HUM HOSPITALITY LTD v STYLO MEDICAL SERVICES LTD [2022] NZCA 251

HUM HOSPITALITY LTD v STYLO MEDICAL SERVICES LTD [2022] NZCA 251 [16 June 2022]IN THE COURT OF APPEAL OF NEW ZEALANDI TE KŌTI PĪRA O AOTEAROACA11/2022[2022] NZCA 251BETWEEN HUM HOSPITALITY LIMITEDAppellantAND STYLO MEDICAL SERVICES LIMITEDRespondentHearing: 8 June 2022Court: Gilbert and Mander JJCounsel: R Armitage, director of Appellant R O Parmenter for RespondentJudgment: 16 June 2022 at 9 amJUDGMENT OF THE COURTThe appellant's application for a stay of execution of the High Court judgment [2021] NZHC 3552 pending appeal is dismissed.____________________________________________________________________REASONS OF THE COURT(Given by Gilbert J)[1] Hum Hospitality Ltd (Hum) applies for a stay of execution of a money judgment pending appeal.1 For the reasons set out below, we do not consider the overall interests of justice favour the making of such an order.1 Stylo Medical Services Ltd v Hum Hospitality Ltd [2021] NZHC 3552 [Quantum judgment].Background[2] The application arises in the context of a long-running dispute between Hum and Stylo Medical Services Ltd (Stylo) concerning a lease of an old villa in central Auckland. Ms Rosanne Armitage, the sole director and shareholder of Hum, lived at the property for approximately 10 years with her son and various flatmates. Ms Armitage says she made the lounge areas of the villa available for members of the community to congregate and participate in a range of activities. A coffee kiosk at the front of the property was operated on weekends. However, Hum had little income and struggled to meet its rental obligations under the lease.[3] In a judgment delivered on 11 November 2020, Brewer J found that Hum was in arrears with its rental payments in the sum of at least $150,000.2 He ordered Hum to pay that sum to Stylo on account of those arrears.3 This was done. The Judge made a direction that if the parties could not agree on the further balance outstanding, they were to file affidavits and memoranda to enable him to determine this.4 The parties could not reach agreement. Following the filing of further affidavits and submissions, the Judge gave judgment for Stylo against Hum in the sum of $106,184.82, being the further amount found to be outstanding as at 12 October 2021.5 This judgment is the subject of the present appeal and application for stay. The judgment sum was calculated as follows:6Total owing (rent and operating expenses) 62,196.99Costs on Property Law Act Notice 460.00Interest 43,527.83Total $106,184.82[4] Hum's appeal against this judgment has not progressed because Hum cannot afford to pay the filing fee or security for costs. It sought a fee waiver and an order dispensing with security for costs. The fee waiver was granted on 15 March 2022, but the application for security for costs was declined by the Deputy Registrar. Hum has applied for a review of the Deputy Registrar's decision, but this has not yet been2 Stylo Medical Services Ltd v Hum Hospitality Ltd [2020] NZHC 2969 [Liability judgment].3 At [44].4 At [47].5 Quantum judgment, above n 1, at [9]–[10].6 At [9].determined. Ms Armitage acknowledges that if security for costs is not waived, Hum will not be able to pursue the appeal and it will inevitably be deemed abandoned.[5] We mention two other matters of contextual relevance.[6] First, Brewer J has also made orders cancelling the lease and requiring Hum to vacate the property.7 Stylo's application to seal those orders was granted by the Judge on 11 February 2021. Hum's various stay applications in respect of those orders were declined. Nevertheless, it refused to yield possession of the property. Eventually, on 26 November 2021, Downs J made an order for Ms Armitage's arrest for contempt.8The Judge directed that the order lie in court until 8 February 2022 and be quashed if Hum vacated the property before that date.9 Hum's applications for recall and stay of the arrest order were dismissed, but it was not until 24 February 2022 that possession was finally yielded to Stylo. The cancellation and possession orders are not the subject of the present appeal. The upshot is that Hum is no longer operating, other than for the purpose of continuing its litigation against Stylo.[7] The second relevant contextual matter is that Hum is insolvent. Ms Armitage confirms in her supporting affidavit that Hum has no income and is effectively moribund:74. The only source of income Hum had was the villa and all the monies was going back to [Stylo].75. However, I am creative and resourceful, if matters were stayed I could bring Hum back to life.[8] Hum's liabilities also appear to far exceed its assets. Draft accounts submitted by Ms Armitage in support of Hum's application for a waiver of the $1,100 filing fee disclose that it traded at a loss of $158,896 in the year to 31 March 2021 and had negative equity of $519,443 taking account of current liabilities at that date of $2,466,803.7 Liability judgment, above n 2, at [49] and Stylo Medical Services Ltd v Hum Hospitality Ltd HC Auckland, CIV-2019-404-365, 11 February 2021 at [10]–[12].8 Stylo Medical Services Ltd v Hum Hospitality Ltd [2021] NZHC 3191.9 At [47].[9] In directions issued on 24 February 2022, Goddard J clarified, for Ms Armitage's benefit, the matters presently in issue in this Court and reserved the question of representation:1. Ms Armitage may represent the appellant, [Hum], in connection with the filing of documents in this Court. She may also participate in any telephone conferences for case management purposes. I reserve for the time being the question whether she should be granted leave to represent Hum at the hearing of this appeal (or any applications) by filing written submissions or making oral submissions. That may require further evidence about Hum's ability to instruct counsel, and consideration of Ms Armitage's ability to conduct those aspects of the appeal in an appropriate manner on behalf of Hum.2. An application for a stay in the context of this appeal can only relate to a stay of the High Court judgment delivered on 20 December 2021 which entered judgment against Hum in favour of [Stylo] for $106,184.42. In the context of this appeal Hum cannot seek a stay of other High Court decisions, in particular the decisions concerning possession of [the property]. The only issue that could arise in the context of a stay application is whether the obligation of Hum to pay the sum awarded should be stayed pending determination of this appeal. Counsel for the respondent has confirmed that no steps will be taken to put Hum into liquidation in reliance on that judgment, pending resolution of the appeal. In those circumstances it does not appear that a stay would serve any useful purpose.3. Hum must file by Friday 4 March 2022 a memorandum advising the Court whether it wishes to pursue an application for stay of the 20 December 2021 judgment, and if so, what prejudice Hum will suffer if that judgment is not stayed. I emphasise that the question of possession of the property is not live in this appeal, and is not relevant to any stay application.4. If the application for a stay if pursued, the respondent may file a memorandum in response by Friday 11 March 2022.5. If the application for a stay is pursued, I will then make further directions in relation to the process for determining that application.[10] On 9 March 2022, Ms Armitage filed a memorandum advising that Hum will not pursue its application for a stay of the High Court judgment given Stylo's assurance that it will not attempt to liquidate Hum pending disposition of the appeal. Her memorandum goes on to state that Hum "would like to reserve the right to proceed" with the stay of other orders made by the High Court. This is despite Goddard J having made it clear that these other matters are not live in the present appeal.[11] Mr Parmenter, for Stylo, responded with a memorandum dated 15 March 2022 proposing that Stylo's undertaking not to take any steps to liquidate Hum forthe judgment debt pending appeal should be understood as being conditional on Hum pursuing the appeal expeditiously and, in any event, revocable on reasonable notice (15 working days was suggested). This prompted the following further minute of Goddard J on 26 May 2022:[Hum] has withdrawn the stay application in reliance on an undertaking by [Stylo] not to take any steps to liquidate [Hum] pending resolution of the appeal. Counsel for [Stylo] has filed a memorandum asking that the undertaking be recorded as subject to the qualification that it could be withdrawn on reasonable notice, and suggesting that reasonable notice would be 15 working days. It is reasonable for the undertaking to be qualified in this way, but in order to enable Hum to revive its stay application if the undertaking is withdrawn I direct that the undertaking may only be withdrawn on 20 working days' notice to [Hum] and to the Court.[12] In these circumstances, Hum advised that it wished to revive the stay application. Goddard J made a direction on 3 June 2022 that the application be listed for an urgent hearing before two judges, noting that it needs to be determined by the date 20 working days from 25 May 2022, when Stylo's undertaking expires. The application was referred to us, submissions have been filed by both parties, and a hearing was held on 8 June 2022. We permitted Ms Armitage to appear and make submissions because Hum cannot afford legal representation and this appeared to us to be the course most consistent with the interests of justice.Should a stay be granted?[13] The grounds on which the stay is sought are set out in Hum's application dated 16 February 2022. These are that: Hum's appeal right will be rendered nugatory if a stay is not granted; Hum is committed to the appeal process; Stylo will suffer minimal prejudice if a stay is granted; and third parties associated with Hum will be significantly prejudiced if the stay is not granted.[14] Hum contends in its application that its appeal right will be rendered nugatory if "the Orders" are not stayed. It is evident that "the Orders" Ms Armitage refers to are other orders not under appeal in this proceeding, namely, the possession order and arrest order. So, for example, Hum contends that its appeal right will be rendered nugatory if the order for Ms Armitage's imprisonment is executed in the face of what she contends is Hum's lawful possession of the property. It is also said thatMs Armitage will have lost her home of 10 years and her freedom. But possession of the property has now been given back to Stylo and the arrest order has been quashed. In any case, these are not consequences of execution of the money judgment under appeal in this proceeding and must be put to one side. The only other particulars listed under this head are the contentions that Stylo will be seen to have benefited from its own wrong (alleged misrepresentation and failure to perform) and unjust enrichment. These are not reasons why the appeal right would be rendered nugatory if a stay is not granted.[15] If a stay is not granted, the only practical consequence is that Stylo may seek to place Hum in liquidation. However, we were advised that at least one other creditor, Auckland Council, is currently pursuing winding up proceedings against Hum in any event. On the information available to us, Hum is plainly insolvent. Success on this appeal would not change that and it may well be that the company should be wound up. Moreover, if there is any merit in the appeal, which we doubt, the liquidator would be able to pursue it. Ms Armitage has been accorded considerable indulgence in being permitted to file documents and appear on behalf of Hum. We do not consider this should be allowed to continue. There appear to be good reasons why control of Hum should now be placed in the hands of an independent liquidator.[16] We accept that Stylo is extremely unlikely to recover the amount due under the judgment and a stay would cause it no prejudice in that respect. However, we see no good reason why it should be prevented from appearing as a creditor in support of Auckland Council's liquidation proceedings or to pursue its own application to place Hum in liquidation. In summary, we are not persuaded it would be in the interests of justice to grant Hum's application for a stay pending appeal.Costs[17] Mr Parmenter advised that Stylo does not seek costs on this application because there is no reasonable prospect of any costs award being recovered. We accordingly make no order for costs.Result[18] The appellant's application for a stay of execution of the High Court judgment [2021] NZHC 3552 pending appeal is dismissed.Solicitors:Winston Wang & Associates, Auckland for RespondentAuckland for Respondent