Carter v Canterbury Design and Development Limited

[2023] NZHC 1750

IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY

I TE KŌTI MATUA O AOTEAROA ŌTAUTAHI ROHE

CIV-2022-409-411

[2023] NZHC 1750

IN THE MATTER

of specific performance of agreements to issue shares

BETWEEN

SIMON LAIDLAW CARTER

First Plaintiff

CHRISTOPHER JOHN SWANN
Second Plaintiff

AND

CANTERBURY DESIGN AND DEVELOPMENT LIMITED

First Defendant

AARON JOHN HOOPER and CARL JAMES FORDYCE

Second Defendants

Counsel:

M G Kirkland for Plaintiffs

No appearance for First Defendant
G D Jones for A J Hooper (Second Defendant)
K M Prendergast for C J Fordyce (Second Defendant)

Judgment:

6 July 2023

JUDGMENT OF ASSOCIATE JUDGE LESTER

(Costs)

CARTER v CANTERBURY DESIGN AND DEVELOPMENT LIMITED [2023] NZHC 1750 [6 July 2023]

[1]    The plaintiffs, as the successful parties in two interlocutory applications on this proceeding, seek costs. The plaintiffs sought summary judgment against the defendants alleging Mr Carter, on behalf of Mr Swann, was entitled to receive one- third of the shares in the first defendant. Perhaps more accurately it was not in issue that Mr Carter was entitled to the shares, the issue was whether a $150,000 payment to the first defendant was a precondition of the shares being transferred to him. The defendants responded by filing an objection to the Court’s jurisdiction, relying on an arbitration clause in the shareholders agreement between the parties. The plaintiffs applied to have the protest set aside and were successful.1 That left the plaintiffs’ application for summary judgment. I assume taking on board the observations made in the judgment concerning the objection to the Court’s jurisdiction, the defendants filed an admission of claim in respect of a number of aspects of the plaintiffs’ claim.

That resulted in a judgment upon the admissions dated 25 May 2023.2

[2]    In their admission the defendants accepted liability for costs on a 2B basis. Accordingly, judgment was entered as to liability in respect of costs. The plaintiffs signalled an intention to seek increased costs and this judgment deals with the application for increased costs.

[3]I am satisfied this is not a case for increased costs.

Contractual right to increased costs

[4]    The plaintiffs rely on provisions in their shareholders agreement and another agreement between the parties, known as the business agreement, to say they are entitled to indemnity costs.

[5]    Exactly where the obligation on the defendants to transfer one-third of the shares in the first defendant to Mr Cater on behalf of Mr Swann is to be found is unclear. That is not to say that the agreements do not contemplate Messrs Carter, Hooper and Fordyce being equal shares in the first defendant, it is just that pinpointing where that obligation is created is not straightforward. For example, the shareholders

1      Carter v Canterbury Design and Development Ltd [2023] NZHC 529.

2      Carter v Canterbury Design and Development Ltd [2023] NZHC 1249.

agreement, in its background, records that upon the parties entering into the sale and purchase agreement (the business agreement) the shareholding of the company would be equal. The shareholders agreement is dated 12 November 2020. However, the business agreement does not create the equal shareholding.

[6]    The point is that in the absence of being able to find the source of the obligation to transfer shares to Mr Carter it is hard to determine whether the indemnity costs provision in either agreement can be relied on. Lest it be thought this cuts across the orders made concerning the transfer of shares, it was common ground that Mr Carter was entitled to a transfer of the shares. The issue was whether there was a precondition, as already noted.

[7]    The short point is I am not persuaded that the plaintiffs are entitled to rely on the indemnity costs clauses in either agreement in respect of the defendants’ failure to transfer the shares. That is because I am not satisfied that the agreements in question, that is the sale and purchase of shares (the business agreement) and the shareholders agreement have been breached. As I recorded in the jurisdiction judgment, the shareholders agreement recorded Mr Swann’s existing status as a shareholder and did not create the right relied upon in the proceeding.

Increased costs because of the defendants’ actions

[8]    I do not accept this is a case where the defendants acted vexatiously, frivolously, improperly or unnecessarily.

[9]    The substance of the dispute between the parties was, as I have already indicated, essentially dealt with in the jurisdiction judgment. In my view the defendants acted reasonably in taking on board what was said in that judgment and filing their admission.

[10]   It was optimistic of the plaintiffs to seek summary judgment in respect of the classification of the $50,000 dispute. The application for summary judgment on that head would have in all likelihood failed given the factual dispute.

[11]   While the defendants’ challenge to jurisdiction failed, in my view nothing in the way that argument was conducted warrants increased costs.

[12]   Accordingly, in respect of this proceeding I find that the plaintiffs are entitled to 2B costs, being $20,414.41, plus disbursements.

Associate Judge Lester

Solicitors:

Carer Law & Advisory Limited, Dunedin (for Plaintiffs)

Lane Neave, Christchurch (for Second Defendant, Mr Hooper) Mitchell Newman, Christchurch (for Second Defendant, Mr Fordyce)