First Mortgage Custodians v Herbert

[2022] NZHC 1294

IN THE HIGH COURT OF NEW ZEALAND NAPIER REGISTRY

I TE KŌTI MATUA O AOTEAROA AHURIRI ROHE

CIV-2021-441-38

[2022] NZHC 1294

BETWEEN

FIRST MORTGAGE CUSTODIANS

First Plaintiff

FIRST MORTGAGE MANAGERS LIMITED
Second Plaintiff

AND

ANTHONY JAMES HERBERT and

STEPHEN PETER LUNN as trustees of the Thackery Trust

First Defendants

ANTHONY JAMES HERBERT and ELIZABETH LILLIAN HERBERT as

trustees of the Herbert Pukawa Trust Second Defendants

ANTHONY JAMES HERBERT, FIONA HERBERT and

STEPHEN PETER LUNN as trustees of the A J and F Herbert Family Trust

Third Defendants

MALCOLM HERBERT and

STEPHEN PETER LUNN as trustees of the Avenue Road Trust

Fourth Defendants

ANTHONY JAMES HERBERT and

STEPHEN PETER LUNN as trustees of the Charles Street Trust

Fifth Defendants

MALCOLM HERBERT
Sixth Defendant

ANTHONY JAMES HERBERT

Seventh Defendant

FIRST MORTGAGE CUSTODIANS v HERBERT [2022] NZHC 1294 [2 June 2022]

MAH ENTERPRISES (FIJI) LIMITED

Eighth Defendant

MALCOLM HERBERT and

STEPHEN PETER LUNN as trustees of the Thorn Place Trust

Ninth Defendants

CIV-2021-441-43

BETWEEN

FIRST MORTGAGE CUSTODIANS LIMITED
First Plaintiff

FIRST MORTGAGE MANAGERS
Second Plaintiff

AND

ANTHONY JAMES HERBERT and FIONA HERBERT and

STEPHEN PETER LUNN as trustees of the A J and F Herbert Family Trust

Defendants

Hearing:

On the papers

Appearances:

D M Fraundorfer for Plaintiffs in both proceedings

D J O’Connor for Defendants in all proceeds other than for Fiona Herbert

G Richards for Fiona Herbert

Judgment:

2 June 2022

JUDGMENT OF ASSOCIATE JUDGE JOHNSTON

[Costs]

[1]    In a judgment dated 22 March 2022, I dismissed applications made by the plaintiffs in both proceedings for summary judgment against the first defendant trustees as borrowers and the second to ninth defendants as guarantors. I concluded that the plaintiffs were unable to discharge the burden of demonstrating that the defendants had no arguable defences and that the plaintiffs’ claims must go to trial.

[2]    I reserved costs in the expectation that counsel would be able to resolve these. I now have received applications on behalf of all defendants other than Fiona Herbert from Mr O’Connor and Mrs Herbert from Mr Richards. The applications for costs are resisted on behalf of the plaintiffs by Mr Fraundorfer.

[3]    Costs are dealt with in pt 14 of the High Court Rules 2016. That part, together with the second and third schedules, contains a comprehensive costs regime. Its overarching objective is to ensure that costs are predictable, so that parties engaged in litigation know where they stand from a costs perspective. The principles involved are not complicated. Costs are fundamentally a matter of the Court’s discretion.1 However, the starting point is that costs follow the event, that is to say that the successful party is likely, all other things being equal, to be entitled to a costs award.2 As to quantum, this is invariably calculated by reference to the scales contained in the Rules, which are designed to cater for gradations in complexity of cases and correspondingly the need for different levels of experience and skill of counsel.

[4]    The purpose of having such a regime is to ensure that the Court does not have to carry out a minute analysis of costs in relation to every case, which would surely result in costs being less predictable, practical, and expedient.

[5]    None of that is to say that there is insufficient flexibility to cater for exceptional circumstances. However, for the Court to move from an assessment based on pt 14 and its associated schedules requires exceptional circumstances.3

[6]    The courts have, as Mr Fraundorfer submits, tended to deal with unsuccessful summary judgment applications as an exception to the general rules. The policy reasons for this were first articulated by the Court of Appeal in NZI Bank Ltd v Philpott.4 Essentially, they come down to the value of summary judgment applications as a first step in the process of dealing with litigation and recognise that such applications dispose of litigation efficiently in a large enough number of cases for the

1      High Court Rules 2016, r 14.1.

2      Rule 14.2(1)(a).

3      McGechan on Procedure (Online loose-leaf ed Thomson Reuters) at HR14.1.02; see also

Manukau Golf Club Inc v Shoye Venture Ltd [2012] NZSC 109, [2013] 1 NZLR 305 at [7].

4      NZI Bank Ltd v Philpott [1990] 2 NZLR 403.

courts to encourage the use of the process. In order to do so the courts have tended to decline costs applications made by defendants who have successfully resisted summary judgment applications, to encourage such applications in appropriate cases and to recognise the fact that the failure on the part of an applicant to secure summary judgment is by no means indicative of the likely outcome at trial.

[7]    In this case, Mr O’Connor and Mr Richards invite the Court to depart from that approach. They say that the plaintiffs’ applications for summary judgment in this case were doomed to failure from the outset and obviously so. They say they should never have been brought, and this is the type of case which the Court should discourage speculative summary judgment applications by making an award of costs.

[8]    I disagree. It is true that in this case I concluded that the plaintiffs were unable to discharge the burden of demonstrating that the defendants have no defence, and that the applications had to go to trial to be examined in more depth than is possible in a summary judgment application.

[9]    However, I do not regard the applications in this case as having been irresponsible or inappropriate.

[10]   Having regard to the policy considerations informing cases such as NZI Bank Ltd v Philpott and the other authorities which have since endorsed that approach, summary judgment is something to be encouraged as a means of disposing of litigation

— sometimes relatively complex litigation involving difficult legal issues. To reverse the current trend by awarding costs in favour of the defendants where the plaintiffs were unsuccessful would not be conducive to that aim.

[11]   In the end, in my view, the proper course in this case is to reserve costs in relation to these applications so that they become costs in the cause and can be dealt with in due course, presumably in accordance with the overall outcome in the proceedings.

[12]   For those reasons, I decline to make any costs orders, and reserve costs accordingly.

Associate Judge Johnston

Solicitors:

Holland Beckett, Tauranga for plaintiffs in both proceedings

Lawson Robinson, Napier for defendants in all proceedings other than for F Herbert Fitzherbert Rowe, Palmerston North for F Herbert