THE COMMISSIONER OF INLAND REVENUE V CENTRAL EQUIPMENT CO LIMITED HC TAU CIV 2003-470-923

THE COMMISSIONER OF INLAND REVENUE V CENTRAL EQUIPMENT CO LIMITED HC TAU CIV 2003-470-923 28 February 2007IN THE HIGH COURT OF NEW ZEALAND TAURANGA REGISTRY CIV 2003-470-923IN THE MATTER OF the Companies Act 1993 BETWEEN THE COMMISSIONER OF INLAND REVENUE Plaintiff AND CENTRAL EQUIPMENT CO LIMITED Defendant Hearing: 27 February 2007 (Heard at Hamilton) Counsel: J Oliver for plaintiff Mr CJ Faloon, given leave for the defendant Judgment: 28 February 2007 at 09:45JUDGMENT OF ASSOCIATE JUDGE FAIRE [on application for stay]Solicitors: Crown Law Office, PO Box 2858, Wellington for plaintiff CJ Faloon, 10B Taramea Rise, Tauranga, defendant[1] Mr Faloon filed an application on 3 November 2006. It seeks an order that execution on my decision given on 2 October 2006 be stayed. My decision on 2 October 2006 was given on a default of appearance basis. It followed my judgment of 10 May 2006 given on the defendant company's application to set aside a statutory demand and which included orders adjourning a substantive proceeding against the defendant company for the appointment of a liquidator. There were a series of adjournments that followed up to 2 October 2006, some of which involved the personal appearances of Mr Faloon. [2] In my decision of 2 October 2006 I dismissed applications for joinder and to review my judgment of 10 May 2006 on the basis that there was no power to review it: Talyancich v Index Developments Ltd [1992] 3 NZLR 28. I placed the defendant company into liquidation and appointed liquidators and ordered that costs be paid. [3] On 5 February 2007 counsel for the Commissioner of Inland Revenue filed a memorandum with the Court. The operative part of that memorandum is paragraph 7 wherein advice is given that the Commissioner consents to an order staying the order I made on 2 October 2006 subject to the condition that the appeal to the Court of Appeal is diligently prosecuted by Mr Faloon and an early fixture sought. [4] On receipt of the above memorandum I issued a minute to the parties as follows:[1] Counsel for the Commissioner of Inland Revenue has filed a memorandum dated 31 January 2007. In that memorandum he indicates the plaintiff is prepared to consent to an order staying my judgment of 2 October 2006 subject to the condition that the appeal to the Court of Appeal will be diligently prosecuted by Mr Faloon and an early fixture sought and reserving leave to the plaintiff to further apply to myself if that condition is not met. [2] Counsel sensibly suggests that an order on the above basis should be made and that the appearances of counsel and Mr Faloon should be excused on 27 February 2007. [3] I ask, in the circumstances, that Mr Faloon advise his consent to the position outlined in this minute as soon as possible. If that consent if forthcoming, I shall make an order accordingly.[5] My Case Officer received advice that Mr Faloon wished the matter to proceed. [6] There next followed an application by Mr Faloon for an adjournment of the hearing. It was met with a minute from myself in which I said:In view of the memorandum filed by counsel for the Commissioner of Inland Revenue which substantially, if not entirely, removes any opposition to the order sought there is no good reason to adjourn the application. Accordingly, the application will be called at 2.15pm on 27 February 2007.[7] The application records that it is made in reliance on r 12(3)(a) of the Court of Appeal (Civil) Rules 2005. Rule 12(3)(a) 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[8] The following brief summary of principle that applies where an application for stay pending the hearing of an appeal is being considered is now set out. a) Unless an order is made under Rule 9 of the Court of Appeal Rules 1997, an appeal does not operate as a stay of execution under the decision appealed from. Court of Appeal Rule 9(3); b) In any stay application the Court must reconcile two competing interests. The first is the right of the successful party to have the benefit of the judgment. The second is the need to ensure that any appeal is not made fruitless. Duncan v Osborne Building Ltd (1992) 6 PRNZ 85 at 87; c) It is often possible to secure an immediate position so that the two competing interests are taken into account by imposing conditions or undertakings. The nature of such conditions or undertakings depends upon the particular circumstance of the case before the Court. Duncan v Osborne Building Ltd;d) In Dymocks Franchise Systems (NSW) Pty Ltd v Bilgola Enterprises Ltd 13 PRNZ 48 at 50 Hammond J mentioned a number of additional factors, namely: i) The bona fides of the applicants as to the prosecution of the appeal; ii) The effect on third parties; iii) Novelty and importance of questions involved; iv) Public interest; v) The overall balance of convenience. [9] This judgment does not purport to determine the substantive rights of the parties. That now is a matter which must be addressed to the Court of Appeal. What the respondent has done, in relation to the appeal, is to offer no opposition to the making of the order sought. A rider must be attached, however, and that is the reservation of leave to apply to lift the stay in the event that the appeal is not prosecuted. [10] Before leaving this matter it is appropriate to record briefly the discussion I had with counsel for the Commissioner and Mr Faloon. It arises from the fact that the copy of the application for special leave to bring a civil appeal, which is on the High Court file, records as the first ground that notice of the hearing on 2 October was not given to Mr Faloon before the order was made putting the company into liquidation. I have referred, in [1] of this judgment, to the series of calls and adjournments which occurred following my judgment of 10 May 2006. Mr Faloon asserts that he did not get notice of the 2 October 2006 hearing date. If that position arose from through some default on counsel for the Commissioner's part so that it can rightfully be established that Mr Faloon had no notice of the hearing on 2 October 2007, there may well be a foundation for the proposition that the judgment and orders made were irregularly obtained. If that is the case, then the consequenceis as stated by Greig J in O'Shannessy v Dasun Hair Designers Ltd [1980] 2 NZLR 652 at 654:The authorities are plain that where a default judgment is irregularly obtained the defendant is entitled ex debito justitiae to a setting aside. It is to be noted further that it is an irregularity in obtaining the judgment rather than the irregularity in the judgment itself.[11] Mr Oliver advised that he would be investigating this matter further. He indicated that, if in fact, there was found on his investigation to be substance to the complaint he would invite Mr Faloon to join him in a joint memorandum confirming that position and inviting the Court to set aside the orders ex debito justitiae. I make it plain that I am making no ruling or determination on these matters but I am simply making these comments to assist the parties as to an appropriate outcome, if the facts establish a basis for it.Orders[12] I order that execution on the decision given in this proceeding on 2 October 2006 be stayed. I reserve leave to the parties to apply on seven day's notice for an order lifting the stay. Although I do not limit the grounds upon which such leave may be activated, it is anticipated that it would be so activated if the current appeal is not prosecuted diligently.Costs[13] I reserve costs. Mr Faloon is a lay litigant and not, in normal circumstances, entitled to costs: re Collier (a bankrupt) [1996] 2 NZLR 438. The position is otherwise in respect of disbursements. I have deliberately reserved costs because I am aware the Commissioner has taken the position he had because of steps which, he says, were allegedly taken by Mr Faloon in relation to the appeal subsequent to filing the application for stay. Further, the outcome of the whole matter, which is the subject of the appeal, may well be dependent upon the question of notice, to which Ihave briefly referred in this judgment. _____________________ JA Faire Associate Judge