TADD MANAGEMENT LTD v WEINE [2023] NZHC 3300

TADD MANAGEMENT LTD v WEINE [2023] NZHC 3300 [21 November 2023]IN THE HIGH COURT OF NEW ZEALANDWELLINGTON REGISTRYI TE KŌTI MATUA O AOTEAROATE WHANGANUI-A-TARA ROHECIV-2019-485-781[2023] NZHC 3300UNDER sections 24–30 and 35 of the Contract andCommercial Law Act 2017IN THE MATTER OF the property at 134 Queens Drive,Lower HuttBETWEEN TADD MANAGEMENT LIMITEDPlaintiffAND RUTH RENTON WEINE and MICHAELDAVID HOFMANN-BODY as trustees ofthe Ruth Weine Family TrustDefendantsAND NEW ZEALAND CONSULTINGENGINEERS LIMITEDThird PartyOn the PapersCounsel: F B Collins for the PlaintiffM R C Wolff for the DefendantsJudgment: 21 November 2023JUDGMENT OF GWYN J(Application for stay of enforcement of judgment)Solicitors:Gibson Sheat Lawyers, WellingtonMorrison Kent, WellingtonIntroduction[1] This proceeding arose out of the purchase by the plaintiff, TADD ManagementLtd (TADD), of a commercial building in Lower Hutt in December 2017 (property).The vendors of the building were Ruth Weine and Michael Hofmann-Body, as trusteesof the Ruth Weine Family Trust (Trust). TADD's claim was that it relied onrepresentations by the vendors as to the seismic rating of the property. An InitialSeismic Assessment (ISA) provided by the vendors assessed the building as having a60%NBS (New Building Standard) rating. Subsequently, TADD obtained twoDetailed Seismic Assessments (DSAs), the first of which assessed the property at10%NBS and the second at 30%NBS.[2] TADD brought claims against the vendors in misrepresentation and/orcommon mistake. The vendors, in turn, claimed against the engineering firm that hadprovided the initial ISA, alleging breach of contract, negligence and breach of the FairTrading Act 1986.[3] In my judgment of 5 April 2023 (judgment),1 I found for the plaintiff againstthe defendants, in both misrepresentation and common mistake. I dismissed thedefendants' claims against the third party.[4] The judgment awarded the plaintiff $609,842.40, together with costs andinterest (judgment sum). Costs were subsequently awarded2 to the plaintiff on a 2Bscale basis.Application to stay enforcement of judgment[5] By application of 23 May 2023 the defendants sought a stay of the judgmenton the basis that they have lodged a notice of appeal against the judgment, their appealwill be rendered nugatory if the stay is not granted, and the plaintiff and the third partywill not be injuriously affected by the judgment being stayed until resolution of theappeal.1 TADD Management Ltd v Weine [2023] NZHC 764.2 TADD Management Ltd v Weine [2023] NZHC 2573; and see also TADD Management Ltd v Weine[2023] NZHC 1968.[6] The application for a stay is opposed by the plaintiff.[7] For the reasons set out in my minute of 13 October 2023,3 there was aconsiderable delay in the application coming before me. As a result of that delay, itwas not possible to afford the parties an oral hearing of the application and I have dealtwith it on the basis of the parties' written submissions.Defendants' submissions in support of application[8] The defendants rely on the principles set out by the Court of Appeal in BrookValley Community Group Inc v Brook Waimarama Sanctuary Trust.4[9] Their primary submission is that the appeal will be rendered nugatory if thestay is not granted, because the defendants have serious concerns about the plaintiff'ssolvency.[10] These concerns are detailed in an affidavit from Michael Hofmann-Body dated22 May 2023. Mr Hofmann-Body notes that the Trust is not aware of TADD'sfinancial position, but does know that TADD is associated with another company,Armstrong Downes Commercial 2012 Ltd (in liq) (Armstrong Downes).[11] Mr Hofmann-Body observes that Armstrong Downes is in liquidation and thereis an ongoing liquidation process. His affidavit attaches a liquidators' report (for theperiod 2 May 2022 to 2 November 2022) which records that there are creditor claimsagainst Armstrong Downes of $30.4 million. The liquidators' report records thatclaims have been filed against related parties and the liquidator is confident there willbe a substantial interim distribution to creditors. Mr Hofmann-Body says that the"Trust considers it very likely" that TADD is being sued, or is at risk of being sued inthat process "for a substantial sum of money."[12] A memorandum of counsel for the defendants dated 10 October 2023 notesthat TADD has sold the property and all other properties owned by it. The defendants'3 TADD Management Ltd v Weine HC Wellington CIV-2019-485-781, 13 October 2023 (Minute ofGwyn J).4 Brook Valley Community Group Inc v Brook Waimarama Sanctuary Trust [2017] NZCA 377.submissions in support of the application state that TADD has made all itsmanagement staff redundant. This is confirmed in Mr Taylor's affidavit which I referto at [18] below.[13] On that basis, the defendants say that, if TADD is able to enforce the judgmentnow, pending the defendants' appeal, the appeal will be rendered pointless becausethere is a real risk that the Trust will not be able to recover any money paid to TADD,if the Trust is ultimately successful in its appeal.[14] The defendants also submit that the appeal involves a novel issue regarding theinterpretation of seismic assessments for commercial buildings. The decision on theappeal may impact on NBS rating calculation methodologies in the future. They saytoo that the interpretation of seismic assessments is a matter of public interest. In thedefendants' submission, the grounds of appeal are strong.[15] Mr Hofmann-Body confirms that the Trust holds cash assets of $1.5 million oninterest-bearing term deposit, sufficient to cover the judgment sum. He gives anundertaking that the Trust will continue to hold that money in the Trust's solicitor'strust account and he will not consent to it being released prior to the appeal being heardand a decision released.[16] For those reasons the defendants say the balance of convenience favours thegranting of a stay of execution.Plaintiff's submissions opposing the stay application[17] The plaintiff opposes the application, relying on the relevant principles as setout in Keung v GBR Investment Ltd5 and Brook Valley Community Group Inc v BrookWaimarama Sanctuary Trust.6[18] TADD submits that there is no evidence provided by the defendants to supporttheir speculation that TADD will be unable to repay the judgment amount if the appealis successful. Mr Taylor, who is one of two co-directors of TADD, has provided an5 Keung v GBR Investment Ltd [2010] NZCA 396, [2012] NZAR 17 at [111].6 Brook Valley Community Group Inc v Brook Waimarama Sanctuary Trust, above n 4.affidavit in which he addresses the assertion made by Mr Hofmann-Body that TADDis very likely being sued or at risk of being sued by the liquidators of ArmstrongDownes. Mr Taylor's evidence is that a claim was filed by the liquidators but wasquickly resolved and settled. The fact of the settlement is recorded in the liquidators'latest report dated 2 June 2023 (which is attached to Mr Taylor's affidavit) and thesettlement amount has been paid in full. Mr Taylor confirms that TADD does not faceany other claims.[19] TADD says that while the property has been sold to a related entity controlledby the directors, that is not an impediment to recovery by the defendants.[20] Mr Taylor records that, in response to the defendants' concern in theHigh Court proceeding that TADD would not be able to meet costs if unsuccessful, itvoluntarily paid security for costs into Court. Mr Taylor confirms that if the appeal issuccessful TADD would have the ability to repay the amount it is currently entitled tobe paid.[21] The plaintiff also says that, as the defendants' own submissions acknowledge,in the event the appeal is successful but the judgment sum is not repaid, they wouldhave to commence debt recovery proceedings or alternatively pursue the directorspersonally. TADD says that the possibility of having to issue debt recoveryproceedings if a judgment is reversed on appeal is a risk common to all successfulappellants.[22] TADD addresses the strength of the defendants' appeal. It says this was aconventional claim for misrepresentation/mistake relating to the sale of a commercialbuilding. It is highly unlikely that both findings of the High Court — that there was amisrepresentation and also a common mistake — will be reversed by the Court ofAppeal, as the case turned on a factual assessment as to the meaning of therepresentations made by the defendants and no novel questions of general or publicimportance arise.[23] TADD says it will be injuriously affected by a stay. It has incurred the costsof substantial seismic strengthening work to the building. It issued proceedings in2019 and obtained judgment on 5 April 2023. The appeal is not to be heard until12 February 2024, with an unknown period following that before release of anyjudgment. In all, TADD has or will have absorbed and funded the costs of thestrengthening works for between three and four years. The balance of conveniencetherefore favours a stay being declined.Discussion[24] The application is made in reliance on r 12 of the Court of Appeal (Civil) Rules2005. Subrules 3 and 4 are of particular importance. They provide:(3) Pending the determination of an application for leave to appeal or anappeal, the court appealed from or the Court may, on an interlocutoryapplication,—(a) order a stay of the proceeding in which the decision was givenor a stay of the execution of the decision; or(b) grant any interim relief.(4) An order or a grant under subclause (3) may—(a) relate to execution of the whole or part of the decision or to aparticular form of execution:(b) be subject to any conditions that the court appealed from orthe Court thinks fit, including conditions relating to securityfor costs.[25] The Court is required to balance two principles. First, a successful litigantshould not be deprived of the fruits of its litigation.7 Second, an appellant should notbe deprived of the fruits of a successful appeal.8[26] In balancing the two principles, the relevant considerations include:9(a) whether the appeal may be rendered nugatory by lack of a stay;(b) the bona fides of the appellant as to the prosecution of the appeal;7 Brook Valley Community Group Inc v Brook Waimarama Sanctuary Trust, above n 4.8 Duncan v Osborne Building Ltd (1992) 6 PRNZ 85 (CA) at 87.9 Court of Appeal (Civil) Rules 2005, r 12 and the commentary in Dymocks Franchise Systems(NSW) Pty Ltd v Bilgola Enterprises Ltd (1999) 13 PRNZ 48 (HC) at [9], as approved by the Courtof Appeal in Keung v GBR Investment Ltd, above n 5, at [11].(c) whether the successful party will be injuriously affected by the stay;(d) the effect on third parties;(e) the novelty and importance of the questions involved;(f) the public interest in the proceeding;(g) the overall balance of convenience; and(h) the apparent strength of the appeal.[27] Not all factors apply in every case. Here, no question arises as to the bonafides of the appellant as to prosecution of the appeal. The appeal is to be heard on12 February 2024.[28] The defendants do not appeal the findings made against them in respect of thethird party and have paid the costs awarded to the third party.Novelty and importance, public interest[29] On the one hand, as the plaintiff submits, the case involved the routineapplication of the Contract and Commercial Law Act 2017, with the judgmentultimately turning on my factual assessment of the representations made by thedefendants to the plaintiff and other prospective purchasers of the building. It is alsocorrect, as the defendants contend, that there is little previous authority on theinterpretation of seismic assessments for commercial buildings. Ultimately thesefactors do not assist in the determination of the application.Strength of the appeal[30] Nor are the merits of the appeal so obvious as to be a critical factor in favourof a stay.Will the appeal be rendered nugatory?[31] The defendants' application focuses primarily on whether their appeal may berendered nugatory, submitting there is a real risk that if they make payment of thejudgment sum, but then succeed in their appeal, the plaintiff will not be in a positionto repay them.[32] In relation to money judgments, as the authors of McGechan on Procedurenote,10 the Court's approach generally has been that, so long as there is an appropriateassurance of repayment if the appeal is successful, then the party successful at firstinstance should have its money at once.11[33] The prospect of litigation by the liquidators of Armstrong Downes againstTADD, mooted by Mr Hofmann-Body, is directly met by Mr Taylor's affidavit, whosays there are no current or pending claims against TADD.[34] There is no evidence before the Court directly relating to TADD's financialposition and whether it would be able to repay the judgment sum. That cuts both ways:on the one hand, the defendants' speculation about the risk of non-payment is simplythat. On the other hand, TADD has chosen not to proffer direct evidence of itsfinancial position in order to support Mr Taylor's commitment that it would be able torepay the defendants if the appeal were successful.[35] The question is whether TADD has given an "appropriate assurance" ofrepayment if successful. In ASB Bank Ltd v Lin,12 Associate Judge Bell held that anappropriate assurance from the Bank was a written undertaking signed by a dulyauthorised bank officer, that if the appeal went against the Bank it would forthwithrefund to the defendants the proceeds of the judgment. However, by its nature, theplaintiff in this case is not in a position to offer the same certainty as a bank.10 Jessica Gorman and others McGechan on Procedure (online looseleaf ed, Thomson Reuters) at[CR12.01(3)].11 McLeod v New Zealand Pine Co Ltd (1892) 11 NZLR 493 (SC) at 495; and Contributory MortgageNominees Ltd v Harris Road No 10 Ltd (2006) 22 NZTC 19, 752 (HC) at [13]–[22].12 ASB Bank Ltd v Lin [2014] NZHC 106, [2014] NZAR 327 at [26].[36] Other cases under r 12 are most frequently concerned with whether the partyseeking the stay (that is, the unsuccessful party) has offered adequate security.13 Inmy view, the assessment of what constitutes adequate security or is an "appropriateassurance" in those cases, is not directly analogous to what is required of the successfulparty where the unsuccessful party seeks a stay.[37] In this case Mr Taylor's commitment on oath that TADD would be able torepay, together with TADD's past record in relation to security, does provide someassurance in the face of what is a speculative concern raised by the defendants.[38] And ultimately the assurance as to repayment is one factor in the balancingexercise, but not determinative. In the stay decision in Skids Program ManagementLtd v McNeill, Woodhouse J said:14I hesitate to differ from an observation of that eminent Judge, [Williams J inMcLeod v The New Zealand Pine Company Ltd] but in my opinion it is unwiseto introduce what appears to be absolutes when considering the exercise of thediscretion that is involved. This includes the Judge's suggestion that theapplicant's ability to recover the payment must be "made certain". Removingmaterial risks for the party required to make the payment is obviously animportant consideration. But it is not an absolute. This is perhaps implicit inthe sentence in which the Judge refers to seeking to reconcile the conflictinginterests "as far as possible". The absence of absolutes was addressed in aslightly different way by the Court of Appeal in Keung. The Court said thatthe fact that an appeal will be rendered nugatory if there is no stay is notdeterminative.15Prejudice to successful party[39] I accept there would be material prejudice to the plaintiff if a stay is granted.It will remain out of pocket for the substantial remediation costs it spent on thebuilding and for which it successfully claimed. That is so notwithstandingMr Hofmann-Body's assurance for the defendants that the judgment sum will be heldin a solicitor's trust account and available to be paid to TADD if the defendants' appealis unsuccessful.13 See for example Contributory Mortgage Nominees Ltd v Harris Road No 10 Ltd, above n 11; andTaylor v Asteron Life Ltd [2019] NZHC 2459.14 Skids Program Management Ltd v McNeill HC Auckland CIV-2010-404-1696, 20 December 2011at [11].15 Keung v GBR Investment Ltd, above n 5, at [20], following Cousins v Heslop [2007] NZCA 377,(2007) 18 PRNZ 677.Overall balance of convenience[40] Having regard to the factors set out above, I conclude that the overall balanceof convenience weighs against granting a stay.Result[41] I conclude that, in this case, justice is best met by declining the application forstay of enforcement of the judgment. The application is dismissed.[42] In consequence, the plaintiff is entitled to immediate payment of the judgmentsum, without condition.Gwyn J