HUM HOSPITALITY LTD v STYLO MEDICAL SERVICES LTD [2016] NZHC 1849

HUM HOSPITALITY LTD v STYLO MEDICAL SERVICES LTD [2016] NZHC 1849 [10 August 2016]IN THE HIGH COURT OF NEW ZEALANDAUCKLAND REGISTRYCIV-2016-404-000636[2016] NZHC 1849BETWEEN HUM HOSPITALITY LIMITEDPlaintiffAND STYLO MEDICAL SERVICES LIMITEDDefendantHearing: 8 August 2016Appearances: R O Armitage (director of Plaintiff)R O Parmenter for DefendantJudgment: 10 August 2016JUDGMENT OF GILBERT JThis judgment is delivered by me on 10 August 2016 at 11.30 ampursuant to r 11.5 of the High Court Rules......................................................Registrar / Deputy RegistrarCounsel:R O Parmenter, Barrister, AucklandCopy to:PlaintiffIntroduction[1] Hum Hospitality Ltd (Hum) applies for a stay of execution of a costs order made by Courtney J in a judgment delivered on 27 June 2016.1 The order for costs was made following a successful application by Stylo Medical Services Ltd (Stylo) for an interim injunction restraining Hum from using premises it leases from Stylo for purposes not authorised under the lease. Hum seeks a stay claiming that it cannot afford to pay the costs, which amount to approximately $9,000, and that, unless a stay is granted, Hum is likely to be liquidated and will be unable to pursue its substantive claim in this proceeding against Stylo.[2] The application came before me in the Duty Judge list and must be disposed of promptly because Stylo has already issued a statutory demand against Hum for payment of the costs.[3] The application is made pursuant to r 17.29 of the High Court Rules which empowers the Court to grant a stay of enforcement of a judgment if it is likely that a substantial miscarriage of justice would occur otherwise.Representation[4] Hum was represented at the hearing of the application for interim injunction before Courtney J by Mr Hollyman and Ms Schumacher. However, Rosanne Armitage, a director of Hum, sought leave to represent Hum for the purposes of this application.[5] The general rule is that a company must be represented by a solicitor in Court proceedings. This rule was affirmed by the Court of Appeal in Re G J Mannix Limited.2 However, the Court has a discretion to depart from the rule in exceptional circumstances. This was explained by Cooke J in Mannix:3In general, and without attempting to work out hard-and-fast rules, discretionary audience should be regarded, in my opinion, as a reserve or occasional expedient, for use primarily in emergency situations when1 Hum Hospitality Limited v Stylo Medical Services Limited [2016] NZHC 1418.2 Re G J Mannix Limited [1984] 1 NZLR 309 (CA).3 At 314.counsel is not available or in straightforward matters where the assistance of counsel is not needed by the Court or where it would be unduly technical or burdensome to insist on counsel. Especially on minor matters, cost-saving could also be a relevant factor. A 'one-man' company might be allowed tobe represented by its owner if the Judge saw fit in a particular case. But it could not be right, for instance, to issue some sort of tacit continuing or general licence to an unqualified agent to appear in winding up or any other class of proceedings.[6] The reasons why it is unsatisfactory for Ms Armitage to continue to represent Hum in this proceeding include:(a) Ms Armitage is not able to represent Hum's interests competently. Hum's interests are not confined to those of Ms Armitage as a shareholder. If Hum is teetering on the brink of insolvency as Ms Armitage suggests, the interests of its creditors must also be considered.(b) Ms Armitage is not able to provide meaningful assistance to the Court, because she has no legal training. By way of illustration, sheinitially formulated Hum's application in reliance of r 15.1(3) of the High Court Rules. This rule is not relevant to the application. It was only after Mr Parmenter helpfully drew Ms Armitage's attention to r 17.29 that an amended application was filed overcoming that fundamental defect.(c) Ms Armitage is unable to differentiate between what is relevant and what is not and does not understand the difference between evidence and submissions. The affidavit she prepared in support of the application is voluminous and full of submission and irrelevancy. It has 119 paragraphs of text and 109 pages of exhibits, hardly any of which is relevant to the present application. This results in wasted costs for Stylo and compromises the efficient use of Court resources.(d) Ms Armitage has sworn the affidavit filed in support of the application. This means that she is both witness and advocate. This is not satisfactory.(e) Ms Armitage is a principal participant in the dispute which has been ongoing for some years and she now lacks objectivity. This further compromises her ability to represent Hum effectively and assist the Court adequately.[7] These observations are not intended as a criticism of Ms Armitage. Rather, I mention them because I would not want her to feel encouraged by the fact that I permitted her to represent Hum at the hearing in the Duty Judge list as any sort of endorsement of this practice for the future conduct of this proceeding. I note that Mr Parmenter withdrew his objection to Ms Armitage representing Hum, but solely for the limited purpose of the present application.Is a stay required to avoid a substantial miscarriage of justice?[8] It is apparent from reading Courtney J's judgment that Stylo acted reasonablyin seeking an interim injunction and that this was only required because of Hum'spersistent unauthorised use of the leased premises to generate income to meet its obligations. The following passages from the judgment demonstrate this:[34] I start from the point that, against a background of previous non- compliance, including an abatement notice, Hum was advertising rooms in the villa for rent on a commercial basis as late as 4 May 2016. It seems to be accepted that Hum has removed those listings. But it is disturbing that Hum appears not to have grasped that what it was doing was in breach of both its lease and the District Plan, notwithstanding that the Council had previously advised that it could not let out rooms on a commercial basis. It is legitimatefor Stylo to have concerns about Hum's understanding of and willingness tocomply with its lease obligations in this regard.[37] In these circumstances I am satisfied that there is a serious question as to whether the villa is being used for a residential purpose other than just accommodation for Ms Armitage and her family and is therefore in breach of the lease and the District Plan. Given the history of advertising rooms for rent there is also a serious question over whether there will be further similar breaches of the lease.[38] I turn, then, to consider where the balance of convenience lies. The sole basis on which the application is advanced is that the premises will be uninsured at the end of July. Stylo faces the task of trying to obtain fresh insurance, which it says it is unable to do because it must disclose theinformation it has about Hum's use of the premises to any prospective insurer.[41] Stylo's insurance was already seriously compromised by Hum'snon-compliant use of the premise. Since October 2015 Stylo has been effectively uninsured for any loss or damage resulting from most of the uses to which Hum has been putting the premises. For example, the endorsement was in place when Hum had the villa listed on Airbnb and letsbookhotel.com in early 2016. Had there been any incident of loss or damage resulting from the residential use of the villa during that time the policy would not have responded at all.[44] The balance of convenience plainly favours Stylo in this case. Stylo has a contractual obligation to its mortgagee to insure the premises. Hum could not rebuild if its activities resulted in the loss of or damage to the villa. Having the building insured is a benefit to both Stylo and Hum (Ms Armitage herself has expressed concern at the need for insurance given the extent of work that Hum has done to the building).[47] In assessing the overall justice of the case I recognise that the evidence as to non-compliance is not clear-cut and that, on previous occasions where non-compliance has been established Hum has desisted. But for a commercial landlord the existence of insurance, particularly when it has an obligation to its mortgagee, means that there is little margin for error. The overriding consideration at present, and one that affects both the parties, is that the villa is already subject to the endorsement and will soon be entirely uninsured. So long as there is the risk of non-compliant use, finding alternative insurance will be extremely difficult. For these reasons, I consider that the overall justice of the case favours Stylo.[9] In terms of r 14.8, costs on interlocutory applications are generally fixed when the application is determined and become payable when they are fixed. However, in cases where the application is for an interim injunction, it is not uncommon for costs to be reserved, or fixed on the basis that they will follow the outcome of the substantive proceeding. This is particularly so where the outcome of the application for interim injunction turns on the balance of convenience.4[10] Courtney J was in the best position to determine how costs should be dealt with on the application for interim injunction having carefully considered all of the evidence. Her Honour concluded that Hum should pay costs to Stylo on the application, assessed on a 2B basis, now.4 See Gibbston Downs Wines Ltd v Perpetual Trust Ltd HC Christchurch CIV-2010-409-001716, 6 October 2010, acknowledged in Nestle New Zealand Ltd v Mars New Zealand Ltd[2014] NZHC 2369.[11] Stylo had good reason to bring the application and Hum appears not to have been justified in resisting it. On the face of it, there is no reason why Hum should not have been required to pay costs on the application in any event, irrespective of the outcome of the substantive proceeding. Hum has not appealed against the costs order.[12] The general rule is that a judgment creditor is entitled to the fruits of its judgment. The main exception is where a stay of execution is ordered pending an appeal so that an appeal right is not rendered nugatory. This does not apply here.[13] The essence of Hum's application is that it claims to be unable to pay thecosts and is therefore likely to be liquidated by Stylo unless a stay is ordered. If that happens, Hum will be prevented from pursuing its substantive claim for damages against Stylo. It argues that this would cause a substantial injustice.[14] However, the only evidence to support Hum's claim of impecuniosity is contained in one paragraph of Ms Armitage's 142 page affidavit:[22] Hum is not insolvent, Stylo has attempted to test that position in past hearings, Justice Whata found this to be incorrect. However, Hum is just meeting its rental commitments to the landlord, keeping its position secure until the substantive Claim can be heard. Any additional burden of expense or cost is something Hum cannot bare (sic).[15] This statement is somewhat equivocal. If Hum is not insolvent, as Ms Armitage states, then it is able to meet its obligations to creditors when they fall due. The costs order is such an obligation. On the other hand, Ms Armitage suggests that Hum cannot cope with additional expenses. This presumably means that Hum can meet all of its obligations other than the costs order.[16] This "evidence" is no more than an unsubstantiated assertion by Ms Armitage and is not adequate to prove impecuniosity. No evidence has been offered toestablish Hum's current assets and liabilities, its income or expenses. As Asher J stated in Raffles Education Corporate Limited v Mills, an application under r 17.29 founded on a claim of impecuniosity must be supported by detailed and credibleevidence so that the judgment creditor and the Court can scrutinise it carefully.5Hum has fallen far short of meeting that standard.[17] I am not satisfied on the evidence that Hum is impecunious and unable to pay the costs that have been ordered. Accordingly, the sole foundation for the application for stay is not made out. It follows that the application must be dismissed.Result[18] The application for stay of execution is dismissed.[19] Stylo is entitled to costs on this application on a 2B basis.___________________M A Gilbert J5 Raffles Education Corporate Limited v Mills HC AK CIV-2008-404-5258, 16 February 2009.