Glover Trust Limited v Glover Trust Corporation Limited

[2015] NZHC 444

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2012-404-006931 [2015] NZHC 444

IN THE MATTER OF

Part 18 of the High Court Rules

BETWEEN

THE GLOVER TRUST LIMITED, BAILEY TRUSTEE SERVICES LIMITED and

AUCKLAND WEST LEGAL SERVICES LIMITED

First Plaintiffs

CIT HOLDINGS LIMITED Second Plaintiff

AND

GLOVER TRUST CORPORATION LIMITED

First Defendant

GLOVER NO 2 LIMITED Second Defendant

Hearing:

12 March 2015

[On the Papers]

Counsel:

M D Pascariu for the Plaintiffs
T A Chubb for the Defendants

Judgment:

12 March 2015

JUDGMENT OF DUFFY J [re Costs]

This judgment was delivered by Justice Duffy on 12 March 2015 at 4.30 pm, pursuant to

r 11.5 of the High Court Rules

Registrar/Deputy Registrar
Date:

Counsel:     T A Chubb, Auckland

Solicitors:    Minter Ellison Rudd Watts, Auckland

THE GLOVER TRUST LTD and ORS v GLOVER TRUST CORPORATION LTD and ANOR [2015] NZHC

444 [12 March 2015]

[1]      The second defendant seeks costs in respect of:

(a)       an application for stay of execution, filed on 27 March 2013:

(b)      an application to vary the freezing order made on 14 March 2013,

brought on 18 April 2013 (“the first variation”); and

(c)       an application to vary the freezing order made on 14 March 2013,

brought on 19 September 2013 (“the second variation”).

Background

[2]      The costs presently sought relate to three steps that were taken in what has been a complex proceeding.   In order to put the costs applications in their proper context, it is necessary to traverse the wider background of these proceedings.

[3]      On 14 March 2013, Allan J made freezing orders over what he described as

the “second tranche” of properties in favour of the plaintiffs.

[4]      On 20 March 2013, Allan J delivered a judgment (“the trust judgment”).  In this judgment, he reserved leave to the parties to make further application regarding the freezing orders.1

[5]      On 27 March 2013, the second defendant applied for a stay of execution of the trust judgment.

[6]      When the application came on for hearing on 18 April 2013, counsel for the second defendant made an oral application to vary freezing orders.  The hearing was adjourned part-heard, due to concerns that I identified regarding the enforcement of the trust judgment.   The concerns I had regarding the enforcement of the trust judgment   related   to   the   standing   of   the   plaintiff,   Glover   Trust   Limited, Bailey Trustee Services Limited, and Auckland West Legal Services Limited to bring

the proceedings.  Full details of those concerns are set out in a Minute that I issued on 13 May 2013.

[7]      The hearing reconvened on 2 August 2013, and I delivered a decision on

14 August 2013 in which I made orders staying the execution of the trust judgment and varying the freezing order.2     The freezing order variation could not be implemented because after I delivered judgment on 14 August 2013, the plaintiffs applied to recall the trust judgment.

[8]      The file records that the freezing orders were varied by consent on 7 October

2013.

[9]      The second defendant seeks increased costs.  The second defendant submits that the plaintiffs’ opposition to the first and second variations of the freezing orders lacked merit, as it was obviously in the best interests of all parties that the funds to be released under the varied orders were used to pay third party mortgages that were in arrears.  It is submitted that the repayment of the mortgagor from the frozen funds could and should have been the subject of a consent memorandum.

[10]     The plaintiffs oppose the second defendant’s costs’ application and submit that costs should lie where they fall.  The plaintiffs submit that as regards the stay application, the Court only granted the stay application on an interim basis in order to  preserve  the  status  quo  until  the  matter  of  CIT  Holdings  Limited’s  (“CIT”) standing and the recall and joinder application of CIT was determined.

[11]     The plaintiffs submit that the issues surrounding CIT’s standing were, in effect, caused by the defendants, who had refused to transfer the shareholding in CIT to the new trustees before the proceedings were issued in November 2012. Accordingly, CIT could not be joined as a plaintiff at the relevant time.

[12]     As regards the first and second variations of the freezing orders, the plaintiffs submit the beneficial ownership of the “second tranche” properties was the main issue in the proceeding.  They refer to the fact that shortly before the hearing of the

proceeding before Allan J in February 2013, the second defendant mortgaged the “second tranche” of properties.   Accordingly, the freezing order was required in order to protect their interest in the second tranche properties, pending delivery of the judgment of the Court.

[13]     They refer to the fact that Allan J expressly provided for the defendants to have an urgent hearing to determine whether the freezing orders should be set aside. They submit the defendants did not utilise this option and rather, at the time the stay application was heard, they stated they were not seeking to disturb the freezing order.

[14]     The plaintiffs contend that the variations were only granted because of a recognition of a real risk that the  “second tranche” properties might  be sold at mortgagee sale, which would be contrary to the interests of CIT, as well as the second defendant.  The plaintiffs submit this risk was created solely by the second defendant encumbering the “second tranche” properties.  It is submitted that granting costs on the first and second variations of the freezing order would allow Ms Sparks, who is a director of the second defendant, to benefit from her own wrongful acts.

Discussion

[15]     I  accept  the  approach  of  the  plaintiffs,  which  would  have  the  costs’ application for the stay and the freezing order variations seen in the wider context of the entire proceedings.

[16]     The plaintiffs are correct that the stay was granted simply to preserve the status quo until the question of CIT’s standing was resolved.  In the decision on the stay application, I had identified a concern regarding the then plaintiffs’ ability to bring   proceedings   that,   in   essence,   sought   to   recover   property   owned   by CIT Holdings.  That company was not then a party to the proceedings.  It is hard to see how it could have been as, at the time, it was under the control of Ms Sparks, who also controlled the two defendant companies.  The fact the stay application was successful had little to do with the arguments advanced by the second defendant, who was the party responsible for bringing the application.

[17]   Regarding the freezing order, the fact the second defendant made oral applications on both occasions shows the lack of thought beforehand in it seeking the variation to the freezing orders, and the lack of advance notice to the plaintiffs.  It is not so surprising that the plaintiffs, when confronted with oral applications in the course of a hearing for another purpose, chose to oppose those applications.  In the end, the second variation was the subject of consent orders.

[18]     The general rule that costs follow the event so that costs are awarded to the successful party reflects circumstances where the successful event has been brought about by the efforts of the successful party.  Here, the successful party made little contribution to the successful outcome it now seeks to rely upon for an award of costs.

[19]     The substantial judgment that the defendants sought to stay was ultimately upheld both in the recall application and later on appeal.  On the merits, the second defendant’s arguments have failed.

[20]     The “standing” issue that resulted in the stay being granted was never raised by the second defendant in the hearing before Allan J, which was the occasion when it should have been raised.   Nor did the second defendant raise it in the stay application.  It was something to which the Court first drew attention.

[21]     As regards the freezing orders and the need for the variations, to some extent the need to release funds in order to avert a mortgagee sale was in part due to the defendants’ actions in failing to release the properties following the delivery of the first judgment by Allan J.

[22]     When  I  weigh  up  all  the  relevant  factors  in  this  proceeding,  I  find  the arguments of the plaintiffs to be persuasive.  I accept their submission that this is a case where costs should lie where they fall and, accordingly, I so order.

Result

[23]     The second defendant’s application for costs is dismissed.

[24]     Costs lie where they fall.

Duffy J