Davies & Co Solicitors Nominee Company Limited v Yelcich

[2013] NZHC 2546

IN THE HIGH COURT OF NEW ZEALAND WHANGAREI REGISTRY

CIV 2012-404-005184

[2013] NZHC 2546

BETWEEN

DAVIES & CO SOLICITORS NOMINEE COMPANY LIMITED

Plaintiff

AND

BORIS KAZIMIR YELCICH

First Defendant

CHURCH ROAD CORPORATION LIMITED
Second Defendant

Hearing:

By memoranda

Appearances:

SRG Judd for plaintiff

JAR Cox defendant in person

Judgment:

30 September 2013

COSTS JUDGMENT OF ASSOCIATE JUDGE ABBOTT

Thisjudgment was delivered by me on 30 September 2013 at 4.30pm, pursuant to Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar Date……………

Solicitors:
Davis Law, Waitakere

Blomkamp Cox Solicitors, Auckland

Counsel:
S R G Judd, Auckland

DAVIES & CO SOLICITORS NOMINEE COMPANY LIMITED v YELCICH [2013] NZHC 2546 [30

September 2013]

[1]     This decision concerns cross applications for costs following discontinuance of an application by the plaintiff for possession of land by way of summary judgment. The plaintiff (Davies) obtained an order for possession against the second defendant (Church Road), the registered proprietor of the land, but did not proceed with its application against the first defendant (Mr Yelcich), allegedly the owner of stock grazing on the land, after the stock were removed.

[2] Davies seeks an order for costs against Mr Yelcich, as the only defendant opposing the application (Church Road took no steps). Davies does not seek an order against Church Road.

[3]   Mr Yelcich opposes any order in favour of Davies, and instead seeks an order for costs in his favour on the basis that there has been no finding against him and the general presumption that a party discontinuing pays the costs of the other party.

[4]   There is no issue as to the level of costs, the parties being agreed that scale 2B costs are appropriate, whichever way the incidence of costs is determined.

Background

[5] Davies is a solicitor’s nominee company. At material times it  was  the mortgagee of land in Church Road, Matakohe, owned by Church Road. Mr Yelcich’s wife and brother-in-law had been the directors and shareholders of Church Road until they were made bankrupt in 2010.1 Mr Yelcich has been actively involved in Church Road’s acquisition and intended subdivision of the property but did not invest in it directly as he was made bankrupt in September 2002.2

[6]     Davies mortgage secures a loan made to Church Road  and others (inter alia) to acquire property for planned development. The loan went into default in 2006. Davies has been endeavouring to recover the loan since that time, including exercising its rights against the land.   It has had similar difficulties in recovering

1 Crawford v Odin Enterprises Pty Ltd HC Auckland CIV-2008-404-7860, 27 May 2010 and Yelcich v Odin Enterprises Pty Ltd HC Auckland CIV-2008-488-833, 27 May 2010.

2 At [5].

against the other development properties, and in exercising rights of mortgagee sale in respect of those properties. Mr Yelcich has had an active part in the resistance, and in one case had stock grazing on land, on the basis of which he obtained deferral of an order for possession pending removal of the stock.3

[7] Davies issued this proceeding in September 2012 against Mr Yelcich alone, alleging that he was preventing Davies from taking possession. In February 2013 Davies amended its claim to join Church Road as second defendant, but retaining its claim against Mr Yelcich on the grounds that he was an unlawful occupier. The evidence in support of the claim includes reference to Davies’ understanding (gained from neighbours) that Mr Yelcich was the owner of stock grazing on the land.

[8] Mr Yelcich filed a statement of defence denying that he was occupying the land or had no right of possession to it, and also asserting that Davies was not entitled to claim possession as its notice under s 92 of the Property Law Act was invalid. He repeated those contentions in his notice of opposition to the application for summary judgment.

[9] Church Road did not take any steps. There was no suggestion that it has any ability to meet the debts secured by the mortgage, which exceed $13 million.

[10] Davies’ application for summary judgment was heard on 6 June 2013. Mr Yelcich was represented by counsel. His argument that the Property Law Act notice was invalid was rejected, and an order for possession was made against Church Road. However, the Court noted that Mr Yelcich had not stated in his evidence whether or not the stock on the land belonged to him, and adjourned the application for an order for possession against him to see what occurred when Davies attempted to enforce its order for possession of Church Road.

[11] When the application came back before the Court, Davies gave evidence that the stock had been removed, prior to the resumed hearing, so it no longer sought an order against Mr Yelcich.  However, it did seek costs on the grounds that it was clear

3 Davies & Co Solicitors Nominee Co Ltd v Crawford & Ors HC Auckland CIV-2012-404-3251.  Mr Yelcich was the second defendant in that case.

from the evidence that Mr Yelcich had been actively preventing Davies obtaining vacant possession of the land by the grazing of the stock, and that Davies should be considered the successful party as the application had achieved the desired result.

Legal principles

[12] Although the Court has an overall general discretion as to costs,4 the Court applies the principles set out in r 14.2 in exercising that discretion, including the principle that the party who fails should pay costs to the party who succeeds.5

[13] Where a plaintiff discontinues a proceeding, r 15.23 of the High Court Rules provides that in the absence of agreement or a Court order to the contrary, the plaintiff is to pay the costs of the defendant up to the point of discontinuance. However, this presumption may be displaced if the Court finds there are circumstances which make it just and equitable that it should not apply.6

[14] The Court is not limited in factors that it may  take into account when considering whether the presumption is displaced, but will weigh the following matters in exercising its discretion:7

(a)As the general rule the Court will not consider the merits of the respective cases (unless they are so obvious that they should influence the costs issue).8

(b)The Court will consider the reasonableness of the stance of both parties in the proceeding (whether it was reasonable for the plaintiff to bring and continue the proceeding, and for the defendant to oppose and continue to oppose it, up to the point of discontinuance).9

4 High Court Rules, r 14.1.

5 High Court Rules, r 14.2(a).

6 Kroma Colour Prints Ltd v Tridonicatco NZ Ltd [2008] NZCA 150, (2008) 18 PRNZ 973 at [12] and

FM Custodians Ltd v Pati [2012] NZHC 1902 at [10].

7 See North Shore City Council v Local Government Commission (1995) 9 PRNZ 182 (HC) at 186 - 188; Kroma Colour Prints Ltd , above n 6 and FM Custodians Ltd v Pati, above n 6 at [11].

8 North Shore City Council, above n 7, at 186 and Kroma Colour Prints Ltd, above n 6.

9 North Shore City Council, above n 7, at 187 and Kroma Colour Prints Ltd, above n 6.

(c)Conduct prior to the commencement of the proceeding may be relevant (for example, if any conduct by a defendant has precipitated the litigation), as may be the reason for discontinuing (for example, where a change of circumstances has made the proceedings unnecessary).10

[15] The general discretion in r 14.1 can also override the general principles relating to discontinuance.11

Analysis

[16] The appropriate incidence of costs in this case turns on consideration of the parties’ respective conduct. In large part this revolves around whether Davies had a basis for issuing its proceeding against Mr Yelcich, as distinct from Church Road (the owner of the land). This in turn requires consideration of the issues over the stock.

[17] Davies contends that the application was appropriately brought against Mr Yelcich because he owned the stock (or, perhaps, was responsible for their presence on the land). It says that the application had to be brought to get the stock removed, and was appropriately withdrawn when that happened. It says that it had a sufficient evidential base to assert that Mr Yelcich was the owner of, or otherwise responsible for the presence of the stock, and relies on Mr Yelcich’s failure to address this factual contention in his affidavit in opposition.

[18]   Davies also contends that Mr Yelcich went beyond merely arguing the point as to whether he was in possession, by arguing that Davies had no right to vacant possession in any event because its Property Law Act notice was invalid. Davies said that it was the successful party in that respect.

10 Australian Securities Commission v Aust-Home Investments Ltd (1993) 44 FCR 194, quoted in North Shore City Council, above n 7, at 187. See also Andrew Beck and others McGechan on Procedure (looseleaf ed, Brookers) at [HR15.23.01], cited in Vector Gas Ltd v Todd Petroleum Mining Co Ltd HC Wellington CIV-2004-485-1753, 7 December 2010.

11  Oggi Advertising Ltd v McKenzie (1998) 12 PRNZ 535 (HC) at 536; Kroma Colour Prints Ltd, above n 6.

[19]  Mr Yelcich argued that Davies had failed to provide any evidence that he was in fact in possession (without referring explicitly to the question of ownership of the stock), and that the evidence as to ownership was merely hearsay. Counsel argued that in those circumstances, and where there had been no finding against Mr Yelcich, there was no basis on which to rebut the presumption on discontinuance.

[20]  Mr Yelcich would have been on stronger grounds had he addressed the issue of ownership of the stock and the allegation as to his role in the presence of the stock on the land. Instead, he said no more than:

I am not a tenant or occupier of the land, and not in legal possession of the land.

[21] I have already found12 that although the evidence as to Mr Yelcich’s ownership of, or responsibility for, the stock is clearly hearsay, it is admissible. In the absence of any evidence directly disputing any relationship to the stock, I find that evidence and the inferences to be drawn from evidence of this long-running dispute to be a sufficient basis for Davies to bring the proceeding. The fact that the stock were removed following the judgment and adjournment of the application against Mr Yelcich also allows a further inference as to his involvement in the absence of any direct evidence to the contrary from Mr Yelcich. In those circumstances it was also entirely understandable that Davies would withdraw its

application after the stock was removed.13

[22] There is also good reason to make an order against Mr Yelcich on the basis that he chose to argue the issue over validity of the Property Law Act notice. I find that inconsistent with his argument that he was not in occupation of the land. Had he not pursued that point, the application may well have been resolved (with an order against Church Road only) at the first call of the application. Instead, he continued to argue the point, and was ultimately unsuccessful on it.

12 Davies & Co Solicitors Nominee Company Limited v Yelcich [2013] NZHC 1344 at [23].

13 Counsel for Davies has referred in a memorandum to the stock being returned after the application was withdrawn, but there is nothing before the Court as to whether that remains the case, and does not alter the conclusions that I have drawn from the evidence that is before the Court.

Decision

[23] In the circumstances I find that Davies is entitled to an order for costs against Mr Yelcich on the basis that it was successful in respect of the argument over the validity of the Property Law Act notice, and can be considered to have been successful by reason of the removal of the stock before the application for an order against Mr Yelcich came back before the Court. I regard the circumstances as sufficient to rebut the presumption under r 15.23.

[24] Mr Yelcich is to pay costs to Davies on a scale 2B basis, together with disbursements as fixed by the Registrar.

Associate Judge Abbott