Arnerich v Vaco Investments (Lincoln Road) Limited (in liquidation)

[2020] NZHC 1814

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2017-404-001926

[2019] NZHC 1814

BETWEEN

ANTONY IVO ARNERICH

Applicant

AND

VACO INVESTMENTS (LINCOLN ROAD) LIMITED (IN LIQUIDATION)

First Respondent

DHC ASSETS LIMITED

Third Respondent

Hearing:	19 February 2020
Appearances:	J McBride and A Steel for the Applicant F Thorp for the Third Respondent
Judgment:	27 July 2020

REISSUED COSTS JUDGMENT OF ASSOCIATE JUDGE SARGISSON

This judgment was delivered by me on 27 July 2020 at 11.30 a.m. pursuant to Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar Date.......................................

Solicitors:

Doug Cowan Barristers & Solicitors, Auckland Christopher Taylor Lawyers, Auckland

Duthie White, Auckland

J McBride, Auckland P Davey, Auckland

F Thorpe, Auckland

ARNERICH v VACO INVESTMENTS (LINCOLN ROAD) LTD (IN LIQUIDATION) [2019] NZHC 1814 [27 July 2020]

[1]                 This proceeding is at an end. The only outstanding matters are costs applications made by the applicant and third respondent following the filing of the applicant’s notice to discontinue the proceeding. The discontinuance has brought an end to the one matter that remained for determination, and that was the originating application for an order for leave to initiate and continue a cross-claim as a derivative action, under s 165 of the Companies Act 1993.

Background

[2]                 The focus of this proceeding has been on defended interlocutory matters. They were concluded, and costs on those matters were the subject of costs orders. Subsequently  the  plaintiff   elected   to   discontinue   the   entire   proceeding   on  5 August 2019.

[3]                 On 23 December 2019 I in fact  issued a brief  costs  judgment  pursuant  to   r 15.23, for the purpose of dealing with outstanding costs issues of and incidental to the proceeding up to and including the discontinuance.1 I disallowed the applicant’s request for costs. This was on the basis that I found little force in the submission for the applicant that there was good reason to depart from the presumption in r 15.23 that “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”. I awarded 2B costs to the third respondent plus disbursements totalling $8,475. The costs I awarded were for several steps (filing a notice of opposition to the originating application and supporting affidavit; attending a mentions hearing; and filing several memoranda).

[4]                 Shortly after the costs judgment was issued, counsel for the applicant advised the Court that in fact no documents in opposition had been filed in relation to the originating application. On that basis I recalled the judgment, and because of the impending Christmas vacation, I allocated a telephone conference for the New Year to

1      15.23 Costs

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.

hear counsel on the narrow point of whether documents in opposition were ever filed in relation to the origin application.

[5]                 I held a telephone conference on 19 February 2020 when I heard further from counsel, reserved  the matter, and indicated  I would issue a further costs judgment.   I very much regret the delay in issuing this judgment (due in part to the COVID-19 lockdown).

[6]                 Two matters raised by counsel for the applicant go to the heart of the costs dispute between the applicant and the third respondent. The first matter related to an award of costs for an appearance at a mentions hearing of 15 September 2017. Counsel submitted that this hearing related to the interlocutory applications filed in the proceeding for which costs have already been awarded. The submission was uncontroversial. The second matter related to the more fundamental point, that the third respondent had overlooked filing a notice of opposition to the originating application. Counsel for the applicant submitted that the third respondent could not ask for costs for filing a notice of opposition – or for that matter, for any other steps taken in relation to the originating application – without first filing a notice of opposition and paying the required filing fee.

[7]                 Counsel for the third respondent pointed out that both sides had, at the Court’s direction, conferred in relation to a timetable for the disposal of the remaining originating application. He also pointed out that subsequently counsel filed a joint memorandum seeking timetable directions by consent to dispose of the originating application. Directions were made in terms of the joint memorandum as follows:

(2) …

(a)  The applicant is to file and serve any updating affidavits in support of the application by 12 September 2018.

(b)  The respondents are to file affidavits in reply (if any) by 26 September 2018.

(c)  The directions in terms of r 7.39 of the High Court Rules shall apply in terms of synopses and bundles, except that the Applicant shall file and serve 5 working days prior and the Respondents shall file and serve 2 working days prior;

(d)  I allocate a one day hearing for 10 October 2018, commencing at 10.00 am.

[8]                 The one day fixture for 10 October 2018 was subsequently rescheduled by consent to Monday 12 November 2018.

[9]                 On 9 November 2018 the fixture was vacated by consent. This was on the basis of a memorandum that was filed by the applicant advising that his originating application was no longer necessary and that the proceeding would be discontinued. Counsel for the applicant advised that the reason for the discontinuance was that the third respondent’s claim against the applicant in a related proceeding was presently before Davison J, and this “had subsumed many of the issues in the derivative application”.

[10]A notice of discontinuance was eventually filed on 5 August 2019.

Assessment

[11]              Counsel for the third respondent acknowledges that formal documents in opposition to the originating application (and the necessary filing fee for a notice of opposition) were not filed. He argues that the parties acted on the basis that the originating application was a draft application, and that it was to be treated as a formal application following the determination of interlocutory matters (including an interlocutory application to commence the proceeding pursuant to Part 19 of the High Court Rules, and for leave under s 284 of the Companies Act 1993).

[12]              He says the reality was that the parties proceeded on the basis that the documents filed in opposition to the interlocutory application would be treated as documents in opposition to the originating application. He submitted this was a sensible course to follow to avoid unnecessary cost and duplication.

[13]              Standing  back  and  looking  at  all  of  this,  I  am  sympathetic  to   the   third respondent’s predicament. Ordinarily it would be entitled to the benefit of the presumption that it should have costs following the applicant discontinuing its originating application. But I do not accept the implication in his submission that there

was no need to file a formal notice of opposition to what was in fact filed as an originating application in respect of which the required filing fee was paid.

[14]              Conversely, I accept that counsel for the applicant is right when he submits that:

(a)the third respondent is not entitled to costs for filing a notice of opposition to the originating application when in fact that step, prescribed by High Court Rules 19.10(1)(f) and 7.24, had not been taken.

(b)the third respondent cannot have costs for memoranda filed in relation to the originating application in circumstances, for the same reason. It had not in fact filed a notice of opposition.

[15]              I note that the Court has the power to set aside a discontinuance under r 15.22 if it is satisfied that the discontinuance is an abuse of process.2 This may have provided an avenue for the third respondent to seek an order setting aside the discontinuance to enable it to file a notice of opposition and to pay the necessary filing fee. But such an application must be made within 25 working days after discontinuance. No such application was made.

[16]              In all the circumstances there will be no order for costs consequential upon the discontinuance. Instead, I order that remaining costs of and incidental to the proceeding will lie where they fall.

Associate Judge Sargisson

2      15.22 Court may set discontinuance aside

(1)The court may, on the application of a defendant against whom a proceeding is discontinued, make an order setting the discontinuance aside if it is satisfied that the discontinuance is an abuse of the process of the court.

(2)An application under subclause (1) must be made within 25 working days after discontinuance under rule 15.19.