Bankhouse Trust Limited v Cloverland Jerseys Limited

[2013] NZHC 2780

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2013-404-4111 [2013] NZHC 2780

UNDER  the Land Transfer Act 1952

BETWEEN  The Bankhouse Trust Limited

Applicant

AND  Cloverland Jerseys Limited

Respondent

Hearing:                   22 October 2013

Appearances:           Mr Illingworth QC for Applicant

Mr D Chisholm QC for Respondent

Judgment:                29 October 2013

JUDGMENT OF ASSOCIATE JUDGE J P DOOGUE

This judgment was delivered by me on

29.10.13at 10 a.m., pursuant to

Rule 11.5  of the High Court Rules.

Registrar/Deputy Registrar

Date……………

The Bankhouse Trust Limited v Cloverland Jerseys Limited [2013] NZHC 2780 [29 October 2013]

[1]      The applicant filed an application to sustain the caveat which it had lodged against the title to the property of which the respondent was the owner in fee simple.

[2]      The source of the rights which the applicant invoked as the basis for the application was an agreement for sale and purchase which the parties entered into

22 May 2012.  The applicant took the position that while the agreement was initially conditional upon “due diligence” being performed by the applicant, it had become unconditional and enforceable by 1 September 2012.   As a result, the applicant asserted that it had acquired an equitable interest in the property which it could enforce.  That sought an order sustaining the caveat so that its potential rights were not defeated.

[3]      In the application which was made pursuant to s 145A of the Land Transfer

Act the applicant stated that:

a)       the agreement required the deposit to be paid upon the agreement becoming unconditional;

b)        The  respondent  requested  payment  of  the  deposit  by  letter  dated

5 September 2009;

c)       The payment was not made “as a result of which the respondent was required to elect whether to affirm or cancel the agreement.   For a period of over seven months the respondent took no steps to cancel the agreement.  The respondent thereby affirmed the agreement”.

d)Subsequently when the respondent gave notice purporting to cancel the agreement for non-payment of the deposit, it was stated, the respondent wrongly repudiated the agreement, such repudiation was not accepted, the applicant was ready, willing and able to perform the agreement including paying the deposit.

[4]      The  respondent  filed  a  notice  of  opposition  in  which  the  following contentions were advanced:

a)       the respondent had sought payment of the deposit giving a notice under the agreement for that to occur;

b)time  was  of  the  essence  for  the  payment  of  the  deposit  and  the respondent “continued to fail to pay the deposit due in breach of the agreement”;

c)       the continuing failure to pay the deposit was a repudiation of the agreement which entitled the respondent to cancel the agreement, which  it  did  by one of  other alternative means  during the period December 2012 to April 2013;

d)       the applicant had no prospect of obtaining specific performance;

i)even if the agreement had not been validly cancelled, the respondent had continued to repudiate it by its refusal to pay the deposit;

ii)despite lodging caveats in December 2012 the applicant had taken no steps to commence specific performance proceedings.

[5]      When the proceeding was called for an opposed hearing at 10 a.m. on 22

October 2013 Mr Illingworth QC advised the Court that the applicant would not be proceeding with the application.   Mr Chisholm QC then sought,  amongst other things, an order for costs, such costs to be augmented essentially for the reason that the applicant had never had proper grounds for lodging caveats and that its attempts to obtain an order sustaining the caveats were bound to fail for the reasons advanced in the notice of opposition which his client had filed.

[6]      Mr Chisholm considered such an order pursuant to r 14.6 (3) HCR.  Although he did not specifically identify the sub rules relied upon it would seem that he had in mind (3) (b) (ii) which authorises the Court to make an increased costs order in circumstances where the opposing party has contributed unnecessarily to the time or expense of the proceeding or step in it by “taking or pursuing an unnecessary step or

an argument that lacks merit”.   Also sub-rule (iii) was relevant.   It provides for increased costs where the party opposing costs is contributed unnecessarily to the time or expense by failing without reasonable justification to “… accept a legal argument”.

[7]      I do not consider that an order can be made upon such grounds because it is not  possible  for  the  Court,  as  part  of  making  ancillary  orders,  to  come  to  the necessary degree of certainty about whether the propositions upon which the applicant’s case were based lacked merit.  While the Court has had the opportunity to read counsel’s submissions in advance of the intended fixture, that is not the same thing as hearing argument.  Obviously the same limiting factor would not be present if the Court had actually embarked upon and heard the parties’ arguments.

[8]      The reasoning which leads me to that view is essentially the same as that which has been persuasive in cases where cases have been discontinued and the discontinuing party has nonetheless sought to avoid the consequence in the rules that it should pay the costs of the proceeding.   In general terms, the Courts will not embark upon a consideration of the merits of the respective sides’ cases in determining the issue.

[9]      The proceedings have not been previously categorised for the purposes of costs.  I consider that given the difficult legal issues and the amounts at stake in the proceeding that they should properly be categorised as category 3 proceedings.   I further consider that the proceedings fall within band B.  The respondent is to have costs based upon that categorisation together with disbursements to be fixed by the

registrar.

J.P. Doogue

Associate Judge