Coastal Mortgages Limited v Collins & May Law HC Wellington CIV 2010-485-1115

[2010] NZHC 1401

IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY

CIV-2010-485-1115

IN THE MATTER OF     the Companies Act 1993

BETWEEN  COASTAL MORTGAGES LIMITED Applicant

ANDCOLLINS & MAY LAW Respondent

Hearing:         26 July 2010

Appearances: K. Smith - Counsel for Applicant

M. Taylor - Counsel for Respondent

Judgment:      4 August 2010 at 3.30 pm

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

This judgment was delivered by me

on 4 August 2010 at

3.30 pm pursuant to r 11.5 of the High Court Rules.

Solicitors:           Peter C Gilbert, Solicitor, PO Box 2420, Wellington

Collins & May Law Office, Solicitors, PO Box 30614, Lower Hutt, Wellington

COASTAL MORTGAGES LIMITED V COLLINS & MAY LAW HC WN CIV-2010-485-1115  4 August 2010

Background

[1]      On 22 June 2010 the applicant filed an application to set aside a statutory demand which had been issued against it by the respondent.  That statutory demand dated 1 June 2010 claimed outstanding legal fees of $4,014.00.  These fees were said to be due from the applicant in relation to the provision of legal services by the respondent in District Court proceedings brought by the applicant against Julia Magaret Bevin under proceeding CIV-2009-442-091.   The statutory demand was served on the applicant on 10 June 2010.

[2]      The application to set aside the statutory demand was supported by two affidavits dated 17 June 2010 and 22 June 2010.

[3]      On 12 July 2010 the respondent filed an Appearance for Ancillary Purpose together  with  affidavits  each  dated  9  July  2010  by  Michael  John  Moohan  and Eugene Jeffery Collins.

[4]      The Appearance for Ancillary Purpose states that the respondent Collins & May Law does not oppose the application to set aside the statutory demand but appears in order to be heard on the matter of costs.

[5]      This matter was called before me in the List on 26 July 2010.

[6]      At  that  time  an  order  was  made  unopposed  setting  aside  the  statutory demand.  I noted at the time that costs, with respect to this application, were sought by both parties and I received submissions on costs from both counsel.  I reserved my decision on the question of costs and now give that decision.

Costs Principles

[7]      In  terms  of  r  14.2  the  starting  point  in  any  question  of  costs  must acknowledge  the  primary  principle  that  the  unsuccessful  party  in  a  proceeding should pay the costs of the successful party – that is costs should follow the event.

[8]      Notwithstanding this, r 14.7(f) High Court Rules makes provision for the Court in its discretion to refuse or reduce an award of costs which might otherwise be payable.  That provision states:

14.7      Refusal of, or reduction in, costs

Despite rules 14.2 to 14.5, the court may refuse to make an order for costs or may

reduce the costs otherwise payable under those rules if—

..........................................................................

(f)        the party claiming costs has contributed unnecessarily to the time or expense of the proceeding or step in it by –

.............................

(ii)         taking or pursuing an unnecessary step or an argument that lacks merit; or

(iii)        failing, without reasonable justification, to admit facts, evidence, or documents, or accept a legal argument; or

.....................

(v)         failing, without reasonable justification, to accept an offer of settlement whether in the form of an offer under rule 14.10 or some other offer to settle or dispose of the proceeding; or

(g)        some other reason exists which justifies the court refusing costs or reducing costs despite the principle that the determination of costs should be predictable and expeditious.

[9]      In the present case essentially the applicant seeks costs from the respondent on the basis that they have been successful in their application and an order has been made setting aside the statutory demand.

[10]     The respondent however does not accept that the applicant needed to bring the present application.  Indeed, the respondent points to a letter dated 10 June 2010 from Collins & May Law to Coastal Mortgages Limited which states specifically that  the  statutory demand  “is  herewith  withdrawn”.    This  letter  was  apparently posted to the applicant company at a post office box address which the respondent states had been provided to it by the company’s director, Mr Belcher, in earlier proceedings.

[11]     In addition, the respondent has exhibited a copy of an email sent 18 June

2010 from it to Mr Belcher of Coastal Mortgages Limited attaching “a notification that the statutory demand is withdrawn”.  This email referred to the earlier 10 June

2010 letter which had been posted to Coastal Mortgages Limited’s post office box.

[12]     In  addition,  Mr  Michael  John  Moohan,  a  solicitor  employed  by  the respondent, deposes at para 5 of his 9 July 2010 affidavit filed in this proceeding that on 18 June 2010 he telephoned Mr Belcher of Coastal Mortgages Limited to confirm first that the statutory demand was withdrawn and secondly that letters to this effect had been and were being dispatched.

[13]     Significantly in my view, there is no evidence before the Court from, or on behalf  of  Mr  Belcher,  which  casts  any  doubt  on  the  clear  evidence  for  the respondents that if not on 10 June 2010 then certainly on 18 June 2010 Mr Belcher, the director of Coastal Mortgages Limited was clearly informed that the statutory demand in question had been withdrawn.

[14]     Notwithstanding  this,  some  4  days  later  on  22  June  2010  the  present application to set-aside the statutory demand was filed in this Court.  Interestingly, it was accompanied by two affidavits, one of which was sworn by Mr Belcher on 22

June 2010.  That affidavit makes no reference at all to the events which occurred 4 days  earlier on 18 June 2010 to the discussions and the email  confirmation he received on that date (as he acknowledged by reply email) that the statutory demand was withdrawn by the respondent.

[15]     Instead, it seems that Mr Smith, who appeared before me as counsel for the applicant, simply complained that this entire matter in his words had turned into a “complete mess” and that the respondent at the time should not have communicated with the applicant’s director but rather  should have  communicated with he, Mr Smith, as “they knew he was acting on behalf of the plaintiff company”.  Mr Smith accordingly endeavoured to persuade me that responsibility for this whole problem and the issuing of the present application must rest with Collins & May Law.  With respect I disagree.

[16]     What is clear to me from the 9 July 2010 affidavit of Mr Moohan for the respondent is that on 18 June 2010 Mr Belcher as director of the applicant company was advised unequivocally that the statutory demand had been withdrawn.   This followed the earlier letter of 10 June 2010 forwarded to the applicant.

[17]     For the applicant in the face of this to then proceed to issue and pursue the present application was entirely inappropriate.   The statutory demand had already been withdrawn and the company through its director advised of this.  And tellingly, Mr Belcher as that director had some four days later sworn an affidavit in support of the application to set-aside the statutory demand when he acknowledged but omitted from that affidavit that he knew the demand had been withdrawn.

[18]     That said, there can be no doubt in my mind that the applicant here is not entitled to any award of costs against the defendants in terms of r 14.7(f) High Court Rules.  I reject the applicant’s claim for costs here.

[19]     So far as the respondent’s claim for costs against the applicant is concerned, it will be apparent from my conclusions outlined above that I take the clear view that, given the respondent had withdrawn the statutory demand prior to the issue of the present proceedings and the applicant must have been aware of this, the applicant should not have brought the present application to set-aside what was an already withdrawn statutory demand.  Accordingly, the applicant must shoulder significant criticism for issuing and pursuing the present proceedings.  In this context, it clearly did not act reasonably in doing so.

[20]     That said, the respondent in my view is entitled to an order of costs against the applicant with respect to this proceeding notwithstanding that the order sought was finally made by consent.

[21]     Although before me Mr Taylor for the respondent sought indemnity costs in terms of r 14.6(4)(a) on the basis that the applicant had acted vexatiously, frivolously or improperly, I take the view they are not justified here.  Clearly the applicant made a significant mistake in bringing this proceeding when the demand had already been withdrawn,   but   I   am   satisfied   this   resulted   from   an   unfortunate   lack   of communication between the company, its advisers and its directors.   In these circumstances, the high threshold for indemnity costs has not been met.  An award of scale costs on a Category 2B basis is appropriate here.

[22]     An order is now made that the applicant is to pay to the respondent their costs in this matter on a Category 2B basis together with disbursements as fixed by the Registrar.

‘Associate Judge D.I. Gendall’