ADM International SARL v Golden Shine NZ Limited
[2024] NZHC 1312
•24 May 2024
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2023-404-001384
[2024] NZHC 1312
BETWEEN ADM INTERNATIONAL SARL
Applicant
AND
GOLDEN SHINE NZ LIMITED
Respondent
Hearing: On the papers Counsel:
C D Hunter and A J Sherlock for Applicant P Davies for Respondent
Judgment:
24 May 2024
JUDGMENT OF ANDERSON J
This judgment was delivered by me on 24 May 2024 at 3.00 pm pursuant to Rule 11.5 of the High Court Rules 2016.
………………………………
Registrar/Deputy Registrar
Solicitors: Hesketh Henry, Auckland
Fee Langstone, Auckland
ADM INTERNATIONAL SARL v GOLDEN SHINE NZ LTD [2024] NZHC 1312 [24 May 2024]
Introduction
[1] This proceeding is resolved following withdrawal of an application by Golden Shine NZ Ltd (GSNZ) to discharge without notice freezing orders obtained by ADM International SARL (ADM) and orders by consent that the freezing orders be made permanent.
[2] The matter of costs was referred to me as Duty Judge. ADM seeks costs in the proceeding on an indemnity basis, or alternatively seeks an uplift of 50 per cent on 2B scale costs. GSNZ submits costs should lie where they fall.
Background
[3] GSNZ provided performance guarantees to ADM International SARL in respect of charter party agreements between ADM and Golden Shine Management Ltd (GSM). GSM defaulted and ADM sought to rely on the performance guarantees. There are proceedings in London addressing the substantive liability.
[4] On 17 July 2023, Davison J granted ADM’s without notice application for an interim freezing order in respect of GSNZ’s assets.1 He declined to make ancillary orders without notice to GSNZ. After GSNZ had been served, the interim order was extended by Venning J until 2 August 2023 for review and consideration of further extension.2 GSNZ raised that the form of the undertaking as to damages did not comply with the orders made by Davison J. ADM was directed to file a compliant undertaking.
[5] On 2 August 2023 Campbell J granted ADM’s application for an ancillary order that discovery be made, now that GSNZ was represented and had failed to file any opposition. He set down a hearing for 9 October 2023 to determine whether the freezing order should continue.3 Campbell J rejected an argument by GSNZ that an amended undertaking still did not comply.
1 ADM International SARL v Golden Shine NZ Ltd [2023] NZHC 1859.
2 ADM International SARL v Golden Shine NZ Ltd HC Auckland CIV-2023-404-1384, 24 July 2023.
3 ADM International SARL v Golden Shine NZ Ltd HC Auckland CIV-2023-404-1384, 2 August 2023.
[6] On 18 August 2023, GSNZ filed an application for an order discharging the freezing order and for security for costs. GSNZ also applied for orders staying the ancillary orders pending hearing of the application (more properly characterised as seeking rescission of Campbell J’s order). Isac J refused this in a “results” ruling on 22 August 2023.
[7] Affidavits had been filed by GSNZ asserting that ADM provided materially inaccurate information in support of its without notice application. In his subsequent reasons for judgment, Isac J held that he could not safely draw this conclusion on the available material. Isac J noted that ADM would ordinarily be entitled to costs on a 2B basis but, given the matter was returning to the Court for further argument on 9 October 2023, he considered it more appropriate for costs to be determined once the continuing status of the freezing order was determined.
[8] ADM’s application to continue the freezing order, and GSNZ’s application for an order discharging it and for security for costs came before Brewer J on 9 October 2023. In the event, the argument at this hearing concerned compliance with the ancillary orders. Brewer J held that GSNZ had not complied. GSNZ’s position was that it had no assets to be frozen. Brewer J held that if that was the case, there was no material prejudice if the freezing order continued until full compliance; yet non- compliance obscured the ability to assess whether any assets did exist. Brewer J extended the freezing order until further order of the Court.4 He reserved costs.
[9] A hearing was then scheduled for 21 February 2024 to determine whether the interim freezing order should become permanent or be discharged.
[10] On 13 February 2024 ADM filed an application for adjournment of the hearing on the basis that new evidence had come to light which appeared to contradict evidence earlier given on behalf of GSNZ. The application was not opposed by the GSNZ, and the hearing was adjourned until 20 June 2024.
[11] On 11 March 2024 GSNZ filed a memorandum advising that it would not further contest the freezing order. GSNZ again submitted that it should be entitled to
4 ADM International SARL v Golden Shine NZ Ltd [2023] NZHC 3021.
a discharge of the order on the basis that there are no assets to which the order attaches. It contended that the matters raised by ADM related to matters outside the scope of the ancillary orders and included unsubstantiated insinuations against GSNZ.
[12] Nonetheless, GSNZ’s memorandum recorded that notwithstanding cultural issues that led it to seek to have the orders discharged, it ultimately had decided to take the path of least resistance. Accordingly, GSNZ withdrew its applications to discharge and for security for costs. Moore J made orders by consent, making the freezing orders permanent.
The law
[13]Costs are at the discretion of the court.5
[14] The key principles applicable to the determination of costs are set out in r 14.2 of the High Court Rules 2016 and include that the party who fails with respect to a proceeding or interlocutory application should pay costs to the successful party.
[15]Rule 15.23 provides:
Unless the defendant otherwise agrees or the court otherwise orders, a plaintiff who discontinues a proceeding against a defendant must pay costs to the defendant of and incidental to the proceeding up to and including the discontinuance.
[16] Applications for freezing orders and applications for discharge of such orders are made by interlocutory application. While the language of r 15.23 refers to the discontinuance of a proceeding, the presumption in this rule has been applied by analogy to an interlocutory application.6 The presumption under r 15.23 may be displaced where it would not be just and equitable to apply it in the circumstances.7
Discussion
[17] On the face of the record, after initial orders were made without notice the following on notice matters were addressed following substantive argument:
5 High Court Rules 2016, r 14.1(1).
6 MV Celebre Ltd v Airwork Flight Operations Ltd [2015] NZHC 1400 at [10].
7 Kroma Colour Prints Ltd v Tridonicatco NZ Ltd [2008] NZCA 150, (2008) 18 PRNZ 973 at [12].
(a)Campbell J made ancillary orders against GSNZ;
(b)Isac J refused GSNZ’s application to stay/rescind those orders;
(c)Brewer J found against GSNZ that the ancillary orders had not been complied with.
[18] GSNZ then consented to ADM’s application for adjournment, followed closely by GSM withdrawing is application for discharge and consenting to the freezing orders being made permanent.
[19] GSNZ has been unsuccessful in the three interlocutory arguments outlined above. ADM is entitled to costs on those. GSNZ also withdrew its interlocutory application, and the r 15.23 presumption is engaged.
[20] GSNZ asserts that ADM has made unsupported allegations and failed to distinguish between matters for substantive determination in London compared to freezing order/asset related issues. Despite GSNZ’s contentions to the contrary, I do not see any matter that renders it just nor equitable for costs to lie where they fall. ADM is entitled to costs on a 2B basis.
[21]I must now address whether indemnity or increased costs are appropriate.
Indemnity costs
[22]Rule 14.6(4) of the High Court Rules provides:
(4)The court may order a party to pay indemnity costs if—
(a)the party has acted vexatiously, frivolously, improperly, or unnecessarily in commencing, continuing, or defending a proceeding or a step in a proceeding; or
(b)the party has ignored or disobeyed an order or direction of the court or breached an undertaking given to the court or another party; or
…
[23] Indemnity costs are exceptional and will not be awarded lightly. To justify indemnity costs misconduct must be flagrant.8 If indemnity costs are sought on the basis that the proceeding involved a “hopeless case”, flagrant misconduct is not necessary.9 A “hopeless case” means one that is bound to fail or totally without merit.10
[24] Reliance on fabricated evidence is flagrant misconduct that entitles an affected party to an award of indemnity costs.11 In Medtronic New Zealand Ltd v Finch the Court awarded indemnity costs where Mr Finch had falsely asserted that Medtronic had contracted with his company and not him personally.
[25] ADM submits that GSNZ should be regarded to have acted improperly in continuing to resist the freezing and ancillary orders pursuant to r 14.6(4)(a). It also submits that pursuant to r 14.6(4)(b), GSNZ is in breach of undertakings to the Court due to alleged falsifications in an affidavit and its failure to comply with an ancillary order.
[26] I am not satisfied that this case meets the threshold where indemnity costs are justified. First, having been withdrawn, the opposition to the freezing order has not been determined. Absent determination of the proceeding, it is not possible to assess whether the proceeding was one which can be deemed a “hopeless case”.
[27] Second, I do not accept that GSNZ’s breach of the ancillary order renders indemnity costs appropriate, or at least that the facts are sufficiently clear for that course. Indemnity costs are only appropriate for breaches of court orders where such breaches are persistent and flagrant.12 The facts outlined do not reach that threshold.
[28] Further, while ADM makes references to alleged falsifications in an affidavit filed by GSNZ, the evidence before me is insufficient to satisfy me that such is true. ADM itself only refers to the evidence as “appearing” to show that the affidavit is
8 Bradbury v Westpac Banking Corp at [28].
9 Ben Nevis Forestry Ventures Ltd v Commissioner of Inland Revenue [2014] NZCA 348, (2014) 22 PRNZ 322 at [27].
10 TheCircle.co.nz Ltd v Trends Publishing International Ltd (in liq and in rec) [2021] NZCA 235 at [34].
11 Medtronic New Zealand Ltd v Finch [2014] NZHC 266 at [29].
12 See, for example, Spark New Zealand Trading Ltd v Spud Consulting Ltd [2021] NZHC 454 and
Bhanabhai v Lowndes [2019] NZHC 2885.
false. More would be required before I would be willing to determine that GSNZ, in the same vein as Medtronic, had falsely asserted something to be true.
[29] In any event, ADM has not filed anything on the matter of the quantum of its actual costs. Absent that information I am unable to satisfy myself that indemnity costs are reasonable, that being a matter I would be required to address were I to make an order of indemnity costs in this case.13
[30]I turn now to increased costs.
Increased costs
[31]Rule 14.6(3) of the High Court Rules provides:
(3) The court may order a party to pay increased costs if –
…
(b)the party opposing costs has contributed unnecessarily to the time or expense of the proceeding or step in it by –
(i)failing to comply with these rules or with a direction of the court; or
(ii)taking or pursuing an unnecessary step or an argument that lacks merit; or
(iii)failing, without reasonable justification, to admit facts, evidence, documents, or accept a legal argument; or
(iv)failing, without reasonable justification, to comply with an order for discovery, a notice for further particulars, a notice for interrogatories, or other similar requirement under these rules; or
…
[32] The party seeking increased costs bears the onus of demonstrating such costs are justified.14 Where increased costs are awarded because a claim lacked merit, it will often be appropriate for increased costs to apply to all steps.15
13 Jones v New Zealand Bloodstock Finance & Leasing Ltd [2021] NZHC 1228 at [46].
14 Strachan v Denbigh Property Ltd HC Palmerston North CIV-2010-454-232, 3 June 2011.
15 NR v MR [2014] NZCA 623, (2014) 22 PRNZ 636; Broadspectrum (New Zealand) Ltd v Nathan
[2017] NZCA 434 at [57].
[33] Rule 14.6(3)(b) is concerned with improper or unreasonable steps.16 The unreasonable conduct must be in relation to the proceeding and does not include conduct that took place before the proceeding was commenced.17 Increased costs are not intended to be punitive18 and will not be appropriate where there is some reasonable explanation for the defendants’ conduct.19
[34] The mere fact that a party abandons a cause of action is not of itself a factor in favour of increased costs.20 Increased costs will only be available where it is shown that a party has unnecessarily contributed to increasing the cost of the proceeding.21
[35] ADM submits that increased costs are justified on the basis of r 14.6(3)(b)(i)-(iv). I disagree.
[36] First, I do not accept that increased costs are justified on the basis of GSNZ’s failure to comply with an order of the Court. While GSNZ did breach an ancillary order, I am not satisfied that the breach is sufficiently serious to warrant an uplift. To the extent that ADM was required to seek the assistance of the Court to remedy the breach, they are entitled to scale costs on a 2B basis.22
[37] Nor are increased costs justified on the basis that GSNZ took or pursued an unnecessary step or an argument that lacked merit; or that GSNZ failed to admit facts or accept a legal argument. Where a claim is abandoned pre-judgment, only where the lack of merit is obvious and incontrovertible will increased costs be appropriate.23 I am not prepared to say that is the case here.
[38]ADM has failed to satisfy me that increased costs are justified.
16 Bradbury v Westpac Banking Corp [2009] NZCA 234, [2009] 3 NZLR 400 at [27].
17 Paper Reclaim Ltd v Aotearoa International Ltd [2006] 3 NZLR 188 (CA) at [160].
18 Wilding v Te Mania Livestock Ltd [2018] NZHC 1506 at [176].
19 Valmar Trustee Ltd v Smart Water Technology [2016] NZHC 1583 at [12].
20 Bradbury v Westpac Banking Corporation [2009] NZCA 234, [2009] 3 NZLR 400 at [79]; and
Body Corporate Administration Ltd v Mehta [2013] NZHC 213 at [40].
21 Law of Costs in NZ at [2.60].
22 See Madsen-Ries (as liquidators of Petranz Ltd (in liq)) v Petera [2015] NZHC 2418 at [10]–[11].
23 N-Tech Ltd v Abooth Ltd [2012] NZHC 1167 at [97] and [108].
Result
[39] ADM is entitled to an award of costs against GSNZ on a 2B basis together with disbursements as fixed by the Registrar. Orders accordingly.
Anderson J
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