Haines v Memelink

[2021] NZHC 1063

IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY

I TE KŌTI MATUA O AOTEAROA TE WHANGANUI-A-TARA ROHE

CIV-2019-485-315

[2021] NZHC 1063

BETWEEN

QUENTIN STOBART HAINES

First Applicant

BPE TRUSTEES (NO 1) LIMITED
Second Applicant

QUENTIN HAINES PROPERTIES LIMITED
Third Applicant

AND

HARRY MEMELINK and LYNX TRUSTEES LIMITED

Respondent

On the papers:

Counsel:

J D Dallas for Applicants

D G Livingston for Respondent

Judgment:

13 May 2021

JUDGMENT OF CHURCHMAN J (COSTS)

Introduction and background

[1]        On 30 August 2019, I awarded costs against Mr Bassett-Burr in respect of a successful application by the applicants (Mr Haines, BPE Trustees (No 1) Ltd and Quentin Haines Properties Ltd) to set aside five statutory demands served on them by the respondents, the trustees of Link Trust (No. 1).1

1      Haines v Memelink [2019] NZHC 2169.

HAINES & ORS v MEMELINK & ANOR [2021] NZHC 1063 [13 May 2021]

[2]        While Mr Bassett-Burr was not a party to that application, costs were awarded against him as a non-party, on the basis that he had signed the statutory demands in question in his capacity as a director of a corporate trustee of the Link Trust (No. 1).2 I held that these demands had been issued improperly, and that under the law, ought to have not been issued at all.3 Costs on a 2B scale, with an uplift of 50 per cent to reflect the conduct of the parties, were ordered.

[3]        Mr Bassett-Burr then appealed to the Court of Appeal, which found that before costs were awarded against a non-party, an application on notice should be made against that party,  and that in this case, insufficient notice had been provided to     Mr Bassett-Burr.4 As a result, the costs order against him was set aside.

[4]        The applicants sought leave to appeal this decision to the Supreme Court, but their application for leave was denied.5

[5]        The applicants have now filed a memorandum seeking costs against the trustees of the Link Trust (No. 1) – namely Mr Memelink and Ms Forester (whose name at times also seems to be spelt “Forster”). Ms Forester appears to have replaced Lynx Trustees Ltd as a trustee of the Link Trust (No. 1), and also appears to have been added as a party to the applicants’ application for leave to appeal to the Supreme Court.

[6]        In his submissions to the Court on this costs order, counsel for Mr Memelink, Mr Livingston, indicated that these proceedings would need to be updated under r 4.56 of the High Court Rules 2016 to add Ms Forester as a party, while Mr Dallas (counsel for Mr Haines) submitted that he expected that “Mr Livingston will confirm  that  Ms Forester has consented to be joined as a party to these proceedings as a trustee”.

2      The first two demands were signed by Mr Bassett-Burr only, on behalf of the Lynx Trustees Ltd, while the latter three notices were signed by both Mr Memelink and Mr Bassett-Burr.

3      Haines v Memelink, above n 1, at [33] and [39].

4      Bassett-Burr v BPE Trustees (No 1) Ltd [2020] NZCA 457.

5      BPE Trustees (No 1) Ltd) v Bassett-Burr [2020] NZSC 14.

Position of the parties

Mr Haines

[7]       Mr Haines position is that, given that costs follow the event, and because of the conduct of the respondents in issuing the statutory demands, costs on a 2B scale with a 50 per cent uplift ought to be awarded against the respondents in this case.

[8]       Mr Dallas set out the following factors as justifying an uplift in these circumstances:

(a)the respondents knew or ought to have known the debt claimed was disputed;

(b)the respondents nominated Devine Law to be their agent in this matter but appear to have obtained no legal advice prior to issuing the statutory demands;

(c)a single application (covering all five statutory demands) was filed by the applicants notwithstanding five statutory demands being issued by the respondents;

(d)Mr Haines wrote to Mr Bassett-Burr on 24 May 2019 requesting that the demands be withdrawn with no issue as to costs;

(e)Mr Bassett-Burr sought time to obtain legal advice (evidencing that none was obtained prior to issuing the demands) but failed to ever respond to Mr Haines’ offer to withdraw;

(f)given the tight time frames involved and the serious consequences of not filing an application to set aside, the applicants had no alternative but to file these proceedings to protect their respective positions;

(g)the statutory demands were purportedly withdrawn by Mr Memelink on 17 June 2019, after he claimed to have received legal advice;

(h)Mr Haines again wrote to Mr Bassett-Burr on a ‘without prejudice’ basis to resolve the question of costs on 18 June 2019. Mr Bassett-Burr did not respond to that correspondence;

(i)after the close of business the night prior to the hearing of this matter, the respondents filed a massive volume of additional material. Counsel had to expend considerable time on an urgent basis reading this material prior to the hearing the following morning; and

(j)the statutory demands were of a frivolous and vexatious nature that never had any prospect of success and were plain wastage of the Court’s time and the applicant’s time on the part of the respondents.

[9]       Mr Dallas also referred to three cases in support of an uplift in  costs:  Summer Construction Ltd v Baker, Four Avenues Property Group Ltd v Higgs Construction Ltd and ETB Realty Ltd v Eastlight Asset Trading No 3 Ltd. I consider and discuss these cases in the “relevant law and analysis” section below.

[10]     Ultimately, Mr Dallas proposed a table of costs on a 2B basis with a 50 per cent uplift, amounting to a total of $24,557.25 and disbursements of $1,230.

[11]     On 3 May 2021, the applicants filed a memorandum in reply to the respondents’ costs memorandum, disputing their submissions as to reduced costs (discussed below), and increasing step 11 in the table of costs to two days, with the total costs sought amounting to $25,991.25

Mr Memelink

[12]     Mr Livingston, on behalf of Mr Memelink, proposed a table of costs with a 50 per cent deduction, on the basis that the straightforward nature of this matter meant that the proceedings could be categorised on a 1A basis (with the exception of preparing the application to set aside the statutory demands, which was conceded as being able to be calculated on a 2B basis).

[13]     Mr Livingston also submitted that this Court should reserve its decision on costs until a summary judgment decision is released regarding the loans owed by the applicants to the respondents. According to Mr Livingston, this provided important context to the current proceedings by determining whether or not the statutory demands were in respect of funds owed by the applicants to the respondents, or not.

[14]     In essence, Mr Livingston set out the position of the respondents opposing the costs award on three grounds.

[15]     Firstly, the costs award sought by the respondents was excessive. The hearing lasted 25 minutes and concerned a matter where no notice of opposition or submissions had been filed – with the respondents maintaining that at all relevant times that the statutory demands were withdrawn. These proceedings were relatively simple, and therefore justified a calculation under the 1A band, rather than 2B. Attendances and memoranda in respect of what Mr Livingston characterised as an unopposed application could be conducted by junior counsel, within a comparatively short period of time, while a number of steps on the applicants’ cost table could be removed or reduced due to the simplicity of the claim.

[16]     Secondly, Mr Livingston sought reduction of the costs award under r 14.7 of the High Court Rules, for several reasons. The first of which was that Mr Haines had effectively added Mr Dallas to the proceedings as figurehead in order to give him the ability to claim costs, and that Mr Haines in fact carried out the majority of the work throughout the proceedings. According to Mr Livingston, to award undiscounted costs in these proceedings would effectively amount to an award of costs for litigation steps performed by a non-lawyer. It was further submitted that a reduction in costs was justified on the basis that the respondents were victims of Mr Haines, in that he had defaulted on his obligations to repay funds that he received through the assistance of the respondents. It was also submitted that the applicants breached the requirements of natural justice through their failure to give notice to Mr Bassett-Burr as a non-party during the last proceedings, which led to an appeal to the appellate Courts, resulting in an unjust expense for the respondents.

[17]     Thirdly, Mr Livingston contended that if ETB Realty Ltd v Eastlight Asset Trading No 3 Ltd was to be applied in this case, then only the steps applied in that case (“filling an application and supporting affidavits” and “filing a memorandum for the first call”) should result in a costs award, with preparation of written submissions and preparation by the applicant of a bundle for the hearings being declined.

[18]     Mr Livingston also sought to distinguish Eastlight from the circumstances of the current case, submitting that in Eastlight, statutory demands were filed for an unmeritorious debt, where is this case, the applicants were in fact facing summary judgment for their outstanding loans, and Mr Haines was facing disgraceful conduct charges for his actions as the respondents’ lawyer.

Relevant law and analysis

[19]     The facts and relevant  law of Eastlight were set out in my judgment of      30 August 2019:6

In circumstances where statutory notices of demand have been improperly issued and have been set aside by the Courts, there have been cases where a third party who has caused the notices to be issued, has been held liable for costs personally. That occurred in the case of ETB Realty Limited v Eastlight Asset Trading No 3 Limited. In that case, a director of Eastlight, Mr Kooiman, had prepared the notice on behalf of Eastlight, and arranged for its service. Mr Kooiman subsequently received legal advice and immediately instructed his lawyer to withdraw the statutory demand.

The company upon which the notice was served, pursued an application for increased costs, namely a 50 per cent uplift on 2B calculations. The order was sought against both Eastlight and Mr Kooiman, as a non-party.

The Court held that the statutory demand was appropriately categorised as being “ill-advised”. The Court said that justified an increase in costs. The Court relied on the decision in Norwich Properties Limited v Mark Gray Architects, where the Court had said:

[31] It is not uncommon for this Court, when considering an uplift over scale costs, to order a 50 per cent uplift on a 2B calculation. The Court views such an approach as fitting well with the intention of the Rules Committee, when the daily recovery rates of the High Court Rules are revised, to reflect approximately two-thirds of what might be considered a reasonable fee between solicitor and client.

The Court determined that the uplift sought was appropriate.

6      At [39]-[42].

[20]     In Summer Construction Ltd v Bakker, Associate Judge Gendall awarded uplifted costs on a 2B basis, following the respondents unsuccessful issuing of statutory demands on the applicant, their opposition to setting aside those statutory demands, and their failure to respond to a Calderbank offer by the applicant after the statutory demand was issued.7 As noted by Mr Dallas, Associate Judge Gendall observed:8

There is no doubt from the authorities that the Court views seriously any decision taken by a party to proceed with an inappropriate statutory demand in the face of a warning issued by an applicant company. This is particularly the case where, as here, settlement offers under r 48G are made. Such situations in the past have often resulted in awards of increased costs being made – see Pramukh Enterprises Ltd v Johal Enterprises Ltd (HC AK, 1 July 2004, CIV-2004-404-1870, Associate Judge Lang); The Ingleby Company Ltd v Rodal Consultants Limited (HC AK, 4 September 2003, CIV-2003-404- 2928, Master Lang); Ordeal Enterprises Ltd v Callan Healthcare Properties Ltd  (HC  AK,  31  March  2003,   M1552/IM02,   Master   Lang)   and  Ebert Construction Ltd v Advanced Windows Ltd (HC AK, 22 February 2001, M105/IM01, Master Gambrill).

[21]     Mr Dallas also referred to the similar approach taken in Four Avenues, where Associate Judge Matthews, again due to a lack of response by the respondent to the applicant following a statutory demand, awarded costs on a 2B basis uplifted by 50 per cent, applying Summer Construction:9

The Court has made its position in relation to the use of statutory demands where debts are in dispute very clear over many years. On this occasion the respondent's failure to engage with the applicant in relation to the claimed dispute, and its decision to withdraw the demand only after the third request, and after the applicant had been put to the expense of filing an application in a statutory environment imposing a very tight deadline for doing so, direct the Court to award costs against the respondent, and in my opinion in the circumstances outlined an  uplift  of  50  per  cent  is  justified,  as  in Summer Construction Ltd v Bakker.

[22]     Overall, as I signalled in my last judgment, I reject Mr Livingston’s submission that the application to set aside the statutory demands was wholly unopposed by the respondents. At [14]-[18] of that judgment, I noted that while Mr Memelink did eventually withdraw the statutory demands (after the application to set them aside had been filed), no notice of opposition was filed in relation to the application despite, as

7      Summer Construction Ltd v Bakker HC Wellington CIV-2006-485-1499, 10 November 2006.

8 At [29].

9      Four Avenues Property Group Ltd v Higgs Construction Ltd [2016] NZHC 1202.

noted by Cull J, Mr Memelink appearing to oppose that implication before Her Honour on 1 July 2019.

[23]     In the context of costs, it is also relevant that the respondents failed to comply with Cull J’s timetable directions requiring them to file a notice of opposition, and after the close of business on 29 August 2019 (at 10:45pm and 2:06am), the day before the hearing, filed a large quantity of documents with little relevance to the hearing. This behaviour put the applicants to needless inconvenience.

[24]     I consider that the position of the Courts on uplifting costs awards where the respondent has filed a statutory demand that lacks merit and have ignored or delayed requests to withdraw those demands, is sufficiently clear to justify an uplift in costs in this case.

[25]     I do not accept that there is any basis for reserving the question of costs as sought by Mr Livingston. An award of costs should reflect the issues arising in the proceeding in respect of which the costs award is made rather than some other set of proceedings. The concerns that I have in relation to Mr Livingston’s client that I have set out above will not be addressed by whatever decision is made in the summary judgment proceedings referred to.

[26]     None of the other grounds advanced by Mr Livingston justify reducing or discounting the award of costs.  There is no evidential basis for the assertion that   Mr Haines had effectively added Mr Dallas to the proceedings as a figurehead, nor is there any justification for the claim that in relation to the proceedings in respect of which the costs are awarded that the respondents were victims of Mr Haines. The reality is that the respondent choose to issue notices and commence proceedings in circumstances where it clearly should not have done so and persisted well past the point when the notices should have been withdrawn.

[27]     Therefore, I consider that a costs award against the respondents should be granted with an uplift of 50 per cent.

[28]     However, there is one aspect of the application by Mr Dallas that needs comment and this is the request for costs in relation to preparing the costs application. There appears to be some judicial divergence as to whether costs can be awarded for such costs applications.10 However, the Courts appear to have indicated that, particularly where costs applications are complex, an application for costs should be treated no differently for costs purposes from an ordinary interlocutory application.11

[29]     In this case, despite the case going up to the appellate Courts, the application for costs does not appear to be particularly complex in itself and has been heard on the papers. Therefore, I consider it appropriate to reduce the time band for costs under step 11 of sch 3 of the High Court Rules, from two days, to 0.8 days, to reflect costs only for the memorandum for the first case management conference and the memorandum opposing adjournment, but removing the 11 March 2021 memorandum for timetabling as to costs memoranda, and the following two memoranda concerning costs of 6 April 2021 and 3 May 2021. This results in costs of $1,912 for that step.

[30]     Calculating the costs on a 2B basis, taking into account the reduced time period for step 11, results in 6.85 days, and a total of $14,459.50, with an uplift of $7,229.75, leading to a final total of $21,689.25.

Result

[31]     Costs of $21,689.25 and disbursements of $1,230 are awarded to the applicants.

[32]     Two other issues should be briefly noted here. Firstly, attached to the respondents’ 23 April 2021 memorandum of costs was a transcript of the 30 August 2019 hearing. It is unclear as to whether this transcript was sourced through the Senior Courts (Access to Court Documents) Rules 2017, or whether it was (as alleged by Mr Dallas), from a recording taken by Mr Memelink. Mr Dallas protested against the use of this document and referred to the warning of the Court of Appeal in Orlov v

10  Ace  Structural  Ltd  v  Green  [2019]  NZHC  2094  at  [27];  and  Prattley  Enterprises  Ltd  v  Vero Insurance New Zealand Ltd [2017] NZHC 1599 at [39].

11  See  Body  Corporate  Administration  Ltd  v  Mehta  (No  4)  [2013]  NZHC  213  at  [85];  Prattley Enterprises Ltd v Vero Insurance New Zealand  Ltd, above n 10, at [39]; and Sealegs International Ltd v Zhang [2020] NZHC 785 at [18]-[19].

Chief Executive of the Ministry of Social Development, where the Court took a “dim view” of the conduct of recording its hearings. I repeat that warning here for the benefit of Mr Memelink:

The Judges of all superior courts have an inherent jurisdiction to control the conduct of hearings in the courtroom. The taking of sound recordings is very much a matter within the control of the Judge or the Judges hearing a case. It will be apparent to even the most inexperienced lawyer that the recording of the proceedings of the Court hearing may only be made with the permission of the Judge or Judges concerned.

Ms Forester

[33]In the concluding paragraph of his submissions, Mr Livingston submitted that:

…the respondents to these proceedings should be updated under High Court Rule 4.56 to Harry Memelink and Cisca Johnette Forester as trustees of the Link Trust (No. 1).

[34]     This submission appears to be on the basis that Ms Forester has now become a trustee in replacement or substitution for Lynx Trustees Limited.

[35]     Under r 4.56 of the High Court Rules, an order to join a party does not require an application and may be made on terms that the Court considers just. However, McGechan on Procedure does note:12

In Standard Optical Co of Australasia Ltd (in receivership) v Charmant Optical Co Ltd HC Wellington CP1007/90, 14 May 1992, the Master observed that serving the parties proposed to be joined is a sensible course and avoids the not uncommon subsequent application by joined defendants to be struck out. However, there is no compulsion to serve the parties proposed to be joined, and in appropriate cases an applicant might oppose their proceeding being heard.

By analogy with r 4.12 (service on third party), service of copies of the notice of proceeding, the statement of claim, statements of defence of existing defendants, and list of documents at a minimum is appropriate. In Kirkland v Jaco’s Timber Co Ltd HC Dunedin CP45/97, 1 May 1998, filing an amended statement of claim before an order of joinder was considered premature while annexing a draft amended statement of claim to the joinder application could be helpful.

12     McGechan on Procedure (online ed, Thomson Reuters) at HR4.56.02.

[36]     There was no indication whether Ms Forester was aware that it was proposed that she be joined as a party to these proceedings, or whether she consented to or opposed such a course.

[37]     More importantly, the relevant parties to these proceedings are the trustees of the Link Trust (No. 1) at the time of the events which led to the application and the hearing of the application itself. There is no evidence to suggest that Ms Forester was a trustee of the Link Trust (No. 1) at that time. Accordingly, there is no basis for joining her as a party.

Churchman J

Solicitors:

Livingston & Livingston, Wellington Counsel: J D Dallas, Wellington