FTG Securities Limited v Gower
[2018] NZHC 1513
•22 June 2018
IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY
I TE KŌTI MATUA O AOTEAROA ŌTAUTAHI ROHE
CIV-2018-409-000041
[2018] NZHC 1513
UNDER THE Declaratory Judgments Act 1908 and Receiverships Act 1993 IN THE MATTER
Of the Receivership of Tuam Ventures
Limited (In Receivership and In Liquidation)
BETWEEN
FTG SECURITIES LIMITED
Plaintiff
AND
COLIN ANTHONY LATHAM GOWER AND STEPHEN JOHN TUBBS AS
RECEIVERS OF TUAM VENTURES LIMITED (IN LIQUIDATION AND RECEIVERSHIP)
First DefendantsROBERT BRUCE WALKER IN PERSON AND AS LIQUIDATOR OF TUAM VENTURES LIMITED (IN LIQUIDATION AND RECEIVERSHIP)
Second Defendant
Hearing: Determined on the Papers Counsel:
D J Ballantyne for FTG Securities Limited
K C Francis – for Second Defendant Liquidator R B Walker
Judgment:
22 June 2018
JUDGMENT OF GENDALL J
FTG SECURITIES LIMITED v GOWER [2018] NZHC 1513 [22 June 2018]
[1] On 27 March 2018, FTG Securities Ltd (FTG) discontinued this proceeding against the liquidators and receivers of Tuam Ventures Ltd (Tuam). Robert Walker, as the liquidator of Tuam, (the Liquidator) seeks costs from FTG. Stephen Tubbs and Colin Gower, as the receivers of Tuam (the Receivers) do not seek costs.
[2] The Liquidator seeks an award of what he says are category 2B scale costs here of $5,798 and filing fee disbursements of $220.
[3] FTG is presumptively liable to pay the Liquidators costs under r 15.23 High Court Rules. However, FTG submits that the clear merits of its case justify overriding that presumption.
Background
[4] FTG commenced the current proceeding on 26 January 2018. In it FTG sought declarations regarding the validity of the transfer of Tuam’s debt to it. Initially it seems the Liquidator and the Receivers may not have formally opposed these orders. FTG amended its claim on 27 February 2018 to raise the issue of whether it had, under the disputed securities, validly appointed a second receiver, a Mr Hunt, over Tuam’s assets. This resulted in an overlap between this proceeding and an earlier 2016 proceeding FTG had brought against BNZ and the Receivers, CIV-2016-409-659 (the BNZ proceeding).
[5] The defendants in the present proceeding and BNZ sought a telephone conference to discuss the difficulties caused by the amended pleading. At this conference, I considered that it was important that all parties genuinely affected by the proceedings involving Tuam be heard. A direction was made for a hearing in this Court of a formal consolidation application between this and the BNZ proceeding. In the event, this hearing was not necessary as FTG discontinued the present proceeding 2018-409-41 the following day, 27 March 2018.
[6] Shortly thereafter, the Liquidator’s solicitors sent several emails to inquire whether FTG was prepared to meet the Liquidator’s costs and disbursements following the discontinuance. Those costs were sought on a category 2B scale basis. However,
it seems that, this was met with no response. Memoranda seeking costs have now been filed and responded to.
Submissions
Liquidator’s submissions
[7] Mr Francis, for the Liquidator, submits that nothing here displaces the r 15.23 presumption on a discontinuance that FTG must pay the Liquidator’s costs. He says in all the circumstances here, FTG took it upon itself to address the overlapping issues between the parties in separate proceedings brought against different parties at different times, and then resisted the defendants’ request to schedule a timetable for a consolidation application. Mr Francis submits that the bulk of the steps in the present proceeding involved addressing case management issues arising out of consequent procedural complexities.
[8] The costs sought, Mr Francis confirms, do not exceed the Liquidator’s actual costs in the discontinued proceeding.
[9] Mr Francis distinguishes this proceeding from that which occurred in another proceeding referred to me by counsel for FTG, Walker v Henderson.1 That proceeding was discontinued five years after it had been filed and just months before its allocated trial fixture. Extensive evidence had already been filed. This enabled the Judge to assess the merits of the case and to establish that the plaintiff was justified in continuing the proceeding to that point. In contrast, the present proceeding was discontinued just two months after it was commenced. No statement of defence had been filed, nor any evidence provided for the Liquidator. Mr Francis submits that this means any assessment of the merits would be entirely premature. The detailed evidence required for that, he contends, is inappropriate for the costs memoranda that have been filed here.
[10] Mr Francis contends too that FTG’s claim that this proceeding was necessitated by the Liquidator’s “capricious and obstructive conduct” is inappropriate and
1 Walker v Henderson [2018] NZHC 59.
misconceived. He suggests there is a lack of evidence for it. Instead, Mr Francis points towards evidence that the Liquidator did not object to the AAI settlement. The Liquidator simply asked that the surplus in dispute be retained by the Receivers in the meantime.
[11] Mr Francis also submits that the staying of any costs consideration here sought by FTG would be inappropriate. Such a delay would require further costs submissions later and he says it goes against the rule that costs should be “predictable and expeditious”.
[12] In response to FTG’s initial critique of its claimed costs, the Liquidator did adjust some items. However, generally the Liquidator defends his position on the appropriateness of costs for the preparation of joint memoranda here.
FTG’s submissions
[13] Mr Ballantyne, for FTG, suggests here that costs should lie where they fall. He argues that FTG’s claim was a strong one. He contends that ss 48 – 53 Property Law Act 2007 and s 97 Land Transfer Act 1952 clearly indicate that the assignment of Tuam’s debt to FTG was valid.
[14] Because of what he suggests is the strength of FTG’s claim, Mr Ballantyne submits that the Court should accept that FTG acted reasonably and sensibly, first in filing its proceeding to seek declarations, and secondly in discontinuing its proceeding when it did. FTG, he says had previously indicated that it would discontinue the proceeding, if the Court was minded to entertain an application for consolidation and to adjourn the hearing of the BNZ proceeding. Once the Court confirmed this, FTG discontinued this proceeding.
[15] In the alternative, Mr Ballantyne argues, as I note above, that determination of costs here should be stayed pending the outcome of the BNZ proceeding to prevent inconsistent findings.
[16] Mr Ballantyne also challenged the scale costs claimed by the Liquidator. In particular, he submitted that the time allocation for filing joint memoranda should be halved as they were prepared by BNZ’s solicitors.
[17] And, in reply submissions, Mr Ballantyne contends that the Liquidator’s position on the merits of FTG’s claim overlooked the fact the Liquidator had simply filed a notice of appearance reserving rights. By this, the Liquidator notified the Court that he did not oppose FTG’s claim, but reserved his rights in the event another party joined the proceeding or FTG took steps in the proceeding against his interests. The Liquidator’s subsequent notice of opposition to the summary judgment application, he maintains, was premised solely on the basis that FTG sought, in its amended statement of claim, an additional declaration to have its appointment of Mr Brenton Hunt as receiver validated under s 34(2)(c) Receiverships Act 1993. The validity of that appointment, Mr Ballantyne suggested, was to be determined in the BNZ proceeding.2
[18] Mr Ballantyne argues that this illustrates what he says are the merits of FTG’s claims. He contends the summary judgment was essentially successful. The Liquidator’s submission that the proceeding was unnecessary, he says, overlooks FTG’s detailed affidavit evidence in support of its summary judgment application. He suggests it evidences what he describes as the Liquidator’s obstructive position regarding the performance of the AAI Insurance Settlement arrangement. He asks the Court to consider the self-evident nature of the declarations sought by FTG.
Law
[19]Rule 15.23 of the High Court Rules provides:
Unless the defendant otherwise agrees or the court otherwise orders, a plaintiff who discontinues a proceeding against a defendant must pay costs to the defendant of and incidental to the proceeding up to and including the discontinuance.
2 Subsequently, on 22 May 2018, FTG terminated the appointment of Mr Hunt as Receiver so this matter obviously fell away.
[20] The learned authors of McGechan on Procedure set out the principles to be applied when considering r 15.23 applications:3
(a)The r 15.23 presumption obviates any requirement for the defendant to demonstrate that the plaintiff acted unreasonably in commencing and then discontinuing the proceeding. The defendant has the advantage of the presumption even where there has not been such unreasonableness.
(b)Although the r 15.23 presumption is designed to give a certain and predictable outcome upon discontinuance, it may be displaced if the court finds there are circumstances which make it just and equitable that it should not apply.
(c)Although the court is not limited in the factors it may take into account when considering whether the presumption is displaced, generally:
(i)The court will not consider the merits of the respective cases, unless they are so obvious that they should influence the costs outcome.
(ii)The court will consider the reasonableness of the stance of both parties up to the point of discontinuance: whether it was reasonable for the plaintiff to bring and continue the proceeding; and for the defendant to oppose the proceeding. The plaintiff will not be able to avoid the presumption by showing that at one point it had reasonable grounds for believing it would be successful in the proceeding.
(iii)Conduct prior to the commencement of the proceeding may be relevant, for example, conduct by the defendant that precipitated the litigation.
(iv)The reason for discontinuing may be relevant, for example a change of circumstances rendering the proceeding unnecessary. However, it must be clear that the plaintiff would have succeeded had the circumstances (in this case new legislation) not changed: The Star Trust v Hamilton City Council [2016] NZHC 821 at [10].
(d)The court’s general discretion in r 14.1 as to costs can also override the general principles relating to discontinuance.
[21] Lang J recently confirmed and summarised these principles in Walker v Henderson:4
There is no dispute regarding the principles that apply in the present context. Although costs are at the discretion of the Court, there is a presumption that a plaintiff who discontinues a proceeding will pay costs to the defendant. It is
3 McGechan on Procedure at (online loose-leaf ed, Thomson Reuters) at [HR15.23.01].
4 Walker v Henderson, above n 1, at [5].
also clear, however, that the presumption may be displaced in circumstances where it is just and equitable that the defendant should not receive an award of costs. As counsel for the plaintiffs points out, the authorities demonstrate that, although the Court is not limited in the facts it may take into account, nevertheless the following factors may often be relevant:
(a)It is not generally appropriate to consider the merits of the respective cases unless they are so obvious that they should influence the outcome in respect of costs.
(b)The Court is entitled to consider whether the parties have acted reasonably up to the point of discontinuance.
(c)Conduct by the parties prior to the commencement of the proceeding may also be relevant.
(d)The circumstances in which the plaintiff elects to discontinue the proceeding may also be relevant. By way of example, in some cases a change of circumstances may render the proceeding irrelevant or unnecessary.
[22] In Walker v Henderson, amongst other claims the plaintiffs sought an order banning Mr Henderson from being a director of any company. Given Mr Henderson’s history, Lang J found that it was reasonable for the plaintiffs to commence the claim. He also found that they acted reasonably in pursuing the claim until the point where it was discontinued. The discontinuance followed a decision of the Court of Appeal upholding the High Court’s order prohibiting Mr Henderson from, among other things, being the director of any company. Lang J considered that, as the plaintiffs could not have foreseen this order being made, it was reasonable for them to pursue it. He considered that the prohibition order showed the merits of the plaintiff’s claim. No costs order was made against the discontinuing plaintiff.
Analysis
Should the presumption be displaced?
[23] The initial purpose for which FTG filed this proceeding originally, it seems, was to seek a declaration that the Receivers do not require the Liquidator’s consent to implement an insurance settlement with AAI. The need for such a declaration, however, is unclear here. The Liquidator has provided evidence that appears to show that he had notified the parties to the settlement that he did not object to the settlement in December 2017. This was over a month before the present proceeding was commenced.
[24] The insurance settlement was signed by the relevant parties and completed on 22 February 2018. Mr Ballantyne suggests that FTG was essentially successful given that the settlement agreement was subsequently performed he says without the Liquidator’s consent. However, as I see it, this actually tends to demonstrate that there was no need for the declaration FTG sought to be made. Mr Francis notes that FTG knew that the agreement was signed when it filed its amended statement of claim, yet it continued to seek the declarations. While FTG might have been successful in obtaining this those declaration, I accept here that this does not justify overruling the r 15.23 presumption. As the declaration, it seems, was not necessary, it was not reasonable for FTG to commence and continue the proceeding, particularly after the settlement was finalised. This factor, in my view, clearly supports the presumption remaining.
[25] One issue it seems the Liquidator did have with the settlement was that he wanted to ensure that the surplus still in dispute would be retained by the Receivers. This dispute is being dealt with by the BNZ proceeding so arguably it was not necessary for FTG to commence the present proceeding to solve that issue.
[26] Then, in its amended statement of claim, FTG sought the additional declaration to have its appointment of Mr Hunt as a further receiver of Tuam validated under s 34(2)(c) Receiverships Act 1993. Given that the validity of that appointment was to be determined in the BNZ proceeding, in my judgment that issue would have been better dealt with in or after that proceeding.
[27] It is also of note that FTG discontinued this proceeding in response to an order from the Court that a consolidation hearing be held. By this, FTG signalled that it did not want to pursue its claims any longer. This is not a case like Walker v Henderson where the claim was discontinued because another proceeding, entirely separate to the plaintiff, made the orders sought unnecessary. There, the plaintiff discontinued the proceeding very shortly after that change in circumstances. Here, despite the agreement being signed, as I see it, FTG continued the proceeding for some time.
[28] In this context, there is no reason, in my view, that the presumption in r 15.23 should be overruled. Unlike Walker v Henderson, the merits of FTG’s claim were not
so strong as to outweigh the presumption. Furthermore, it is reasonably arguable here that FTG did not act reasonably in maintaining its claim after the clear change in circumstances. It could also have appropriately dealt with the appointment of Mr Hunt in the BNZ proceeding. I conclude here that the interests of justice, and the principle that costs should be predictable, support the application of the presumption in all these circumstances.
Should costs be stayed?
[29] As I note, Mr Ballantyne also argues that any determination of costs here should be stayed pending the outcome of the BNZ proceeding. This, he says, is to prevent inconsistent findings. I disagree, however. I do not consider that there is any risk of inconsistent findings as costs in this case are not based on the merits of the proceeding. Any stay would require further costs submissions and go against the principle that costs should be expeditious. This is to be avoided.
[30] I conclude there is no justification for an order staying determination of the costs question for this proceeding.
Are the costs sought by the Liquidator appropriate?
[31] The costs sought by the Liquidator, as amended in its reply memorandum of 23 April 2018, in my view, do appropriately reflect a reasonable amount for costs in this proceeding. In my view, there is no real substance in the submissions advanced for FTG contesting the quantum of these costs. The Liquidator is entitled to the full 2B scale costs amount for filing the three joint memoranda which proved to be necessary. No issue can be taken with the $220 court filing fees disbursement. I accept Mr Francis’s submission that the time involved in agreeing a joint position between three parties may take a similar length of time to setting out that involving one party’s position.
[32] An order will follow awarding to the Liquidator the costs and disbursements as sought.
Conclusion
[33]I repeat that no reason exists here that justifies displacing the presumption in r
15.23 that the plaintiff should pay costs on discontinuing its claim, as has happened here.
[34] An order is now made that FTG is to pay to the Liquidator his costs on this proceeding of $5,798 and disbursements of $220.
...................................................
Gendall J
Solicitors:
Canterbury Legal, Christchurch Meredith Connell, Auckland
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