WALKER AS THE LIQUIDATOR OF GIBBSTON WATER HOLDINGS LIMITED v CASTLEREAGH PROPERTIES LIMITED [2015] NZHC 907

WALKER AS THE LIQUIDATOR OF GIBBSTON WATER HOLDINGS LIMITED v CASTLEREAGH PROPERTIES LIMITED [2015] NZHC 907 [4 May 2015]IN THE HIGH COURT OF NEW ZEALANDCHRISTCHURCH REGISTRYCIV-2015-409-000062[2015] NZHC 907UNDER the Companies Act 1993BETWEEN ROBERT BRUCE WALKER AS THELIQUIDATOR OF GIBBSTON WATERHOLDINGS LIMITEDPlaintiffAND CASTLEREAGH PROPERTIESLIMITEDDefendantHearing: 13 April 2015Appearances: J Moss for Applicant/DefendantK P Sullivan for Respondent/PlaintiffJudgment: 4 May 2015JUDGMENT OF ASSOCIATE JUDGE OSBORNEas to stay of liquidation proceedingIntroduction[1] The defendant (Castlereagh) applies for an order staying this liquidation proceeding.[2] Mr Walker, as liquidator of Gibbston Water Holdings Limited (Gibbston), has applied for an order putting Castlereagh into liquidation. As evidence ofCastlereagh's insolvency, Mr Walker relies upon Castlereagh's failure to complywith a statutory demand issued upon the basis of a costs award (the judgment debt) made in Walker v Gibbston Water Services Ltd.11 Walker v Gibbston Water Services Ltd [2014] NZHC 2250 [Costs judgment].The costs judgment[3] Mr Walker, as liquidator of Gibbston, was the successful plaintiff in Walker v Gibbston Water Services Ltd.2 Centrally the High Court upheld Mr Walker's earlierdecision to avoid a sale and purchase agreement between Gibbston and Castlereagh whereby Gibbston shortly before its liquidation transferred its shares in another company (Gibbston Water Services Limited) to Castlereagh for $1.00. As a consequence, Mr Walker was empowered to sell Gibbston's shares in Gibbston Water Services Ltd, which he has done. Gibbston Water Services Ltd assets were then sold and the company was immediately thereafter put into liquidation. In the same judgment, Mander J held that Mr Walker was entitled to costs on a 2B basis. Submissions were invited if agreement was not reached on the actual award.3[4] Subsequently, Mander J made orders against a number of respondents.4 HisHonour fixed the respondents' total liability for costs and disbursements at$32,945.96. He apportioned 10 per cent of that figure to Gibbston Water Services Limited, before making Castlereagh and Kristina Louise Buxton (Ms Buxton) jointly and severally liable to pay 90 per cent of the costs and disbursements, being $29,651.37, to Mr Walker. That judgment (which I will refer to as the Costs judgment) was delivered on 17 September 2014.[5] On 22 December 2014, Mr Walker, in reliance on the judgment debt, issued the statutory demand upon which this liquidation proceeding is based.Undisputed facts[6] The undisputed facts are:(a) The judgment debt is due and owing to Mr Walker by Castlereagh (and jointly and severally by Ms Buxton), with interest accruing.(b) Castlereagh has not complied with the statutory demand (nor has Ms Buxton satisfied the judgment debt).2 Walker v Gibbston Water Services Ltd [2014] NZHC 1638 [Substantive judgment].3 At [139].4 Costs judgment, above n 1, at [17].(c) Castlereagh has neither assets nor income from which to meet the judgment debt.[7] In these circumstances it is clear that the jurisdictional requirements for a liquidator to be appointed under s 241(2) Companies Act 1993 are met.The substantive judgment is appealed[8] Castlereagh, in August 2014, filed an appeal as of right against the Substantive judgment. Security for the appeal was subsequently fixed by the Court of Appeal (at $5,800) and has been met by Castlereagh. In December 2014, the Court of Appeal allocated 20 August 2015 as the fixture date for the appeal.[9] For Castlereagh, Mr Moss identifies three questions raised by the appeal as involving novelty or importance, being:(a) whether the High Court had erred in concluding that s 141 Companies Act 1993 contains a power available to a liquidator;(b) whether the High Court had erred in finding that the respondents were not entitled to rely upon s 107(3) (upon the basis that such consent as Ms Buxton had given to the transaction did not meet the requirements of s 107 of the Act); and(c) whether the High Court had erred in concluding that Ms Buxton had failed to establish that the shares were transferred at fair value.The stay application[10] Castlereagh expressly invokes the Court's power under r 31.11(1)(b) High Court Rules to make an order staying further proceedings in relation to a liquidation.[11] The application might equally have been made by express reference to r 20.10(2)(b) High Court Rules which empowers the Court, pending determination of an appeal, to make an order staying enforcement of any judgment or order appealed against. As an alternative, Castlereagh might have invoked r 12(3)(a) Court ofAppeal (Civil) Rules 2005 which empowers the Court, pending the determination of an appeal, to order a stay of the execution of the appealed decision.[12] In the event, Mr Moss put his submissions for Castlereagh upon the basis that the principles attaching to the granting of stays in relation to pending appeals are applicable principles. Although no authority was cited, it appears to me correct that where a stay is sought under r 31.11 in the context of a pending appeal, the appropriate outcome is most likely to be assisted through a consideration of principles applying in the context of the granting of stays pending appeal.5 I proceed on that basis in line with the submissions of counsel.[13] In considering Castlereagh's application, I nevertheless remind myself that the stay sought is not a stay of execution of the Substantive judgment relating to the sale and purchase agreement. Rather, though seeking a stay of the liquidation proceeding, what Castlereagh seeks is in effect a stay of the Costs judgment (and only that judgment).A stay of execution but with security?[14] By its application, Castlereagh sought a stay of any further proceedings in the liquidation, without express provision for any other interim arrangement pending the hearing of the appeal (save recognition that Castlereagh was providing standard security in the Court of Appeal).6[15] By his evidence in opposition, Mr Walker observed that by the time the appeal is heard it will have been more than 12 months since his costs and disbursements were awarded. He deposed:The appeal is not to be heard until August 20, and I expect there will be a judgment given some months after that. It will therefore be longer than 12 months since the costs judgment is issued if the stay sought is granted.There is real prejudice to me. This prejudice has continued since the costs judgment has remained unsatisfied. I relied on the costs judgment to meet the costs of running this litigation. This litigation is in pursuance of my5 High Court Rules, rr 1.6 and 20.10(2)(b).6 Being $5,880.statutory duty. But the persons who do not pay are the persons who caused the very transactions which the Court has denounced.[16] After I allocated this application its hearing date, Castlereagh's solicitorcorresponded with Mr Sullivan with proposals for security. It was proposed that a Te Anau property with a rating valuation of $68,000 be transferred from CTI Developments Ltd to FTG Securities Ltd. FTG would grant Gibbston a first mortgage to secure the Costs judgment and any additional unsecured costs awarded in the Court of Appeal. Shortly before the hearing, Ms Buxton (who had not previously given an affidavit in this proceeding) filed an affidavit exhibiting the offer, which had not been accepted.[17] Ms Buxton also referred to her family home, being a lifestyle block at Gibbston, for which she holds a valuation (as at 11 March 2014) of $1,850,000. The Gibbston property is owned by Tomanovich Investments Ltd, of which she is sole director. (Ms Buxton does not mention shareholdings). She deposes that the debt of $920,000 is secured over the property. She adds that it would take at least four months for this property to be readied for sale and appropriately marketed.[18] On the eve of hearing Mr Walker filed a further affidavit in response to MsBuxton's evidence. I admitted the affidavit as Mr Walker needed to be able to respond to evidence which Ms Buxton should have given in support of the application, rather than in "reply". Mr Sullivan explained cogently why the security offered was unattractive. In summary:(a) he wants the benefit of cash in hand;(b) there are complex issues relating to the Te Anau property. It is part of a large subdivision from which some properties (including that offered as security) came to be owned by CTI Developments Ltd in questionable circumstances; and(c) the suggestion of substantial equity in the Gibbston property is also questionable given that Ms Buxton, in order to satisfy the judgmentdebt, has not simply named $30,000 on the basis of the allegedly substantial equity.[19] In relation to the security offered at a late point, I conclude that Mr Walker is entitled to regard it as not being so demonstrably sufficient and reliable as to be close to an outright payment or a payment into a stakeholding.Stay application - the overarching principles[20] When considering whether to grant a stay of execution, New Zealand Courts have tended to first refer to some overall principles and to then review a number of specific factors commonly taken into account. I identify first the overarching principles.[21] One overarching requirement upon the Court is:7 to weigh all of the factors in the balance between the right of a successfullitigant to have the fruits of a judgment and the need to preserve the position in case the appeal is successful.[22] As recognised by the Court of Appeal in New Zealand Insulators Ltd v ABB Ltd through adoption of the principles identified by Buckley LJ in Minnesota Mining & Manufacturing Co v Johnson & Johnson Ltd:8The object, where it can be fairly achieved, must surely be so to arrange matters that, when the appeal comes to be heard, the appellate court may be able to do justice between the parties, whatever the outcome of the appeal may be.[23] The New Zealand authorities in effect recognise what is expressed in Canadian authorities, namely that the ultimate question on any application for a stay of execution is the interests of justice.97 Duncan v Osborne Building Ltd (1992) 6 PRNZ 85 (CA) at [87] per Gault J; Keung v GBRInvestment Ltd [2010] NZCA 396 at [11] per Ellen France J.8 New Zealand Insulators Ltd v ABB Ltd (2006) 18 PRNZ 459 (CA) at [13], quoting Minnesota Mining & Manufacturing Co v Johnson & Johnson Ltd [1976] SFR 139; [1976] RPC 671 (CA) at 676.9 See, for instance, Coburn v Nagra [2001] BCCA 607, (2001) 96 BCLR (3d) 327 at [9]. Associate Judge Faire in Contributory Mortgages Nominees Ltd v Harris Road No 10 HC Auckland CIV 2005-404-3078, 31 January 2006 at [13]–[22] approached the matter in terms of how justice was best met between the parties.The consideration of relevant factors[24] In New Zealand, the Courts have repeatedly recognised that in order to assess the overall interests of justice, they will conventionally address a number of recognised, but not exhaustive, factors. In Dymocks Franchise Systems Ltd (NSW) Pty Ltd v Bilgola Enterprises Ltd,10 Hammond J listed the following factors which the Courts conventionally address:(1) If no stay is granted will the applicants' right of appeal be rendered nugatory?(2) The bona fides of the applicants as to the prosecution of the appeal.(3) Will the successful party be injuriously affected by the stay?(4) The effect on third parties.(5) The novelty and importance of the question involved.(6) The public interest in the proceedings.(7) The overall balance of convenience.[25] These seven factors are often cited in assessing the interests of justice. The Court of Appeal, in 2010, adopted this as an inclusive list in Keung v GBRInvestment Ltd.11[26] The seven item Dymocks Franchise list does not refer to the appeal'sprospects of success. In Keung v GBR Investment Ltd, the Court of Appeal noted that:12That list does not include the apparent strength of the appeal but that has been treated as an additional factor.[27] Reference to the jurisprudence in other jurisdictions where the Courts have powers to stay execution pending appeal indicates that the review of the merits of the appeal in those jurisdictions is very limited.10 Dymocks Franchise Systems Ltd (NSW) Pty Ltd v Bilgola Enterprises Ltd (1999) 13 PRNZ 48(HC) at [9]. The Court of Appeal upheld the High Court's refusal of a stay in Bigola Enterprises Ltd v Dymocks Franchise Systems Ltd (NSW) Pty Ltd 13 PRNZ 48 (CA) at [31].11 Keung v GBR Investment Ltd, above n 7 at [11].12 At [11]. The Court footnoted Body Corporate No 188529 v North Shore City Council (No. 6)HC Auckland CIV-2004-404-3230, 11 February 2009, in which Venning J, without referring to authority, referred to the merits of the appeal, concluding at [26] that the prospects of the appeal succeeding were not high.[28] The position in New South Wales is illustrated by the judgment of the Court of Appeal in Alexander v Cambridge Credit Corp Ltd where the Court expressed one of the applicable principles thus:13 although courts approaching applications for a stay will not generally speculate about the appellant's prospects of success, given that argumentconcerning the substance of the appeal is typically and necessarily attenuated, this does not prevent them considering the specific terms of a stay that will be appropriate fairly to adjust the interest of the parties, from making some preliminary assessment about whether the appellant has an arguable case. This consideration is protective of the position of a judgment creditor where it may be plain that an appeal, which does not require leave, has been lodged without any real prospect of success and simply in the hope of gaining a respite against immediate execution upon the judgment.[29] The position in British Columbia appears to be similar. In that jurisdiction, a list of factors to be considered is standardly taken from the judgment of Legg JA inRoe McNeill & Co v McNeill.14 The Court of Appeal recognised that:15 a first step to consider on a motion for a stay is to determine whether an appeal is without merit or has no reasonable prospect of success.[30] I note the apparently parallel conclusion of Associate Judge Faire inContributory Mortgage Nominees Ltd v Harris Road No. 10 Ltd, where his Honour made the following addition to the Dymocks Franchise factors:16Whether the appellant has demonstrated a sufficiently arguable point to be considered on appeal.[31] For the purposes of the case before me, I conclude:(a) The applicant must establish as a first step that the appeal has a prospect of success, akin to the "serious question to be tried" test ininterim injunction cases.13 Alexander v Cambridge Credit Corp Ltd (1985) 2 NSWLR 685 at 695.14 Roe McNeill & Co v McNeill (1994) 49 BCAC 247; as adopted in Bea v Strata Plan LMS 2138(2010) BCCA 463 (2010) 94 CPC (6th) 117; applying Rogers Foods (1982) Ltd v Federal Business Development Bank (1984) 57 BCLR 344 at 347 and Mikado Resources Ltd v Dragoon Resources Ltd (1990) 46 BCLR (2d) 354 (BCCA) at 357.15 At [6]16 Contributory Mortgage Nominees Ltd v Harris Road No. 10 Ltd, above n 9, at [9](h).(b) As indicated by the Court of Appeal in Keung, there may be stay applications where, without assuming prominence, the relative merits of the arguments on appeal may inform the consideration of where the balance of convenience lies.17A framework for considering the various factors[32] In assessing the various factors on a stay of execution, I find the framework established as stated by Legg JA in Roe McNeill & Co v McNeill helpful:18The relevant factors to consider on whether to grant a stay are these:1. A successful plaintiff is entitled to the fruits of his judgment. He should not be deprived of them unless the interests of justice require that they be withheld from him until the defendant's appeal is decided.2. The court's power to grant a stay is discretionary and should be exercised only where it is necessary to preserve the subject matter of the litigation or to prevent irremedial [sic]19 damage or where there are other special circumstances.3. In the exercise of its discretion the court may weigh the interests of the parties, the balance of convenience and any prejudice that may arise and grant the stay on terms it considers appropriate.4. A first step to consider on a motion for a stay is to determine whether an appeal is without merit or has no reasonable prospect of success.Money judgments and costs judgments[33] Money judgments, including costs judgments, fall to be considered according to the same principles and factors as judgments involving other subject-matter. However, the factual characteristics of money judgments and costs orders are such that either it may be inappropriate to stay them at all or that a stay, if granted, will be conditional on the appellant's payment of the judgment debt in the interim.17 An approach which I adopt from the judgment of Hardie Boys J in relation to an interim injunction application in Shotover Gorge Jetboats Ltd v Marine Enterprises Ltd [1982] 2 NZLR 154 (HC) at 157.18 Roe McNeill & Co v McNeill, above n 14, at [6] (citations omitted).19 I infer that "irremediable" is meant.[34] This reality is recognised in the number of cases in which an appellant successfully obtains a stay in relation to substantive orders but is required in the interim to meet the costs award outright.20[35] In McLeod v New Zealand Pine Company Ltd, Williams J in 1892 explained the approach to money judgments thus:21The right of plaintiff in the present case is an absolute right to have his money at once. The right of defendants is the right of appeal, and the right in some way or other to have it made certain by this Court that that appeal shall not be fruitless. The duty of this Court is, I think, to reconcile as far as possible the conflicting rights of the plaintiff and the defendants. The way to do that is to follow the English cases, and to say that an order staying proceedings shall be made on payment by the defendants to the plaintiff of the money in question, the plaintiff giving security for the repayment. As to the question of costs, the costs ought also to be paid; but I think that, as it is stated in the present case that the plaintiff is not in a sound financial position, defendants are entitled to have something more than the security of theundertaking of plaintiff's solicitor that the costs should be refunded. I think that the security should extend to cover both the damages and the costs.[36] In apparent reliance on such authority, the authors of Sim's Court Practicehave previously included in their discussion of the "Basic Principles" applying tostay applications the following:22As a general rule, an order staying proceedings will be granted upon payment by the defendant to the Plaintiff of the money in question, the Plaintiff giving security for repayment.[37] Associate Judge Faire in Contributory Mortgage Nominees Ltd v Harris Road No. 10 Ltd cited this passage with approval (albeit omitting reference to the introductory words "as a general rule").23 This has instigated something of an indirect judicial exchange in subsequent cases. In SKIDS Program Management Ltd v McNeill, Woodhouse J noted the use of "absolute" terminology by Williams J inthe New Zealand Pine Company case, while recognising that Williams J went on to20 For instance, Mana Property Trustee Ltd v James Developments Ltd HC Dunedin CIV-2008- 412-1027, 28 May 2009 at [51]; Bea v Strata Plan LMS 2138, above n 14, at [20].21 McLeod v New Zealand Pine Company Ltd (1892) 11 NZLR 493, (SC) at 495.22 Sim's Court Practice (looseleaf ed, LexisNexis) at [CAR12.6], quoted in SKIDS Program Management Ltd v McNeill HC Auckland CIV-2010-404-1696, 20 December 2011 at footnote 7.23 Contributory Mortgage Nominees Ltd v Harris Road No. 10 Ltd, above n 9, at [8].note the duty of the Court to reconcile "as far as possible" the conflicting rights of the parties.24[38] Recently, in ASB Bank Ltd v Lin, Associate Judge Bell was dealing with a stay application in relation to a money judgment. His Honour referred to the earlier judgments and concluded:25[13] While Woodhouse J was concerned lest an "absolutist" approach beapplied, it is apparent that there are certain recurring features which allow these particular applications to be resolved in a consistent manner. Moreover, such cases often do not have the complicating features that make other cases more difficult to resolve.[16] A matter that is often raised by judgment debtors - and these defendants have raised it here — is that if a money judgment is enforced against them, they may no longer be able to prosecute their appeal. That complaint goes to their financial ability to prosecute the appeal, not to whether the right of appeal will be rendered nugatory. For the defendants in this case Mr Kashyap submitted that they lacked funds and would not be able to meet the judgment in any event.[17] I come back to the approach outlined by Williams J in McLeod v The New Zealand Pine Company Ltd. So long as there is an appropriate assurance of repayment if the appeal is successful, then there should be nothing to prevent the party who was successful at first instance from enjoying the fruits of judgment. The unsuccessful party may have to run with their appeal, notwithstanding the fact that enforcement steps can be taken against them in the meantime.[39] The general approach first identified by Williams J in the New Zealand Pine Company case and reformulated by Associate Judge Bell in ASB Bank Ltd v Linappears to have close parallels elsewhere. The Courts in British Columbia deal in their parallel (but not identical) approach by what are commonly referred to as Vothorders, being a reference to the judgment of Lambert JA in the British Columbia Court of Appeal in Voth Bros. Construction (1974) Ltd v National Bank of Canada,where his Honour explained the Court's approach in these terms:266 If no order is made for a stay of execution, then a successful plaintiff will be able to compel satisfaction of its judgment. If the defendant is successful in its appeal, it will have no assurance that the amount24 SKIDS Program Management Ltd v McNeill, above n 22, at [11].25 ASB Bank Ltd v Lin [2014] NZHC 106, [2014] 21 PRNZ 698, [2014] NZAR 327.26 Voth Bros. Construction (1974) Ltd v National Bank of Canada (1987) 12 BCLR (2d) 43 (BCCA) at 45–46 (citations omitted).of the judgment will be repaid, or, if it is repaid, that it will carry interest. The plaintiff might well have had the use of funds to which it was never truly entitled, without paying any interest for their use, and the defendant might have been deprived for a time of funds, which ultimately are shown to have been its own funds, without any compensation.7 To avoid those problems, the practice has been adopted, where the amount involved is significant, of ordering a stay of execution on payment of the amount of the judgment into court by the defendant, and ordering payment out of the plaintiff on terms first that if the defendant is successful on its appeal it will be entitled to interest on the funds repaid to it and, second, that the plaintiff provide sound security, sufficient to secure the repayment of the amount paid out, together with an amount representing an estimate of the defendant's costs of the appeal on a party-and-party basis, and an amount representing interest on the funds that would be repaid if the defendant were to be successful in the appeal: 8 The advantage of such an order is that it gives the plaintiff the fruits of his judgment as soon as he is entitled to them, but at the same time it protects the defendant against the risk that he will not be repaid, and against the loss of the interest he would earn from the use of the money which may ultimately turn out to have belonged to him all along.27[40] The approach giving rise to Voth orders in British Columbia is underpinned by the same considerations as inform the former commentary in Sim's Court Practiceand identified by Associate Judge Bell in ASB Bank Ltd v Lin.28[41] I adopt, in relation to money judgments generally, Associate Judge Bell'sformulation.29Costs judgments specifically[42] I view costs judgments as requiring consideration beyond that which applies to money judgments generally.27 For a subsequent discussion of Voth orders, see Tompkins v Barden (1999) BCCA 10 at [9], the British Columbia Court of Appeal recording that the amount of money involved in the judgment is a relevant factor, with smaller sums less likely to justify the making of a Voth order.28 I say "former" because the current version of Sim's Court Practice now contains a discussion of the degree of conflict in the recent cases. For the reasons given in this judgment, I consider the original sentence in Sim's Court Practice to be a succinct and accurate formulation. Also adopted in Jack v Jack [2014] NZHC 2502 at [47].29 ASB Bank Ltd v Lin, above n 25. I approve also the sentence from Sim's Court Practice at [36] above.[43] Those involved in litigation in this Court are subject to a regime whereby costs become payable when they are fixed.30 Successful parties are intended to have (upon the fixing of costs) the cash flow benefits of the costs to which the Court has found them entitled.[44] Where the unsuccessful party appeals a substantive judgment, the justice in relation to identifying who should be out of pocket for awarded costs in the interim will most often (albeit not invariably) favour the successful respondent. The respondent has had to bear costs in either suing the other party or defending the otherparty's unsuccessful claim. That stage of the litigation is over. If the unsuccessfulparty elects to embark on a further stage of litigation through appeal it will generally be just that the successful party (through the payment of costs) is reimbursed in the interim for the costs awarded and fixed pursuant to its success.[45] Such an approach will by the nature of the balancing exercise remain subject to influence by factors of particular relevance in an individual case. One such factor is where the appellant establishes that the successful party may be unable to repay the awarded costs in the event the appeal is successful. But such factors are morelikely to inform the Court's decision on the way in which the unsuccessful partyshould make any payment in the interim (e.g. by outright payment to the plaintiff or by payment into a stakeholding) rather than on whether the unsuccessful party should be relieved of the requirement to make payment pending the determination of the appeal.The exercise of the discretion in this caseThe competing interests – overview[46] By reason of the Substantive judgment of this Court on 11 July 2014, Mr Walker is entitled to costs and disbursements (subsequently fixed on 17 September 2014 at $29,651.37) together with interest. If payment of the judgment debt isstayed pending the outcome of Castlereagh's appeal, Mr Walker will have noprospect of obtaining any payment by Castlereagh until the Court of Appeal delivers30 This applying not only to the costs of the proceeding generally but also to costs on opposed interlocutory applications per r 14.8(1)(b) High Court Rules.its judgment on or after the hearing date of 20 August 2015. In the meantime, Mr Walker will have had the costs of preparation and attendance at the appeal hearing without the benefit of the cash flow which he would receive if Castlereagh paid the judgment debt.[47] For Castlereagh, Mr Moss submits that refusal of a stay would produce an injustice through the failure to balance Castlereagh's need to preserve the position incase its appeal is successful.The position to be preserved[48] Castlereagh's appeal is expressly against the Substantive judgment (rather than the Costs judgment). The basis upon which Mr Moss seeks a stay of the liquidation proceeding is his cogent submission that were the Court of Appeal toallow Castlereagh's appeal on the substance, it would appear inevitable that the Costs judgment would be set aside. Castlereagh's case is that the liquidationproceeding should be stayed so as to enable Castlereagh to argue for that outcome on appeal.[49] Thus, in this case the Court is not concerned in the usual way with protecting"the subject matter of the litigation" as it is referred to in the second limb of theBritish Columbia formulation.31 The substantive subject matter of the litigation, being the shares in Gibbston Water Services Ltd, has already been disposed of in the absence of a stay. The only fruit of judgment which Mr Walker has yet to receive is payment of the judgment debt.The bona fides and prospects of success of the appeal[50] This Court has no reason to doubt Castlereagh's bona fides (and in particular the bona fides of its director, Ms Buxton) in pursuing the appeal. Issues, including legal issues of some complexity, were the subject of evidence and submissions in the High Court proceeding. Castlereagh promptly filed its appeal and has diligently pursued it to the prompt allocation of a hearing date.31 Roe McNeill & Co v McNeill, above n 14, at [6].[51] The substantive issues which Castlereagh focuses on in its appeal are those I have identified above at [9]. The first two (involving construction of ss 107 and 141 Companies Act) were the subject of full submissions at first instance. There is a degree of novelty attaching to the points pursued by Castlereagh. While the reasoning and conclusions of Mander J on the issues appear conclusive, I consider that the legal issues framed for appeal by Castlereagh involve serious questions to be tried.[52] Castlereagh's third ground of appeal relates to the factual conclusions reached by Mander J on the evidence as to the fair value of the shares. As the Substantive judgment indicates, this issue becomes relevant only if the Court doesnot uphold Mr Walker's legal arguments in relation to the Companies Act provisions.The High Court hearing took place over three days. Mander J reviewed the evidence before concluding that the respondents in the High Court proceeding (that is Castlereagh and others) had not discharged the onus of establishing their contended fair value.32 His Honour found that the sale of the shares could have been validly set aside pursuant to s 348 Property Law Act 2007. My impression is that an appellate court is unlikely to take a different view of the facts. However, the apparent lack of expert evidence as to the price achievable on the sale of the potable water scheme which the subject shares effectively represented raises some possibility that the Court of Appeal might reach a different value conclusion to that reached by Mander J.33 That is the highest it can be put.[53] I am unable to conclude that Castlereagh's appeal is without merit or has no reasonable prospect of success. This is accordingly not a case where the stay should be refused on the grounds that the appeal is meritless or is being pursued with mala fides.Novelty and importance of questions involved[54] I recognise, as I have stated, some novelty in the arguments pursued by Castlereagh in relation to the construction of ss 107(3) and 141 Companies Act. Mr Moss asserts also that the questions involved are important inasmuch as they relate32 Substantive judgment, above n 2, at [99].33 See the Substantive judgment at [100].to matters which could be of consequence in the administration of liquidations generally.[55] I was not referred to any commentary or similar material which indicated that uncertainties in the law in this area had been causing difficulty in company liquidations. Furthermore, the value of having an appellate court finally determine novel issues involved is substantially diminished in this case by virtue of the now moot nature of the substantive issues as they stood at the time of the High Court hearing. Castlereagh now wishes to pursue the appeal not for the delivery of the shares but in order to have the Costs judgment reversed (upon the basis that one or more of the substantive findings in the High Court was in error).[56] I do not view the novelty and importance of the questions involved as significantly in favour of Castlereagh.Public interest in the proceeding[57] There is no evidence of public interest in the proceeding.Effect on third parties[58] I do not perceive there to be any significant effect on third parties which the Court should justly take into account.[59] Mr Moss identified Ms Buxton as a relevant third party, upon the basis that if a stay were granted Ms Buxton would in practice benefit from the stay judgment.[60] There was evidence in relation to the position of Ms Buxton. Initially Mr Walker had elected to take steps towards liquidation of Castlereagh before taking any parallel steps in relation to Ms Buxton. Mr Walker has deposed that he had initially hoped to save on the costs of pursuing Ms Buxton's bankruptcy by instead extracting payment of the Costs judgment on Castlereagh. His position altered when Castlereagh applied to stay the liquidation proceeding. Mr Walker has now issued a bankruptcy notice against Ms Buxton. She has not made an application for stay of execution of the Costs judgment.[61] I do not regard Ms Buxton as a "third party" of particular significance in the context of this stay application.[62] First, both Castlereagh and Ms Buxton have apparently chosen not to pursue in this Court or in the Court of Appeal an application for stay of execution of the Costs judgment, notwithstanding their joint and several liability for the $29,651.37.What is before me is Castlereagh's application for stay of the liquidation proceeding.Although I will be determining this application according to the principles that apply on a stay application under r 12 Court of Appeal (Civil) Rules 2005, my determination has to be primarily in relation to the position as between Mr Walker and Castlereagh, upon the evidence adduced. In relation to Castlereagh's application, the evidence is focussed understandably on Castlereagh's position andnot that of Ms Buxton. I know, for instance, that Castlereagh is without assets and income. I do not have similar evidence, let alone sworn evidence, as to Ms Buxton'sposition and in particular her personal ability to satisfy the Costs judgment, other than by invoking the assistance of related parties.[63] Secondly, Mr Moss invited me to consider the merits of Castlereagh's stayapplication by considering how the Court would deal with an application by Ms Buxton to halt an application for an order adjudicating her bankrupt. Mr Moss referred to Re Small Business Accounting (NZ) Ltd, ex parte Ridge.34 In that case, following an unsuccessful proceeding against her former husband, Ms Ridge was ordered to pay costs of $101,409.40. She applied for an order halting the adjudication application pending the outcome of her appeal. At the time of theapplication's hearing, the appeal had yet to be heard but an urgent hearing had been requested. Associate Judge Christiansen found that it did not appear that any prejudice would be caused if the creditor were required to await payment after the outcome of the appeal with interest accruing on the costs judgment in the interim.35There would be assets available for realisation and payment at a later point.36 His Honour then concluded that balance of convenience considerations favoured Ms Ridge, concluding:3734 Re Small Business Accounting (NZ) Ltd, ex parte Ridge [2014] NZHC 2512.35 At [18] and [35].36 At [19] and [34].37 At [36] and [43].Prospects of success considerations aside, the unfettered discretion of the Court upon applications for stay focus in broad terms upon the balance of convenience.[64] I respectfully decline to follow Re Small Business Accounting (NZ) Ltd, ex parte Ridge. The judgment creditor's entitlement to payment does not appear to have been given weight and was arguably absorbed within a simple "balance of convenience" consideration.38[65] It may be that the sheer size of the costs judgment in the Ridge case ($101,409.40), although not mentioned as a factor, influenced the Court's assessmentof the balance of convenience. By the standards of High Court costs judgments, it was substantial whereas the judgment against Castlereagh and Ms Buxton is not comparably sizeable. Regardless of the potential availability of stays in relation to judgments purely for costs and disbursements, there will be costs judgments involving relatively modest sums which simply do not justify the Court'sintervention by way of a stay. Such is the approach applied in British Columbia in relation to Voth orders. In Tompkins v Barden, for instance, the British Columbia Court of Appeal found the net payment to the plaintiff was too small to justify a Voth order.39 The application for stay was accordingly dismissed.[66] Ms Buxton has not met the Costs judgment. She has not made it the subject of an application for stay of execution. Any application for relief is in her hands. She has standing to apply. I do not consider the impact of the outcome of the present application on Ms Buxton should significantly affect the outcome of Castlereagh'sapplication. The outcome should be determined primarily as between Castlereagh and Mr Walker according to the identified principles.38 The judgment of Venning J in Avowal Administrative Attorneys Ltd v District Court at Northshore HC Auckland CIV-2006-404-7264, 8 May 2009 at [11] helpfully identifies the primary need to consider whether the appeal will be rendered nugatory and there will be prejudice to the respondent, with balance of convenience issues usually being covered by consideration of those two matters.39 Tompkins v Barden (1999) BCCA 10 at [5]–[7] per Donald JA.Will Castlereagh's right of appeal be rendered nugatory if the liquidation proceeding is not stayed?[67] If I do not stay the liquidation proceeding against Castlereagh, there are at least two possible outcomes. First, Castlereagh and/or Ms Buxton, faced with the liquidation hearing, may find a way to make a payment under protest to Mr Walker. Secondly, the liquidation proceeding may go to hearing, at which Castlereagh will be entitled to urge the Court in its discretion not to liquidate Castlereagh, but Castlereagh may be liquidated.Possibility 1 – a payment to Mr Walker?[68] I have carefully examined Castlereagh's evidence. Castlereagh's solicitor,who gave the initial evidence in support of the stay application, did not speak aboutCastlereagh's ability or inability to meet the judgment. Ms Buxton's subsequentevidence was as I have summarised it at [17] above. If Ms Buxton's evidence wereaccepted in an unqualified way, the implication is that given four months to ready the property for sale and to market it, Ms Buxton would meet the Costs judgment (and any additional Court of Appeal costs).[69] Castlereagh's evidence does not indicate what steps, if any, have been taken to raise funds to pay the Costs judgment. Castlereagh's deponents have eitherunwittingly or deliberately remained silent on that point. In the absence of such evidence from Castlereagh, I find as a probability (as suggested by Mr Walker) thatCastlereagh and Ms Buxton's associated companies would between them have beenable to raise the funds needed to meet the Costs judgment had they set out to do so.[70] I note also that Castlereagh and Ms Buxton were represented by solicitors and a barrister for the three day 2014 hearing. Castlereagh has again been so represented in the steps taken by way of appeal to the Court of Appeal. The Castlereagh evidence does not explain how it has the means to sustain such litigation. Castlereagh has no assets or income. It may be considered unlikely that its legal representation has been and will continue to be provided without charge. There is uncertainty in relation to this matter because of the way Castlereagh has left its evidence. But there is at least a likelihood that Castlereagh or Ms Buxton hasbeen paying legal fees and disbursements. The impression is that funds could be found to meet the Costs judgment if Castlereagh and Ms Buxton are prepared to make arrangements (such as involving Tomanovich Holdings Ltd).[71] On this basis, the issue of liquidation resulting from inability to pay (andrefusal of a stay) does not arise because Castlereagh's liquidation will flow out of theelective failure of Castlereagh and Ms Buxton to make arrangements for payment of the judgment debt when arrangements were possible.Possibility 2 – liquidation following a hearing?[72] By reason of my previous finding, it becomes strictly unnecessary to consider the impact should there be a liquidation hearing and the appointment of a liquidator.[73] Mr Moss submitted that although, in theory, a liquidator could pursue the appeal on behalf of Castlereagh if Castlereagh is wound up, in practice it is extremely unlikely and almost implausible that a liquidator would do so. Mr Moss notes that the substantive issues (over the Gibbston Water Services Limited shares) have fallen away through the recent sale of the shares, followed by sale of the underlying assets. Mr Moss observes that a liquidator of Castlereagh would be tasked with deciding whether it is worth pursuing an appeal to overturn a costs award against the only known creditor of Castlereagh. He submits that there is no financial benefit in the liquidator pursuing that appeal. But he adds there is significant benefit in Castlereagh's pursuing the appeal both on its own behalf and on behalf of Ms Buxton.[74] Mr Sullivan responded that a liquidation would not, strictly speaking, renderCastlereagh's appeal nugatory. Mr Sullivan submitted that a liquidator, funded by Castlereagh, could decide to pursue the appeal.[75] Had it been necessary to reach a conclusion as to "nugatory judgment" by reference to Castlereagh's liquidation prior to an appeal hearing, I would haveconcluded in the circumstances of this case that the "nugatory hearing" consequencedoes not arise. Castlereagh is plainly insolvent at present. If, in recognition of its insolvency, Castlereagh is placed in liquidation, the liquidator will make decisionsfor Castlereagh in the same way as its director does currently. When analysed, thenub of Mr Moss's concerns is that a liquidator, acting in the best interests ofCastlereagh, may reach a different conclusion to its current director, by deciding not to pursue an appeal. Or, if of the view there is merit in the appeal, the liquidator may insist on an assured line of funding before proceeding. Mr Moss has noted in his submissions that a liquidator might elect to retain more expensive legal assistance than Castlereagh and Ms Buxton have had to date. A consequence may be that those asked to fund an appeal may not be prepared to do so.[76] In either event (that is, a liquidator deciding against appeal or a liquidator insisting on funds for an appeal, but not being funded and therefore abandoning the appeal), the appeal rights become "nugatory" not directly because of the refusal of stay but through the decision of the liquidator on behalf of the company or the failure of those who might fund the appeal to do so.A question over repayment by Mr Walker[77] The former commentary passage in Sim's Court Practice on the "Basic Principles" of a stay recognises that, as a general rule, an order staying proceedings will be granted upon payment by the defendant to the plaintiff of the money in question, the plaintiff giving security for repayment.40[78] Mr Moss made submissions regarding a perceived uncertainty as to Castlereagh being repaid in the event it successfully pursues its appeal. Without detailed calculations, Mr Moss suggested a likely additional total costs order (comprising High Court and Court of Appeal costs) in favour of Castlereagh of $40,000 to $50,000 (together with repayment of the $29,651.37).[79] Mr Moss referred to issues he says other companies have faced when pursuing payment of costs by companies of which Mr Walker is liquidator.41 Mr Moss submitted that on the history of Mr Walker's conduct, it can be anticipated thathe might argue that he is not personally liable for costs in relation to proceedings40 Sim's Court Practice, above n 22, at [CAR12.6].41 Citing in particular the costs awarded in RFD Finance Ltd v SOL Management Ltd [2014] NZHC 2983.brought by him as liquidator for Gibbston's benefit. Mr Moss' concludingsubmission was that in the absence of a personal undertaking from Mr Walker, Castlereagh faces the prospect, if successful on appeal, that it will not recoup the $29,651.37 and will also be unable to obtain payment of the further $40,000 to $50,000.[80] I am not here concerned with the costs and disbursements which might be awarded to Castlereagh in the Court of Appeal. The focus is on the $29,651.37 already ordered to be paid to Mr Walker.[81] A judgment debtor who pays such costs and disbursements under protest, pending appeal, may seek an order from the Court of Appeal in the event of a successful appeal as to repayment together with interest.42[82] Mr Sullivan addressed the event in which Castlereagh pays the judgment debt to Mr Sullivan and is subsequently successful in having the Substantive judgment,including the costs order, reversed. Mr Sullivan accepted that Mr Walker will be obliged to repay that sum to Castlereagh. (Mr Walker had in his affidavit gone on to state that he would also meet any costs order made against him personally by the Court of Appeal but that addresses the discrete matter of any costs orders in that Court).[83] Mr Walker has deposed, having regard to his professional role as a chartered accountant and liquidator, that he would need to make any payment of any costs he is ordered to pay personally. That clearly applies equally to any repayment of the costs he is paid but which fall to be repaid on a successful appeal.[84] In the circumstances, this is not a case in which there is an evidential basis on which to conclude that Castlereagh might be unable to recover back from Mr Walker the money it pays on account of the judgment debt.42 Court of Appeal (Civil) Rules 2005, r 54. See Deloitte Touche Tohmatsu Trustee Company v Christchurch Pavilion Partnership (No 1) [2002] 3 NZLR 215 (CA) at [7]–[8] and [14]–[15];Palmerston North City Council v Dury [2007] NZCA 521 at [93]; AMI Insurance Ltd v Devcich[2011] NZCA 266 at [110].Relevance of the costs – nature of the judgment[85] I note that under Legg JA's formulation in Roe McNeill & Co v McNeill the Court considers whether to grant a stay not on a formula of whether appeal rights arerendered nugatory but rather on the need to "preserve the subject matter of the litigation".43 Such terminology usefully reinforces the conclusions I have reached asto "nugatory appeal". The Court is not here concerned with access to justice issues(through an appeal) in relation to the subject matter of the litigation itself. Rather, the Court is concerned with the costs consequences for the judgment debtors in failing to obtain the substantive orders they sought. Cases may arise where a costs and disbursements order is so great that the Court considers it just to treat it as akin to a substantive judgment. But generally speaking a costs order will not represent, either strictly speaking or by analogy because of its size, the subject matter of the first instance litigation.The effect on Mr Walker as judgment creditor[86] At [15] above I have quoted from Mr Walker's evidence as to the prejudicehe suffers through not receiving payment of the Costs judgment. There is no reasonto doubt Mr Walker's statement that he relied on the Costs judgment to meet the costs of running the litigation.[87] There would be an additional, tangible, prejudice if Castlereagh were able to resist liquidation while not meeting the Costs judgment. In pursuing its appeal, Castlereagh is likely to leave Mr Walker (if successful on the appeal) still further out of pocket for the costs of the litigation. The Court of Appeal's judgment in Keung GBR Investments of such exposure to irrecoverable, increasing costs.44[88] Mr Walker is likely to be prejudicially affected by a stay. This factor powerfully militates against the making of a stay.43 Roe McNeill & Co v McNeill, above n 14, at [6](2).44 Keung v GBR Investment Ltd, above n 7, at [26].The balancing[89] Against the background of the above discussion, the balancing of respective interests is clear. Mr Walker has an entitlement to payment of his costs and disbursements. He will be prejudicially affected in a significant way if payment is not made. The evidence does not establish the potentially countervailing factor ofCastlereagh's appeal rights being rendered nugatory. Mr Walker's entitlement to payment of the Costs judgment debt ought not to be interfered with in the Court'sdiscretion.The appropriate outcome[90] Had this application been brought under r 12 Court of Appeal (Civil) Rules as an application for stay of execution pending appeal, I would have considered granting a conditional stay. This grant would have depended on Castlereagh'smaking payment to Mr Walker and Mr Walker executing an undertaking that in the event of a successful appeal he would reimburse costs paid by Castlereagh.[91] As it is, Castlereagh has elected to make this application solely for a stay of the liquidation proceedings. In the period which has passed since Mander J gave the Substantive judgment on 11 July 2014, Castlereagh and/or Ms Buxton have been in my judgment in a position to make arrangements to meet the judgment debt but have elected not to do so. When Mr Walker issued the statutory demand on 22 December 2014, Castlereagh did not take steps within the 15 working days to set the statutory demand aside or to then apply for a stay of execution.[92] A liquidation proceeding has its own features and addresses interests which differ from ordinary civil proceedings. In this case, Castlereagh is presumed to have been insolvent from early 2015 and its insolvency is not disputed.[93] In the circumstances, I do not consider it is appropriate on this particular application to grant a stay on conditions as to Castlereagh's making payment. Theappropriate course is to dismiss the application. That will leave Castlereagh and/or Ms Buxton free to arrange payment in such a way that they cease to be judgment debtors whereupon Castlereagh may seek to defend the proceeding on that ground(in addition to any others it chooses). In the meantime, the normal management of this liquidation proceeding (which has necessarily been deferred by the need to deal with the stay application) will be able to resume without a timetable relating to conditions of a stay.Costs and disbursements[94] Counsel accepted that on Castlereagh's application costs and disbursements would follow the event and that they would appropriately be on a 2B basis.Orders[95] I order:(a) the defendant's application dated 24 February 2015 is dismissed;(b) the defendant is to pay to the plaintiff the costs of the application on a 2B basis together with disbursements to be fixed by the Registrar, there being a certificate for Mr Sullivan's reasonable costs of traveland accommodation;(c) the time for the filing of the defendant's statement of defence isextended to 10 working days from the date of this judgment; and(d) the proceeding is adjourned to the List at 10.00 am, 28 May 2015.Associate Judge OsborneSolicitors:Luke Cunningham Clere, Wellington.Canterbury Legal Services Limited, Christchurch