Coupe v Learmonth

[2020] NZHC 2281

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2019-404-001858

[2020] NZHC 2281

BETWEEN

AARON PETER COUPE

Plaintiff

AND

PATRICK MURRAY LEARMONTH

First Defendant

NZ CASTLE RESORTS & HOTELS LIMITED
Second Defendant

GARY EIKI ODA
Third Defendant

ALAN ROLAND MATTSON
Fourth Defendant

THE CASTLE GROUP INC
Fifth Defendant

JERRY A RUTHRUFF

Sixth Defendant

Hearing:	On the papers
Judgment:	3 September 2020

COSTS JUDGMENT OF DOWNS J

This judgment was delivered by me on Thursday, 3 September 2020 at 11 am pursuant to r 11.5 of the High Court Rules.

Registrar/Deputy Registrar

Solicitors/Counsel:

Leigh Judd Law, Auckland. Cook Morris Quinn, Auckland. BD Gray QC, Auckland.

COUPE v LEARMONTH [2020] NZHC 2281 [3 September 2020]

[1]    NZ Castle Resorts & Hotels Ltd1 and The Castle Group Inc2 seek increased and indemnity costs of $36,198 against the plaintiff, Aaron Coupe, in the wake of  Mr Coupe’s abandonment of a  claim  against  them  and  four  other  defendants.  Mr Coupe acknowledges he is liable for costs but argues these should not exceed scale, on his calculation, $15,296.3

[2]    Mr Coupe’s claim concerned a failed joint venture to develop and operate a hotel in Greys Avenue, Auckland.4 Ascent Industries No.33 Ltd5 was the initial corporate vehicle. Its shareholders are Greys Avenue Investments Ltd, or GAIL, and Greys Avenue Partners LLC, or GAP. Mr Coupe is the sole shareholder of GAIL; Mr Oda, the sole shareholder of GAP. Mr Oda is a shareholder of Castle Group, a Hawaiian-based company. Castle Group owns NZ Castle.

[3]    GAIL owned the property. It agreed to transfer the property to Ascent. GAP agreed to fund Ascent, so Ascent could turn the property into a hotel. NZ Castle and Ascent entered a hotel management agreement in contemplation of the property being that. NZ Castle was also allegedly responsible for joint venture finances, employing some staff, and negotiating the first agreement.6

[4]    Things did not go well. The transfer of the property to Ascent encountered difficulties. These culminated in GAP and Castle Group bringing a claim, in Hawaii, against Mr Coupe and the director of GAIL. The claim was abandoned when a new joint venture vehicle was created, Liberte Investments Ltd.7 Liberte’s shareholders are Mr Coupe and GAP. Liberte agreed to buy the property from GAIL. However, this never occurred and the Bank of New Zealand Ltd sold the property at a mortgagee sale. GAP and Castle Group brought a second claim in Hawaii against Mr Coupe. It too is now abandoned.

1      NZ Castle.

2      Castle Group. NZ Castle’s and Castle Group’s actual costs exceeded $78,000.

3      The remaining defendants and Mr Coupe have agreed scale costs.

4      The property.

5      Ascent.

6      These aspects are disputed by NZ Castle and Castle Group.

7      Liberte.

[5]    Mr Coupe, GAP and GAIL blame each other for the losses. NZ Castle and Castle Group, the Castle defendants, say this has nothing to do with them as their role was confined to hotel management.

[6]Mr Coupe filed this claim 10 September 2019. He abandoned it 29 April 2020.

[7]    The  Castle  defendants  argue  they  should   have   increased   costs   from 10 September 2019 because the claim was  “hopeless”,8  and indemnity costs from  19 November 2019, when they pointed as much out in a Calderbank letter.9

[8]    Principle is agreed. Increased costs for an abandoned claim are appropriate when the claim was obviously and incontrovertibly meritless;10 indemnity costs when there is vexatious or improper litigation, or very unreasonable conduct by a litigant.11

[9]    Mr Coupe’s claim was very poorly pleaded. It contained curiosities too, including an action against the Castle defendants seemingly based on s 174 of the Companies Act 1993. This section is concerned with oppressive conduct against a minority shareholder. Mr Coupe’s claim also lacked particularity. For example, the Castle defendants were said to have a broad, unqualified obligation of good faith to others. Mr Coupe prepared the claim himself. Legal input, if any, must have been modest.

[10]   Despite these failings, I am not persuaded the claim was obviously and incontrovertibly meritless, still less vexatious or deserving of indemnity costs for some other reason.12 True, this is impression, but little else is available when a claim has not been tried. Therein lies the rationale for the strictness of the test for increased (or indemnity) costs on an abandoned claim.

8      High Court Rules 2016, r 14.6(3)(b)(ii).

9      Rule 14.6(4)(a).

10     N-Tech Ltd v Abooth Ltd [2012] NZHC 1167 at [97] and [108].

11     Bradbury v Westpac Banking Corporation [2009] 3 NZLR 400 (CA).

12   The Castle defendants refer to colourful email of Mr Coupe and his allegedly meritless allegation of theft in relation to the sixth cause of action. However, these points are not greatly developed in the submissions and appear ancillary to the hopeless claim contention. Moreover, the Castle defendants accused Mr Coupe of misrepresentation or worse in Hawaii. Abandonment there, I gather, does not attract costs.

[11]   However, Mr Coupe was told of the many shortcomings with his claim by the Castle defendants on 19 November 2019, in an extensive, self-explanatory Calderbank letter. Mr Coupe did not abandon his claim for another six months.  Increased costs of 50 percent from 19 November are warranted as Mr Coupe pursued the claim, unreasonably, thereafter.13

[12]   This leaves one matter. On behalf of Mr Coupe, Mr Gray QC contends costs should not encompass the Castle defendants’ preparation of submissions for strike-out and security applications as neither application was heard. I disagree. Both sets of submissions were prepared before Mr Coupe abandoned his claim, and in accordance with the customary timetable.

[13]This produces costs of $27,485.

Result

[14]Mr Coupe must pay the Castle defendants costs of $27,485 and disbursements.

……………………………..

Downs J

13     High Court Rules, r 14.6(3)(v).