Clay Exports Limited v Waitoto Developments Limited HC Auckland Civ-2006-404-7740

[2007] NZHC 1621

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2006-404-7740

BETWEEN  CLAY EXPORTS LIMITED Plaintiff

AND  WAITOTO DEVELOPMENTS LIMITED First Defendant

AND  RODNEY DAVID HAINES Second Defendant

Hearing:         15 February 2007

Appearances: A.P. Duffy QC for Plaintiff

J. Carter for Defendants

Judgment:      15 February 2007

ORAL JUDGMENT OF ASSOCIATE JUDGE D.I. GENDALL

[1]      Before the Court is an application by the plaintiff for summary judgment against the first defendant and second defendant.

[2]      The claim relates to a loan made to the first defendant on mortgage, under which the second defendant was a covenantor.

[3]      Although a Notice of Opposition to the summary judgment application was filed  and  served  on  8  February  2007,  before  me  Mr  Carter,  counsel  for  the defendants, acknowledged that in effect this opposition was withdrawn.   This was first,  so  far  as the plaintiff’s substantive claim  for  the  principal  sum under  the mortgage of $577,725.00 was concerned, and secondly so far as interest on this sum

under the Judicature Act 1908 rate of 7.5% per annum from the date of filing these

CLAY EXPORTS LIMITED V WAITOTO DEVELOPMENTS LIMITED AND ANOR HC AK CIV-2006-404-

7740 15 February 2007

proceedings 15 December 2006 to the date of this judgment 15 February 2007 was concerned.

[4]      Accordingly,  an  order  is  now  made  granting  summary  judgment  to  the plaintiff in terms of its Statement of Claim against both the first defendant and the second defendant for:

a)       The principal sum of $577,725.00 pursuant to paragraph (a) on page 4 of the plaintiff’s Statement of Claim (against the first defendant) and pursuant to paragraph (a) on page 6 of the plaintiff’s Statement of Claim (against the second defendant).

One matter needs mention here.   By way of clarification,  leave is granted to  the  plaintiff  to  amend  paragraph  (a)  on  page  6  of the Statement of Claim to the effect that this paragraph is now to read judgment is sought there against the “second” defendant as opposed to the “first” defendant.  The earlier reference to first defendant is clearly a typographical error.

b)       Summary judgment is also granted in favour of the plaintiff against the first defendant and the second defendant for the sum of $9,137.59, representing interest upon the $577,725.00 under the Judicature Act at the rate of 7.5% per annum from 15 December 2006 to 15 February

2007 ($118.67 per day).

[5]      That leaves one matter in issue between the parties outstanding.  This was the question of costs.

[6]      Before me Ms Duffy QC for the plaintiff sought costs on a solicitor/client basis with respect to this proceeding.  The rationale for this, according to Ms Duffy, rests with r48C(4)(e) High Court Rules which states:

(4)       The Court may order a party to pay indemnity costs if-

…

(e)      The  party  claiming  costs  is  entitled  to  indemnity  costs  under  a contract or deed.

[7]      Here Ms Duffy referred me to paragraph 6(a)(iv) of the standard mortgage provisions contained in Memorandum No. 1995/4003 referred to in the “Operative Clause” of the mortgage document signed by both the first defendant and second defendant in favour of the plaintiff.   This clause 6(a)(iv) is in the section “Enforcement” in the mortgage terms and states in part:

All sums expended by the mortgagee pursuant to this subclause or otherwise by reason of any default by the mortgagor or in exercising or enforcing or attempting to exercise or enforce any power, right or remedy contained or implied in this mortgage shall be payable by the mortgagor to the mortgagee on demand and shall be secured by this mortgage, together with interest, computed from the respective dates on which those sums are expended.

[8]      Ms Duffy QC for the plaintiff accordingly sought judgment as to liability for costs on a solicitor/client basis and requested that memoranda be filed as to the calculation of the quantum of these costs in due course.

[9]      In response,  Mr  Carter  for  the  defendants  contended that  although  costs should be awarded here to the plaintiff, they should be on a scale basis only, and he suggested category 2B.

[10]     The issue before me, therefore, is whether costs here are to be awarded on an indemnity solicitor/client basis, or alternatively upon a scale basis suggested at category 2B.

[11]     McGechan on Procedure at para HR48C.01(11) notes that the Court  will always look closely at the wording of a contract, deed or mortgage to see whether it gives an entitlement to indemnity costs.

[12]     As to this, Mr Carter referred me to the decision of Master Kennedy-Grant in Noma Oysters Limited v Brown (HC AK, 24 February 1998, CP35/96) in which a debenture included as part of the secured debt “all costs and expenses that  may properly be incurred by the lender in enforcing or protecting the security hereby granted” and this was held to give an entitlement to party costs only.

[13]     Other examples referred to in McGechan (HR48C.01(11)) to which I was not specifically referred by counsel given the haste today in addressing me on these issues include ANZ Banking Group NZ Limited v Gibson [1986] 1 NZLR 556 (CA), Frater Williams & Co Ltd v Australian Guarantee Corp (NZ) Limited [1994] 2 NZ Conv. C 191,873.  In both these cases the entitlement was to solicitor/client costs.  In addition, in Pangani Properties Limited v Owens Transport Limited (HC AK, 12

July 2004, CIV-2001-404-2036, Justice Frater) the words “all costs” in a deed were held to provide a full costs indemnity.

[14]     I turn now to consider the words used in the mortgage in the present case. They are in a standard form and the operative part states that they are to include:

…all sums expended by the mortgagee pursuant to this subclause (the enforcement subclause) or otherwise by reason of any default by the mortgagor or in exercising or enforcing or attempting to exercise or enforce any power, right or remedy contained or implied in this mortgage.

(emphasis added)

[15]     In my view these words are wide and deliberately so.   The expression “all sums expended by the mortgagee”, as I see it, are clearly intended to mean that the mortgagee is not to be left out of pocket as a result of what is after all a default by mortgagors in meeting their contractual obligations freely entered into when the mortgage was signed.

[16]     As I see it, these words are considerably wider than the words which Master

Kennedy-Grant was confronted with in the Noma Oysters Limited v Brown decision.

[17]     I have little hesitation in finding that the words used in this enforcement provision clause 6 of the mortgage do fall within r48C(4)(e) and entitle the plaintiff here to claim full solicitor/client costs with respect to this proceeding.

[18]     That said, summary judgment is also granted in favour of the plaintiff as to liability for indemnity costs on this proceeding against the first defendant and the second defendant calculated upon a full solicitor and client basis.

[19]     If counsel are unable to agree as to the quantum of these costs, then leave is reserved for either party to approach the Court by memorandum on three days notice, in which event in the absence of either party giving notice that it wishes to be heard on the costs question, this quantum issue is to  be determined upon the basis of

memoranda filed on behalf of both the plaintiff and the defendants.

Associate Judge D.I. Gendall