Cain v Mettrick
[2020] NZHC 2597
•2 October 2020
IN THE HIGH COURT OF NEW ZEALAND a REGISTRY
I TE KŌTI MATUA O AOTEAROA ŌTAUTAHI ROHE
CIV-2018-409-000548
[2020] NZHC 2597
UNDER the Companies Act 1993 IN THE MATTER
of an application under section 301 of the Act
BETWEEN
R J CAIN and R G LOGAN as liquidators of Stonewood Homes Limited (in liquidation) First Plaintiffs
AND
R J CAIN and R G LOGAN as liquidators of Stonewood Homes New Zealand Limited (in liquidation)
Second Plaintiffs
AND
R J CAIN and R G LOGAN as liquidators of Holmfirth Group Limited (in liquidation)
Third Plaintiffs
AND
B A METTRICK
First Defendant
AND
J BOULT
Second Defendant
Hearing: Determined on the Papers Counsel:
M G Colson and J W A Johnson for Plaintiffs
G J Ryan and K M Anderson for Second Defendant
Judgment:
2 October 2020
COSTS JUDGMENT OF ASSOCIATE JUDGE PAULSEN
This judgment was delivered by me on 2 October 2020 at 3.30 pm pursuant to Rule 11.5 of the High Court Rules
Registrar/Deputy Registrar Date:
CAIN v METTRICK (Costs Judgment) [2020] NZHC 2597 [2 October 2020]
Introduction
[1] The second defendant applied for a stay of this proceeding due to factors relating to the plaintiffs’ funding arrangements. This resulted in several other interlocutory skirmishes. Ultimately, two judgments of the court have issued. These were judgments on:
(a)the second defendant’s application for stay dated 31 July 2019;1 and
(b)the second defendant’s application for production of documents dated 25 September 2019;2
[2] The plaintiffs and the second defendant both seek costs against each other on the applications. Counsel have filed helpful and focused submissions.
The application for production of documents
The application
[3] The plaintiffs’ funding agreements were disclosed to the defendants but with redactions. The second defendant sought disclosure of unredacted copies of the funding agreements as well as other related documents. The application was brought on the basis that disclosure was necessary for the purposes of the second defendant’s stay application.
[4] When the application came on for hearing there were 10 clauses of the litigation funding agreements still in issue which I individually considered in my judgment. I made orders the plaintiffs disclose just two of the clauses, but otherwise accepted the redactions were appropriate and necessary.
1 Cain v Mettrick [2020] NZHC 2125.
2 Cain v Mettrick [2019] NZHC 2756.
Second defendant’s submissions
[5] The second defendant argues that the starting position in respect to costs is that the successful party is entitled to costs, which is consistent with the principles that the determination of costs should be predictable and expeditious.3
[6] The second defendant asserts he achieved success on this application as the plaintiffs were ordered to make disclosure of redacted clauses. He submits the application was relevant to the determination of the stay application and it was appropriate the court have before it versions of the funding agreements that contained only necessary and appropriate redactions.
[7] The second defendant seeks costs on a 2B basis with an allowance for second counsel.
The plaintiffs’ submissions
[8] The plaintiffs argue the second defendant was not successful when he obtained disclosure of just two clauses of the funding agreements and those clauses were of no practical significance to the stay application.
[9] The plaintiffs contend they were successful because the court’s decision reflected the responsible approach they had taken to providing a copy of the funding agreements with limited redactions. The plaintiffs contend also, that overall, they were successful.
[10] The plaintiffs also seek costs on a 2B basis but, in any event, oppose any allowance for second counsel because the matters argued were narrowly focused and second counsel was not necessary for the effective presentation of the application.
3 Shirley v Wairarapa District Health Board [2006] NZSC 63, [2006] 3 NZLR 523 at [19].
The stay application
[11] The second defendant argued this proceeding should be stayed as an abuse of process due to factors related to the identity of the plaintiffs’ funder and the terms of the funding agreements.
[12] In my judgment, I rejected the argument the funder had ulterior or improper motives. I ordered a temporary stay of the proceeding because certain terms of the funding agreements amounted to an assignment of bare causes of action for profit.
[13]The offending terms have now been amended and the stay lifted by consent.
The second defendant’s submissions
[14] The second defendant claims he was successful on this application because the stay was granted, and whilst not all arguments advanced on his behalf were accepted, “success on more limited terms is still success”.4
[15] I was referred to Emmons Developments New Zealand Ltd v Mitsui Sumitomo Insurance Co Ltd,5 and the discretionary principle in the High Court Rules that costs may be refused or reduced if: 6
… although the party claiming costs has succeeded overall, that party has failed in relation to a cause of action or issue which significantly increased the costs of the party opposing costs.
[16] The second defendant submits that his costs should not be refused or reduced because the court rejected some of his arguments. It was appropriate, he argues, the court have before it evidence of the context of the funding arrangement as a whole and the further evidence presented of this context did not significantly increase the plaintiffs’ costs.
4 Weaver v Auckland Council [2017] NZCA 330.
5 Emmons Developments New Zealand Ltd v Mitsui Sumitomo Insurance Co Ltd [2020] NZHC 932.
6 High Court Rules 2016, r 14.7(d).
The plaintiffs’ submissions
[17] The plaintiffs argue the second defendant’s approach is too simplistic and it cannot be assumed the second defendant was successful simply because a stay was granted.
[18] They contend the second defendant’s application substantially failed because the crux of the application was the funder had an improper motive, which the court had very little difficulty in disposing of. In those circumstances, the plaintiffs submit, a realistic appraisal of the overall result must lead to the conclusion the plaintiffs were in fact the successful parties.
[19] The stay was granted, the plaintiffs argue, because of concerns about terms of the funding agreements but they and the funder were always open to amendments to the agreements being made to deal with any genuine concerns.
[20] The plaintiffs say they invited dialogue with the second defendant as to the specific terms of the funding agreements but the invitation was not taken up. On 29 July 2019, the plaintiffs’ solicitors wrote to the second defendant’s solicitors saying:
Although our clients consider the funding arrangements are unobjectionable, they invite your client to set out any valid concerns he has so that a potential resolution of any such valid concerns can be explored without the need for an application. A failure to respond to this invitation will be raised by the liquidators in the unlikely event that the costs of any application become relevant.
[21] The plaintiffs also rely on Mr Colson’s submission at the hearing that should the court conclude some terms of the funding agreements were problematic, it should allow time for those terms to be amended.
[22] The plaintiffs argue they acted entirely reasonably throughout and such success as the second defendant had on the application does not justify a costs award.
[23] Claiming success for themselves, the plaintiffs seek costs on this application on a 2B basis. Again, they reject any allowance for second counsel.
My approach
[24] All matters of costs are discretionary. The discretion must be exercised on a principled basis.
[25] The party who has lost should pay the costs of the party that has won. The loser pays costs unless there are exceptional reasons to the contrary. The determination of costs, so far as possible, should be both practicable and expeditious.
[26] Here, the first step is to determine who was the successful party overall on each application. If one party has achieved overall success that party is generally entitled to costs.
[27] As was observed in Emmons Developments New Zealand Ltd v Mitsui Sumitomo Insurance Co Ltd, it is not always easy to determine which party won overall and what is required is a realistic appraisal of the end result.7 In Emmons Developments, that appraisal involved consideration of which parties won on five issues that had been put before the court for determination, but was not confined to that. The court took into account the terms of a partial settlement agreement resolving issues which would otherwise have been determined in the proceeding and also the downstream financial implications of its findings on the five issues.
[28] Once I have determined which party won overall, it is necessary to consider if there are grounds to reduce/refuse costs upon any of the grounds set out in the High Court Rules.8 In respect to this issue, r 14.7 of the High Court Rules provides:
14.7 Refusal of, or reduction in, costs
Despite rules 14.2 to 14.5, the court may refuse to make an order for costs or may reduce the costs otherwise payable under those rules if
---…
(d) although the party claiming costs has succeeded overall, that party has failed in relation to a cause of action or issue which significantly increased the costs of the party opposing costs; or
…
7 Emmons Developments New Zealand Ltd v Mitsui Sumitomo Insurance Co Ltd, above n 5, at [28].
8 At [26]-[27].
(f)the party claiming costs has contributed unnecessarily to the time or expense of the proceeding or step in it by
---
…
(v) failing, without reasonable justification, to accept an offer of settlement whether in the form of an offer under rule 14.10 or some other offer to settle or dispose of the proceeding;
My assessment
The production of documents application
[29] Neither party succeed overall on the production of documents application. The second defendant had sought an unredacted version of the funding agreements and did not achieve that. He can claim limited success as the plaintiffs were required to disclose two clauses of the funding agreements. That must be considered in the context that there were ten clauses in issue and it was held in eight instances the redactions were appropriate and necessary.
[30] Furthermore, the application was pursued on the basis that it was necessary for the stay application, yet the two clauses ordered to be disclosed had very limited relevance to the ultimate resolution of the stay application.
[31] The plaintiffs claim success overall for themselves. I do not consider that is correct either. It overlooks the success the second defendant did achieve. Also, in pursuing the application the second defendant faced a difficult situation. It was impossible for him to know the nature of the information redacted from the funding agreements, yet the funding arrangement had to be assessed through a consideration of the terms of the agreements as a whole.9 It was reasonable for the second defendant to have pursued the application in those circumstances.
[32]Costs on this application are to lie where they fall.
9 Waterhouse v Contractors Bonding Ltd [2013] NZSC 89, [2014] 1 NZLR 91 at 112.
The stay application
[33] The second defendant was the successful party overall on this application. The proceeding was stayed. Although this was on a temporary basis the second defendant was not seeking a permanent stay. In so far as a stay was ordered, it was required only while the impugned aspects of the funding agreements remained in place.
[34] The real issue, then, is whether there are grounds to refuse or reduce the second defendant’s costs. In my view, there are two grounds for doing so. First, overwhelmingly, the focus of the stay application was the allegation the funder had improper motives or that its involvement might create perceptions engaging public policy concerns. These were arguments which I consider had little prospects of success and significantly added to the plaintiffs’ costs and the length and complexity of the hearing. That they were raised also substantially delayed the progress of the proceeding.
[35] It is not correct, as the second defendant submits, the evidence presented in response to this issue for the plaintiffs was limited to essentially Mr Meehan’s affidavits. Evidence having a bearing on the issue was also contained in Mr Cain’s and Mr Johnson’s affidavits and, of course, the plaintiffs’ counsel had to respond to the extensive factual material filed for the second defendant and, in some respects, novel legal arguments.
[36] Second, I accept also the plaintiffs’ argument that they were willing to enter into a dialogue with the second defendant and respond to legitimate concerns as to the terms of the funding agreements. That offer was not taken up by the second defendant. Had it been, the stay application should have been avoided. This is a matter I am entitled to take into account in exercising my discretion.10
[37] Standing back and considering these factors, the just result is that costs on this application shall lie where they fall.
10 Morrell v World Solar Ltd [2018] NZHC 528 at [22].
Result
[38]Costs on both applications lie where they fall.
[39] My judgment of 29 October 2019 has been suppressed pending the hearing of the stay application. The stay application has now been determined. That judgment may now be released.
O G Paulsen Associate Judge
Solicitors:
Wynn Williams, Christchurch White Fox & Jones, Auckland
cc: Buddle Findlay, Christchurch
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