Cardy Business Limited v GSE Group Limited HC Wellington CIV 2009-485-1175

[2010] NZHC 689

IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY

CIV-2009-485-1175

UNDER  the Companies Act 1993

IN THE MATTER OF     an application for putting company into liquidation by the Court

BETWEEN  CARDY BUSINESS LIMITED Plaintiff

ANDGSE GROUP LIMITED Defendant

Judgment:      11 May 2010 at 3.30 pm

JUDGMENT AS TO COSTS OF ASSOCIATE JUDGE D.I. GENDALL

This judgment was delivered by Associate Judge Gendall on 11 May 2010 at 3.30 pm pursuant to r 11.5 of the High Court Rules.

Solicitors:           City Law, Solicitors, PO Box 6086, Wellesley Street, Auckland

Thomas Dewar, Solicitors, PO Box 31240, Lower Hutt, Wellington

CARDY BUSINESS LIMITED V GSE GROUP LIMITED HC WN CIV-2009-485-1175  11 May 2010

Introduction

[1]      GSE Group Limited, the defendant in this proceeding, seeks costs against the plaintiff Cardy Business Limited on its application for orders that monies held in the plaintiff’s solicitor’s trust account be returned to it.

[2]      Those  monies  had  been  deposited  by the  defendant  with  the  plaintiff  to support a stay of liquidation proceedings brought against the defendant. The defendant finally became entitled to a refund of the monies when Disputes Tribunal proceedings were decided in its favour and a request for their return was made.

[3]      The defendant claims that initially the plaintiff and its solicitor refused to return the retained monies, hence the Application for Ancillary Orders.  Subsequent to the Application being filed an amount representing the principal sum was finally paid to the defendant.  The defendant now seeks costs on its application.

Background Facts

[4]      On 17 August 2009 this Court ordered the defendant to pay into the trust account of the plaintiff’s solicitor $12,477.08 pending resolution of certain judicial review proceedings.

[5]      In  2007,  the  plaintiff  had  brought  proceedings  in  the  Disputes  Tribunal claiming that the defendant was liable to it under a photocopier hire contract.  The Disputes Tribunal ordered the defendant to pay to the plaintiff the sum of $4,618.13.

[6]      The defendant sought a re-hearing of the matter on the basis that it had not been  made  aware  of  the  original  Tribunal  hearing.     That  application  was unsuccessful.

[7]      The plaintiff then brought liquidation proceedings against the defendant to enforce the alleged debt but those proceedings were stayed pending determination of a judicial review application brought by the defendant against the Disputes Tribunal.

[8]      On 5 August 2009 the defendant was ordered to pay the amount in question into the plaintiff’s solicitor’s trust account pending the disposal of the judicial review application.  The monies were paid on 10 August 2009.

[9]      On 8 December 2009 the parties agreed that the defendant’s application for judicial review would be discontinued and that the original dispute would be referred back to the Disputes Tribunal for re-hearing.   The parties also agreed that the plaintiff’s solicitors would continue to hold the money in their trust account until the outcome of the Disputes Tribunal proceedings were known.

[10]     It is appropriate to set out the relevant terms of this agreement between the parties:

....(2)     The $12,000 currently held in the trust account of City Law (“the monies held”)  shall  remain  there  until  the  outcome  of  the  Disputes  Tribunal Hearing is known.

(3)In the event that Cardys is successful in the Disputes Tribunal hearing, City Law, Solicitors, shall pay the monies held to Cardy upon receipt of a copy of the decision to the effect that Cardy is successful.

(4)       Further, if Cardys is successful in the Disputes Tribunal hearing, GSE shall immediately pay to Cardys the sum of $8,778.55 being the further costs incurred by Cardys in this matter in the High Court pursuant to the liquidation, Judicial Review and Recall of the Judicial Review matters.

(5)In the event that GSE is successful in the Disputes Tribunal hearing, City Law, Solicitors, shall pay the monies held to GSE and further Cardy agrees to pay the sum of $16,946.00 to GSE, that sum being the sum expended by GSE in the liquidation, Judicial Review and Recall of the Judicial Review matters, upon receipt of a copy of the decision to the effect that GSE is successful.

[11]     The  dispute  between  the  plaintiff  and  the  defendant  was  reheard  in  the Disputes Tribunal on 5 February 2010.   On 5 March 2010, the Disputes Tribunal gave its decision dismissing the plaintiff’s claim against the defendant.

[12]     On 9 March 2010, counsel for the defendant wrote to the solicitors for the plaintiff requiring the immediate payment of the funds held in their trust account. The plaintiff’s solicitors then advised that they would not be paying out the funds until avenues of rehearing and appeal had been exhausted.

[13]     In its Application for Ancillary Orders filed on 19 March 2010 the defendant sought orders first, that the sums held in the plaintiff’s solicitor’s trust account be paid to the defendant forthwith and secondly, that the plaintiff pay the defendant’s costs on that Application.  The Application was supported by a detailed affidavit.

[14]     On  23  March  2010,  this  matter  was  called  in  the  List  and  there  were appearances on behalf of both the defendant and the plaintiff.   At that call, the plaintiff sought time to file a Notice of Opposition to the defendant’s application and an affidavit in support.  As I understand the position, the plaintiff’s refusal to have its solicitors pay out the monies held in trust to the defendant was made on the basis that its options of seeking a rehearing or appealing the Dispute Tribunal decision had not, at that point, been exhausted.

[15]     Accordingly, on 23 March 2010 I made directions that the plaintiff was to have  until  30  March  2010  to  file  and  serve  its  Notice  of  Opposition  to  the defendant’s application and its supporting affidavit, the defendant was then to have 5 working days to file and serve any reply evidence and the opposed application was set down for hearing on 12 April 2010.

[16]     On 12 April 2010 when the matter was called Mr Dewar appeared as counsel for the defendant.  There was no appearance for the plaintiff.  As I understand the position,  no  Notice  of Opposition  or  supporting material  had  been  filed  by the plaintiff as directed on 23 March 2010.

[17]     Instead, it seems that the next day on 13 April 2010 the solicitors for the plaintiff paid to the defendant’s solicitors an amount equal to the amount they held being precisely the sum deposited with them in August 2009.

Counsel’s Arguments and My Decision

[18]     As I have noted above, the defendant now seeks costs and disbursements with respect to the Application filed on 19 March 2010.   He has filed a detailed Memorandum on costs dated 22 April 2010.

[19]     Costs are opposed by the plaintiff.   Counsel for the plaintiff has filed a

Memorandum on the issue of costs dated 27 April 2010.

[20]     I have now had an opportunity to consider all the matters referred to in the Memoranda filed by counsel for the parties together with all other material on the file and give my decision on the costs question.   On this, the defendant seeks an award of actual solicitor/client costs and disbursements and has set out in a schedule to counsel’s 22 April 2010 Memorandum details of these amounts.   They total

$4,324.00 being $4,124.00 for costs and $200.00 for a Court filing fee disbursement.

[21]     Counsel for the defendant has also completed an alternative calculation of costs on this Application on a Category 2B basis which amount to some $2,080.00. He seeks this amount as an alternative together with the $200.00 Court filing fee disbursement.

[22]     In reviewing all the material before the Court in this case I am satisfied that the Application for Ancillary Orders brought by the defendant was properly brought and necessary.   The defendant needed to file this application to get back its own money from the plaintiff pursuant to the 8 December 2009 Agreement between the parties.  As I have noted above, this provided that, in the event the defendant was successful before the Disputes Tribunal (which it was) the plaintiff’s solicitors would refund the monies held to it without delay.

[23]     As mentioned previously, the request for payment from the defendant was met with the plaintiff’s response that it would not refund the monies until it had exhausted all rehearing and appeal rights.  In my view given the earlier Agreement between the parties, it was not entitled to do this.

[24]     As I see the position, the defendant is therefore entitled to costs on its present Application.   The issue remains, however, as to whether those costs should be awarded on the usual Category 2B scale basis or whether indemnity solicitor and client costs should be awarded.

[25]     Here, the defendant’s preferred position is that indemnity costs should be awarded against the plaintiff.   It is clear from the authorities that a high threshold needs to be passed before an order for indemnity costs is made – Paper Reclaim Limited   v   Aotearoa   International   Limited   (CA)   14   March   2006,   CA70/04. Indemnity costs are generally reserved for cases “where truly exceptional circumstances exist” – Hedley v Kiwi Co-operative Dairies Limited (2002) 16PRNZ

694 per Goddard J at paragraph 8.

[26]     Counsel for the defendant contends that the present case is directly analogous to a situation in which a party has disobeyed an order or direction of the Court.  The present  application  according  to  the  defendant  has  been  necessitated  by  the plaintiff’s wrongful refusal to pay out money held consequent upon an earlier order of this Court.

[27]     In response, counsel for the plaintiff contends that the obligation on those solicitors to refund the monies held to the defendant was not an immediate one and in fact here, the retained monies were repaid to the defendant within 6 weeks of the decision of the Dispute Tribunal being given.   He submits that it was therefore unnecessary for the present application to be made to the Court as the defendant knew throughout that the refund would be made, though the defendant strongly refutes this.

[28]     It need hardly be said that it is most unfortunate that this matter reached a stage where a formal application needed to be made to this Court to refund the retained monies.  The positions of the respective parties regarding the need for this application are somewhat at odds.  It is difficult to reconcile these.

[29]     Notwithstanding  this,  as  I have  noted  above,  I  am  of  the  view  that  the defendant here was left with little choice but to bring the present application and thus is entitled to costs on the application.

[30]     As  I  see  the  position,  although  this  matter  no  doubt  has  lead  to  great frustration on the part of the defendant, it cannot be said that “truly exceptional circumstances exist” here to justify an award of indemnity costs.  Nor in my view are

increased costs appropriate here.  This is a relatively straight forward matter where

Category 2B scale costs should be awarded.

[31]    An order is now made therefore awarding costs to the defendant on its Application  for  Ancillary  Orders  against  the  plaintiff  on  a  Category  2B  basis totalling $2,080.00 together with a court fee filing disbursement of $200.00.

‘Associate Judge D.I. Gendall’