Goodwin v Rocket Surgery Ltd

[2013] NZHC 2046

IN THE HIGH COURT OF NEW ZEALAND PALMERSTON NORTH REGISTRY

CIV 2013-454-000397 [2013] NZHC 2046

UNDER  Section 145 of the Land Transfer Act 1952

BETWEEN  WAYNE ERNEST GOODWIN AND MARY ELIZABETH GOODWIN Applicants

ANDROCKET SURGERY LIMITED Respondent

Hearing:                   8 August 2013

Appearances:           A Beck for applicants

D P Robinson for respondent

Judgment:                13 August 2013

JUDGMENT OF ASSOCIATE JUDGE ABBOTT

This judgment was delivered by me on 13 August 2013 at 4.45pm, pursuant to Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar

Date……………

Solicitors:

Jenny Beck Law, Dunedin
Gallaway Cook Allan, Dunedin

Counsel:

Andrew Beck, Greytown

GOODWIN v ROCKET SURGERY LIMITED [2013] NZHC 2046 [13 August 2013]

[1]      The  applicants  are  the  former  owners  of  a  property  at  212  Bush  Road, Mosgiel, now registered in the name of the respondent.  They have lodged a caveat over the title to that property, claiming an interest arising out of arrangements made between  the  parties  which  led  to  the  respondent  acquiring  the  property  at  a mortgagee sale.

[2]      In  essence,  the  respondent  bid  for,  and  obtained,  the  property  at  the mortgagee sale as “a white knight” to give the applicants an opportunity to raise the money to repurchase the property or, alternatively, to give them time to secure a purchaser for market value.

[3]      The respondent says that the arrangement was only ever intended to be for a limited period (approximately one year).   It wishes to sell the property to repay substantial borrowings and recover cash contributions either to the purchase or to outgoings.  The applicants claim that they have a continuing interest in the property. In  separate  proceedings  they  are  resisting  the  respondent’s  efforts  to  obtain possession of the land and an order for sale.  The dispute is before the Court now on an application by the applicants to sustain a caveat.

Background

[4]      The dispute has already been before this Court and the Court of Appeal on the respondent’s proceedings seeking orders for possession and sale.  The history of the matter is succinctly stated in the following passages from the judgment of the Court of Appeal in that proceeding:1

[3] The Goodwins owned a residential property at Mosgiel, near Dunedin, known as “Chelmsford”. They fell into financial difficulties and faced a sale by the mortgagee, Westpac Banking Corporation.

[4] The Goodwins’ son-in-law, Campbell Harvey, agreed to assist in saving Chelmsford from sale. Mr Harvey and some colleagues were shareholders in RSL, a small private company. RSL agreed to borrow a sufficient sum to buy the property at the mortgagee’s sale and to cover financing costs for a year after purchase while the Goodwins recovered financially. The ultimate purpose was to enable the Goodwins to buy Chelmsford back in their own names or through a nominee.

1 Goodwin v Rocket Surgery Ltd [2013] NZCA 172 at [3] – [6].

[5] It was agreed in principle that RSL would derive some reward for providing the finance. Apart from an understanding that when repurchasing the Goodwins would repay RSL all outgoings spent on the property, they were also to pay a fee for providing the finance. That fee was never settled but the parties discussed figures ranging between $20,000 and $40,000. If the Goodwins were unable to repurchase, Chelmsford would be sold and RSL would recover its expenditure. Unfortunately the parties never settled the terms and conditions of an agreement.

[6]  In  accordance  with  this  informal  arrangement  RSL  purchased  the property at sale by Westpac in April 2010. But thereafter relations between the parties gradually deteriorated. Attempts to settle written terms of  an agreement were unsuccessful. Proposals and counter proposals were exchanged in an environment of increasing acrimony. The Goodwins did not repurchase the property within a year. In the event, in May 2012, more than two years after the acquisition, RSL filed a proceeding against the Goodwins in the High Court. The company sought summary judgment for a range of remedies on the grounds that the Goodwins had no right of occupation or interest in the property and no defence to RSL’s claim.

[5]      The respondent sought, and obtained, summary judgment in this Court.2   The applicants appealed, successfully, against that decision.  The nature of the claim, and the findings on appeal, are relevant to issues on the present application.  The Court of Appeal summarised the summary judgment application as follows:3

[9] RSL’s statement of claim alleged the existence of an oral agreement between Messrs Harvey and Goodwin entered into for the parties prior to RSL’s purchase of the property on 7 April 2010. The agreement as pleaded alleged eight material terms and conditions which the Goodwins breached by failing to purchase the property from RSL by March 2011. RSL sought orders cancelling the oral agreement and directing the Goodwins to give vacant possession of the property; a declaration that the Goodwins had no interest in the property; judgment in a sum equivalent to the holding costs incurred by RSL during the Goodwins’ unlawful possession; and interests and costs.

[10] The Goodwins filed a notice of opposition. Significantly, they alleged that the relationship between the parties relating to RSL’s acquisition of Chelmsford was one whereby RSL held legal title to the property on trust for the Goodwins’ beneficial interest. Allegations of consequential breach were made. Alternatively, the Goodwins asserted that if there was a contract, which  was  denied,  then  its  terms  were  materially  different  from  those alleged by RSL.

[11] Messrs Harvey and Goodwin filed affidavits in support and opposition to RSL’s application for summary judgment. The affidavits were extensive, covering a large amount of argumentative and irrelevant territory. But they disclosed a direct conflict between Messrs Harvey and Goodwin on the terms and extent of what was agreed between them. In the normal course,

2 Rocket Surgery Ltd v Goodwin [2012] NZHC 2752.

that evidential conflict could only be resolved by findings of fact made by the High Court following a trial.

...

[13] [Counsel for RSL] apparently filed an amended statement of claim seeking the alternative remedy for breach of trust at the Associate Judge’s instigation. In essence RSL’s amended pleading alleged that it held Chelmsford on trust for the Goodwins or their nominee for a period of one year to 31 March 2011 for the specific purposes of enabling the Goodwins to purchase the property from RSL on terms or procure the sale to a third party; that the purpose of the trust had failed; and that in the result the parties held Chelmsford  as  tenants  in  common  in  unequal  shares  reflecting  their respective contributions to the purchase price.

[6]      The   Court   of   Appeal   decided   that   the   claim   was   not   suitable   for determination by summary judgment because of the factual dispute regarding the terms of contract between the parties.   It also found the respondent’s reliance, for summary judgment, on a breach of trust was not available on the facts, there being no evidence of an intention to create an express trust, and possible alternatives of a

constructive or resulting trust were “plainly unavailable”.4

[7]      Although it found that the respondent was not entitled to summary judgment, the Court of Appeal made comments as to the status of the parties’ rights and obligations flowing from the original arrangement.  Those comments have particular relevance for the present application to sustain the caveat over the property:5

[25]  In  summary,  RSL’s  claim was  never  suitable  for  determination  by summary judgment. Its allegation of breach of contract was unsustainable on summary disposition because its terms were in dispute. There was no evidence of a clear intention to create an express trust. The alternatives of a constructive or resulting trust are plainly unavailable. In essence this was an informal family arrangement which was never properly documented. The facts as pleaded do not support the existence of a trust.

[26] We add that this litigation was unnecessary from the outset. RSL is the registered proprietor of Chelmsford. It had an absolute right to exercise its powers of sale whenever it asserted that it was no longer obliged to retain the property. The Goodwins could have lodged a caveat against the title if they wished to oppose sale, alleging the existence of an equitable interest in the property. The Goodwins, not RSL, would have carried the burden of proving the nature and extent of their interest.

History of present application

[8]      The Court of Appeal released its decision on 22 May 2013.  On 6 June 2013 the applicants lodged the caveat that is the subject of this proceeding.  The interest claimed in the caveat is:

By virtue of a cestui que trust created between the Registered Proprietor described herein as trustee and the Caveator as beneficiary under the trust, the Caveator has an entitlement to the surplus equity in the property should the Registered Proprietor conduct a sale of the property.

[9]      Upon receiving notice of that caveat, the respondent applied to the Registrar General to lapse the caveat.   Upon receipt of notice of that application from the Registrar General, the applicants applied6  for an order that the caveat not lapse, on the grounds that they had a proper basis to sustain the caveat, and that their rights would be determined in the proceedings already before the Court (the respondent’s proceedings for orders for possession and sale).  In support of their application the

applicants relied on authorities for the imposition of a constructive trust in respect of contributions made to a property.

[10]     The  respondent  filed  a  notice  of  opposition  contending  that  the  interest claimed by the applicants was not capable of sustaining a caveat.  It also relied on the fact that the applicant, Mr Wayne Goodwin, was bankrupt, having been adjudicated on 28 March 2013.  The latter point was not pursued in the hearing (the respondent accepts that the applicant Mary Goodwin’s rights are not affected).

[11]     The applicants’ application was filed on 17 July 20137 and listed for first call on 8 August 2013.  Ordinarily, where notice of opposition is being filed, the matter would be allocated a defended hearing at a subsequent date, with an interim order being made.  However, as the respondent opposed an interim order, and the caveat would lapse if an order was not made by 14 August 2013, the Court made time to hear the application on the afternoon of 8 August 2013.  Although the matter was listed for defended hearing of an application for interim order, counsel were able to address the substantive aspects of the application.

[12]     The application is supported by an affidavit of the applicant, Mr Goodwin, attaching a document that he says he prepared to record the arrangement8  between the applicants and the respondent; a copy of the current statement of claim in the respondent’s proceeding; the decisions of this Court and the Court of Appeal on the summary judgment and a subsequent minute of this Court allocating a trial date for that  proceeding;  a  claim  in  a  subsequent  proceeding  issued  by  the  respondent

seeking summary judgment on the basis of an alleged agreement to occupy the property; and a copy of the caveat and the Registrar General’s notice of intention to lapse the caveat.

[13]     The  respondent  has  not  filed  an  affidavit  in  support  of  its  notice  of opposition, contending that the application can be determined either as a matter of law or on the facts presented in Mr Goodwin’s affidavit.  However, to the extent that the Court considers that further evidence is needed to determine the matter, the respondent seeks opportunity to file an affidavit in support.  In that event it accepts that an interim order sustaining the caveat would be appropriate.

Legal principles

[14]     The principles that the Court applies in determining applications under s 145

Land Transfer Act 1952 are clearly established by decisions of the Court over a lengthy period of time:

(a)       An order for removal of a caveat will not be made unless:9

... it is patently clear that the caveat cannot be maintained either because  there  was  no  valid  ground  for  lodging  it  or  such  valid ground as then existed no longer does so.

(b)The caveator has the onus of showing a reasonably arguable case for a caveatable interest.10

8  It is expressed to be a declaration of trust, with effective date of 15 February 2010, showing the respondent as custodial trustee and what appears to be an incorporated society as the beneficiary, but is not signed by the respondent.  It is signed by the applicant, Mary Goodwin as “director” on behalf of the entity named as beneficiary.

9 Sims v Lowe (1988) 1 NZLR 656 (CA) at 659 – 660.

(c)       The Court will not determine the parties rights unless the facts are not in dispute and the law has been fully argued.11

(d)The Court has a residual discretion to remove a caveat where there is no practical advantage in its continuance.12

The applicants’ case

[15]     Counsel for the applicants submitted that the fundamental question for the Court was whether the applicants had established an arguable case for an equitable interest in the property.  He submitted they had done so on two bases.  First, their evidence as to the arrangement that the respondent would hold the property on trust for them.  Secondly, and pursuant to the terms of their agreement which included a right of occupation and imposed obligations as to payment of outgoings, they had made contributions to the property, giving rise to a constructive trust under the

principles in Lankow v Rose.13   Counsel acknowledged that the terms of the parties’

agreement were in dispute, but argued that the agreement (whatever it might be) placed limits on the respondent’s rights to deal with the property, and that was sufficient for an arguable case until the terms of the agreement could be determined in the respondent’s proceedings.

[16]     Counsel accepted in oral submissions that the caveat was not worded as well as it could have been, but argued that the description of the interest in the caveat was intended to be “a sign post” to the interest rather than a definitive statement, and invited  the  Court  to  focus  on  the  reference  to  “equity  in  the  property”,  which reflected both arguments of an express oral trust and a constructive trust arising out of the contributions.  In anticipation of the respondent’s argument, he submitted that

the applicants’ contributions took their interest beyond a mere licence to occupy.14

Again in anticipation of an argument for the respondent that any express trust was only for approximately a year (whilst the applicants put together the finance to

11 New Zealand Limousin Cattle Breeders Society v Robertson [1984] 1 NZLR 41 (CA).

12 Pacific Homes Ltd (In Rec) v Consolidated Joineries Ltd [1996] 2 NZLR 652 (CA).

13 Lankow v Rose [1995] 1 NZLR 277 (CA).

14 Relying on McFadyen v Styles HC Auckland CIV 2010-404-2387, 8 August 2010, where the Court accepted that contributions made under a family property sharing agreement, under which the McFadyens had a licence to occupy, gave the McFadyens an equitable interest sufficient to sustain a caveat they had lodged.

repurchase the property,  or alternatively arranged sale to a third party), counsel submitted that the point depended on a determination of what was agreed between the parties (and this would need oral evidence tested by cross-examination).   He argued that even if the applicants no longer had a right to occupy, they still had a claim to beneficial interest based on their contribution.

The respondent’s case

[17]     The respondent says that the applicants have not shown an arguable case for an interest capable of sustaining the caveat.  It says first as a matter of law the caveat fails because the interest claimed is not an interest of land (it is expressly stated to be an interest in “surplus equity” following sale of the land) and the interest claimed in the caveat cannot now be amended to include the claims advanced in Mr Goodwin’s affidavit and in counsel’s submissions (that the applicants have an interest in land arising out of the underlying agreement or as a result of the alleged contributions). Secondly, the respondent says that the applicants have not shown an arguable case on the facts because even on their own evidence any express trust (pending repurchase or sale) no longer applies and the applicants have given no evidence of their alleged contributions, but even  if their general evidence in that regard was accepted as sufficient, their rights were remedial in nature (by way of an interest in the proceeds

of sale) and did not amount to an interest in land15.

[18]     In the alternative, counsel for the respondent submitted that if the Court came to the view that there was a sufficient case for an arguable interest, this was a suitable case to exercise the discretion to discharge in any event.  That is because the injury  that  the  respondent  was  suffering  (carrying  finance  for  some  20  months beyond what it says was agreed with no evidence that the applicants had any ability to purchase or that they had taken any steps to sell the property) constituted exceptional circumstances warranting exercise of the discretion.  Counsel referred to

the decision of this Court on an application for stay pending appeal16  as to level of

outgoings and the amount recoverable by the respondent from the property being in excess  of  the  market  value.    Counsel  also  referred  to  the  Court  of  Appeal’s

15 Willigers v McFarlane (2005) 6 NZCPR 885 at [42]-[43].

16 Rocket Surgery Ltd v Goodwin [2012] NZHC 3319 at [32] – [34] and [40] – [41].

comments17  that in the event that the applicants had lodged a caveat (prior to the summary judgment application) the Court would likely have discharged it on terms for lodgement of proceeds of sale into a solicitor’s trust account pending determination of the claims for contribution.

Discussion

a)       Validity of the caveat

[19]     The formal requirements for a caveat are stated in s 137(2) of the Land

Transfer Act:

(2)       A caveat under this section must contain the following information: (a)     the name of the caveator; and

(b)       the nature of the land or estate or interest claimed by the caveator, which must be stated with sufficient certainty; and

(c)       how the land or estate or interest claimed is derived from the registered proprietor; and

(d)       whether or not it is intended to forbid the making of all entries that would be prevented by section 141 or a specified subset of them; and

(e)       the land subject to the claim, which must be stated with sufficient certainty; and

(f)       an address for service for the caveator.

[20]     Under s 137(2)(b) the caveat must state:

The nature of the land or estate or interest claimed by the caveator, which must be stated with sufficient certainty.

[21]     The applicants’ caveat claims an estate or interest in

... the surplus equity in the property should the Registered Proprietor conduct a sale of the property.

[22]     This is a claim to an interest in proceeds of sale rather than in the land.  It is

specific in its terms.   It was made after the Court of Appeal’s decision on the

summary judgment application and the Court’s comments about the nature of the

17 Goodwin v Rocket Surgery Ltd, above n 1 at [27].

applicants’ interest.   The claim is consistent with an acceptance of the Court of

Appeal’s comments.

[23]     Counsel for the applicants acknowledged that the claims advanced in Mr Goodwin’s affidavit and in his submissions for the applicants (for an interest in the land based on an express trust or contributions) did not fit easily into the language of the caveat.   However, counsel argued that the language was sufficient to allow a claim for interest in the land (I have already referred to his emphasis upon “equity in the property”).

[24]     The wording in the caveat has to be construed in context, which includes the comments of the Court of Appeal that the respondent is entitled to sell the property, and that any caveat would be discharged on terms protecting the proceeds of sale pending determination of the applicants’ claim based on contribution.  If the interest was to be left as broadly as the applicants contend in Mr Goodwin’s affidavit (and as counsel argued on their behalf) there would have been no need for the additional wording “the Caveator has an entitlement to the surplus equity in the property should the Registered Proprietor conduct a sale of the property”.  Alternatively, the drafter could have confined that phrase to “an entitlement to the equity in the property”.

[25]     Whether a caveat has been stated with sufficient certainty (for the purposes of s 137(2)(b)) is to be decided on the circumstances of the case.  In this case I find that the interest has been stated with certainty, but the interest claimed is not a beneficial interest in the land.  In deciding whether there is a caveatable interest, the Court must consider only the interest claimed in the caveat.   On an application to remove the caveat, the Court cannot amend the interest claimed or the grounds on which the

interest is based.18

b)       Is a caveatable interest arguable?

[26]     The applicants have the onus of showing that they have a reasonably arguable case for a caveatable interest.   Their counsel submitted that there is a sufficiently

18  Refer New Zealand Mortgage Guarantee Co Ltd v Pye [1979] 2 NZLR 188 (SC), and Ball v Fawcett [1997] 1 NZLR 743 (HC), applied in Westpac NZ Ltd (1763882) v Nga Uri Whakatipurunga O Ngarae (Inc) HC Auckland CIV 2008-404-007298, 24 November 2008 at [5] and [6].

arguable basis in the evidence given by Mr Goodwin of the arrangement under which the respondent purchased the property, supported by the various documents exhibited to that affidavit.  Counsel submitted that the Court should not go past that evidence when determining whether to sustain the caveat until the terms of the arrangement are determined in the substantive proceedings now awaiting a trial date.

[27]     I do not accept the evidence of Mr Goodwin as sufficient to discharge the applicants’ onus in this case.   I will deal first with the argument that they have a beneficial interest under an express trust.   Mr Goodwin’s evidence is that the applicants’ understanding of the arrangement is expressed in the memorandum of understanding that he appended to his affidavit.  That memorandum states explicitly that the “custodial trustee role” of the respondent was for a limited time (approximately one year) but that period was negotiable and could be extended or varied by agreement.  There is no evidence that the arrangement was extended, so on the applicants’ own case the trust period was due to expire about April 2011 (a year after the respondent settled the purchase).  Even if some latitude was possible (and it appears that the respondent did not start pressing for sale and recovery of its contributions for another year), there can no longer be any basis for the applicants’ case that the respondent still holds the property under that express trust.  This finding does not require a determination of the dispute over the precise terms of the arrangement: it is based on the evidence provided by the applicant.

[28]     Turning to the claim to an interest based on contributions, the applicants have given no evidence of their contributions either towards the purchase of the property or towards payments of the mortgage or outgoings (although I record that counsel for the respondent accepted in the hearing that the applicants did meet the term imposed by the Court of Appeal on granting a stay pending appeal that the applicants pay

$4,700 per month towards outgoings on the property pending appeal).  I accept the submission of counsel for the respondent that the Court needs to be able to evaluate both the fact and level of contribution in deciding whether it should recognise that contribution by imposing a constructive trust.19  Although I do not need to determine this  point  (given  the decision  I have  already reached  that  the  caveat  is  invalid

because it does not claim an interest in the land) I consider that there is no need to

19 Based on Lankow v Rose, above n 13.

impose a constructive trust on the land to protect the applicants’ claimed interest. This leads me to the last point, namely whether this is an appropriate case for exercise of the Court’s remedial discretion.

c)       The discretion to discharge on terms

[29]     Counsel for the respondent submitted that if I was satisfied that the applicants had established a reasonably arguable case that they had a caveatable interest, the circumstances of this case are sufficiently exceptional to warrant exercise of the Court’s discretion to discharge the caveat (albeit on terms to protect the applicants’ claimed interest).   Counsel for the applicants resisted this argument both on the grounds that it had not been advanced prior to the hearing and that it had not been advanced substantively (the circumstances did not warrant removal of the protection for the applicants).

[30]     I do not consider that the failure to raise this point explicitly in the notice of opposition prevents the matter being addressed on the application.   It is always a factor that the Court can take into account.   The applicants cannot be said to be prejudiced by the failure to raise it explicitly.

[31]     As is apparent from the decision of this Court in McFadyen,20 the Court will intervene in equity to protect family arrangements.  If this were truly, and solely, a family arrangement, I would exercise the discretion in favour of the respondent. However, the respondent is not a vehicle just for the applicants’ son-in-law.   The respondent accepts that it took part in the arrangement because the son-in-law had an interest in it, but he is only one of several owners.   It was clearly a commercial arrangement (evidenced by previous findings that the respondent was to receive a fee as well as return of its contributions).  Although the family connection led to the arrangement, it is not a determining factor.

[32]     It is not in dispute that the respondent borrowed a substantial sum to purchase

the  property and,  even  on  the  applicants’ case,  it  is  entitled  to  recovery of  its contributions.     Those  contributions  have  exceeded  what  the  parties  initially

20 McFayden v Styles, above n 14.

contemplated (because the arrangement has run on well past the date originally contemplated), and it seems very possible that the accruing cost of the contributions may not be recoverable from the sale of the property, even at proper market value. There is no evidence that applicants have other resources available to them to allow them to complete purchase (as was originally intended) or have any ability to meet any shortfall from any other sources (indeed, Mr Goodwin is now bankrupt).

[33]     Ultimately this aspect comes down to a balancing of respective interests. Given  the  applicants’ apparent  inability to  repurchase  the  property,  and  lack  of evidence as to means to meet the outgoings pending determination of the other proceeding (let alone any shortfall on value) I can infer that there is a risk that the respondent may incur further losses (by way of contribution to outgoings on the property).  In the circumstances, and weighing the considerable uncertainty (at best) as to any caveatable interest that the applicants may have, I consider that this is an appropriate case to remove the caveat on terms that any net proceeds of sale be preserved pending determination of the applicants’ claim for contribution.

Decision

[34]     For the reasons  I have given I am not satisfied that the applicants have established an arguable case for maintaining their caveat, both on the grounds that the stated interest is only as to surplus proceeds of sale, which is not a caveatable interest, and (in the event that I am wrong in that view), because they have not established a sufficient evidential basis for a beneficial interest in the land as distinct from the right of claim against the proceeds of sale.

[35]     I am conscious, however, that this decision is being given on a summary basis, and on short notice.  To guard against the possibility that I am wrong in both of the above findings, I have come to the conclusion that this is an appropriate case to order a discharge of the caveat but on terms that the respondent hold the net proceeds of sale (after repaying obligations to third parties) until such time as the respective  entitlements  of the parties can  be determined  in  the proceeding now awaiting trial or separately.

[36]     The application for an order that caveat 9422547 not lapse is dismissed on terms that in the event of sale of the property at 212 Bush Road, Mosgiel (bearing the legal description OT187/20):

(a)       The proceeds of sale shall be applied to repay:

(i)       any sum(s) due under mortgages secured against the title;

(ii)any sums otherwise borrowed by the respondent to effect the purchase of the property together with any interest payable on those sums; and

(iii)     the costs of sale (including agent’s fees and legal fees and

disbursements).

(b)The  balance  of  the  proceeds  of  sale  (after  payment  of  the  items identified above) is to be held by the respondent’s solicitor, on an interest bearing deposit, and to be paid out to the parties either in accordance with their agreement or as directed by the Court.

[37]     Leave is reserved to either party to seek further directions from the Court as to the terms on which the balance of the proceeds of sale are to be held, or paid out to the parties.

Costs

[38]     The respondent has sought costs on a solicitor/client basis in the event that it is successful.  The applicants have applied for legal aid, but as at the date of hearing, that application had not been determined.

[39]     An order for costs can be made against a legally-aided party, but only in exceptional  circumstances.21     Where  an  application  has  been  made,  but  not

determined by the time of the judgment, the Court will frequently reserve costs until

21 Legal Services Act 2011, s 45(2).

the application for aid is determined.22   Once aid is granted, the Court has discretion whether or not to give the determination retrospective effect, so as to preclude the legally aided party’s liability for costs incurred before the legal aid was granted.23

[40]     If the Court is of the opinion that the “exceptional circumstances” referred to in s 45(2) exist, the question of retrospective effect obviously becomes irrelevant. Furthermore,  if  such  exceptional  circumstances  exist,  the  Court  should  not  be required to await the legal aid determination before making an award for costs.  This is because the granting of legal aid does not prevent the Court from awarding costs against the legally aided party in these circumstances.

[41]     For the reasons given earlier in this judgment I consider this to be a case where exceptional circumstances warrant an order for costs being made now:

(a)       The application to sustain the caveat was unreasonable given that: (i) the caveat did not state an interest in the land;

(ii)the  applicants  did  not  have  the  evidence  to  establish  a caveatable interest;

(iii)the Court of Appeal had indicated (on the stay application) that the likely outcome was a discharge on terms; and

(iv)these points were advanced by the respondent from the outset, and appropriate terms for discharge were advanced by the respondent.

(b)      The applicants put the respondent to unnecessary costs.

22  See for example Hornby v ACC [2009] NZCA 33, at [11]; Taueki v Crown Forestry Rental Trust

High Court Wellington, CIV 2011-485-1497, 17 February 2012 at [89].

23   Section 45 was given such retrospective effect in Wine Country Credit Union v Dugh High Court Napier, CIV-2010-441-667, 1 March 2011.  However, the Court of Appeal declined to give s 45 retrospective effect in CMD v JMT [2011] 2 NZLR 567 (CA) at [19] – [20] due to the conduct of the legally aided party.

[42]     Although there is a case to be made for either indemnity or increased costs (in light of the comments made by the Court of Appeal) there was no evidence before the Court to support a claim for indemnity costs, and I suspect (given the bankruptcy of Mr Goodwin) that it will make little practical difference whether costs are awarded just on scale or on an increased basis.

[43]     Weighing  the  various  factors,  I find  that  in  the  event  the  applicants  are granted legal aid, exceptional circumstances warrant an order being made now that the applicants pay the respondent costs on a scale 2B basis, together with disbursements as fixed by the Registrar (but allowing for counsel’s airfare to argue the matter urgently on 8 August 2013).  This is the amount that would be ordered

irrespective of the application for legal aid.

Associate Judge Abbott