STYLO MEDICAL SERVICES LTD v HUM HOSPITALITY LTD [2022] NZHC 1683

STYLO MEDICAL SERVICES LTD v HUM HOSPITALITY LTD [2022] NZHC 1683 [14 July 2022]IN THE HIGH COURT OF NEW ZEALANDAUCKLAND REGISTRYI TE KŌTI MATUA O AOTEAROATĀMAKI MAKAURAU ROHECIV-2019-404-000365[2022] NZHC 1683UNDERANDs 244 Property Law Act 2007IN THE MATTER of an application for cancellation of Deed ofLease dated 22 January 2011 and possessionBETWEEN STYLO MEDICAL SERVICES LIMITEDApplicantAND HUM HOSPITALITY LIMITEDRespondentHearing: 13 July 2022 (by VMR)Appearances: R Armitage (director) for ApplicantR O Parmenter for First RespondentV F Harrison for Second RespondentJudgment: 14 July 2022JUDGMENT OF VENNING JSTAY AND RELATED ORDERSThis judgment was delivered by me on 14 July 2022 at 3.45 pm, pursuant to Rule 11.5 of the HighCourt Rules.Registrar/Deputy RegistrarDateSolicitors: Auckland Council (V F Harrison)Winston Wang & Associates, AucklandCounsel: R O Parmenter, AucklandCopy to: ApplicantApplication[1] Hum Hospitality Limited (Hum) has filed an application for stay by way ofinterim relief pending appeal against a strike-out decision made on 5 July 2022. Thedocument was filed by Ms Armitage, a director of Hum. The application was listedbefore me in the duty Judge list.[2] In the application Hum seeks:(a) the halting of an auction of a property at Grafton Road scheduled for20 July 2022 pending the determination of Hum's appeal against adecision of Toogood J of 5 July 2022; and, in the alternative,(b) [preventing] the dispersing of proceeds of sale, such proceeds to be heldin trust pending determination of various matters referred to in thedocument; and(c) the stay of any execution of judgments by way of liquidation of Hum.[3] Mr Parmenter appeared for Stylo. Stylo opposes the application. Ms Harrisonappeared for the Auckland Council, a defendant in separate but related proceedingsCIV-2016-404-636 (the 2016 proceedings) in which Hum sues Stylo, AucklandCouncil and others. Auckland Council has also taken separate liquidation proceedingsagainst Hum.1 The Council opposes any stay of its liquidation proceedings.Hum's representation[4] The first issue Mr Parmenter raised was an objection to Ms Armitagerepresenting Hum. Given the apparently urgent nature of the relief sought in theapplication and that Ms Armitage was before the Court, the Court indicated it wouldhear from Ms Armitage on this application but without prejudice to whatever ultimateorders the Court might make as to Ms Armitage's role in the future.1 Auckland Council v Hum Hospitality Ltd HC Auckland CIV-2022-404-080.Background[5] The application arises in the context of a long-running dispute between Humand Stylo concerning a lease of an old villa in central Auckland. Ms RosanneArmitage, the sole director and shareholder of Hum, lived at the property forapproximately 10 years with her son and various flatmates. Ms Armitage says shemade the lounge areas of the villa available for members of the community tocongregate and participate in a range of activities. A coffee kiosk at the front of theproperty was operated on weekends. However, Hum had little income and struggledto meet its rental obligations under the lease.2Procedural background[6] There is a considerable procedural background to the matters in issue betweenStylo and Hum in relation to the property.[7] The procedural background was summarised by Toogood J in his minute of 4July 2022 which the current stay application is focused on:3[2] On 11 November 2020, [the liability judgment] Brewer J found thatHum was in arrears with its rental payments in the sum of at least $150,000.4Hum was ordered to pay that sum to Stylo on account of the arrears and theJudge made a direction that if the parties could not agree on the further balanceoutstanding, they were to file affidavits and memoranda to enable the balanceto be determined. The parties could not agree and on 20 December 2021, [thequantum judgment] Brewer J gave judgment for Stylo against Hum in the sumof $106,184.82, being the further amount found to be outstanding as at12 October 2021.5[3] Between issuing the liability judgment and the quantum judgment,Brewer J was required to deal with a number of procedural matters either bydelivering a judgment or by issuing minutes of the Court. On 11 February2021, Brewer J issued a minute in which he addressed the consequences ofHum paying the $150,000 on account of rental arrears within one month ofthe liability judgment but failing to pay any rental due pending resolution ofthe outstanding quantum issue. In the liability judgment, the followingdirection was given:[48] Pending resolution of any dispute as to quantum, the lease willremain in force provided rental payments are paid on time. If Hum defaults2 Hum Hospitality Ltd v Stylo Medical Services Ltd [2022] NZCA 251 at [2].3 Minute of Toogood J, dated 4 July 2022: Although the application for stay is referred to as a strikeout decision made 5 July 2022, Toogood J's minute is dated 4 July 2022 on its face.4 Stylo Medical Services Ltd v Hum Hospitality Ltd [2020] NZHC 2969 (the liability judgment).5 Stylo Medical Services Ltd v Hum Hospitality Ltd [2021] NZHC 3552 (the quantum judgment).on the payment of any rental due, then unless Hum can show the non-payment was remedied within 10 working days of being due, the lease iscancelled and Hum must forthwith give possession of the premises to Stylo.[4] In the minute of 11 February 2021, Brewer J was satisfied that Humdefaulted regarding a rental payment which was due on 1 January 2021 bypaying only $10,000 of the rent due but omitting to pay GST on that sum. Asa consequence, Stylo submitted that the cancellation paragraph at [48] of theliability judgment was crystallised. The Judge agreed and granted Stylo'sapplication, directing that orders may be sealed in the form provided.[5] Being a decision of the Court, the orders made in the minute of11 February 2021 were appealable by Hum but no notice of appeal was filed.[6] Water continued to flow under the bridge and numerous orders byminute and judgment were issued Brewer J and other judges of the Court.[7] On 17 September 2021, Brewer J issued a minute relating todocuments presented for filing by Ms Armitage that had been referred to him,pursuant to r 5.35A of the High Court Rules 2016, for consideration underr 5.35B. For reasons which are not relevant at this juncture, the Judge held hewas satisfied that the applications filed by Ms Armitage were "plainly anabuse of the process of the Court" and struck them out.[8] On 21 September 2021, Brewer J issued a further minute relating toan interlocutory application for an order rescinding the strike-out order madein his minute of 17 September 2021, noting that they had not been acceptedfor filing. The Judge declared that for the Registry to accept the documentsfor filing would contribute to an abuse of the process of the Court and directedthe Registry not to accept them.[9] On 24 September 2021, Brewer J directed that still further attemptsby Ms Armitage to file documents in the proceeding were an abuse of theprocess of the Court and directed the Registry not to accept them for filing.[10] Brewer J issued a further minute on 27 September 2021. It isnecessary to set it out in full. It reads:[1] In my minute dated 24 September 2021, I said:[7] Should Stylo seek to continue the proceeding inorder for quantum to be determined, then I will acceptan application by Ms Armitage to represent Hum forthat purpose. Stylo would have to be heard on anysuch application, but I would place weight on the factthat Ms Armitage has personally guaranteed thelease.[2] I now have an interlocutory application by Ms Armitage foran order permitting her to represent Hum on the quantum dispute.Ms Armitage has also tendered a memorandum and an affidavit.[3] I fear that the application by Ms Armitage is a Trojan Horsein that although it outwardly resembles an application for a verylimited purpose, inside it there are all the argumentsMs Armitage wants to advance to enable Hum to retainpossession of the premises.[4] There is no application from Stylo (of which I am aware) forquantum to be determined by the Court.[5] I direct the registry to send the interlocutory application toMr Parmenter as counsel for Stylo, together with a copy of thisminute.[6] I direct Mr Parmenter to advise:(a) Does Stylo intend to apply to the Court fordetermination of quantum?(b) If so, does Stylo object to Ms Armitagerepresenting Hum on that issue?[7] The registry is not to accept Ms Armitage's documents forfiling without a further order from me.[11] There have been further decisions of the Court since the minute of27 September 2021 was issued, including a costs judgment of Brewer J dated31 May 2022.6[12] The latest minute is one delivered by Brewer J on 2 June 2022 inwhich he referred to a request filed by Ms Armitage on 31 May 2022 askingthe Judge to "correct" the liability judgment using the slip rule, r 11.10. TheJudge held that he could not do that; first, because he held there was no clericalmistake or error arising from an accidental slip or omission, but principallybecause the judgment had been sealed; the Judge said he was functus officio(that is, without jurisdiction to deal with the matter) and that the correction ofany error was for the Court of Appeal.[13] It appears that Hum did not appeal the liability judgment but that ithas appealed the quantum judgment. That appeal has not progressed in theCourt of Appeal because Hum cannot afford to pay the filing fee or securityfor costs. On 16 June 2022, the Court of Appeal dismissed an application byHum for a stay of execution of the quantum judgment.7[8] Toogood J had before him the following documents:8(a) an interlocutory application for leave to appeal out of time theinterlocutory orders made by Brewer J in his minute of11 February 2021;(b) a draft notice of appeal against the orders made on11 February 2021;6 Stylo Medical Services Ltd v Hum Hospitality Ltd [2022] NZHC 1237.7 Hum Hospitality Ltd v Stylo Medical Services Ltd [2022] NZCA 251.8 Minute of Toogood J, dated 4 July 2022 at [14].(c) an affidavit of Ms Armitage in support of the application forleave to appeal out of time;(d) a memorandum regarding the application for leave to appealout of time;(e) an updating memorandum dated 26 June 2022 regarding theapplication for further orders by the Court under the slip rule;(f) an application dated 27 June 2022 for orders under the sliprule; and(g) an application on 28 June 2022 for stay by way of interimrelief pending leave to appeal the 11 February 2021interlocutory orders out of time.[9] Toogood J considered the documents were plainly an abuse of the process ofthe Court and in accordance with r 5.35B directed that the documents not be acceptedfor filing. He also directed the Registrar was not to accept from Hum any applicationor memorandum relating to this proceeding without the leave of a judge. (The presentapplication for relief was accepted given the impending auction date and was listed inthe duty Judge list before me).[10] There have been two further relevant developments. In a judgment deliveredon 28 June 2022 Brown J in the Court of Appeal dismissed Hum's application toreview the Deputy Registrar's decision declining to dispense with security for costs inrelation to an appeal against the quantum judgment of Brewer J.9 If that appeal is tobe maintained Hum has to pay security for costs in the Court of Appeal by 26 July2022.[11] The second development is that on 11 July 2022 Associate Judge Taylor issueda minute in the liquidation proceedings adjourning them to 19 August 2022.Relevantly, he also dismissed Ms Armitage's application to represent Hum in thoseproceedings. The Judge directed that Hum was to instruct counsel "if it wishes todefend these proceedings". He also required Hum to apply for an extension of time toappeal the security for costs judgment by 5 August 2022.9 Hum Hospitality Ltd v Stylo Medical Services Ltd [2022] NZCA 269.Jurisdiction for the application[12] The application for stay is made in reliance on Court of Appeal (Civil) Rules2005, r 12, and High Court Rules 2016, rr 20.10 and 17.29.[13] High Court Rule 20.10 has no relevance. The rule applies to appeals from theDistrict Court to the High Court.[14] High Court Rule 17.29 provides the Court may grant a stay of enforcement ofa judgment upon the ground that "a substantial miscarriage of justice would be likelyto result if the judgment were enforced".[15] Under r 12 of the Court of Appeal (Civil) Rules 2005, this Court may order astay of the proceeding in which the decision was given or grant other interim reliefpending the hearing of an appeal. Factors taken into account include:10• whether the appeal may be rendered nugatory?• the bona fides of the applicant as to prosecution of the appeal?• whether the successful party will be injuriously affected?• the effect on third parties;• the novelty and importance of questions involved;• public interest in the proceeding;• overall balance of convenience; and• the merits of the appeal.10 Keung v GBR Investment Ltd [2010] NZCA 396; and Dymocks Franchise Systems (NSW) PtyLtd v Bigola Enterprises Ltd (1999) 13 PRNZ 48.The grounds advanced for the stay[16] Hum seeks to prevent Stylo from selling the property in issue pending a hearingof the appeal against Toogood J's "strike-out" decision of 5 July 2022.11 In the papersin support Ms Armitage also variously refers to:(a) Hum's claim in the 2016 proceedings against the Auckland Council andStylo and others;(b) Hum is "near completing" an application to appeal out of time againsta security for costs order made by Associate Judge Bell in the 2016proceedings;(c) Hum has appealed other costs and "money" orders;(d) the possession and cancellation step of 11 February 2021 is now beforethe Court of Appeal; and(e) the quantum decision is impacted by the 11 February 2021 "order"which is now before the Court of Appeal.[17] Ms Armitage also notes, inter alia, that Stylo has possession of the property,albeit that some of Hum's and her belongings remain on the site.[18] If relief is not granted she says Hum's right of appeal will be rendered nugatory,particularly as the appeal will deal with the 11 February 2021 order and costs orders.She considers that if Hum is successful on its appeal it will gain back possession ofthe property and a substantial sum will be due to it.[19] Ms Armitage also submits that if Hum is liquidated a substantial miscarriageof justice will ensue because Hum will lose the ability to pursue its claims against theAuckland Council and Stylo in the 2016 proceedings.11 Although referred to as a strike out, Toogood J did not strike out Hum's proceeding, rather heinvoked r 5.35B and directed the documents not be accepted for filing.[20] Ms Armitage also submits that third parties, such as herself and others will notbe able to "reinstitute their belongings" and their place at the property.[21] She also repeats allegations of unjust enrichment and improper action by Styloand the Council.[22] Ms Armitage referred to a number of authorities which discuss the relevantprinciples.12Analysis[23] The principles are settled. As in every case the rules and principles have to beapplied to the facts of the particular case. In this case the merits are entirely againstHum and the submissions that Ms Armitage makes for a stay both on a factual andlegal basis.[24] The application pursued by Ms Armitage on behalf of Hum is premised on amisapprehension of the impact of Hum's appeal against the orders of Toogood J. Theorders made by Toogood J were made under r 5.35B. The effect was to direct theRegistrar not to accept the documents for filing, and to prevent Hum from filing anyfurther documents in this proceeding without leave. In the event Hum's appeal againstthose orders was successful, then at best from Hum's point of view the application forleave to appeal (out of time) the orders made by Brewer J on 11 February 2021 and arelated stay application would have to be considered by this Court.[25] The appeal against Toogood J's decision does not open the door to Hum toenable it to revisit matters on appeal which have been finally determined against it,such as the liability decision and Stylo's right to possession of the property in issue.12 Dymocks Franchise Systems (NSW) Pty Ltd v Bigola Enterprises Ltd, above n 10; Royal Forestand Bird Protection Society of NZ Inc v Minister of Fisheries [2021] NZHC 2282; Fullers Bay ofIslands Ltd HC Auckland CIV-2009-404-7207, 23 February 2011; Palmerston North City Councilv Birch [2012] NZHC 3248; Enright v Gold Medal Exports Ltd (1989) 3 PRNZ 243 at 245-246;Raffles Education Corporation Ltd v Mills HC Auckland CIV-2008-404-5258, 16 February 2009;Harnish v Bruce [2014] NZHC 302 at [16]; and Pinson v Pinson (1991) 5 PRNZ 177.[26] I accept Mr Parmenter's submission that it is now far too late for Hum to seekto challenge the liability decision (as was also recorded by Brown J in the recentjudgment of the Court of Appeal).13 As Brown J noted in that judgment:14[8] Hum's notice of appeal purports to give notice of an appeal againstnot only the quantum judgment, but also the liability judgment and the ordergranting permission to seal orders cancelling the lease of 11 February 2021.Hum cannot revisit the liability judgment given the outcome ofCA176/2021. Nor without leave can it seek to file an appeal long out of timein relation to the 11 February 2021 decision. Hence its current appeal isconfined to a challenge to the quantum judgment.The Court of Appeal confirmed in CA176/2021 that the appeal against the liabilityjudgment lapsed. It would be an abuse to seek to relitigate that again as Ms Armitageapparently proposes.[27] The requirements of r 17.29 are not met in this case. No miscarriage of justice(let alone a substantial miscarriage of justice) arises if this Court does not stay theeffect of Toogood J's orders. Even if Toogood J's orders were set aside that could haveno practical effect on Stylo's ability to pursue the sale of the property in issue. It isentitled to possession and to deal with the property as it sees fit.[28] Nor are the requirements for a stay under r 12 of the Court of Appeal Rulesmet. The appeal against Toogood J's judgment will not be rendered nugatory if a stayis not granted. As noted, Toogood J's orders can have no impact on the previousjudgments of this Court and the Court of Appeal. On the other hand, to prevent Stylodealing with its property would severely prejudice it and would be contrary to thoseprevious judgments.[29] Ms Armitage says she and other former tenants/occupiers of the property willbe affected. However, that submission is based on the premise they have rights in theproperty which have been determined against them.[30] There is no public interest in the proceeding.13 Hum Hospitality Ltd v Stylo Medical Services Ltd, above n 9.14 (footnote omitted).[31] The balance of convenience clearly favours Stylo being able to deal with itsproperty.[32] Ms Armitage also referred to the 2016 proceeding. Hum has had opportunityto pursue its proceedings against the Council and Stylo in the 2016 proceedings. Ithad three previous fixtures adjourned for a variety of reasons. That 2016 proceedingis currently stayed until Hum pays the security for costs ordered by Associate JudgeBell. Those proceedings are unaffected by the orders of Toogood J in theseproceedings.[33] The reasons given by the Court of Appeal in its judgment of 16 June 2022 inwhich it refused to stay enforcement of the quantum judgment pending the appeal areworth repeating and are also applicable to this application:15[14] Hum contends in its application that its appeal right will be renderednugatory if "the Orders" are not stayed. It is evident that "the Orders" MsArmitage refers to are other orders not under appeal in this proceeding,namely, the possession order and arrest order. So, for example, Hum contendsthat its appeal right will be rendered nugatory if the order for Ms Armitage'simprisonment is executed in the face of what she contends is Hum's lawfulpossession of the property. It is also said that Ms Armitage will have lost herhome of 10 years and her freedom. But possession of the property has nowbeen 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 appealin this proceeding and must be put to one side. The only other particulars listedunder this head are the contentions that Stylo will be seen to have benefitedfrom its own wrong (alleged misrepresentation and failure to perform) andunjust enrichment. These are not reasons why the appeal right would berendered nugatory if a stay is not granted.[34] As to the suggestion Hum would lose the opportunity to pursue any meritoriousclaim if liquidated, as the Court of Appeal observed in the same judgment, if there wasany merit in the appeal (which it doubted) the liquidator would be able to pursue it.[35] The merits of the appeal do not support a stay. Toogood J's decision underr 5.35B was a decision open to him on the basis of his review of the proceedings.Hum's attempt to revisit the liability judgment through the means of seeking to leaveto appeal the orders made in the minute of 11 February 2021 is misconceived.15 Hum Hospitality Ltd v Stylo Medical Services Ltd, above n 2.[36] Even if it were appropriate for the Court to consider the merits of the proposedapplication for leave to appeal out of time the 11 February orders of Brewer J on thecurrent appeal, the merits would not support relief. In the minute of 11 February 2021Brewer J did no more than confirm that Stylo could seal orders for possession. Thebasis for the orders for possession arose from the liability judgment itself which, asnoted, is now beyond challenge.[37] Ms Armitage's submission on behalf of Hum that if the quantum judgmentappeal succeeded that would enable the reopening of the liability judgment is alsomisconceived and highlights the difficulties presented by Ms Armitage's approach tothe matter of behalf of Hum. Further, for that appeal to proceed requires Hum to paysecurity to the Court of Appeal by 26 July 2022 which, on its own evidence, Hum isextremely unlikely to be able to do. As the Court of Appeal said in its stay judgment:16[7] Hum is insolvent. Ms Armitage confirms in her supportingaffidavit that Hum has no income and is effectively moribund:74. The only source of income Hum had was the villa and all themonies was going back to [Stylo].75. However, I am creative and resourceful, if matters werestayed I could bring Hum back to life.[8] Hum's liabilities also appear to far exceed its assets. Draft accountssubmitted 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 31March 2021 and had negative equity of $519,443 taking account of currentliabilities at that date of $2,466,803.[38] While the Court is conscious of the need to facilitate access to justice, theinterests of justice also require the Court to consider the interests of other litigants andparties who are drawn into vexatious proceedings or applications and are forced toincur unnecessary expense to respond to them without a realistic prospect ofrecovering any costs, as is the position Stylo faces in this case. Further, there is a realrisk that the credibility of, and respect for, the Court system generally would bedamaged if the Court were to permit such behaviour.16 Hum Hospitality Ltd v Stylo Medical Services Ltd, above n 2.Result/orders[39] For the above reasons the applications for stay in their various guises aredismissed. Stylo is to have costs on a 2B basis.[40] Mr Parmenter orally sought costs against Ms Armitage. If that application isto be pursued a formal application should be filed. Ms Armitage should have theopportunity to take advice and respond to such an application.[41] Having reviewed the procedural background to the proceedings and theprocedural morass created by the documents filed by Ms Armitage I also make thefollowing orders:(a) Ms Armitage is not to represent Hum in either these proceedings CIV-2019-404-365 or CIV-2016-404-636 that are currently before thisCourt.17(b) If Ms Armitage purports to file any documents on behalf of Hum ineither of the above proceedings they are to be rejected by the Court andreturned to her.[42] For the avoidance of doubt, Stylo is entitled to deal with the property in issueas it sees fit whether by sale or otherwise.[43] The liquidation proceedings against Hum are to proceed as directed and uponthe terms confirmed by the Associate Judge in his recent minute.__________________________Venning J17 The record in CIV-2016-404-636 currently discloses that Hum is represented by a solicitor.