Eden Property Developments Limited v Williams

[2016] NZHC 1579

IN THE HIGH COURT OF NEW ZEALAND NAPIER REGISTRY

CIV-2015-441-133 [2016] NZHC 1579

UNDER

the Companies Act 1993

BETWEEN

EDEN PROPERTY DEVELOPMENTS LIMITED

Applicant

AND

STANLEY DAVID WILLIAMS Respondent

On the Papers
Counsel:	T R Wano for the Applicant J McDowell for the Respondent
Judgment:	12 July 2016

COSTS JUDGMENT OF ASSOCIATE JUDGE SMITH

[1]      Further to the judgment I gave on this matter on 10 May 2016,1 counsel have now filed memoranda on costs.

[2]      Eden Property asks for costs on a 2B basis, together with disbursements totalling $1,155.32.  Mr Williams submits that costs should lie where they fall.

[3]      For Eden Property, Mr Wano relies on the principle that an unsuccessful party should be liable to pay the successful party’s costs.2    He relies on Eden Property’s success in the proceeding, and refers to the observations made in the judgment that there were far too many “grey areas” in Mr Williams’ claim for the debt demanded,

particularly on the question of what were the terms of the loans (and indeed whether

1      Eden Property Developments Ltd v Williams [2016] NZHC 939.

2      High Court Rules, r 14.2(a).

in fact they were loans).3   He refers to my finding that the dispute was not one which was suitable for determination on a setting aside application.

[4]      Mr Wano  also  refers to  the fact  that  Mr Williams  had  issued  an  earlier statutory demand on 23 April 2015, for the same amount of money, and that Eden Property had contended in correspondence from 27 May 2015 that the matter was not suitable for the issue of a statutory demand.   At that time Eden Property’s solicitors urged Mr Williams to reconsider the demand and consider dealing with all the issues, including related relationship property issues between Mr and Mrs Eden. Mr  Wano  submits  that  Eden Property’s  solicitors  had  advised  as  early  as  21

September 2015 that any claim by Mr Williams would be “effectively a constructive trust claim”, and the lack of clarity over the details of the alleged debts was also referred to in correspondence from Eden Property’s solicitors prior to the issue of the second statutory demand.

[5]      Mr Wano refers to the case of Greys Avenue Investments Ltd v New Zealand Mint Ltd, a case in which the creditor withdrew the statutory demand before the hearing. The Court made the following observations in that case:4

If a statutory demand is set aside under s 290, the company will have costs from having succeeded, even if the creditor has acted properly in accordance with [the principle that there is no reasonable argument against the amount demanded].  The company’s right to costs follows its success, regardless of these principles…Again, the right to costs does not require findings in its favour…Instead, arguments as to improper use of the statutory demand have a different place: they may go to whether the court should order increased or indemnity costs under r 14.6(3) and (4) of the High Court Rules.

[6]      In reliance on Greys Avenue, Mr Wano submits that even if it could be said that Mr Williams acted properly, in the belief that there was no reasonable argument that could be raised against the statutory demand, Eden Property’s success nevertheless means that it is entitled to an award of costs.

[7]      In his submissions in opposition, Mr McDowell does not dispute that in normal circumstances costs should follow the event.   Nor does he disagree with

3      Eden Property Developments Ltd v Williams, above n 1, at [64].

4      Greys Avenue Investments Ltd v New Zealand Mint Ltd [2015] NZHC 2633.

Mr Wano’s submission that, if costs are awarded, they should be assessed on a 2B

basis.

[8]      Mr McDowell submits that the reality of the application is that it is not an application by Eden Property, for it is clear that Mrs Eden, an equal shareholder and co-director with Mr Eden, did not and does not support Eden Property’s stance in the matter.   He alleges that the claim for costs is part of an “unprincipled pattern of behaviour” on the part of Mr Eden, as a consequence of Mr and Mrs Eden’s separation.  He emphasises that Mr Williams is “unquestionably” owed the money that was advanced, and the only issue that now appears to arise is “the entity to which it was owed”.

[9]      While I have some sympathy with the position in which Mr Williams finds himself, which appears to have arisen from a desire to assist his daughter and son-in- law, I am in the end persuaded that Eden Property’s success in the litigation does entitle it to an award of costs.  I take into account in particular that Eden Property is a separate entity from either Mr Eden or Mrs Eden, and that Mrs Eden did not seek to intervene in the proceeding on the ground that Mr Eden had no authority to act on behalf of Eden Property in making the application.   Eden Property is a separate “legal person”, and on reflection I do not consider there is a sufficient basis to lift the corporate veil and enquire why the application was made and pursued to a hearing. The only issue was whether or not there was a genuine and substantial dispute over whether Eden Property owed the money to Mr Williams.

[10]     Nor do I consider that the fact that Mr Williams may have some claim against Eden Property (whether for recovery of a loan or on a constructive trust basis) assists him on the costs question.  He could only access the statutory demand procedure by contending that the various payments made to Eden Property were loans, and he failed to show that there was no genuine and substantial dispute over whether the payments were loans, and if so, the terms on which they were made.  Mr McDowell submits that Mr Williams is “unquestionably owed the money that was advanced”, but that is not what I found in my judgment.  If Mr Williams’ proper claim in fact is in constructive trust, I do not think it could be said with any degree of certainty that he would be entitled to the return of his money – his entitlement might be to some

part of the value of the property to which the money was applied.  In any event, a claim of that sort is not a claim for a debt, for which the statutory demand procedure is designed.

[11]     I conclude accordingly that Eden Property is entitled to the order for costs that it seeks.

[12]     I make an order for costs in favour of Eden Property in the sum of $7,582 as claimed, plus disbursements as fixed by the registrar.

Associate Judge Smith