Body Corporate 185632 v Fabri-Cell Australasia Limited (Formerly Havon Buildings Limited)

[2016] NZHC 702

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2015-404-001793 [2016] NZHC 702

IN THE MATTER

of an interpleader application under rr 4.58

and 4.63 of the High Court Rules

BETWEEN

BODY CORPORATE 185632
Plaintiff

AND

FABRI-CELL AUSTRALASIA LIMITED (FORMERLY HAVON BUILDINGS LIMITED)

First Defendant

BAYSHORE ENTERPRISES LIMITED Second Defendant

Hearing:	(on the papers)
Counsel:	R F Harvey for the Plaintiff J W A Johnson and H T Shaw for the First Defendant K J Crossland and J S Langston for the Second Defendant
Judgment:	15 April 2016

COSTS JUDGMENT OF PALMER J

This judgment is delivered by me on 15 April 2016 at 5 pm pursuant to r 11.5 of the High Court Rules.

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

Solicitors/Counsel:

Grimshaw & Co, Solicitors, Auckland
Wynn Williams, Solicitors, Christchurch

Shieff Angland, Solicitors, Auckland

BODY CORPORATE 185632 v FABRI-CELL AUSTRALASIA LTD (FORMERLY HAVON BUILDINGS LTD) [2016] NZHC 702 [15 April 2016]

Summary

[1]      Disputes over the costs of legal proceedings can take on a life of their own. Here the plaintiff seeks leave to discontinue interpleader proceedings and wants its costs of $24,262.49 paid from funds deriving from settlement of other proceedings. This matter has been the subject of some seventeen memoranda of counsel since September  2015.    That  needs  to  stop.     I  grant  the  plaintiff’s  application  to discontinue and order that the costs be shared equally by the two defendants.

Background

[2]      In 2005 the plaintiff, the Body Corporate of the Mews in Newton Auckland (the Body Corporate), as well as the owners of units in the Mews, brought proceedings  arising  from  construction  defects  against  various  parties.    The first defendant, Fabri-Cell Australasia Ltd (Fabri-Cell) (under its former name Havon Buildings Ltd) was a second plaintiff as owner of Unit 7A.   In 2011 Fabri-Cell assigned its causes of action in, and any damages or compensation from, the proceedings  to  the  second  defendant,  Bayshore  Enterprises  Ltd  (Bayshore)  the current owner of Unit 7A.

[3]      The proceedings against the Auckland Council were settled in 2013 and Unit

7A’s share of the settlement was $385,656.81 (the Funds). The Funds are held by the Body Corporate in its trust account.  Exchanges with solicitors for both Fabri-Cell and Bayshore indicated that both asserted an interest in the Funds.  In August 2015 the Body Corporate exercised its right to interplead, under r 4.58 of the High Court Rules, for directions as to the payment of the Funds.

[4]      Fabri-Cell and Bayshore both agree that the Funds may be used by the Body Corporate for the remedial works and that the interpleader application may be discontinued.  That is where agreement ends.  Through some seventeen memoranda of counsel since September 2015 the parties appear to have reached the following positions:

(a)       The  Body  Corporate  wants  indemnity  costs  of  the  interpleader application, in the sum of $24,262.49, to be paid out of the Funds.

(b)Bayshore doesn’t want discontinuance to occur until costs have been determined.   Bayshore wants costs decided now but to be paid by Fabri-Cell for causing the interpleader application.  It does not want them paid out of the Funds.

(c)       Fabri-Cell still disputes ownership of the Funds vis a vis Bayshore.

Fabri-Cell says it, and a related company, will issue separate proceedings against Bayshore; though it has not done so yet.1     As recorded in a memorandum of counsel of 8 October 2015, Fabri-Cell says that Bayshore misapplied funds of Fabri-Cell which it can trace into Unit 7A which it claims Bayshore holds as a constructive trustee. It also says the Deed of Assignment was an unconscionable bargain which it entered as a result of a misrepresentation.  Fabri-Cell wants liability for costs reserved until those proceedings are determined.

Issues and Decision

[5]      The three issues, that the parties agree may be decided on the papers, are:

(a)      Should   the   Body   Corporate’s   application   to   discontinue   the interpleader application be granted?

(b)Should the Body Corporate be granted indemnity costs for the interpleader, should they be paid out of the Funds and should they be paid now?

(c)       How should costs be allocated between Fabri-Cell and Bayshore?

[6]      I grant the Body Corporate’s application to discontinue the interpleader.  The issues it concerned have been resolved.  I do not accept Bayshore’s argument that the Body Corporate issued the interpleader prematurely.  It has at least led to resolution

of the issues faced by the Body Corporate about the use of the Funds.

1      In a memorandum of counsel of 30 October 2016 Fabri-Cell said it was in the process of finalising its Statement of Claim which was predicted to be filed within a week.  It was not so filed.

[7]      I  also  grant  the  Body  Corporate’s  application  for  indemnity  costs.    The default presumption under r 4.64 is that the applicant for an interpleader “is entitled to indemnity costs of, and incidental to, the application”.  I see no reason to differ.

[8]      There has been New Zealand authority since 1884 that the costs of an interpleader made in good faith will normally be deducted out of the funds in dispute and will usually be borne by the unsuccessful claimant.2

[9]      Here, however, it is not clear which defendant will bear the costs if they are paid out of the Funds or which defendant is unsuccessful.   Ostensibly, the costs would be borne by Bayshore since paying the costs out of the funds would increase the levies on the existing owners for funding the remedial works.  However if Fabri- Cell fully succeeds, in its long threatened proceedings which have not yet materialised, then it would bear the costs if they are paid out of the Funds.

[10]     I consider that it would be just for both defendants to share the payment of indemnity costs.    I discern no  material  difference between  them  in  making the interpleader  application  necessary.    Since  paying  the  costs  out  of  the  Funds  is unlikely to result in equal sharing, I do not so order.

[11]     I order the two defendants to pay the indemnity costs of the Body Corporate equally.  They can then get on with their remaining disputes without involving the Body Corporate.

[12]     Following  Mahon  J’s  order  in  Coolstores  (New  Zealand)  Ltd  v  Sunplus Products Ltd & Anor, I also order that the party ultimately successful in any further proceedings between them over entitlement to the Funds is then entitled to recover from the unsuccessful claimant its proportion of the costs so paid.3

Palmer J

2      Shaw v Weldon (1884) 2 NZLR 395 (SC) relied on, for example, by White J in Walters v Icon

Central Ltd & Ors [2011] NZHC 908 at [13](d).

3      Coolstores (New Zealand) Ltd v Sunplus Products Ltd & Anor [1977] 1 NZLR 690 (SC) at 694.