Gowdey v Heseltine

[2021] NZHC 540

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV 2020-404-129

[2021] NZHC 540

BETWEEN

DAVID RUSSELL GOWDEY

Plaintiff

AND

JOHN DAVID HESELTINE

First Defendant

BRIDGET ALISON MCNEIL
Second Defendant

CB TRUSTEES (2013) LIMITED

Third Defendant

Hearing:

23 July 2020 & 16 March 2021

Appearances:

S E Russell for Plaintiff

C Upton for First Defendant
CJR Baird for Second and Third Defendants

Judgment:

17 March 2021

JUDGMENT OF DUFFY J

This judgment was delivered by me on 17 March 2021 at 2.15 pm pursuant to

Rule 11.5 of the High Court Rules.

Registrar/ Deputy Registrar

Solicitors/Counsel:

Russell Legal, Auckland Castle Brown, Newmarket

Lee Salmon Long, Auckland

CJR Baird, Barrister, Auckland

GOWDEY v HESELTINE [2021] NZHC 540 [17 March 2021]

[1]                  The plaintiff, David Gowdey, sought summary judgment in New Zealand in relation to the enforcement of a foreign sealed judgment from the state of California, United States of America, issued as a default judgment (the US judgment).

[2]                  The US judgment named three defendants: John Heseltine; Bridget McNeil; and CB Trustees (2013) Ltd (together the defendants), the latter defendant being a registered company with offices in New Zealand and the former two defendants being business persons residing in New Zealand. The defendants opposed the application for summary judgment and applied for a stay of proceedings pending determination of an appeal in the United States against the US judgment.

The US judgment

[3]                  The US judgment concerned a loan agreement between the plaintiff and the first defendant whereby the plaintiff loaned Mr Heseltine USD 450,000 under a loan agreement and promissory note executed on 20 December 2017. On that same date security for the loan was arranged by way of a stock pledge agreement. On 12 February 2018 this stock pledge agreement was amended. The amended stock pledge agreement provided that a specified quantum of shares in AIPARC Inc would be transferred to the Jet Miners Trust, of which the second and third defendants, Ms McNeil and CB Trustees (2013) Ltd were trustees.

[4]                  There were allegedly three defaults on this loan agreement by Mr Heseltine. The first default was alleged to be an attempted transfer of all shares held by Mr Gowdey under the amended stock pledge agreement to another company. Mr Gowdey then demanded full repayment of the loan by 12 July 2018. The second loan default was a failure to pay the loaned sum with interest and late fees, by the demanded date. The third loan default occurred on 2 November 2018 and concerned a termination and release agreement that cancelled all shares that had been transferred to the Jet Miners Trust. As a result, the shares ceased to exist.

[5]On 9 November Mr Gowdey filed his complaint in the California courts. On

21 December 2018 the California court entered a default judgment against the defendants as they failed to file their answer to the complaint in the requisite time frame. On 30 July 2019, following a formal proof hearing, the California Court granted

Mr Gowdey’s application for default judgment and the judgment was subsequently sealed.

[6]                  In October 2019, the defendants, filed a motion (out of time) to set aside the US judgment. On 9 December 2019 this motion was declined.

[7]                  On 20 December 2020 the loan became due and payable in full in the ordinary course of business. Mr Gowdey did not attempt to obtain recovery by this means and instead continued to pursue recovery under the default judgment he had already obtained. I understand that the loan to this date remains unpaid.

[8]                  On 6 January 2020 the defendants filed their appeal in the US courts. Later that same month Mr Gowdey filed his application for summary judgment in this Court to enforce the US judgment.

[9]                  Mr Gowdey’s application for summary judgment and the defendants’ application for a stay of proceedings were heard before me in July 2020. Judgment was reserved.

[10]              Early this year the Court of Appeal of the State of California delivered a judgment allowing the defendants’ appeal, which meant the US judgment was set aside.1

[11]              Following this event the defendants filed a memorandum informing the Court of the material change of circumstances and seeking directions as to what should occur next. Mr Gowdey filed a similar memorandum. I called a telephone conference during which I heard from the parties.

[12]              The defendants contend there is now no foreign judgment for this Court to enforce, thus Mr Gowdey’s summary judgment application should be declined and his proceeding dismissed.

1      The judgment refers to the default judgment being reversed which I consider to have the same effect as being set aside.

[13]              Mr Gowdey accepts there is presently no judgment to be enforced in New Zealand. However, he contends that the loan is now repayable because it has expired. He says he will be taking steps in California to enforce payment of the now expired loan. Therefore this proceeding should be stayed until he obtains a new judgment in California, at which time the present summary judgment application can be amended to reflect the change of circumstances.

[14]              I see no basis for allowing the proceeding to continue in circumstances where there is no longer a foreign judgment capable of enforcement. I acknowledge that in the future Mr Gowdey may obtain judgment in California to enforce payment of the loan, but that will be on a different basis from the earlier attempt. Accordingly, I am satisfied the appropriate course is for me to decline Mr Gowdey’s summary judgment application.

[15]              The defendants have filed an application pursuant to r 15.1(3) of the High Court Rules seeking a stay of Mr Gowdey’s proceedings. I consider that what has eventuated in California warrants the Court striking out Mr Gowdey’s statement of claim and dismissing the proceeding pursuant to r 15.1(1). The power to strike out does not require an application having been made: Siemer v Stiassny.2 At today’s telephone conference the defendants requested the proceeding be dismissed and I agree this is the appropriate course of action.

[16]              The remining issue is the question of costs. Leave is reserved for the parties to file memoranda as to costs in accordance with the timetable directions given below.

Costs

(a)            Defendants to file and serve a memorandum as to costs within 10 working days thereafter.

(b)            Plaintiff to file and serve a memorandum as to costs within a further 10 working days thereafter.

2      Siemer v Stiassny [2011] NZCA 1 at [14].

(c)            Defendants to file and serve any reply memorandum as to costs within a further 10 working days thereafter.

Duffy J