Capital City Holdings Limited v Mighty Rocket Properties Limited

[2021] NZHC 3535

IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY

I TE KŌTI MATUA O AOTEAROA TE WHANGANUI-A-TARA ROHE

CIV-2021-485-550

[2021] NZHC 3535

UNDER

section 290 of the Companies Act 1993

IN THE MATTER

of a statutory demand

BETWEEN

CAPITAL CITY HOLDINGS LIMITED

Applicant

AND

MIGHTY ROCKET PROPERTIES LIMITED

Respondent

Hearing:	On the papers
Appearances:	S Barker and A Duncan for applicant Respondent in person
Judgment:	17 December 2021

JUDGMENT OF ASSOCIATE JUDGE JOHNSTON

[Costs]

[1]    Capital City Holdings as landlord and Mighty Rocket Properties as tenant were parties to a lease in respect of a Wellington apartment. Capital City Holdings terminated the lease. Mighty Rocket Properties alleges that the termination was unlawful, and asserts that as a direct result it suffered losses of various sorts totalling

$260,262. These were said to relate to allegedly unlawful restraint and removal of property from the flat, utility services said to have been used by Capital City Holdings, repair invoices and loss of projected profits.

[2]    On 24 September 2021, Mighty Rocket Properties, served a statutory demand on Capital City Holdings for that amount.

CAPITAL CITY HOLDINGS LIMITED v MIGHTY ROCKET PROPERTIES LIMITED [2021] NZHC 3535

[17 December 2021]

[3]    On 6 October 2021 Capital City Holdings commenced this proceeding by originating application seeking an order setting aside the statutory demand. This was supported   by   a   detailed   affidavit    sworn    by    the    company’s    director,   Ms Catherine Jones.

[4]    Before matters progressed any further, Mighty Rocket Properties filed a document headed “Submission for Respondent” dated 20 October 2021 in which the company, through its director, Mr Aaron Gilmore, indicated that it was withdrawing its statutory demand.

[5]    When the matter was called in the Associate Judge’s list on 7 December 2021, counsel for Capital City Holdings and Mr Gilmore were present and, by consent, the statutory demand was set aside. It was agreed that I should deal with costs on the papers.

[6]I have submissions from both parties as to costs.

[7]    As Mr Barker submits on behalf of Capital City Holdings, the starting point is straightforward.  Capital  City  Holdings  applied  for  an  order  setting  aside Mighty Rocket Properties’ statutory demand, and has been successful in that regard. The High Court Rules 2016 provide that in all but exceptional cases costs follow the event, that is to say that the successful party is entitled to an award of costs. Generally, costs are calculated on the basis of the scales contained in the Rules.

[8]    Prima facie then, Capital City Holdings Ltd is entitled to a costs award and in my view 2B costs (the middle range) of costs is the obvious starting point in this case.

[9]    Mr Barker submits that this is a case in which the Court should exercise its overarching discretion in relation to costs and award Capital City Holdings increased costs. He seeks an award of scale costs increased by 50 or 75 per cent, or indemnity costs.

[10]   In support of this submission Mr Barker analyses the relevant aspects of pt 14 of the High Court Rules 2016 dealing with costs. His analysis is wholly orthodox. As

he submits, the Court will award increased costs where the party against whom the award is to be made has acted improperly in one way or another, thus causing the other party to incur costs, most relevantly by pursuing a claim for an ulterior purposes or with wilful disregard for the merits. Mr Barker submits that this is a claim in which Mighty Rocket Properties behaved improperly in serving its statutory demand in the first place which is the step that resulted in the proceeding being commenced and Capital City Holdings incurring costs. He contends that there was no proper basis upon which Mighty Rocket Properties could issue the statutory demand because the company’s claim was for an unliquidated claim for damages. In addition, he submits that the claim is without substantial merit. He says all this was clear from the outset and that Mighty Rocket Property, through Mr Gilmore, must have been aware of this and was using the Companies Act process for an improper purpose. As some measure of this he points to the fact that the claim was withdrawn as soon as this application was made.

[11]   In his response, Mr Gilmore attempts to justify the company’s underlying claim. He does not address the essential point which is that even if Mighty Rocket Properties has a claim of some sort it was never, on any view, a liquidated claim of a sort capable of sustaining a statutory demand.

[12]   In my view, Capital City Holdings is entitled to an increased costs award on the basis that the statutory demand was served in circumstances which lacked merit in the sense already described.

[13]   Mr Barker has calculated scale costs on a 2B basis at $7,170, which appears to me to be correct.

[14]By comparison Capital City Holdings’ actual costs apparently amount to

$14,696.

[15]   Standing back from the matter, I am not satisfied that this is a case which would justify an order for indemnity costs.

[16]   However, an uplift of 50 per cent would seem to meet the case. That would result in an award of $10,755.

[17]   Capital City Holdings also submits that the costs order ought to be made against Mr Gilmore as well as Mighty Rocket Properties. Third parties — in this case, the party’s director — are only made in exceptional circumstances. As Mr Barker submits such orders are made:

(a)In exceptional circumstances — cases outside the ordinary run of cases where parties pursue or defend claims for their own benefit and at their own expense;

(b)When non-party funds and/or substantially controls or benefit from the case (for example, a substantial shareholder);

(c)Whether, in the circumstances, the order is fair — justified often, for example, where there is impropriety or mala fides by a non-party.

[18]Those categories of cases are drawn from Dymock’s Franchise Systems (NSW)

Pty Ltd v Todd (No. 2) Ltd.1

[19]   In this case, Mr Gilmore was clearly the driving force behind the demand, forcing Capital City Holdings to take the steps that it did.   The demand was, as     Mr Barker submits, “wholly unmeritorious and was issued and/or maintained despite Mr Gilmore’s knowledge of  this”.  Mr  Barker  also  points  to  the  evidence  that Mr Gilmore failed to withdraw the demand when first requested and that he failed to accept offers of settlement (reflected in  without prejudice correspondence which   Mr Gilmore has put before the Court).

[20]   There is no doubt that in this case Mr Gilmore was primarily responsible for Capital City Holdings’ course of action. At all material times Mr Gilmore was the sole director. He was the directing mind and will of the company, and stood to gain from the outcome of the dispute. Furthermore, he has, by acting for the company in this proceeding injected himself in a direct way, personally advanced the case.

1      Dymock’s Franchise Systems (NSW) Pty Ltd v Todd (No. 2) Ltd [2004] UKPC 39; [2005] 1 NZLR 145.

[21]   The view I take is that it is appropriate that the costs order is made against Mighty Rocket Properties and Mr Gilmore jointly.

[22]   There will be a costs order in favour of Capital City Holdings Ltd against Mighty Rocket Properties and Aaron Wayne Gilmore jointly in the sum of $10,755 together with disbursements in the sum of $639.57.

Associate Judge Johnston

Solicitors:
Buddle Findlay, Wellington for applicant