ARMITAGE v STYLO MEDICAL SERVICES LIMITED [2023] NZCA 425

ARMITAGE v STYLO MEDICAL SERVICES LIMITED [2023] NZCA 425 [6 September 2023]IN THE COURT OF APPEAL OF NEW ZEALANDI TE KŌTI PĪRA O AOTEAROACA200/2023[2023] NZCA 425BETWEEN ROSANNE ARMITAGEAppellantAND STYLO MEDICAL SERVICES LIMITEDRespondentCourt: Courtney JCounsel: Appellant in PersonR O Parmenter for RespondentJudgment:(On the papers)6 September 2023 at 11 amJUDGMENT OF COURTNEY JThe application for review of the Deputy Registrar's decision is declined.____________________________________________________________________REASONS[1] This review of a Deputy Registrar's decision concerns an appeal againstAssociate Judge Brittain's decision dismissing an application for orders staying orstriking out liquidation proceedings brought by Stylo Medical Services Ltd (Stylo)against Hum Hospitality Ltd (Hum).1 Stylo and Hum have a long history of litigationarising from a lease by Hum of premises owned by Stylo. The lease has now beencancelled and judgment entered against Hum for rental arrears.2 That judgment sumforms one of the grounds on which Stylo sought an order placing Hum into liquidation.1 Stylo Medical Services Ltd v Hum Hospitality Ltd [2023] NZHC 463 [Strike out judgment].2 Stylo Medical Services Ltd v Hum Hospitality Ltd [2020] NZHC 2969 [Liability judgment].[2] Ms Armitage brings the appeal in her capacity as a creditor and shareholder ofHum. She filed her notice of appeal on 17 April 2023.3 Security for costs was set at$7,060.4 Ms Armitage applied for an order dispensing with security for costs or,alternatively, reducing security and deferring the date by which it was payable.5Her grounds for seeking a dispensation were that she is impecunious, that the appealis genuine and reasonably arguable and there is a public interest in the issues raised.A Deputy Registrar of this Court declined the application. Ms Armitage applies for areview of that decision.[3] The Deputy Registrar set out the relevant legal principles at some length. Hersummary of the principles was correct. There is no need for me to restate them.[4] It is accepted that Ms Armitage is impecunious. The Deputy Registrar did not,however, consider that the appeal raised any substantive issue of public interest, northat the grounds of appeal were reasonably arguable. I agree with both conclusions.[5] The appeal is part of a very long history of litigation between Hum and Styloand the decision under challenge was one involving the application of establishedprinciples to the facts of the case. No issue of public interest arises.[6] I turn to the Deputy Registrar's assessment of the merits of the appeal and thequestion of whether the potential costs and benefits justified requiring Stylo to defendthe judgment without the protection of security for costs. There are seven grounds ofappeal being advanced.6 They relate broadly to the Judge's findings regarding (1)service of the proceedings, (2) advertising of the proceedings, (3) Hum's rights ofset-off/counterclaim and (4) Hum's insolvency.[7] As to the issue of service, the Judge held service of the liquidation proceedingshad been effected in accordance with s 387 of the Companies Act 1993 and that there3 The notice of appeal was originally filed in the name of Hum Hospitality Ltd (Ms Armitage aspersonal guarantor), but an amended notice of appeal filed on 26 April 2023 named Ms Armitagepersonally as the appellant.4 Court of Appeal (Civil) Rules 2005, r 35.5 Rule 35(6).6 The amended notice of appeal identified 11 grounds, however in her memorandum of 18 May2023 filed in support of the application for dispensation, Ms Armitage conceded four of thegrounds.was no obligation on Hum to serve other documents such as those connected toadvertising of the liquidation of the proceedings.7 In holding that service had beenproperly effected, the Judge relied substantially on the decision in Denize Trustee CoLtd v Waimauri Ltd.8 Ms Armitage challenges both the reasoning in Denize and theJudge's application of it to the facts before him. However, I see no error in the DeputyRegistrar's conclusion that this ground of appeal is not reasonably arguable — theJudge was entitled to follow Denize and there is no obvious error in his application ofthat decision.[8] Nor is there error in the Deputy Registrar's conclusion regarding the failure toserve other documents such as those relating to the advertising. There was noobligation to serve these documents and the Deputy Registrar correctly concluded thatthis ground was not reasonably arguable.[9] The next area of challenge, relating to the advertising of the liquidationproceedings, arises from Stylo's early publication of the liquidation proceedings toanother judgment creditor in breach of r 31.10 of the High Court Rules 2016.However, the Judge had a discretion to cure that procedural defect and did so on thebasis that no prejudice had resulted from the breach.9 Ms Armitage asserts, byreference to other cases on this issue, that the Judge had "stepped away from" expectedpractice. However, she has not asserted any error of principle, nor any other basis onwhich the exercise of a discretion can be impugned. The Deputy Registrar was correctto conclude that this ground of appeal was not reasonably arguable.[10] Next is Ms Armitage's assertion of error by the Judge in failing to recogniseHum's right of set-off or counterclaim relating to GST, insurance and rates, which shesays may be raised in the context of the liquidation proceedings. The Judge held thatthese issues had been determined by Brewer J's in one of the judgments on which theliquidation application was based and it was no longer open to Hum to raise them.10Ms Armitage maintains that the issues were not determined by Brewer J. However, in7 Strike out judgment, above n 1, at [40] and [43]–[44].8 Denize Trustee Co Ltd v Waimauri Ltd [2020] NZHC 1718, (2020) 21 NZCPR 247.9 Strike out judgment, above n 1, at [53].10 At [58].his liability judgment Brewer J held that Hum had underpaid its rent.11 He was unableto determine the amount of the underpayment and left quantum for determinationseparately, with the parties to provide further information. In his quantum judgment,Brewer J determined the issue of "how much Hum now owes Stylo".12 In thesecircumstances there is no error in the Deputy Registrar's conclusion that it is notreasonably arguable that the Judge erred in his approach.[11] Ms Armitage also says that Hum is entitled to raise misrepresentation andbreach of quiet enjoyment claims against Stylo by way of set-off. These claims arethe subject of extant proceedings brought in 2016. They have not been progressedbecause Hum requires legal representation to do so and it cannot afford a lawyer.Stylo's counsel, Mr Parmenter, points out that three trial dates have been adjourned inthose proceedings. The Judge did not consider that the existence of the claims shouldpreclude liquidation, noting that the claims could be advanced by the liquidator.13Ms Armitage says that this was an error and the fact that Hum cannot obtain legalrepresentation at present was given too much weight. The Deputy Registrar did notconsider that this ground was reasonably arguable and considered that it would not beright to allow Hum to avoid liquidation when it is unable to advance its claim.[12] It must be the case that, in considering whether a company that is insolventought to be placed in liquidation, the Judge was entitled to place weight on the factthat the asserted claim — brought some seven years ago — cannot be advancedbecause of lack of funds. There is no error in the Deputy Registrar's assessment ofthe merits on this aspect.[13] The next ground of appeal is that the Judge erred in concluding that, primafacie, Hum was insolvent. The basis for the Judge's conclusion was that the judgmentdebts remained unpaid and there seems to be no dispute that Hum has not paid thejudgment debts.14 Therefore, there can be no error by the Judge. Ms Armitagenevertheless challenges the Judge's conclusion on the basis that when this Courtdetermined an application by Hum for stay of Brewer J's quantum decision in 202211 Liability judgment, above n 2, at [25].12 Stylo Medical Services Ltd v Hum Hospitality Ltd [2021] NZHC 3552 at [5].13 Strike out judgment, above n 1, at [60].14 At [63].and concluded that Hum was plainly insolvent, it did so on the basis of old draftaccounts which showed that Hum was indebted to her for more than $2 million.15Ms Armitage says that since it is open to her to forgive that debt Hum should not nowbe regarded as insolvent. There is no merit in this argument. In any event, it does notovercome the problem that the judgment debts remain unpaid and there was no errorby the Judge on the evidence before him. The Deputy Registrar was right to concludethat this ground is not reasonably arguable.[14] Ms Armitage also challenges the Judge's decision on the basis that he failed totake into account Stylo's motivation in bringing the liquidation proceedings, whichshe says is to prevent Hum from pursuing its claim against Stylo. It is correct that theJudge did not appear to consider, as a separate matter, the reasons for Stylo bringingthe liquidation proceedings. The Deputy Registrar did not ascribe merit to this groundbecause the failure to pay the judgment debts entitled Stylo to bring its application,and Hum's claim against Stylo could still be advanced by a liquidator. In my view,the circumstances of the case generally make it highly unlikely that Ms Armitage'sassertions regarding Stylo's motivation would alter the outcome. I do not considerthat the Deputy Registrar erred.[15] Finally, the Deputy Registrar considered the benefits to Ms Armitage of theappeal (both pecuniary and non-pecuniary) against the potential costs (estimated as atleast $9,560). She noted the benefits to Ms Armitage, recording the efforts she andHum had made in terms of creating a community space and the perceived wrongs doneby Stylo to their reputation, as well as the size of the claim against Stylo.The Deputy Registrar concluded that these benefits did not outweigh the costs.[16] Consideration of the respective benefits and costs is relevant because the Courtneeds to assess whether it is it is right to require Stylo to defend the appeal without theprotection of security for costs. Ms Armitage wishes to raise a number of argumentsthat are not tenable. Without detracting from the genuineness of her views, I amsatisfied that it would not be right to require Stylo to incur the cost of defending theappeal without security for costs.15 Hum Hospitality Ltd v Stylo Medical Services Ltd [2022] NZCA 251 at [7].Result[17] The application for review is declined.Solicitors:Winston Wang & Associates, Auckland for Respondent