Fenton Projects Limited v Carlton Gore Holdings Limited

[2013] NZHC 3082

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2013-404-3604 [2013] NZHC 3082

BETWEEN  FENTON PROJECTS LIMITED Applicant

ANDCARLTON GORE HOLDINGS LIMITED

Respondent

Hearing:                   On the papers

Counsel:                  M Lenihan for Applicant

GJ Luen for Respondent

Judgment:                21 November 2013

COSTS JUDGMENT OF ASSOCIATE JUDGE SARGISSON

This judgment was delivered by me on 21 November 2013 at 4.30 p.m., pursuant to Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar

Date: ………………………….

Solicitors:           Burton & Co, Auckland

Hesketh Henry, Auckland

FENTON PROJECTS LTD v CARLTON GORE HOLDINGS LTD [2013] NZHC 3082 [21 November 2013]

[1]      On 31 October 2013, I issued judgment dismissing Fenton Projects Limited to set aside Carlton Gore Holdings Limited’s statutory demand.  I made additional orders as follows:

[a]       Fenton is to pay the debt of $63,578.95 within 10 working days of the date of this judgment.

[b]       In default of payment within the time allowed, Carlton may make an application to put Fenton into liquidation on the ground that Fenton is unable to pay its debts.

[c]       Costs  are  reserved  as  counsel  have  requested.     Carlton  seeks indemnity  costs  in  terms  of  the  assignment  of  lease.    For  that purpose, Carlton has five working days to file a memorandum and Fenton  a  further  five  working  days  to  file  any  memorandum in opposition.

[2]      Counsel have now filed costs memoranda.

[3]      Carlton  seeks  indemnity  costs  pursuant  to  the  assignment  of  lease  of

$21,590.09 (for the two year period from 31 October 2011 to 31 October 2013) for legal costs, disbursements and the costs of its costs memorandum.   The itemised costs are set out in Schedule A attached to counsel’s memorandum.  Alternatively, Carlton seeks indemnity costs for the steps taken in relation to this proceeding since and including filing its statutory demand and its documents in opposition on 31 July

2013, being $12,821.35, plus the cost of preparing counsel’s costs memorandum estimated at $1,500; or increased  costs in the sum of $12,000.   If  all of these alternatives are disallowed, Carlton seeks 2B costs on the steps it has taken since 31

July 2013 plus actual disbursements totalling $11,007.05.

[4]      Counsel for Fenton submits that an appropriate award of costs would be scale costs on a 2B basis.

[5]      Under the statutory costs regime, the presumption is that costs follow the event.  High Court Rule 14.2(a) provides that the party who fails with respect to an interlocutory application should pay costs to the party who succeeds.   Costs are, however, in the overall discretion of the Court.1   Relevantly, the Court may order a

party to pay increased costs or indemnity costs where reason exists which justifies

1      High Court Rules, r 14.1.

the Court making such an order despite the principle that the determination of costs should be predictable and expeditious.2

[6]      If the party claiming costs is entitled to indemnity costs under a contract or deed, that can be sufficient reason for the Court to exercise its discretion to order a party to pay indemnity costs.3     An award of indemnity costs must be related to conduct in relation to the proceedings.4

[8]      It is common ground that Carlton has an entitlement to indemnity costs under the statutory covenant implied in the lease that Fenton will indemnify and keep Carlton harmless from and against all expenses in respect of the non-payment of the rent, and that such indemnity covers Carlton’s actual legal expenses (on a solicitor/client basis) for serving the statutory demand and opposing the application to set aside the demand.

[9]      As noted at paragraph [6] of my judgment:

Notwithstanding the assignment of the lease, Carlton also remains liable to the Trust Board for sums due under the lease and pursuant to s 98 of the Land Transfer Act 1952 and s 367(5) of the Property Law Act 2007, it has the benefit of implied covenants in the lease expressed or implied.  Under the same provisions, Carlton has the benefit of Fenton’s implied covenant to indemnify it in respect of unpaid rent or breach of the covenants of the lease and to keep Fenton harmless against all associated actions and expenses.  Emphasis added.

[10]     I am not satisfied that it would be appropriate to make an order for indemnity costs pursuant to the assignment of lease for the entire two-year period that Carlton seeks.  Though Carlton may have a contractual right to enforce indemnity costs for that period, if it wishes to pursue its rights over that period, it will need to do so in the normal way by separate action.  I am concerned only with this proceeding and the period from the date when Carlton served its statutory demand on 17 July 2013 sought payment of the debt of $63,579.62 and required Fenton, in the alternative, to

enter into a compromise under Part 14 of the Companies Act 1993 or otherwise

2      High Court Rules, r 14.6.

3      Rule 14.6(4)(e).

4      Paper Reclaim Limited v Aotearoa International Limited [2006] 3 NZLR 188 (CA) at [160], applied in Anzide Properties Ltd v Dunedin City Council [2010] NZHC 3046. “An award of indemnity cases must be related to conduct in relation to the proceedings”.

compound with it or give a charge over property to secure payment of the debt. There was no demand for a debt incurred by way of indemnity costs under the assignment of lease.   The demand was concerned with outstanding rent and other funds due under the lease.   However, I accept that the Carlton has a right to seek indemnity costs in relation to this proceeding and that Fenton has not demonstrated that there are discretionary reasons why Carlton should not have the benefit of the implied covenant as to indemnity in relation to the proceeding.

Result

[14]     I am satisfied that reason exists which justifies the Court making an order for indemnity costs pursuant to r 14.6(f).  Those costs are clearly set out in counsel’s memorandum.    Accordingly, I make an order of $12,821.35 inclusive of disbursements.   Additionally, I allow $1,500 or actual costs on the costs memorandum, whichever is the lesser.  (Counsel for the plaintiff is required to file and serve a brief memorandum confirming what the actual costs are on a time and

attendance basis.)

Associate Judge H Sargisson