BETWEEN ROWAN JOHN CHAPMAN, GEOFFREY DONALD CAMPBELL WALKER AND TERENCE FRANCIS MCGRATH First Appellants
AND MARTIN VICTOR RICHARDSON AND TIMOTHY JOSEPH GOLDFINCH Second Appellants
AND BADON LIMITED First Respondent
AND BIROA LIMITED Second Respondent
AND CLARKK LIMITED Third Respondent
AND COLWIL LIMITED Fourth Respondent
AND FAIRHOUSE LIMITED Fifth Respondent
AND WAITE LIMITED (IN LIQUIDATION) Sixth Respondent
Court: O'Regan P, Arnold and Ellen France JJ
Counsel: A Challis for Appellants R B Stewart QC and T P Mullins for Respondents
Judgment: 14 December 2010 at 2.30 pm
JUDGMENT OF THE COURT
The appellants’ application for costs is declined.
REASONS OF THE COURT (Given by Arnold J)
Introduction
The first and second appellants, partners at various times in the firm Gosling Chapman (Gosling Chapman), seek an award of costs against the respondents in respect of an appeal that they have abandoned. In particular, they seek costs in respect of:
(a) the abandoned appeal;
(b)their strike out application, which was declined by Venning J and was the subject of the abandoned appeal; and
(c)the respondents’ abandonment of the fifth cause of action against them.
The application is opposed by the respondents. The parties are agreed that the application can be dealt with on the papers.
Background
The High Court proceedings underlying the appeal arise out of investments promoted by Gosling Chapman to its clients in Digi-Tech Communication Ltd (Digi‑Tech) and New Zealand Investments Ltd (NZIL) in the 1990s. We will not go into the full background. For present purposes it is sufficient to note that investors agreed to buy shares in Digi-Tech and NZIL, with the payment obligation spread over ten years. Investors could also acquire a loss of profits insurance policy to hedge their risk. The premium was $1 million, four per cent of which was to be paid by cash at the outset and the remaining 96 per cent funded through an offshore lender.
The IRD began an investigation into the scheme, in particular into whether the transactions involved in the scheme had in fact been carried out. Gosling Chapman took responsibility for co-ordinating the response of investors to that investigation. With the assistance of a barrister, Mr Clews, and Russell McVeagh, Gosling Chapman conducted its own examination into the background to the investment scheme and gave information or advice (there is a dispute as to which) to investors concerning the cancellation of their share purchase arrangements.
When payments were not made in accordance with the payment timetable, the vendor companies issued proceedings against the non-paying investors, as did Totara Investments Ltd (Totara) which had taken an assignment of the lenders’ rights under the investors’ loan agreements with the offshore funder. Those investors then issued third party claims against various parties, including Gosling Chapman. In one of the claims against Gosling Chapman the investors alleged that the firm had breached a duty of care which it owed them in various respects and sought to be indemnified by the firm…
Grounds of appeal
[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.
[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.
[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.
Consideration
[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.
[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.
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AGLC
Chapman v Badon Ltd [2010] NZCA 613
Case
[2010] NZCA 613
Decision Date
CaseChat Overview and Summary
The Court of Appeal of New Zealand considered an application for costs by the first and second appellants, partners in the firm Gosling Chapman, against the respondents in relation to an abandoned appeal. The appellants sought costs for the abandoned appeal, a strike out application declined by Venning J, and the respondents’ abandonment of the fifth cause of action against them. The respondents opposed the application, and both parties agreed that the matter could be decided on the papers. The underlying High Court proceedings involved investments promoted by Gosling Chapman in the 1990s, which led to litigation over non-payment of shares and third-party claims against Gosling Chapman. The appellants applied to have the fifth cause of action struck out, but Venning J declined the application. The appellants then filed an appeal, but before it was heard, the Supreme Court rendered the fifth cause of action redundant, leading to the abandonment of the appeal.
The court examined whether it had jurisdiction to quash or vary a costs order in the High Court where an appeal was abandoned. While the Court of Appeal has the power to quash or vary costs orders in the High Court, the court doubted whether it had jurisdiction to do so in this case, particularly since the appellants had abandoned their appeal in its entirety. Furthermore, the court found that even if jurisdiction existed, it should not be exercised because the abandonment of the appeal did not mean the appellants’ strike out application was properly brought or that their appeal would have succeeded. The court also held that it was not in a position to assess costs in the High Court in respect of work associated with the fifth cause of action, as the appellants still faced third-party claims, and the question of costs should be determined in the High Court when appropriate.
Regarding costs on the abandonment of the appeal, the court noted that in normal circumstances, if there was to be any award of costs, it would be in favour of the respondents, as the appellants had abandoned their appeal. However, the court accepted that another approach was justified in this case. Despite the appeal being rendered moot by the respondents' abandonment of the fifth cause of action, the court declined to grant the appellants a costs order in their favour. Instead, the court considered that costs should lie where they fall, and declined the appellants' application for costs.