100 Investments Limited v Walker
[2020] NZHC 487
•11 March 2020
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
COMMERCIAL PANEL
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2019-404-001160
[2020] NZHC 487
BETWEEN 100 INVESTMENTS LIMITED
First Plaintiff
FTG SECURITIES LIMITED
Second PlaintiffRFD FINANCE LIMITED
Third PlaintiffTOMANOVICH HOLDINGS LIMITED
Fourth Plaintiff…/2 cont’d
Hearing: (On the papers) Judgment:
11 March 2020
COSTS JUDGMENT OF VENNING J STRIKE OUT APPLICATION
This judgment was delivered by me on 11 March 2020 at 3.45 pm, pursuant to Rule 11.5 of the High Court Rules.
Registrar/Deputy Registrar Date……………
Solicitors: Canterbury Legal, Christchurch
Norling Law, Auckland Wotton Kearney, Wellington
Minter Ellison Rudd Watts, Auckland
Copyto: A Barker QC, Auckland D Bigio QC, Auckland
100 INVESTMENTS LTD v WALKER [2020] NZHC 487 [11 March 2020]
AND ROBERT BRUCE WALKER
First Defendant
JOHN MARSHALL SCUTTER
Second DefendantSPF NO 10 LIMITED (REMOVED)
Third DefendantLPF GROUP LIMITED
Fourth Defendant
Introduction
[1] In a judgment delivered on 14 February 2020 the Court granted applications by the first, second and fourth defendants to restrain Canterbury Legal from continuing to act in the proceeding (the recusal application).1 Costs were fixed and followed the outcome.
[2] The defendants had also filed applications to strike out the plaintiffs’ statement of claim. The applications were resolved before the hearing and a joint memorandum filed confirming that a hearing was not required on them. All that remained was the issue of costs.
[3] The parties have now exchanged memoranda as to costs on the strike out applications. They take quite divergent views as to the appropriate outcome. The second and fourth defendants seek costs on an indemnity basis from the plaintiffs. The first defendant seeks an uplift on scale costs. But the plaintiffs consider that, in the circumstances they were successful, and seek costs against the defendants.
Background
[4] I take the background to the plaintiffs’ claim from the recusal application as follows.
[5] Property Ventures Ltd (PVL) was the parent company for a number of subsidiaries involved in individual property developments and investments.
[6] PVL was placed in liquidation on 25 July 2010. The first defendant was appointed liquidator. The second defendant was appointed joint liquidator with the first defendant from 4 June 2013 and remained in that role until 22 March 2018.
[7] At various dates between 13 December 2010 and 9 February 2012 the subsidiaries were also placed in liquidation. The first defendant was also appointed sole liquidator of the subsidiaries.
1 100 Investments Ltd v Walker [2020] NZHC 165.
[8] In 2012, the first defendant brought proceedings against PVL’s former directors, PriceWaterhouseCoopers (PwC), Fright Aubrey Ltd and Richard Gibbons in relation to alleged breaches of duty said to have contributed to the PVL Group’s collapse in 2010 (PVL proceedings).
[9] To fund the claim, the liquidators entered a litigation funding agreement with SPF No. 10 Ltd (SPF). SPF was a special purpose vehicle incorporated for the purpose of the PVL proceedings. It was a wholly owned subsidiary of LPF Group Ltd, the fourth defendant (LPF).
[10] At various dates between 2014 and 2017 the liquidators of PVL reached confidential settlements with each of the PVL defendants (apart from the directors). In 2018, after concluding a final settlement with PVL’s former directors the liquidators discontinued the PVL proceedings.
[11] The plaintiffs in this proceeding, 100 Investments Ltd, FTG Securities Ltd, RFD Finance Ltd and Tomanovich Holdings Ltd allege that they were and are secured creditors of the above PVL subsidiaries, by reason of various assignments of security interests originally held over the subsidiaries by other creditors. As the PVL subsidiaries were also plaintiffs in the PVL proceedings, the plaintiffs claim that they are entitled to a portion of the settlement proceeds. They seek to recover the same against the first and second defendants as liquidators and against SPF and LPF as recipients of the settlement proceeds.
The strike out applications
[12] The first defendant sought to strike out the claim against him on the basis it failed to disclose a cause or causes of action. The grounds included that the plaintiffs’ claim against him alleged unspecified breaches of “legal and other duties”.
[13] In addition he argued the plaintiffs’ claim failed to specify on what grounds the payments to SPF and LPF were challenged. Further the plaintiffs’ claim could not succeed given the prima facie application of the salvage principle.
[14] The second defendant also sought to strike out the claim on the basis that the breaches alleged against him disclosed no cause of action appropriate to the nature of the pleading. The claim included allegations likely to cause prejudice or delay. The second defendant also relied on res judicata and the salvage principle.
[15] The fourth defendant sought to strike out the claim on a number of grounds including that the claim disclosed no reasonably arguable cause of action as it failed to plead any specific cause of action against the fourth defendant and/or to specify the relief or remedy sought on each apparent cause of action after pleading that cause of action.
[16] The fourth defendant also said the moneys payable to SPF as project costs and services fee under the services deed constituted reimbursement for moneys advanced to the liquidators in order to allow them to take the proceedings which gave rise to the financial settlements and as such were not proceeds available for distribution to creditors.
[17] After the strike out and recusal applications were filed, Mr Forbes QC, who was counsel on record for the plaintiffs, agreed to withdraw. Mr Barker QC was instructed to act for the plaintiffs to oppose the strike out and the remaining application to recuse the solicitors.
[18] After reviewing the pleadings Mr Barker filed submissions in opposition to the strike out and then joined with counsel for the first, second and fourth defendants to file a memorandum with the Court in advance of the hearing scheduled for 3 and 4 February. That memorandum recorded:
Following the provision of the plaintiffs’ submissions in opposition to the application to strike out, the parties have resolved that application on the basis that the plaintiffs will prepare an amended statement of claim in line with the suggested pleading referred to in those submissions. The parties have not at this stage agreed costs on that application.
[19]A timetable was set for the exchange of memoranda on the issue of costs.
Analysis
[20] The rules and principles relating to the imposition of costs are settled and it is unnecessary to repeat them. It is a matter of application of the principles to each case. I consider the position regarding costs in this case to be clear. The plaintiffs have not successfully opposed the application for strike out. The defendants succeeded in their application at least to the extent the plaintiffs have agreed to what will be a substantial repleading.
[21] An application for strike out is often resolved on the basis that the plaintiff is given the opportunity to replead. A strike out will only usually succeed entirely where the plaintiff cannot succeed at law or the pleading is so deficient that a de novo start is required rather than amendment. In the words of Tipping J in Marshall Futures Ltd (in liquidation) v Marshall:2
The difference, using by analogy the terminology of motor vehicle insurance, is between a pleading which is a total write-off and one which is deficient but is capable of effective repair.
[22] On my review of the initial claim compared to the proposed repleading in Mr Barker’s submissions, the plaintiffs in this case have accepted a substantial repleading was necessary. In terms of the analogy, while not a total write-off, and the underlying chassis may remain, several panels have had to be replaced.
[23] In his submissions in opposition to the strike out, Mr Barker carefully analysed the basis of the liquidator’s claim in the PVL proceedings, the relationship with the subsidiaries’ potential claim and addressed, in argument, the points raised by the applicant defendants. Importantly for present purposes and following an analysis of the claim, counsel prepared a draft amended claim with causes of action in conversion, money had and received and under the Personal Property Securities Act 1999. The proposed pleading brought focus to the claim in contrast to the original claim filed.
[24] The cases Mr Barker relies on to advance the plaintiffs’ case for costs (and to oppose the defendants’ application for costs) do not assist the plaintiffs. In Couch v Attorney-General (No 2) the Court awarded costs to the plaintiff because she was
2 Marshall Futures Ltd (in liquidation) v Marshall (1991) 3 PRNZ 200 at 207, [1992] 1 NZLR 316.
ultimately successful in her opposition to the strike out application (which had been fully argued) and against the background that in a previous decision the Court had indicated that the plaintiffs could avoid a strike out by repleading.3 The case is a straightforward application of the principle that costs normally follow the event.
[25] The case of Westpac Banking Corporation v M M Kembla New Zealand Ltd involved an unsuccessful application by a defendant for summary judgment.4 Such an application is different to a strike out, involving as it can contested affidavit evidence. As the Court of Appeal noted:
[60] Where a claim is untenable on the pleadings as a matter of law, it will not usually be necessary to have recourse to the summary judgment procedure because a defendant can apply to strike out the claim under R 186. Rather R 136(2) permits a defendant who has a clear answer to the plaintiff which cannot be contradicted to put up the evidence which constitutes the answer so that the proceedings can be summarily dismissed. The difference between an application to strike out the claim and summary judgment is that strike-out is usually determined on the pleadings alone whereas summary judgment requires evidence. Summary judgment is a judgment between the parties on the dispute which operates as issue estoppel, whereas if a pleading is struck out as untenable as a matter of law the plaintiff is not precluded from bringing a further properly constituted claim.
[26] Neither Couch nor Westpac v Kembla support the plaintiffs’ argument for costs. On my review of the original pleadings, the grounds for strike out articulated in the various applications, and the proposed repleading, it is the defendants, rather than the plaintiffs, who succeeded in relation to the strike out application.
[27] However, I do not accept the defendants’ argument for indemnity or even increased costs has been made out. As I have noted, strike-out applications often result in amended pleadings being required. Generally costs on such cases are dealt with at scale.5
[28] With Mr Barker’s assistance the plaintiffs have responsibly agreed to replead. The merits of the claims are yet to be tested. I do not accept the plaintiffs can be said
3 Couch v Attorney-General (No 2) [2010] 3 NZLR 149.
4 Westpac Banking Corporation v M M Kembla New Zealand Ltd [2001] 2 NZLR 298.
5 Obrecht v Earthquake Commission [2015] NZHC 555; and Martin v Araneo Ltd [2013] NZHC
28. While in Deep v Auckland Gold Line Co-operative Taxi Society Ltd, [2018] NZHC 1673 Moore J let costs lie where they fall, that was clearly dependent on the particular facts of the case.
to have acted vexatiously, frivolously and unnecessarily in opposing the strike out application.
Result
[29]The plaintiffs’ application for costs is dismissed.
[30] Each of the defendants is to have costs against the plaintiffs on a 2B basis for all steps taken in support of the strike out application, including the preparation of submissions.
Venning J
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