ASB BANK LTD v SGARGETTA [2018] NZHC 2061

ASB BANK LTD v SGARGETTA [2018] NZHC 2061 [17 August 2018]IN THE HIGH COURT OF NEW ZEALANDAUCKLAND REGISTRYI TE KŌTI MATUA O AOTEAROATĀMAKI MAKAURAU ROHECIV-2017-404-788[2018] NZHC 2061BETWEEN ASB BANK LIMITEDPlaintiffAND ELLIOT DANIEL SGARGETTADefendantHearing: 29 May 2018Appearances: JJK Spring and A E Simkiss for the PlaintiffDefendant in person (on the papers)Judgment: 17 August 2018JUDGMENT OF WOODHOUSE J(Stay pending appeal)This judgment was delivered by me on 17 August 2018 at 4:00 p.m.pursuant to r 11.5 of the High Court Rules 1985.Registrar/Deputy RegistrarSolicitors / Parties:Mr JJK Spring and Ms A E Simkiss, Minter Ellison Rudd Watts, Solicitors, AucklandMr E D Sgargetta[1] By judgment dated 13 December 2017 (the substantive judgment), I enteredsummary judgment for the plaintiff, ASB Bank Limited (ASB), against the defendant,Mr Sgargetta.1[2] Mr Sgargetta sought an order staying enforcement of the substantive judgmentpending determination of an appeal against it.[3] Mr Sgargetta elected not to appear at the hearing of his application for stay.Mr Sgargetta has acted on his own behalf throughout. He lives in Australia and wasunable to attend the hearing. However, he filed written submissions in support, and adetailed response to submissions for ASB. In addition, and because Mr Sgargetta wasunable to attend, a transcript of the oral hearing was completed and has been forwardedto the parties.Preliminary issue (1): recusal[4] Mr Sgargetta objected to my determining the application for stay because, inhis submission, it is not appropriate that I determine whether there should be a staypending an appeal against my own judgment. This is not a ground for recusal.Applications for stay pending an appeal, as a matter of practice and for good reason,are generally heard by the Judge who delivered the substantive judgment.[5] There was also a general submission which, reduced to the particular, soughtmy recusal from this case if I have any direct or indirect shareholding or other interestin any New Zealand bank and if I have in the past acted as a legal practitioner for anybank. Those matters also do not provide grounds for my recusal.Preliminary issue (2): withdrawal of judgment issued on 13 August 2018[6] By 10 August 2018 I had completed a draft of a reasoned judgment to dismissMr Sgargetta's application for stay. On 13 August 2018 I received a copy of a noticefrom the Court of Appeal that, pursuant to r 43 of the Court of Appeal (Civil) Rules2005, Mr Sgargetta's appeal had expired and was deemed abandoned as at 16 June2018. The notice is dated 9 August 2018.1 ASB Bank Ltd v Sgargetta [2017] NZHC 3097.[7] Having received that notice I delivered, to the parties, a brief judgmentrecording that, given the notice from the Court of Appeal, there were no grounds formaking an order for stay and the application was dismissed accordingly with an orderfor costs in favour of ASB.[8] Soon after the judgment had been received by Mr Sgargetta, this Court receivedcopies of emails and other documents from and on behalf of Mr Sgargetta to the Courtof Appeal objecting to the notice of abandonment of the appeal. When this Courtreceived the documents the brief judgment had not been released for generaldistribution; that is to say, it had gone to the parties only. The case officer responsiblydeferred general distribution. I confirmed his decision and advised the parties, in aminute, that the judgment was not to be acted on by ASB pending any decision by theCourt of Appeal in response to Mr Sgargetta's submissions to the Court of Appeal, orany further direction by me. I made clear that these directions were precautionary onlyand did not indicate any view on the matters raised by and on behalf of Mr Sgargettain respect of the proceeding before the Court of Appeal.[9] Further emails and documents have been sent to this Court on behalf of MrSgargetta. One of the documents amounts to further submissions on the applicationfor stay. The filing of further submissions is inappropriate and I do not intend to haveany regard to them. However, given what has occurred, I have decided to issue thefully reasoned judgment which had been earlier drafted. I have necessarily added whatis contained in this section (paragraphs [6] to [10]), but otherwise the reasons in thisjudgment which lead to dismissal of the application for stay on the merits are unalteredfrom the draft.[10] The brief judgment issued on 13 August 2018 is withdrawn and replaced withthis judgment.The substantive judgment[11] ASB sought summary judgment against Mr Sgargetta in reliance on anunlimited deed of guarantee and indemnity in respect of loans made by ASB to SleepOvers Ltd (in receivership and liquidation). The claim was for $598,340.15, andinterest. Judgment was entered for that sum with leave reserved to ASB to file amemorandum relating to the claim for interest and a claim for indemnity costs.2[12] One of the important factors required to be taken into account on the presentapplication is the apparent strength of Mr Sgargetta's appeal. Because it was asummary judgment application the onus was on ASB to establish that Mr Sgargettahad no defence to the claim. For reasons set out in detail in the substantive judgment,I concluded that Mr Sgargetta did not have a defence.[13] Matters of particular relevance to the strength of the appeal are the following:(a) There was no challenge by Mr Sgargetta to the validity of theguarantees, and related facility agreements.(b) Mr Sgargetta's primary grounds for opposition to summary judgmentwere counterclaims – referred to in the substantive judgment as grounds1 to 4.3 The appeal is directed to my conclusions on grounds 2 and 4.(c) It is uncontroversial law that counterclaims do not constitute a defenceto an application for summary judgment.(d) In addition, and in any event, clause 8.1 in the guarantees precludes aclaim of set-off, and a counterclaim, in response to a claim by ASB.Every payment due is required to be made "without any deduction orwithholding whatsoever (whether in respect of set-off, counterclaim,charges or otherwise)".4The appeal – procedural matters[14] The appeal was lodged with the Court of Appeal out of time becauseMr Sgargetta had sent the notice of appeal to the High Court. There was a telephoneconference before Brown J in the Court of Appeal on 15 March 2018. ASB did not2 See ASB Bank Ltd v Sgargetta [2018] NZHC 2066.3 Grounds 1 to 4, outlined in the substantive judgment at [23]-[28] and dismissed as grounds forrefusing summary judgment for the reasons recorded at [37]-[49].4 The full terms of the clause are recorded in the substantive judgment at [39].oppose Mr Sgargetta's application for an extension of time to appeal, but soughtconditions. The Judge considered the conditions were appropriate and made an ordergranting an extension of time subject to the following conditions:5(a) Mr Sgargetta must file a notice of appeal that clearly and conciselyidentifies his specific grounds of appeal; and(b) Mr Sgargetta must pay $6,600 security for costs into Court within 20working days as required by r 35 of the Rules unless before that periodexpires he files and serves satisfactory evidence that he has made anapplication for legal aid; or(c) if Mr Sgargetta applies for legal aid, and his application is declined,Mr Sgargetta must pay $6,600 security for costs within 10 workingdays of that decision; and(d) if security for costs is required and not paid in accordance with and inthe time specified by in (b) or (c) above, the appeal is struck out.[15] There was a further telephone conference on 25 May 2018, presided over byFrench J. Matters relevant to the present application for stay, recorded in a minutedated 28 May 2018, are:(a) Mr Sgargetta had not filed a notice of appeal as directed in the minuteof Brown J and French J directed that that be done by 18 June 2018 andthat there would be no extension of that deadline.(b) Mr Sgargetta's application for legal aid had been declined but he hadappealed against that decision. Leave was granted to pursue that legalaid appeal.[16] I understand, from a recent enquiry to the Court of Appeal case officer, that:the legal aid appeal was unsuccessful; Mr Sgargetta is considering judicial review ofthe legal aid decision; the matter will not be advanced by the Court of Appeal unlesssecurity for costs is paid.65 Sgargetta v ASB Bank Ltd CA85/2018, minute of Brown J of 15 March 2018.6 This records advice received before the notice of deemed abandonment was issued.Evaluation[17] In the following evaluation of Mr Sgargetta's application I have taken accountof his submissions and documents attached to the submissions which are relevant tothe stay application.The starting point[18] The Court of Appeal has summarised the starting point for applications suchas the present, and the proper approach of the Court, as follows:7As a starting point, a successful party is entitled to the fruits of its judgment.An appellant who seeks to stop this must make an application and show whythe usual consequences of a judgment should not follow. The court will needto balance the competing rights of the party who has obtained judgmentagainst the need to preserve the appellant's position in the event of the appealsucceeding.8[19] The cases have identified a range of factors as included amongst those to betaken into account in the balancing exercise.9 These factors, and some others raisedby Mr Sgargetta, are addressed under the following sub-headings. The primaryarguments for Mr Sgargetta and ASB are taken into account under appropriate sub-headings.Will the appeal be rendered nugatory if there is no stay?[20] If a successful appeal by Mr Sgargetta would be rendered nugatory because, inthe meantime, ASB enforced the judgment against him, this would be a substantialpoint in favour of granting the application for stay. If a successful appeal will not berendered nugatory, this would be a telling point against making an order for stay.[21] For reasons recorded in the following paragraphs, Mr Sgargetta's right ofappeal will not be rendered nugatory if there is no order for stay.7 Brook Valley Community Group Inc v Brook Waimarama Sanctuary Trust [2017] NZCA 377,(2017) 23 PRNZ 598 at [10].8 Duncan v Osborne Buildings Ltd (1992) 6 PRNZ 85 (CA) at 87.9 See Dymocks Franchise Systems (NWS) Pty Ltd v Bilgola Enterprises Ltd (1999) 13 PRNZ 48(HC) at [9]; upheld on appeal in Dymocks Franchise Systems (NWS) Ptd Ltd v Bilgola EnterprisesLtd (1999) 13 PRNZ 48 (CA). See also Keung v G B Arthur Robert Investments Ltd [2010] NZCA396, [2012] NZAR 17 at [11].[22] If the appeal proceeds, and the Court of Appeal concludes that summaryjudgment should not have been entered, but in the meantime ASB has recovered all orpart of the judgment sum, there is no basis for concluding that ASB would not be ableto repay the money if directed to do so. I reject Mr Sgargetta's submissions to thecontrary, which are founded on references to the Commission of Inquiry in Australiainto banking, including the conduct of ASB's parent, the Commonwealth Bank ofAustralia.[23] ASB submitted that Mr Sgargetta's appeal would not be rendered nugatory ifMr Sgargetta was adjudicated bankrupt before the appeal was determined, citingJeffreys v Morgenstern.10 Mr Sgargetta expressly accepted that bankruptcy would notrender his appeal nugatory, although he submitted that it would "make the appealprocess more convoluted than it already is". I am satisfied that Mr Sgargetta'sbankruptcy will not render the appeal nugatory, for the reasons noted in Jeffreys vMorgenstern.[24] In addition, if ASB seeks to enforce the judgment by applying for adjudicationin bankruptcy, the application will have to be made in Australia because Mr Sgargettais resident in Australia. Section 40(1)(g) of the Australian Bankruptcy Act 1966 has aprovision which is in substance the same as to s 17(1)(d)(ii) and (vii) of the NewZealand Insolvency Act 2006. Both provisions provide, in effect, that an act ofbankruptcy will not have been committed if the debtor satisfies the Court that he orshe has a counterclaim, set-off or cross-demand equal to or exceeding the amount ofthe judgment debt, being a counterclaim, set-off or cross-demand that could not haveset up in the action or proceeding in which the judgment or order was obtained. If abankruptcy proceeding is commenced in Australia before the appeal has beendetermined, and if Mr Sgargetta seeks to invoke s 40(1)(g) of the AustralianBankruptcy Act then he might argue, albeit contrary to one of his arguments on theappeal, that he could not set up the claims in opposition to the summary judgmentapplication given my conclusion on that application.10 Jeffreys v Morgenstern [2014] NZHC 671 at [22]-[23].The apparent strength of the appeal[25] Mr Sgargetta's principal ground of appeal is that he has a good claim againstASB for damages in a sum equal to or exceeding the judgment in favour of ASB. Thisis founded on allegations that ASB took direct steps to market the mortgagedproperties which adversely affected the value of the properties, and that receiversappointed by ASB to Sleep Overs Ltd, the owner of the properties mortgaged to ASB,sold the properties at an undervalue. I will address the merit of this ground of appealunder the present heading, together with a new contention that there was fraud by anASB employee, Ms Natasha Rowe. A third ground of appeal is that I wrongly refusedto adjourn the hearing of the summary judgment application. I will deal with thatcontention below when considering other arguments by Mr Sgargetta that he did notget a fair hearing in the High Court.[26] The principal ground of appeal amounts to a contention that Sleep Overs Ltd,as the owner of the properties that were sold by the receivers, is entitled to recoverdamages because the properties were sold at an undervalue. Mr Sgargetta's documentdescribed as 'Grounds of Appeal' is in fact a lengthy and discursive argument, but theessence of his contention is that damages are recoverable because of breach of s 176of the Property Law Act 2007. This ground, expanded in the further arguments in thenotice of appeal, do not support a contention that summary judgment was wronglyentered. Reasons for that opinion are recorded in the substantive judgment, but areappropriately summarised here:(a) The claims are plainly counterclaims. Counterclaims do not provide adefence to an application for summary judgment. I am not persuadedby Mr Sgargetta's submissions that the matters he advances by way ofcounterclaim also amount to a defence.(b) Section 176 prescribes the duty of reasonable care owed by a mortgageeexercising a power to sell mortgaged property. ASB was the mortgageeof the properties, but ASB did not sell the properties. The propertieswere sold by the receivers of Sleep Overs Ltd, the owner of theproperties. The receivers were not ASB's agents.11 A contention thatASB has liability for the acts of the receivers is not tenable.(c) Clause 8.1 of the guarantees is a further high hurdle for Mr Sgargetta.12(d) Mr Sgargetta took no steps, prior to hearing of the summary judgmentapplication, to plead affirmative defences or claims of set-off, orcounterclaims, and has still taken no steps to do so.[27] Mr Sgargetta in his grounds of appeal, and in submissions, contends that adecision of the Court of Appeal in Robertson v ASB Bank Ltd supports his primaryargument.13 This included a submission (in the grounds of appeal), that the Court ofAppeal in Robertson "found that a genuinely triable case for a claim that exceeds theamount for which judgment has been given against a debtor under s 176 of theProperty Law Act of 2007 is a defence against an application for summary judgment".[28] There was no finding to that effect in Robertson, and that case does nototherwise indicate that Mr Sgargetta has a reasonably arguable case on appeal thatsummary judgment should not have been entered. Robertson was an appeal against aHigh Court decision refusing to set aside bankruptcy notices. There were two groundsof appeal. One was against the Associate Judge's refusal to grant an adjournment.That has no present relevance. The second ground of appeal was that the Judge waswrong in refusing an application to set aside the bankruptcy notices on the groundsthat they had a qualifying cross-claim that they had been unable to raise in thesummary judgment proceedings. The argument on appeal was directed tos 17(1)(d)(ii) and (vii) of the Insolvency Act 2006, the provisions of which were notedearlier. The Court of Appeal did not hold that a claim by a debtor under s 176 of theProperty Law Act is a defence against an application for summary judgment.11 See the substantive judgment at [48].12 See above at [13](d).13 Robertson v ASB Bank Ltd [2014] NZCA 597.[29] The other ground of appeal, to be considered in this section, is that the"summary judgment would allow ASB to profit on fraud by Natasha Rowe".14 MsRowe was an employee of ASB, but there is no merit in this ground of appeal for thefollowing reasons:(a) Mr Sgargetta's allegations relate to alleged conduct of Ms Rowe whenshe was an employee of the Bank of New Zealand, not ASB.(b) Although Mr Sgargetta made allegations against Ms Rowe in thevoluminous documents filed in opposition to the summary judgmentapplication, and in some submissions, the allegations were notidentified as grounds of opposition.(c) No cause of action arising out of these allegations has been identified.[30] An assessment of the merits of the appeal does not support Mr Sgargetta'sapplication for stay.Stay of enforcement has already been declined in this Court[31] In the substantive judgment, having concluded that ASB had established thatthere was no defence, I determined, in exercise of the discretion contained in r 12.12(2)of the High Court Rules, that this was not a case warranting stay of enforcement of thesummary judgment in favour of ASB. The present application for stay, pending anappeal, arises in a context different from my earlier determination that there should beno stay. It is nevertheless a material factor. The reasons for declining stay underr 12.12(2) bear on the present application and do not support the present application.15Will the appeal proceed expeditiously to a hearing?[32] There can be no confidence that the appeal will be prosecuted expeditiously byMr Sgargetta. This is indicated by Mr Sgargetta's approach in the High Court.16 It is14 These allegations are recorded in paragraphs 71-78 of the document filed by Mr Sgargetta as anotice of appeal.15 See the substantive judgment at [58]-[59].16 See the substantive judgment at [3]-[5].reinforced, and in a direct way, by Mr Sgargetta's conduct of his appeal, as earlieroutlined in this judgment. The essence is that judgment in this Court was entered on13 December 2017. There are rules requiring appeals to be advanced expeditiously toa hearing, but almost nine months after judgment was entered in the High Court theappeal has not been advanced at all. Mr Sgargetta does not even have the necessaryleave to appeal out of time.[33] The factor now being considered is sometimes referred to as the appellant'sbona fides as to prosecution of the appeal. If I am correct in my understanding thatMr Sgargetta is considering judicial review of the decision refusing his application forlegal aid, with the original refusal of legal aid having been appealed, there is anindication of a lack of bona fides – diligent pursuit of the appeal in good faith.[34] This factor also supports dismissal of the stay application.Did Mr Sgargetta have a fair hearing in the High Court?[35] As noted earlier, an apparent ground of appeal is that I refused an applicationto adjourn the hearing of the summary judgment application. This is one of severalallegations by Mr Sgargetta that he did not get a fair hearing in the High Court.[36] Mr Sgargetta expressly contends in his grounds of appeal that in the hearingbefore me he requested an adjournment and I refused the application (at paragraphs27 and 28 of the grounds of appeal). Mr Sgargetta did not seek an adjournment at thehearing of ASB's summary judgment application. Unless Mr Sgargetta has seriousproblems with his memory, I also find it hard to believe that he mistakenly recollectedthat he may have sought an adjournment. He had come from Australia for the hearing,presumably at his own expense, and had come fully prepared to oppose the summaryjudgment application which he did in a hearing, which lasted the entire day, havingbeen set down for a half day.[37] Based on this incorrect contention, Mr Sgargetta further argued that, had Igranted his alleged request for an adjournment, he would have found lawyers torepresent him and this was essential to enable him to have a fair hearing because he isnot a lawyer and he is also an Australian citizen unfamiliar with New Zealand's rulesand laws. The expanded argument from the false premise is disingenuous. Theproceeding was served on Mr Sgargetta on 15 May 2017. The hearing on 4 September2017 was set down on 7 June 2017. I agree with ASB's submission that Mr Sgargettahad ample time to find and instruct a lawyer. Mr Sgargetta did make three applicationsto adjourn the hearing to other Judges in the course of case management conferencesin July 2017. All three were refused. None of Mr Sgargetta's applications was madeon the grounds that he needed time to instruct a lawyer.[38] In respect of a number of Mr Sgargetta's claims, I concluded that there was noevidential foundation for them. Mr Sgargetta now claims that the evidentialfoundation was in documents which he had originally filed in opposition to thesummary judgment application, but which had been ruled inadmissible in some of theearlier case management conferences. Mr Sgargetta now claims, apparently as anotherground of appeal, that he was unfairly disadvantaged because the documents ruledinadmissible contained the evidential foundation. There is no merit in this argument.The documents were rejected by Court order, and there was no appeal against thosedecisions. In any event, the material in the documents earlier rejected, or thesubstance, was in substance repeated in a very large number of documents which Iruled admissible at the commencement of the hearing before me. These matters aresummarised in the substantive judgment.17[39] The Supreme Court of the United Kingdom has held, contrary to the thrust ofa number of Mr Sgargetta's arguments, that a lay litigant's lack of representationshould not justify "a lower standard of compliance with rules or orders of the court"and a lay litigant should "familiarise himself with the rules which apply to any stepshe is about to take".18[40] In spite of the onus on Mr Sgargetta, substantial indulgences were granted tohim to seek to ensure that he did get a fair hearing. In addition, the deficiencies in MrSgargetta's presentation of a very large number of documents which were admitted,for the hearing, were materially rectified by ASB's counsel who put the documentsinto a comprehensible form.17 At [3]-[6].18 Barton v Wright Hassall LLP [2018] UKSC 12 at [18].[41] There is no merit in any of Mr Sgargetta's arguments that he did not get a fairhearing. The content of some of the assertions adds weight to a conclusion that theCourt's discretion on an application for stay should not be exercised in Mr Sgargetta'sfavour unless there are strong countervailing factors in support of an order for stay.None of the factors so far considered support stay, a number point against stay, and theremaining matters do not assist Mr Sgargetta.Will ASB be injuriously affected by a stay?[42] This is a conventional factor often taken into account. There was no argumentfor ASB of any particular adverse effect if stay is granted beyond its basic entitlement,to enjoy the fruits of the judgment it has obtained.The effect on third parties[43] ASB has not submitted that there are third parties who will be affected by anorder for stay. Mr Sgargetta submitted that enforcement of the judgment against himwill cause hardship to his family, including, he says, his parents and parents-in-lawwho he asserts, without evidence from them, invested money in the investments madethrough Sleep Overs Ltd. This does not provide grounds for stay. Enforcement byASB of its judgment against Mr Sgargetta will not prevent legal proceedings againstASB, or others, to seek to recover losses alleged to have been caused by wrongful actsof ASB or those others.The absence of security from Mr Sgargetta[44] Mr Sgargetta has not supported his application for stay with any proposal toprovide security to ASB for any part of the judgment sum. ASB advanced this pointas another factor counting against grant of stay. It is a factor that does count againstan order for stay, although I do not attach much weight to it.Is there any novelty or importance in the questions on appeal?[45] This is a factor conventionally referred to. There is no novelty or importancein the questions for appeal.Is there any public interest in the proceeding?[46] This is not a proceeding in which there is any public interest justifying stay.Mr Sgargetta submitted that there is public interest because the receivership andsubsequent liquidation of Sleep Overs Ltd, and the sale of the properties, was reportedin local media. That does not point to relevant public interest which might lend supportto an application for stay.What is the overall balance of convenience[47] I am satisfied that, in assessing the matter overall, the weight of the argumentis substantially in favour of ASB.Result[48] Mr Sgargetta's application for stay of enforcement of the substantive judgmentis dismissed.[49] ASB is entitled, pursuant to the guarantee and related contractual documents,to its actual legal expenses and disbursements, reasonably incurred, but excludingGST.19 There is an order that expenses, excluding GST, reasonably incurred by ASBwith its solicitors for legal fees and disbursements relating to Mr Sgargetta'sapplication for stay are recoverable from him.____________________________________Woodhouse J19 This entitlement is discussed in the separate judgment dealing with ASB's claim for additionalinterest and costs on the summary judgment application.