DOVEY AVIATION CONSULTING LIMITED v THE ATTORNEY-GENERAL OF NEW ZEALAND [2021] NZHC 3340

DOVEY AVIATION CONSULTING LIMITED v THE ATTORNEY-GENERAL OF NEW ZEALAND [2021]NZHC 3340 [7 December 2021]IN THE HIGH COURT OF NEW ZEALANDWELLINGTON REGISTRYI TE KŌTI MATUA O AOTEAROATE WHANGANUI-A-TARA ROHECIV 2018-485-972[2021] NZHC 3340BETWEEN DOVEY AVIATION CONSULTINGLIMITEDPlaintiffAND THE ATTORNEY-GENERAL OF NEWZEALANDFirst DefendantJAMES PATRICK RANKINSecond DefendantWARBIRDS OVER WANAKAAIRSHOWS LIMITEDThird DefendantEDWARD RICHARD MILES TAYLORFourth DefendantCHRISTOPHER CHARLES LEEFifth DefendantRONALD JOHN DAVID LAMONTSixth DefendantALLEN VICTOR HOGANSeventh DefendantHearing: 29 November 2021Counsel: C S Chapman for PlaintiffJ A MacGillivray for First and Second DefendantsM S Anderson for Third to Seventh DefendantsJudgment: 7 December 2021JUDGMENT OF MALLON J(Stay application)Introduction[1] The plaintiff company brought a negligence claim against the defendants fordamage sustained to its Yak-3M aircraft at the 2018 Warbirds over Wanaka airshow.It was successful and was awarded damages of $708,975 (inclusive of GST) plusinterest in a judgment delivered on 9 March 2021 (the substantive judgment).1 A costsorder of $250,014.81 plus interest was made in the plaintiff's favour in a judgmentdated 28 May 2021 (the costs judgment).2[2] On 7 and 8 April 2021 respectively, the first and third defendants filed anappeal against the substantive judgment. While there is no appeal against the costsjudgment, success on the appeal against the substantive judgment may led to arevisiting of the costs judgment. The first and third defendants seek an order stayingthe execution of both judgments pending the appeal. The plaintiff opposes theapplication.[3] At the outset of the hearing, counsel for the first and third defendants advisedthat their respective clients would consent to there being a condition of a stay that thedefendants would jointly and severally indemnify the plaintiff for any increase inrepair costs post the date of the substantive judgment. The defendants submit that astay subject to such a condition provides an outcome that is fair to everyone becauseit preserves each party's position. The parties have subsequently agreed the terms ofsuch an indemnity if a stay is to be granted in a consent memorandum dated2 December 2021.PrinciplesSubstantive judgment[4] Rule 20.10 of the High Court Rules 2016 provides the Court with the power toorder a stay pending appeal:1 Dovey Aviation Consulting Ltd v The Attorney-General [2021] NZHC 429.2 Dovey Aviation Consulting Ltd v The Attorney-General [2021] NZHC 1224.(a) r 20.10(1) provides that an appeal does not operate as a stay of theenforcement of any judgment or order appealed against; and(b) r 20.10(2) provides that, despite r 20.10(1), a court "may" onapplication order a stay of enforcement of any judgment or orderappealed against.[5] The "may" in r 20.10(2) means that the Court has a discretion. It is well-established that, in exercising this discretion, the Court is required to balance the rightof the successful party to the fruits of its judgment against the need to preserve thelosing party's position against the prospect of the appeal succeeding. Factors relevantto this balancing exercise are:3(a) whether the appeal may be rendered nugatory by the lack of a stay (inthe present context, this relates to the risk that money paid may not berepaid);(b) whether the successful party may be injuriously affected by the stay;(c) the bona fides of the applicant as to the prosecution of the appeal;(d) the effect on third parties;(e) the novelty or importance of the issues on appeal;(f) the strength of the appeal; and(g) the overall balance of convenience.[6] In this case, there is no suggestion the defendants do not genuinely intend toprosecute their appeal. They continue to hold the view that the plaintiff was whollyor partly responsible for the accident and the outcome of the appeal will be importantto the conduct of airshows going forward. There is no suggestion that there will be an3 Keung v GBR Ltd [2010] NZCA 396.effect on third parties if a stay is or is not granted. This means that the relevant factorsare (a), (b), (f) and (g).Costs judgment[7] In Walker v Castlereagh Properties Ltd, the Court regarded an order for a stayof costs judgments as "requiring consideration beyond that which applies to moneyjudgments generally".4 This was because:[43] Those involved in litigation in this Court are subject to a regimewhereby costs become payable when they are fixed. Successful parties areintended to have (upon the fixing of costs) the cash flow benefits of the coststo which the Court has found them entitled.[44] Where the unsuccessful party appeals a substantive judgment, thejustice in relation to identifying who should be out of pocket for awarded costsin the interim will most often (albeit not invariably) favour the successfulrespondent. The respondent has had to bear costs in either suing the otherparty or defending the other party's unsuccessful claim. That stage of thelitigation is over. If the unsuccessful party elects to embark on a further stageof litigation through appeal it will generally be just that the successful party(through the payment of costs) is reimbursed in the interim for the costsawarded and fixed pursuant to its success.[45] Such an approach will by the nature of the balancing exercise remainsubject to influence by factors of particular relevance in an individual case.One such factor is where the appellant establishes that the successful partymay be unable to repay the awarded costs in the event the appeal is successful.But such factors are more likely to inform the Court's decision on the way inwhich the unsuccessful party should make any payment in the interim (e.g. byoutright payment to the plaintiff or by payment into a stakeholding) rather thanon whether the unsuccessful party should be relieved of the requirement tomake payment pending the determination of the appeal.[8] The defendants did not contend that this approach to a stay of a costs order waswrong or should not be applied.4 Walker as Liquidator of Gibbston Water Holdings Ltd v Castlereagh Properties Ltd [2015] NZHC907 at [42].ApplicationPlaintiff's financial position[9] The defendants submit that the evidence available to the Court suggests thereis a real risk that the plaintiff may be unable to repay the substantive and cost judgmentsums if the appeal is successful.[10] The defendants refer to the following:(a) In the context of a potential security for costs application, in March2019 the plaintiff provided information to the defendants that it hadcash assets of approximately $653,000, comprising a deposit of$350,000 at Kiwibank and the balance being proceeds of the sale of aWanaka property invested with Milford Asset Management.(b) A little more than a year later, in May 2020, Mr Dovey stated in hisbrief of evidence for the substantive hearing that he had not startedrepairs to the aircraft because the plaintiff company did not have thefunds to do so at that stage. He gave this evidence at the trial inJuly 2020.(c) The evidence of Callum Smith at the trial, who repairs and restoresvintage aircraft, was that the value of the wreck would be aroundUSD150,000 to USD200,000 but in the current market (2020) therewould be a "very limited market of people who would look atpurchasing the aircraft in its current condition".(d) The evidence of Mr Smith at the trial was that he would be speculatingas to the market value of the aircraft once it was restored by him,although the value of Yak 3s had been increasing over recent years andit would probably be in the ballpark of USD695,000.(e) The plaintiff has not provided information about whether its assetposition has changed since March 2019 but it is known that it incurredthe substantial costs of proceeding to trial.[11] The defendants submit that it is reasonable to expect the plaintiff to haveprovided information about its ability to repay the judgment sum and the costs awardif the defendants succeed on appeal. The defendants say that the plaintiff has not beenforthcoming about this. This information is only available to the plaintiff and it cannotbe correct that a plaintiff can defeat a stay application by refusing to provideinformation as to its financial position.[12] Relying on the settled position when an application for security for costs ismade, the plaintiff says there must first be an evidential foundation for a risk that itwill be unable to repay the judgment sum before an adverse inference should be drawnwhen a plaintiff fails to provide information about its means.5 The plaintiff says thereis no such evidential foundation. It also submits that the defendants failed to ask theplaintiff to provide evidence of its financial position.[13] I consider that the matters referred to at [10](a) and (b) above provide anevidential basis for legitimate concern that the plaintiff may be unable to repay thejudgment sums if the defendants succeed on appeal. Although the plaintiff's view wasthat no direct request for evidence of its financial position had been made, it was clearfrom the correspondence between counsel that it intended to seek a stay because of aconcern that the plaintiff may be unable to repay the judgment sum or some part of thejudgment sum if the defendants were successful on appeal. It should have beenapparent to the plaintiff that, if it was able to provide satisfactory evidence of itsfinancial position, a stay could have been avoided.[14] Absent updated financial information, I consider this factor favours the stayapplication. The present asset position of the plaintiff is unknown. The Yak-3Maircraft in its current state has not insubstantial value, but may be difficult to sell. It is5 Referring to Nev Mellon Electrical Ltd v AAPC NZ Pty Ltd HC Wellington CIV-2005-485-268,13 December 2005 at [15].not known whether Mr Dovey has the benefit of a substantial current account forexample.Harm to the plaintiff[15] A stay denies a successful party the fruits of their success for a period of time.Because this is for a limited period of time and interest will continue to run on thejudgment sum, this factor will usually be outweighed by the harm to the defendant ifit is successful on an appeal and the plaintiff cannot repay the judgment sum.[16] In this case there is an additional consideration. The plaintiff had understoodthat the defendants' principal concern was that if the judgment sum was paid and spenton aircraft expenditure then the expenditure might exceed the increase in valueresulting from that expenditure. The plaintiff offered not to make a start on the workif the defendants indemnified the plaintiff against an increase in the cost of repairs.The judgment sum of $708,975 reflected the cost of repairs as at May 2020. Theplaintiff has provided an updated estimate from Mr Smith. As at July 2021 heestimates that the cost of repairs had increased by between $71,000 to $106,000. Thiswell exceeds interest on the judgment sum. That increase could be more by the timethe appeal is determined.[17] It is because of this concern that the defendants now propose that a stay besubject to the condition of an indemnity (in the form the parties have agreed). Becausethe defendants will provide this indemnity, the prejudice to the plaintiff from increasedrepair costs if a stay is granted is removed.Prospects of success[18] The defendants submit their appeal is arguable. The plaintiff submits thedefendants have no realistic prospect of complete success on appeal and a discount forcontributory negligence is the best they could hope to achieve. I agree with theplaintiff that the defendants' prospects on appeal does not point in favour of a stay. Itis at best neutral.Costs[19] As counsel for the plaintiff puts it, in the 27 months from the 2018 Warbirdsover Wanaka airshow to the end of the trial in July 2020, the judgment creditorincurred legal costs and disbursements and is justifiably aggrieved that 16 months afterthe trial, and despite a sealed judgment for costs and disbursements of $250,014.81 itis yet to receive any payment. That grievance is understandable. I consider thecomments in Walker v Castlereagh Properties Ltd referred to above are well made.The plaintiff should be entitled to payment of its costs because, unless and until thejudgment is disturbed on appeal, it is the successful party and should have the cashflow benefits of the costs to which the Court has found it entitled.[20] The defendants say that, if the costs judgment is not to be stayed, then theamount should be held by a stakeholder. This is unnecessary in my view. The concernabout whether the plaintiff can repay the costs order if it is revisited and alteredfollowing an appeal is much less than in relation to the judgment sum. The amount ismuch less, the damaged wreck has a not insubstantial value, and there is nothing tosuggest that Mr Dovey (through putting his company in funds to do so if necessary)would not repay the defendants if that is what was ordered. Moreover, the prospect ofany revisiting of the costs order is not high as, even if on appeal it is found that thejudgment sum should be reduced for contributory negligence, that reduction wouldhave to be very substantial to affect the costs order (in view of the level at which the"without prejudice except as to costs" offer was made and the fact that a reduction forcontributory negligence would not change who was the successful party for thepurposes of costs).Overall balance[21] Balancing the various factors, I consider the overall justice:(a) favours a stay of execution of the substantive judgment subject to thecondition set out as an appendix to the consent memorandum dated2 December 2021; and(b) does not favour a stay of execution of the costs judgment.Result[22] The application for an order staying execution of the Court's substantivejudgment is granted subject to the condition set out as an appendix to the consentmemorandum dated 2 December 2021.[23] The application for an order staying execution of the Court's cost judgment isdismissed.[24] Costs on this application are to lie where they fall. The defendants havesucceeded in part but subject to a condition that was offered only at the hearing.Overall, both parties have had a measure of success on the application.Mallon J