Allied Prime Finance Limited v Stock Street Developments Limited HC Wellington Civ-2006-485-2613

[2007] NZHC 1725

IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY

CIV-2006-485-2613

BETWEEN  ALLIED PRIME FINANCE LIMITED Applicant

ANDSTOCK STREET DEVELOPMENTS LIMITED

Respondent

Judgment:      7 May 2007 at 11.30 am

In accordance with r540(4) I direct the Registrar to endorse this judgment with a delivery time of 11.30am on the 7th day of May 2007.

JUDGMENT AS TO COSTS OF ASSOCIATE JUDGE D.I. GENDALL

[1]      In a Judgment I issued in this proceeding on 7 March 2007:

a)       I  ordered  the  removal  of  caveat  6929926.1  and  6929926.3  and charging order 6996438.1 against Certificates of Title WN419/173 and WN420/137.

b)        I reserved costs.

c)       I directed that counsel for the parties were to file memoranda as to costs.

[2]      Counsel for the applicant has filed a memorandum as to costs dated 28 March

2007.

[3]      Counsel for the respondent has filed his memorandum and submissions as to costs dated 23 April 2007.

ALLIED PRIME FINANCE LIMITED V STOCK STREET DEVELOPMENTS LIMITED HC WN CIV-2006-

485-2613  7 May 2007

[4]      Although the respondent’s submissions were late in terms of the timetable directions made in my 7 March 2007 Judgment, I have read and considered those submissions, together with the submissions made by counsel for the applicant.

[5]      I now give my judgment with respect to the costs question.

[6]      From my 7 March 2007 Judgment it is clear that the applicant succeeded entirely in its application to remove the caveats and the charging order which were registered against the titles to the property over which it held a prior mortgage.  In August 2006 the applicant had acted under this mortgage, which was in default, to accept a tender for the sale of the property under a mortgagee sale process.

[7]      Notwithstanding this, in his memorandum dated 23 April 2007 counsel for the respondent submitted that for reasons outlined in that memorandum, costs should be awarded against the successful applicant with respect to this matter.

[8]      This contention from counsel for the respondent is quickly disposed of.  His submission is based upon the argument first, that prior to the hearing of this application the applicant had failed to disclose the basis of its submissions, and secondly, following the hearing, the applicant abused proper process by allegedly taking steps to remove the caveats and charging orders once my Judgment was given, and effecting an urgent sale of the properties prior to expiry of a possible appeal period.

[9]      These contentions are rejected.  As I see it, there was nothing improper with respect to the submissions provided by the applicant on this application.   Further, there was no application or order for stay of my 7 March 2007 Judgment ordering removal of the caveats and charging orders.  That said, the applicant was entitled to have the caveats and charging orders removed, and to complete a transfer of title to the properties which it did, no doubt pursuant to the earlier mortgagee sale tender process which had been due for completion since around August 2006.

[10]     Any claim by the respondent to costs in this matter is therefore rejected.

[11]     Turning now to the applicant’s request for costs, I am satisfied that this is a case where the normal principle outlined in r47(a) that the successful party is entitled to an order of costs from the unsuccessful party should apply.   The applicant succeeded in its application and is accordingly entitled to costs.

[12]     In  the  normal  course  of  events  this  would  be  an  order  of  scale  costs calculated on a category 2B basis.  In her memorandum and submissions, counsel for the applicant, however, seeks in the alternative:

a)      An award of indemnity costs against the respondent pursuant to r48C(4)(a) totalling $20,718.59 (being the actual solicitor and client costs incurred here); or

b)        An order of increased costs pursuant to r48C(3) High Court Rules of

$10,800.00   (being  category  2B  scale   costs   totalling   $7,200.00 together with a 50% increase to make a total of $10,800.00).

[13]     As I have noted above, scale costs in this matter calculated on a category 2B

basis would total $7,200.00.

[14]     As to the request for indemnity costs, r48C(4)(a) states:

(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…

[15]     Examples of claims made under r48C(4)(a) include Paper Reclaim Limited v Aotearoa International Limited (HC, AK, CIV-2004-404-4728, 24 April 2005, Harrison J) and Hedley v Kiwi Co-operative Dairies Limited (2002) 16 PRNZ 694, both of which were cases in which the plaintiff had pursued fraud allegations without a proper evidential basis.

[16]     In Hedley v Kiwi Co-operative Dairies Limited Goddard J quoted the six situations which Sheppard J in Colgate Palmolive Co v Cussons Pty Ltd (1993) 118

ALR 248 considered may warrant the award of indemnity costs.   According to

counsel for the applicant, those situations include three instances which are relevant here:

(d)The fact that the proceedings were commenced in wilful disregard of known facts or purely established law.

(e)       The making of allegations that ought never to have been made or the undue prolongation of a case by groundless contentions.

(f)       An imprudent refusal of an offer to compromise.

[17]     It is clear that indemnity costs should not be awarded lightly.  Counsel for the applicant  contends,  however,  that  this  is  a  case  where  indemnity  costs  are appropriate because:

a)       The respondent wilfully disregarded known facts and established law, in  particular  the  applicant’s  prior  registered  mortgage  and  the principles of indefeasibility.

b)The respondent made groundless contentions that it had an equitable interest in the properties capable of defeating the applicant’s interest so that the applicant’s counsel was required to carry out unnecessary research into those areas.

c)       The respondent refused to remove the caveats and charging orders despite the applicant’s requests before the application was brought.

d)The applicant has suffered prejudice and loss because of the delay and expense caused by the respondent.

[18]     In  Hedley  v  Kiwi  Co-operative  Dairies  Limited  Goddard  J  stated  that indemnity costs tend to be reserved for cases “where truly exceptional circumstances exist” – paragraph 8.   It is clear too that the party claiming indemnity costs must explain why they are justified – Radfords Limited v Advertising Works NZ Limited (trading as Ogilvie Advertising Works) (HC AK, 26 April 2006, CIV-2006-404-325, Associate Judge Faire).

[19]     Whilst under the circumstances of this case I am satisfied that the respondent here has contributed unnecessarily to the time and expense of the proceeding by pursuing arguments that lack merit, in my view this is not one of those cases “where truly exceptional circumstances exist” justifying an award of indemnity costs against the respondent.

[20]     That said, however, in my view this is a case where increased costs as sought by the applicant pursuant to r48C(1)(a) and (3) are appropriate.  In my 7 March 2007

Judgment I found that the respondent was quite unable to show it had any reasonably arguable case to the caveatable interest it claimed in the properties, and further, and in any event, removal of the caveats would be ordered because any interest that the respondent did have in the properties would be defeated by the applicant’s interest as mortgagee which had priority.  Further, the respondent made no complaint about the conduct of the mortgagee sale or the actions of the applicant in concluding that sale by tender.  If, as I noted at paragraph [55] of my Judgment, the respondent had any valid complaint here, then it was with respect to breach by H & P Developments Limited (in liquidation) of the agreement it had with that company and its remedies lay under that agreement.

[21]     That said, I am satisfied that the alternative award of increased costs sought by counsel for the applicant in her memorandum is appropriate here.  This is a 50% uplift on category 2B scale costs ($7,200.00) to give a total increased costs award of

$10,800.00.

[22]     Costs are therefore awarded against the respondent in favour of the applicant with respect to the caveat application of $10,800.00, together with disbursements as approved by the Registrar.

‘Associate Judge D.I. Gendall’

Solicitors:

Kensington Swan, Wellington for Applicant

Jeremy McGuire, Wellington for Respondent