Gaskin v Stark

[2020] NZHC 2519

IN THE HIGH COURT OF NEW ZEALAND DUNEDIN REGISTRY

I TE KŌTI MATUA O AOTEAROA ŌTEPOTI ROHE

CIV-2020-412-26

[2020] NZHC 2519

IN THE MATTER

of the Companies Act 1993

BETWEEN

GRAHAM KENNETH GASKIN and

ELIZABETH JOAN DUSTIN, as trustees of the DUSTIN FAMILY TRUST
Plaintiffs

AND

ALASTAIR DAVID STARK by his

litigation guardian CAROLINE ANN STARK

First Defendant

AND

ALAN BEVIN McKAY

Second Defendant

AND

RICHARD DRUMMOND FRASER

Third Defendant

AND

MEAD STARK LIMITED

Fourth Defendant

Hearing:

Determined on the papers

Counsel:

P J Dale QC and V E Fletcher for Plaintiffs

D G Hurd for First, Second and Third Defendants A J Gaborieau for Fourth Defendant

Judgment:

25 September 2020

JUDGMENT OF ASSOCIATE JUDGE LESTER

This judgment was delivered by me on 25 September 2020 at 3.00pm pursuant to Rule 11.5 of the High Court Rules

Registrar/Deputy Registrar 25 September 2020

GASKIN v STARK [2020] NZHC 2519 [25 September 2020]

[1]        This proceeding commenced 4 May 2020 and has already encountered two, not insignificant, procedural potholes.

[2]        The first involved the identity of the correct plaintiffs. That issue was subject to a judgment of his Honour Associate Judge Paulsen dated 7 August 2020.1

[3]        The second involved the identity of the fourth defendant, named from the outset as Mead and Stark.

[4]        On 21 August 2020, an application for summary judgment was filed on behalf of Mead and Stark on the basis, inter alia, that Mead and Stark was a non-existent entity. Counsel for the plaintiffs on 16 September 2020 applied for an order that Mead Stark Ltd be substituted for the fourth defendant as originally named. That application was unopposed and an order made accordingly.

[5]        The background to this proceeding is set out in Associate Judge Paulsen’s judgment of 7 August 2020, which I do not repeat here, save for noting that the now correctly identified plaintiffs bring this claim relying on a deed under which the Official Assignee assigned litigation rights to them.

[6]        The application for summary judgment by the fourth defendant was based on the proposition that the plaintiffs’ ability to bring the claim is predicated on the deed of assignment. The deed of assignment refers to the non-existent entity, Mead and Stark, and because Mead and Stark is a non-existent entity, it did not have any interaction with the Official Assignee, let alone those alleged to give rise to the plaintiffs’ claim.

[7]        The fourth defendant said it was Mead Stark Ltd that had interactions with the Official Assignee relevant to the plaintiffs’ claim.

[8]        Lest it be thought that the fourth defendant’s use of a summary judgment application to raise this issue was something of an over-reaction when Mead Stark Ltd was served with the statement of claim, which named Mead and Stark as the fourth

1      Dustin v Stark [2020] NZHC 1975.

defendant, its solicitors properly and promptly raised with the plaintiffs that its client, Mead Stark Ltd, had been misnamed and misdescribed in the pleadings. At that point, counsel for the fourth defendant thought the issue was simply a slip which could be easily corrected, as at that point the fact the deed of assignment did not refer to Mead Stark Ltd was not raised.

[9]        The plaintiffs’ solicitor wrote back asserting that Mead and Stark was not misnamed in the statement of claim and stating: “Mead and Stark on its letterhead does not include the word “Limited” as is required by s. 21 of the Companies Act 1993.”

[10]      Despite counsel for Mead Stark Ltd, when opposing the application to correct the identity of the plaintiffs providing “chapter and verse” as to why Mead Stark Ltd was the correct party, it was not until the application for summary judgment was brought on 21 August 2020 that the plaintiffs brought their application to substitute Mead Stark Ltd for the incorrectly named Mead and Stark as fourth defendant.

[11]      Counsel for the fourth defendant now seeks costs on its application for summary judgment.

[12]      Counsel for the plaintiffs accept costs should follow the event and submits costs on a 2B basis are appropriate.

[13]      Counsel for the fourth defendant submits that costs should be approached not on the basis of an application for summary judgment, but using the allowance provided in the High Court Rules 2016 for an originating application to arrive at what is submitted to be a more realistic figure.

[14]      Costs on a 2B basis for an interlocutory application would be $1,634. Costs, if the application for summary judgment were treated as an originating application for costs purposes, would be $4,980 (in each case including the filing fee of $200). In addition, the fourth defendant seeks an uplift of costs of 20 per cent. The uplift is sought under r 14.6(3)(b)(ii) and (iii) on the basis that the plaintiffs, in failing to take steps to confirm the correct identity of the fourth defendant, pursued an unnecessary

step or an argument that lacked merit, or failed without reasonable justification to admit facts or accept a legal argument.

[15]      I am not convinced that it is consistent with the costs regime to treat the interlocutory application as if it were an originating application. One of the primary tenets of the costs regime is that it is intended to be predictable. If there is to be an adjustment to costs based on a party taking an unreasonable position, then it should be dealt with by way of an uplift or indemnity costs if the circumstances warrant, not through “deeming” an application to be what it is not.

[16]That said, I am satisfied an uplift is appropriate and I now explain why.

[17]      I accept the fourth defendant’s argument that the plaintiffs’ right to bring its claim rests on the deed of assignment. The deed of assignment is clear that what is being assigned are rights derived from the sale of shares by the Official Assignee to the first, second and third defendants in 2016. Mead Stark Ltd was involved in that sale.

[18]      I accept the deed of assignment refers to Mead  and Stark and not Mead  Stark Ltd. However, it was incumbent on the plaintiffs, when the issue was raised by the solicitors for the fourth defendant, to investigate the correct identity of the fourth defendant. The correspondence surrounding the sale of shares subject to the proceeding, refers throughout to Mead Stark Ltd. The correspondence included Mead Stark Ltd providing financial accounts for the companies in which the Official Assignee held the shares she wished to sell. Those financial accounts were prepared by Mead Stark Ltd. While it is true there are earlier accounts going back to 2010 which simply refer to Mead Stark, a review of the correspondence and documents created at the time of the transaction of concern refers to Mead Stark Ltd.

[19]      The explanation given by the plaintiffs’ solicitor for dismissing the initial “heads up” from the solicitor for the fourth defendant about the identity of the fourth defendant, that is, there is reference to Mead and Stark on a letterhead without the word “Limited” is not convincing. Certainly no later than when the fourth defendant’s solicitor’s full explanation of why the wrong party had been named was provided in

its submissions in opposition to the application to correct the name of the plaintiffs, the plaintiffs should have undertaken a detailed review of the issue. There is no suggestion that it did so and it seems it is only with the fourth defendant’s application for summary judgment filed approximately three weeks after the date of the fourth defendant’s submissions, that the plaintiffs belatedly accepted it had named the wrong fourth defendant.

[20]The fourth defendant should not have had to bring its application.

[21]      I find that the plaintiffs failure to confront, in a timely way, an issue that was properly raised by the fourth defendant’s solicitor meant that the plaintiffs pursued an argument that lacked merit. The plaintiffs did so by maintaining the fourth defendant was correctly named, and failed without reasonable justification to accept the facts and evidence put forward as to the correct identity of the fourth defendant.

[22]      The fourth defendant is entitled to costs on a 2B basis plus a fifty per cent uplift for step 22 together with the filing fee of $200. It is also entitled to costs on a 2A basis for step 24 for the preparation of its submissions on its application for costs.

Associate Judge Lester

Solicitors:

Sandi Anderson & Partners, Auckland (for Plaintiffs)

Copy to counsel: P J Dale QC, Barrister, Auckland

Checketts McKsay Law Limited, Alexandra (for First, Second and Third Defendants) Copy to counsel: D G Hurd, Barrister, Omakau, Central Otago

Parker |Cowan, Queenstown (for Fourth Defendant)