the Court of Appeal (Civil) Rules
2005 and/or r 17.29 of the
High Court Rules.
Grounds of application
[4] In an affidavit sworn on 5 February 2016, Mr Napier states that the main and only real asset that he and his wife own is their family home at 701A Whangaripo Valley Road, Wellsford. That property secures a number of mortgages totalling
$933,458.21. I am advised during the course of the hearing today that Mr and Mrs Napier are able to meet both principal and interest repayments of those mortgages from their current income. Mr Napier estimates that the property might be lucky to achieve $1.3 million on a forced sale. The Napier Family Trust does, however, have assets in the form of shares and a residential property that does exceed the sum ordered to be paid by the Trust.
[5] Mr Napier states that if their family home is sold they would
effectively be left with nothing, even if the appeal is successful
and the
plaintiffs are required to repay any proceeds they obtained from such sale. Mr
Napier states that the value lost as a result
of a forced sale would be
irrecoverable.
[6] Mr Napier states that they are genuine about the appeal
and have now instructed lawyers to act for them. The
grounds of appeal are
specified as:
(a) The learned High Court Judge’s decision depended heavily upon
inferences and conclusions that were not reasonably available
to the Court on
the admissible evidence;
(b) Due, in part, to the error referred to at (a) above, the learned
High
Court Judge:
(i) Gave insufficient weight to the appellants’ evidence as to
the
terms and conditions of their employment;
(ii) Gave excessive and undue weight to the contrary evidence given on behalf
of the respondents;
(c) Due, in part, to the errors referred to (a) above, the learned High
Court Judge failed to give sufficient weight to the
evidence produced on behalf
of the appellants that demonstrated the extent to which the first named
appellant was required, in the
interests of the respondents, to make cash
payments to suppliers from company funds or, in other cases, from the
appellants’
own resources subject to subsequent reimbursement by the
respondents;
(d) The learned High Court Judge applied the “maelstrom” principle referred to in Sinclair Investments (UK) Ltd v Versailles Trade Finance Ltd [2011] EWCA Civ 347; [2011] 3 WLR 1153 to establish liability when such principle is a remedial one to assist tracing only and by extending the
principle as His Honour did the learned Judge reversed the onus of proof that
the respondents could not, otherwise, satisfy;
(e) Irrespective of and in addition to the foregoing, the hearing
miscarried due to the interlocutory decisions of the Court
given on 9 June 2015
that denied the appellants a legally qualified McKenzie Friend to assist at
the hearing which assistance
would have enabled the appellants to understand the
rules of evidence and procedure and present their case more effectively that
would, in all likelihood, have had a material bearing on the outcome of the
hearing.
[7] On 29 February 2016, the first defendants filed a memorandum in the
Court of Appeal recording a further sixth ground of
appeal and, that is, that I
overstated the losses to the plaintiffs by including the GST
component.
[8] Although not lawyer, Mr Napier believes that there is substance in
the appeal. He reiterates the plaintiffs’ judgment
is secured in so far as
they have charging orders over the family home, a residential property owned by
the Trust and over the assets
of the Trust itself. For that reason, there is no
danger of the plaintiffs being less able to enforce their judgment after
determination
of the appeal, if that is still their right at the
time.
[9] When this application was first called at 10:00 am yesterday, Mr
Napier appeared on behalf of himself and his wife.
Mr Napier had
not filed any submissions in support of the application, but complained he had
not had the opportunity to respond
to the plaintiffs’ submissions, which
had been filed the day before. I, therefore, adjourned the hearing of the
application
to 2:15 pm today for Mr Napier to seek legal advice and assistance.
Mr McAnally appears today, having been urgently instructed by
Mr
Napier.
[10] Mr McAnally has filed helpful submissions in which he has referred to the relevant principles, which are not in dispute. He stresses two factors in particular - Mr Napier’s evidence about the sale of their family home and the novelty and importance of the “maelstrom” principle.
Grounds of opposition
[11] The plaintiffs’ position is that the appeal has no merit
whatsoever. The appeal and stay are said to be an attempt
by the defendants to
continue to avoid liability. As such, the application for stay should not be
granted.
[12] As to the grounds of appeal (noted above), the plaintiffs’
submit that the first three grounds challenge the Court’s
factual findings
and interpretation of the evidence. The factual findings were comprehensive and
damming, so it is said, and there
is no legitimate basis to challenge these
findings and none have (or can) be advanced.
[13] The fourth ground of appeal concerning the application
of Sinclair Investments (UK) Ltd v Versailles Trade Finance Ltd is also
said to be without merit, according to the plaintiffs, as the case was but one
of a number discussed and taken into account
when determining the approach to
assessing the quantum of loss of unauthorised payments.
[14] As to the fifth ground of appeal, the plaintiffs submit that the
issue at trial was a straightforward factual one –
did the defendants have
authority to take or use the money? Mr Napier’s conduct during the Court
hearing showed he quite clearly
understood the nature of the issue and felt
comfortable presenting evidence on it.
[15] The plaintiffs also submit that if a stay is granted they will, as
the successful parties, be injuriously affected. The
defendants have had the
benefit of the plaintiffs’ money for in excess of 10 years and need to
account for it. Their house
at Whangaripo Valley Road, Wellsford, could only
have been built because of the misappropriation of their money and having that
property
sold to pay the judgment debt was more than appropriate.
Discussion
[16] Rule 12(3) and (4) of the Court of Appeal (Civil) Rules 2005
provides:
12 Stay of proceedings and execution
..
(3) Pending the determination of an application for leave to appeal or an
appeal, the court appealed from or the Court may, on 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.
...
[17] According to McGechan on Procedure an application under r
12(3) requires the Court to balance the competing rights of the party who
obtained the judgment appealed from
against the need to preserve the
appellant’s position against the event of the appeal succeeding. Factors
to be taken into
account in the balancing exercise include:
(a) Whether the appeal may be rendered nugatory by the lack of a stay; (b) The bona fides of the applicant as to the prosecution of the appeal; (c) Whether the successful party will be injuriously affected by the stay; (d) The effect on third parties;
(e) The novelty and importance of questions involved; (f) The public interest in the proceeding; and
(g) The overall balance of convenience.
[18] McGechan also notes that, while not included on the above
list, the apparent strength of the appeal now appears to be generally recognised
as an additional factor.
[19] 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.
[20] McGechan on Procedure states that r 17.29 is a separate and
distinct rule from the power to stay execution of a judgment pending an appeal
against it under
s 12 of the Court of Appeal (Civil) Rules 2005. McGechan
states that the onus under r 17.29 is on an applicant for a stay to persuade
the court to exercise its discretion. A “substantial
miscarriage of
justice” must be involved. It is not a substantial miscarriage of
justice for a party that has had the use
of another’s money to be required
to repay that money or for a creditor to be able to take whatever steps it sees
fit to pursue
recovery. A balancing exercise is, again, involved. McGechan
states that the Court must seek to recognise and reconcile the conflicting
interests of both parties in such a manner as will best
preserve the overall
interests of justice.
[21] Rule 17.29 appears to me to impose a higher test than r 12, in
that an applicant under r 17.29 has to persuade the
court that a substantial
miscarriage of justice would be likely to result if the judgment was
enforced.
[22] Mr McAnally notes that the second defendants have not appealed and
that, therefore, their position can only be protected
under r 17.29 as
liable parties. Mr McAnally submits that the commonality of issues and
findings, the subject of this Court’s
judgment are such that if the appeal
brought by Mr and Mrs Napier were to succeed, then enforcement action against
the second defendants,
in the interim, would result in a substantial miscarriage
of justice. Mr McAnally submits, however, that the secondary application
under
r 17.29 may conveniently stand or fall with the application under r 12 of the
Court of Appeal (Civil) Rules.
[23] I, therefore, turn to the principles governing applications under r
12.
[24] Looking in turn to those factors. First, I do not believe that the appeal would be rendered nugatory by lack of a stay. If the appeal is successful, the plaintiffs would be in a position to repay and would be required to repay the defendants any money they may have received from a sale of Mr and Mrs Napier’s family home,
which I found had been built by the defendants using, in part, the
plaintiffs’ money. Mr and Mrs Napier would then be able to
use the repaid
money to buy another family home.
[25] Second, I accept that Mr Napier is genuine in wanting to
prosecute the appeal, having instructed counsel and filed
an
appeal.
[26] The plaintiffs say that they will be injuriously affected by a stay
in that they will not be able to access the fruits of
their litigation.
Counsel submits that the defendants have illegitimately had the use of the
plaintiffs’ money for many years,
causing the rest home business to fall
into disrepair as well as bringing the business to the brink of financial
failure due to the
non-payment of tax. This is, however, not a strong factor in
the plaintiffs favour, in my view. The plaintiffs have three charging
orders
over property and, may, in fact, be able to recover more from the sale of the
family home after the Court of Appeal decision
because of the steady rise in
property values in and around Auckland.
[27] The parties have not shown any affect on third parties. Mr McAnally submits that the novelty and importance of the “maelstrom” principle is a factor, but, in my view, it is not a significant one. I agree that it might be useful for the Court of Appeal to supply guidance as to the parameters of the “maelstrom” principle. But standing back and looking at the matter overall, it will be difficult for counsel to argue that it might affect my primary finding that I had no doubt that Mr Napier had misappropriated company funds to which he was not entitled. I also did not specifically apply the “maelstrom” principle in reaching my findings. Further, the “maelstrom” principle had no relevance to the calculation to salary overpayments of
$281,087.01. There is also no public interest in the proceeding.
[28] As to the overall balance of convenience, Mr and Mrs Napier appear to me to continue to be under considerable financial stress with mortgages totalling
$933,458.21 on their family home, which Mr Napier says is only worth $1.3 million at most on a forced sale. A sale of the family home and the extinguishment of that debt burden may, in fact, be financially beneficial to Mr and Mrs Napier.
[29] Finally, the grounds of appeal do not appear to me to be
particularly strong. They rely on persuading the Court of Appeal
that factual
conclusions I made were not reasonably open to me on the admissible evidence.
Assessing the weight of the evidence
is, however, normally seen as the province
of a trial judge.
Conclusion
[30] Weighing all relevant factors, I am of the view that the application
for a stay of execution or enforcement of my judgment
should be dismissed. The
most important factors in my mind are the fact that the appeal will not be
rendered nugatory if a stay
is not ordered and the fact that grounds of appeal
are, to my mind, not particularly strong. The application is accordingly
dismissed.
[31] The plaintiffs are entitled to costs on a 2B basis, both for
today’s appearance
and for the initial appearance on Wednesday, 23 March
2016.
.....................................
Woolford J
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