SABA YACHTS LTD V FISH PACIFIC LTD AND ANOR HC AK CIV-2006-404-441

SABA YACHTS LTD V FISH PACIFIC LTD AND ANOR HC AK CIV-2006-404-441 29 March 2006IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY CIV-2006-404-441BETWEEN SABA YACHTS LTD Appellant AND FISH PACIFIC LTD First Respondent AND ARTHUR ANAE Second Respondent Hearing: 29 March 2006 Appearances: Neil Campbell for Appellant Ian Williams for Respondents Judgment: 29 March 2006JUDGMENT OF HARRISON J_________________________________________________________________________________ SOLICITORS Joseph Shaw – in house counsel, Saba Yachts Ltd, Auckland COUNSEL Neil Campbell (Auckland) for Appellant Ian Williams (Auckland) for Respondents[1] On 20 December 2005 following trial the District Court at Auckland entered judgment in favour of Fish Pacific Ltd and Mr Arthur Anae (collectively FPL) against Saba Yachts Ltd for $97,154.75 together with interest at 7.5% from 22 March 2004 and costs. Mr Ian Williams, FPL's counsel, advises that the total amount of the judgment is about $124,000. [2] On 2 February 2006 Saba filed an appeal against the judgment and contemporaneously applied for an order staying execution pending determination of its appeal. Mr Neil Campbell, who appears for Saba today but was not counsel instructed in the District Court, advises that a half day fixture for hearing the appeal is set for 15 June 2006. [3] The grounds upon which Saba relies are that a refusal to grant a stay will result in a serious miscarriage of justice to it whereas FPL will not suffer any serious or ongoing loss in that event. It relies principally upon affidavits sworn in support by its director, Mr Wayne Shaw. His primary affidavit says this:6. Given the state of the marine industry at the present time profit margins are at a minimum and it is necessary to run a minimal profit to compete for available projects. SYL does not therefore currently hold the funds to allow for payment of the judgment in full immediately. 7. Given its current financial position if a stay is not granted and SYL is required to pay the judgment debt in full immediately it will not be able to continue with the appeal without the sale of assets of the company to pay the judgment debt immediately. SYL does have assets which it may sell but this will not only take time given that the assets are not the type that are easily liquidated, but this will also cause prejudice to SYL in that these assets of the company are necessary for the operation of SYL and the sale of these assets will severely restrict the operational ability of SYL. 8. If a stay of execution was not granted and SYL was forced to sell its assets to pay the judgment debt immediately, the right of appeal of SYL would in effect be nullified as the sale of assets would not only frustrate SYL's daily operations and continuing earning ability but would also restrict the reacquisition of those assets and in effect render the appeal rights of SYL without effect.[4] On 27 March 2006, in anticipation of hearing Saba's application today, I issued a minute placing Saba on notice that Mr Shaw's affidavit failed to give sufficient information about the company's financial circumstances. He did notdepose to its assets and liabilities with appropriate values attributed to each or produce its most recent set of accounts. I suggested that Saba should also provide evidence of the existence or otherwise of any credit balances and bank accounts. [5] On 28 March 2006 Mr Shaw filed a supplementary affidavit. He produced an unaudited statement of Saba's financial position "as of March 2006". He did not provide the company's most recent set of accounts. However, the informal document produced discloses that Saba has total current assets of $811,885 and liabilities of $669,123. By far the largest component of the latter is an item described as "total long term liabilities $600,000". In view of my earlier minute, I would have expected more precise evidence from Mr Shaw. [6] Mr Campbell acknowledges that I have a discretionary power to grant a stay. His brief but focused submission is that Saba's right of appeal will be rendered nugatory without a stay. He freely acknowledges that Saba does not assert an inability to satisfy the judgment. Instead he points to the prospect of damage consequential upon an obligation to sell assets. [7] I am not satisfied of the factual basis for this submission. I have already referred to the unsatisfactory nature of the financial evidence tendered by Saba in support. I infer that the company has sufficient resources either to borrow the necessary funds or to raise them from sale of assets. Mr Shaw asserts that the latter course will severely restrict Saba's operational ability. He does not provide any reliable information in support. [8] In addition, Mr Campbell submits that Saba's appeal is bona fide; is based upon genuine grounds; and has been prosecuted diligently. I accept those propositions. I acknowledge his constructive identification of the primary issue for determination on appeal. I accept its legal novelty and importance, namely whether the pre-incorporation provisions of the Companies Act 1993 applied to a pre- incorporation contract allegedly entered into by an overseas company. [9] However, these factors are not sufficient to justify a stay. I repeat that Saba has not satisfied me that it will suffer a miscarriage of justice if the judgment isenforced before determination of its appeal. Accordingly, I dismiss Saba's application. FPL is entitled to costs according to category 2B. [10] I wish to express my appreciation to both counsel for the manner of identification of the issue for determination today and their assistance in resolving it. ______________________________________ Rhys Harrison J