F M Custodians Ltd v Cousins & Associates HC Christchurch CIV-2009-409-002728
[2011] NZHC 1499
•26 October 2011
IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY
CIV-2009-409-002728
BETWEEN F M CUSTODIANS LTD Plaintiff
ANDCOUSINS & ASSOCIATES First Defendant
ANDDOMINION FINANCE GROUP LTD (IN RECEIVERSHIP AND IN LIQUIDATION)
Second Defendant
ANDIAG NEW ZEALAND LTD Third Party
Hearing: On the Papers
Counsel: J V Ormsby for Plaintiff
A J Forbes QC for First Defendant
I J Thain for Second Defendant
A S Ross for Third Party
Judgment: 26 October 2011
COSTS JUDGMENT OF WHATA J
This judgment was delivered by Justice Whata on
26 October 2011 at 4.00 p.m., pursuant to r 11.5 of the High Court Rules
Registrar/Deputy Registrar
Date:
Solicitors:
Wynn Williams & Co., PO Box 4341, Christchurch
DLA Phillips Fox, PO Box 160, Auckland 1140
Chapman Tripp, PO Box 2206, Auckland 1140
Layburn Hodgins, PO Box 795, ChristchurchCopy to:
A J Forbes QC, PO Box 2929, Christchurch
F M CUSTODIANS LTD V COUSINS & ASSOCIATES HC CHCH CIV-2009-409-002728 26 October 2011
[1] By joint memorandum of counsel, dated 8 July 2011, the fixture for this matter was vacated by me. The plaintiff, FM Custodians Ltd claimed that Cousins failed to register a mortgage after the advance of funds and before amalgamation of titles, and after title amalgamation had taken place. The first defendant, Cousins and Associates, had admitted liability on the plaintiff’s claim and only quantum as to liability was outstanding. The plaintiff now wishes to seek costs against the first defendant on a 2B basis and disbursements as set out in a schedule attached to the plaintiffs’ memorandum. In turn the first defendant seeks costs against a non party, receivers for the second defendant. The first defendant say the receiver caused any loss suffered by the plaintiff by improperly refusing to cede priority to the plaintiff.
[2] I will deal with each claim in turn.
The plaintiff ’s claim
[3] In support of the application for costs the plaintiff observes that the core of the proceedings related to a claim that the first defendant had breached relevant duties to the plaintiff by failing to provide or register a first mortgage security over lands and buildings at 96 Litchfield Street.
[4] The relevant allegations were denied in a statement of defence. Following exchange of evidence by the plaintiff, the first defendant then admitted liability on the plaintiff’s claim. That admission contradicts, the plaintiff says, the defendants’ position set out in its statement of defence.
[5] The plaintiff therefore contends overall that the effect of the first defendants’ admission of liability is that the plaintiff has been successful in its liability claim against the first defendant.
[6] The plaintiff relies on the standard principle that costs should follow the event, and details the number of matters it says further justify an award of costs and disbursements including:
(a) The strength of the plaintiff’s claim was supported by the qualified admission of liability;
(b)The plaintiff was willing to enter into settlement negotiations early in the piece;
(c) The first defendants did not accept liability until one month before the proceeding and after the evidence had been exchanged;
(d)It is unacceptable that the plaintiff has had to incur further costs in preparing for this matter to go to trial.
[7] As to the quantum of costs claim, the plaintiff applies an orthodox methodology of time as against category 2B and arrives at a total figure of $30,172 for costs and $9,514 for disbursements.
[8] The first defendant, Cousins & Associates, has also filed a memorandum:
(a) In opposition to the application for costs by FM Custodians against
Cousins & Associates;
(b)In support of an application for costs by Cousins & Associates against the receivers of the second defendant (Dominion Finance Group Ltd).
[9] There are two basic grounds for opposing the application for costs namely: (a) The application is premature, with quantum to be identified;
(b)If any costs are ordered they should be stayed pending the determination of the damages claim.
[10] The first defendant highlights what it says is relevant background, namely that the plaintiff could have entered into possession and taken steps as mortgagee upon default, which would have resulted in no loss being incurred by it. In those circumstances, the first defendant says it ought not to be liable in any way either for any damages or for any costs.
[11] The first defendant identifies the following reasons as to why an award of costs should not be made at this time:
(a) By analogy to the approach taken to summary judgment, costs should abide the final determination of the proceedings;
(b)It would be unjust to fix costs at the liability trial stage if there is a prospect that there will be no relief ultimately.
[12] As to the reasons why a costs order should be stayed, the first defendant submits:
(a) I should adopt the approach taken by Cooper J in Cox v Young and Young,[1] where His Honour directed that in the meantime that the award of costs in favour of the plaintiff is not to be enforced pending determination of the quantum issues in respect of the plaintiff’s claim, and determination of the counterclaim.[2]
[1] Cox v Young and Young HC Rotorua CIV-2004-463-000240, 15 May 2006.
[2] At para [15].
(b)Like Cox, the plaintiff might not receive any damages and accordingly, it would be appropriate to grant a stay.
(c) If the first defendant is successful in terms of quantum, then it would have an unassailable claim for costs which would then be set off
against any costs award on liability in favour of FM Custodians.
Assessment
[13] While I can see the sense in Cooper J’s approach in Cox v Young, each case must be assessed on itw own merits. In this case liability is admitted. Only the quantum of liability is challenged. Unlike Cooper J, who reached judgment after trial, I only have memoranda of counsel upon which to form a view about the merits of the challenge to quantum. Plainly that is a very thin basis upon which to defer a costs award if one is appropriate. I prefer to proceed on the basis that the admission of liability was made only after various steps were taken by the plaintiff. Those steps have inevitably incurred cost. The plaintiff has succeeded in establishing liability. Costs should follow. If the first defendant is ultimately successful then there will be accounting for costs on the remaining part of the process in the usual way.
[14] I would also observe that the first defendant could have approached the matter in a more robust way and provided a qualified admission from the outset. That would have avoided the cost to this point in respect of liability. While I fully appreciate that admitting liability is a difficult call to make, and I intend no criticism of counsel in making my observation, the reality is liability is now admitted and could have been admitted earlier with costs avoided.
[15] Accordingly, I direct that the first defendant to pay the plaintiff ’s costs on a
2B basis. As to quantum, no challenge has been by the first defendant to quantum. But I an conscious that that may have been because the first defendant was focused on avoiding costs at this stage altogether. I, therefore, reserve leave to the first defendant to raise any issue as to quantum with submissions to be filed within five working days. I will not look favourably upon matters that are not clearly worthy of consideration.
Application by Cousins & Associates against receiver
[16] Cousins & Associates claim that had Dominion made concessions recorded in an 8 July 2011 memorandum prior to the issue of proceedings against Cousins & Associates, the issue of proceedings against them would very likely have been
unnecessary and Cousins & Associates would not have been responsible for any losses.
[17] However, because Dominion maintained priority in terms of its security, the proceedings were commenced with the result that Cousins & Associates became exposed to liability to the plaintiff.
[18] More specifically, the first defendant submits:
27.It is submitted that it is clear from the exchange of correspondence referred to above:
(i) that in 2009, the receivers refused to concede priority in circumstances where, had that concession been made at the time, this proceeding would very likely have been unnecessary
(ii) the receivers reversed their position after the proceeding had been issued, as is evidenced by the terms of the joint memorandum.
[19] On that basis, Cousins & Associates asserts that it should not bear any burden of any costs award in favour of FM Custodians, namely the plaintiff.
[20] The first defendant cites recent authority of Osborn AJ in Phin v Cousins & Associates and another.[3] In that case the Associate Judge summarises recent authorities dealing with seeking costs against non parties and observes that there may be costs against non parties:[4]
Who have caused proceedings to be brought and continued because the receiver, by failing to provide the confirmation requested by the plaintiff’s solicitors, left the plaintiffs no alternative but to sue.
[3] Phin v Cousins & Associates and another HC Christchurch CIV-2010-409-2654, 4 February 2011.
[4] Supra at [27]
[21] Cousins & Associates also contends that while the discretion to award costs against a non party is confined, it is a matter of discretion not jurisdiction.[5]
[5] Citing Knight and Another v FP Special Assets Ltd and Others [1992] 107 ALR 585, at 603.
[22] The third party raises numerous issues with the approach sought by the first defendant. While both sets of submissions serve a significant educative purpose, the
short answer is that it is simply too early to resolve the repective accountability of the first defendant and the receiver to each other, if there is any accountability at all. There is no admission of liability or wrongdoing by the receiver. Rather, various allegations of disputed facts are made that will need to be resolved. The place for that is the hearing on quantum or in the context of a separate claim if there is one.
[23] I propose, therefore, to defer costs considerations as between the first defendant and receivers until the conclusion of the substantive proceedings.
Whata J
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