Body Corporate 68792 v Lynx Trustees Limited (in liquidation)
[2022] NZHC 3125
•29 November 2022
IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY
I TE KŌTI MATUA O AOTEAROA TE WHANGANUI-A-TARA ROHE
CIV-2019-485-389
[2022] NZHC 3125
BETWEEN BODY CORPORATE 68792
Plaintiff
AND
LYNX TRUSTEES LIMITED (in
liquidation) Defendant
ROY BASSETT-BURR
Interested Party
Hearing: On the papers Appearances:
A O’Connor for Body Corporate 68792
G A D Neil and R M G Hindriksen for the liquidators of Lynx Trustees Ltd (in liquidation)
J D Haig for the receivers of the Link Trust No. 1 (abiding the Court’s decision)
D Livingston for Mr Bassett-BurrJudgment:
29 November 2022
Reissued:
6 December 2022
JUDGMENT OF ASSOCIATE JUDGE JOHNSTON
[Costs]
[1] Body Corporate 68792 and Lynx Trustees Ltd (in liquidation) seek costs orders against Mr Bassett-Burr following Mr Bassett-Burr’s discontinuance of his interlocutory application in this proceeding to stay Lynx Trustees’ liquidation pursuant to r 31.11 of the High Court Rules 2016.
[2]The background to their applications is not without its complications.
BODY CORPORATE 68792 v LYNX TRUSTEES LIMITED (in liquidation) [2022] NZHC 3125
[29 November 2022]
[3] In order not to overburden this costs judgment, I summarise the background as briefly as possible:
(a)The Court made an order winding up Lynx Trustees on 10 September 2019.
(b)Since their appointment, the liquidators have been embroiled in a complex liquidation which, amongst other things, involved them in difficult and protracted litigation.
(c)By 26 January 2022 the liquidators could apparently see light at the end of the tunnel, and applied for an order approving their costs down to that point. In the overwhelming majority of liquidations, such applications are made by memorandum — often from the liquidator or liquidators, without involving solicitors or counsel — on an ex parte basis, and reviewed and approved by the Court on the papers. On behalf of the liquidators, their solicitors, Meredith Connell, proceeded on that basis. On considering the application, it was obvious to me, as it had been to Mr Neil as counsel for the liquidators, because he mentioned it in his covering memorandum, that there was a distinct possibility that the trustees of the Link Trust No. 1, Mr Harry Memelink and Ms Cisca Forster, who faced the prospect of being liable for costs, might oppose the order sought. It appeared to me that Mr Memelink and Mr Forster should have the opportunity to be heard. I therefore directed that the liquidators’ application be served on the trustees and that they be given a limited period of time to file a formal notice of opposition and affidavit evidence.
(d)The trustees did not do so within the designated period of time, and I made an order approving the liquidators’ costs on 13 April 2022.
(e)It subsequently became apparent that, as a result of an administrative error, a memorandum filed and served on behalf of the trustees by Mr Memelink had not been brought to my attention, so that I had made
the order approving the liquidators’ costs in ignorance of the same. Whilst Mr Memelink’s memorandum did not constitute proper compliance with the Court’s earlier directions, it did indicate that the trustees planned to oppose the liquidators’ application.
(f)Against strong opposition from the liquidators, on 5 May 2022, I recalled my judgment, on the basis that I would reconsider the matter having regard to Mr Memelink’s memorandum.
(g)Things then took a new turn when, in different proceedings, Churchman J made an order appointing receivers over the Link Trust No. 1, meaning that the receivers needed to be offered an opportunity to have their say as to the liquidators’ costs in this proceeding.
(h)The matter was called in the Associate Judge’s list on 29 August 2022 and directions were made giving the receivers such an opportunity.
(i)Neither the trustees nor the receivers filed and served any formal opposition to the liquidators’ application.
(j)The matter was called again in the Associate Judge’s list on 27 September 2022.
(k)Mr Memelink was also in attendance at this call. He sought further time within which to file a formal opposition and affidavit evidence. I refused his request. By this stage, Mr Bassett-Burr had filed and served his application.
(l)I expressed some doubt as to the legitimacy of Mr Bassett-Burr’s application, but made directions for the disposal of it nonetheless.
(m)Because Mr Bassett-Burr was self-represented, I asked the solicitors and counsel acting for Body Corporate 68792 and Lynx Trustees, both of which were opposing his application, to assist him as necessary to
discharge his obligations as the applicant. It is obvious that Mr Bassett-Burr was offered considerable assistance in that regard.
(n)The affidavit evidence indicates that a good deal of dialogue between Mr Bassett-Burr and the solicitors and counsel for Body Corporate 68792 and Lynx Trustees followed, not only in relation to procedural matters, but also concerning the merits of his application.
(o)As already said, Mr Bassett-Burr has now discontinued his application.
[4] The costs applications by Body Corporate 68792 and Lynx Trustees are advanced on essentially the same grounds, and I will deal with them together.
[5]Costs are dealt with in pt 14 of the High Court Rules 2016.
[6] In this case, the starting point is r 15.23 which provides that on the discontinuance of a proceeding by a plaintiff or other claimant, a defendant or other respondent is entitled to a costs award down to the point of the discontinuance, unless the parties agree, or the court determines, otherwise. It is common ground between the parties that Body Corporate 68792 and Lynx Trustees are entitled to a costs award against Mr Bassett-Burr down to the date of the discontinuance of his application. The issue is as to quantum.
[7] Costs are quintessentially a matter for the Court’s discretion. Like any discretion, this must be exercised on a principled basis. The principles are well settled and clear.
[8] Generally, costs “follow the event”, that is to say that the successful party is entitled to a costs award. As already said, this case was concluded by the filing of a discontinuance and the position and is therefore governed by r 15.3. The discontinuing party is prima facie liable for costs down to the discontinuance.
[9] In all but exceptional cases costs are awarded in accordance with the scales contained in the High Court Rules. These scales are designed to bring a degree of
objectivity to costs assessment. They are calibrated by reference to the complexity of the case. By applying them, it is possible to determine the costs award that the successful party is likely to be entitled to at the conclusion of the litigation. In this way, costs are predictable and costs risks can be assessed at the time that a party commences a claim or enters a defence. In the vast majority of cases, when scale costs are applied, the applicant party’s actual costs are irrelevant.
[10] However, r 14.6 provides that in exceptional cases the Court may adjust costs up or down. At the extremes it may award solicitor-and-client (indemnity) costs, or deny costs altogether. As a very general proposition, the Court only deviates from scale costs where there is evidence of impropriety.
[11] In this case, Body Corporate 68792 and Lynx Trustees contend that the Court should award indemnity costs, or, in the alternative, increased scale costs. This, they both say, would be a proper response to Mr Bassett-Burr having discontinued his application in circumstances which they argue involve a degree of impropriety.
[12] On what basis, then, do the plaintiff and the defendant assert that the Court would be justified in making such an order?
[13] The essential contention advanced by Mr O’Connor for the plaintiff and Mr Neil for the defendant is that Mr Bassett-Burr’s application was “hopeless” — doomed from the very outset.
[14] In this they rely on the principle articulated by French J in J Corp Pty Ltd v Australian Builders Labourers Federation of Workers (WA Branch) (No. 2)1 to which the New Zealand Court of Appeal referred in Ben Nevis Forestry Venture Ltd v Commissioner of Inland Revenue2 that a hopeless case may provide grounds for an increased costs award.
1 J Corp Pty Ltd v Australian Builders Labourers Federation Union of Workers (WA Branch) (No. 2). [1993] FCA 42.
2 Ben Nevis Forestry Venture Ltd v Commissioner of Inland Revenue (2014) 22 PRNZ 322 at [15].
[15] The thrust of the principle is that, in a plainly hopeless case, in the absence of any other explanation, a court is entitled to assume that the party concerned knew or ought to have known that it was hopeless, and infer an ulterior purpose.
[16] Mr Livingston for Mr Bassett-Burr did not quite put it this way, but, as he implied, it is not just a matter of asking whether the case was hopeless. The question is whether the hopelessness of the case is properly regarded as pointing to impropriety of some sort.
[17] I have had little difficulty in concluding that Mr Bassett-Burr’s application was indeed hopeless:
(a)The focus of r 31.11 is a stay of liquidation proceedings. It is not at all obvious to me how an order could be made staying the liquidation itself.
(b)Even if it were open to the Court to do so, the order winding up Lynx Trustees Ltd (in liquidation) was made in September 2019, and the liquidation has proceeded to a point where the liquidators were seeking the approval of their costs. In other words, not only is the original proceeding a matter of historical interest only, the liquidation itself is virtually at an end. The prospect of the Court interfering at this point was always vanishingly small.
(c)As Mr O’Connor and Mr Neil both submit, Mr Bassett-Burr is not someone who, as of right, has standing to make his application. He would need leave. He has not applied for or secured the same.
[18] Around the time that Mr Bassett-Burr commenced his proceeding, it would have become clear to Mr Memelink that he was not in a position to resist the costs order sought by the liquidators. Mr Bassett-Burr is Mr Memelink’s brother-in-law. As the shareholder and director of Lynx Trustees, a former trustee of the Link Trust No. 1, he has featured in litigation concerning Mr Memelink’s bankruptcy before. Given the hopeless nature of this claim, it would not be difficult to infer that it was commenced as a cynical, last ditch effort to prevent the Court approving the liquidators’ costs at
the instigation of Mr Memelink. That, in my assessment, would be an improper purpose and an abuse of the Court’s processes.
[19] By way of explanation, Mr Livingston suggests that Mr Bassett-Burr’s motivation was to ensure that issues in Mr Memelink’s bankruptcy which he regarded as being unresolved were considered by the liquidators and if necessary the Court. The issues concern claims that Mr Memelink has sought to litigate in the past relating to whether body corporate levies were payable. That, in my assessment, constitutes an attempt to stretch the Court’s credulity beyond endurance. As Mr O’Connor and Mr Neil submit, those historical claims have been dealt with in earlier proceedings by this Court and the Court of Appeal, albeit not in a way that Mr Memelink agrees with.
[20] For those reasons, I have reached the following conclusions. Mr Bassett-Burr’s application was doomed to failure from the outset. The Court is entitled to assume that he was aware of that. There was no legitimate reason for the commencement of the proceeding, other than as some sort of stalling tactic on behalf of the trustees of the Link Trust No. 1 to stop this Court making the order sought by the liquidators.
[21] In advancing the costs claim in this case, Mr O’Connor and Mr Neil acknowledged that they are inviting the Court to make costs orders in favour of their clients which in part covers their costs in making the application itself — “costs-on-costs”. Mr Livingston for Mr Bassett-Burr drew attention to the different views that have been expressed by the Courts from time to time in relation to applications for costs-on-costs.
[22] It is true that the Courts have on occasions been critical of such applications and declined to make costs awards accordingly.
[23] However, the issue is a very contextual one, and, in my view, there are circumstances — of which this case is an example — where the Court can and should allow costs to be claimed in relation in part to the costs application itself.
[24] I reject Mr Livingston’s argument that the Court ought to refuse this component of the application.
[25] For those reasons, I accept the submissions made by Mr O’Connor and Mr Neil that the Court would be justified in departing from the general rule that costs are awarded in accordance with scale.
[26] I have considered the submissions advanced by Mr O’Connor and Mr Neil (which verge on strident) to the effect that the Court ought to award indemnity costs. The view I take is that the case does not warrant that. While I am satisfied that the Court is entitled to consider above scale costs, I am prepared to accept that Mr Bassett-Burr, influenced no doubt by his brother-in-law, may have believed — wrongly, in my assessment — that there remained unresolved issues of the sort described above.
[27] In my judgment, substantial justice will be done in this case if I make an order that both the plaintiff and the defendant are entitled to scale costs with an uplift of 50 per cent. Such an order, whilst less than the actual costs of the parties, should reflect objectively determined actual costs.
[28] Mr Bassett-Burr will pay scale costs on a 2B basis to the plaintiff and the defendant, increased by 50 per cent, together with such disbursements as may be allowed by the Registrar following discontinuance of his interlocutory application.
Associate Judge Johnston
Solicitors:
Mana Law, Wellington for the company in liquidation Gibson Sheat, Wellington for the receivers
Meredith Connell, Auckland for the liquidators
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