Hansa Limited (in liquidation) v Hibbs

[2018] NZHC 1832

IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY

I TE KŌTI MATUA O AOTEAROA ŌTAUTAHI ROHE

CIV-2016-409-001214

[2018] NZHC 1832

BETWEEN

HANSA LIMITED (IN LIQUIDATION)

First Plaintiff

AND

DAMIEN GRANT AND STEVEN KHOV

as liquidators of Hansa Limited (In Liquidation)

Second Plaintiff

AND

PAUL CLIFFORD HIBBS

First Defendant

AND

CAMERON GLADSTONE INVESTMENTS LIMITED

Second Defendant

AND

HALDON RANGE VINEYARDS LIMITED

Third Defendant

AND

CONTAINERS DIRECT LEASING LIMITED

Fourth Defendant

Hearing:

23 July 2018 (On the papers)

Appearances:

A S Botterill and J Wong for the Plaintiffs

C Whitnall QC and R Kay for the Third Defendant

Judgment:

23 July 2018

JUDGMENT OF DUNNINGHAM J

HANSA LIMITED (IN LIQUIDATION) v HIBBS [2018] NZHC 1832 [23 July 2018]

Introduction

[1]                  Haldon Range Vineyards Limited (Haldon) succeeded in its application against Hansa Limited (in liquidation) (Hansa) to have a judgment obtained by default against it set aside.1

[2]                  While I expressed a tentative view at the conclusion of the judgment that costs should lie where they fall, I reserved costs. Haldon now applies for costs calculated on a 2B basis. That is opposed by Hansa which says that my preliminary view that costs should lie where they fall should prevail.

[3]                  This judgment determines the issue of costs in light of the parties’ respective submissions.

Background

[4]                  The judgment obtained by Hansa against Haldon was one of various steps taken to unravel the affairs of companies related to the first defendant, Mr Hibbs, and to recoup funds that had been misappropriated by Mr Hibbs. Hansa’s liquidators brought proceedings against Haldon, seeking repayment of $167,914.33 as monies had and received over the period 9 April 2009 to 21 January 2015. Haldon failed to file a statement of defence, despite raising its concerns with the claim with Hansa’s lawyers, and judgment by default was sought and entered.

[5]                  I set aside that judgment on the ground that Haldon had an arguable defence to the claim and that there was, or may have been, a miscarriage of justice. Nevertheless, I indicated that, as Haldon “must share some of the burden and blame for the present circumstances”, costs should lie where they fall.

1      Hansa Limited (in liq) v Hibbs [2018] NZHC 1036.

Submissions

Haldon’s submissions

[6]                  Haldon submits that it is entitled to costs in line with High Court Rules,        r 14.2(1)(a), which sets out the principle that the party who fails in a proceeding or interlocutory application should pay costs to the party who succeeds. As it succeeded in its application to set aside the judgment, Haldon submits Hansa should be liable for costs, in the usual way.

[7]                  While Haldon acknowledges the Court’s discretion on costs, it submits it is entitled to costs for the following reasons:

(a)Hansa used the default judgment procedure when the demand was not in fact a liquidated demand, as defined in r 15.7;

(b)The claim against Haldon was pleaded with a lack of reasonable clarity, incorporating pleadings which related to equitable claims into a claim for monies had and received;

(c)After judgment had been obtained, Haldon raised its concerns with Hansa about the legitimacy of the judgment. Despite this, when Haldon applied for the judgment to be set aside, Hansa filed its opposition, resulting in otherwise avoidable costs to Haldon; and

(d)Haldon was ultimately successful in its application to have the judgment set aside.

[8]                  Haldon thus seeks costs on a 2B basis, particularised in its submissions, amounting to $7,136 and disbursements of $500.

Hansa’s submissions

[9]                  Hansa submits that my preliminary view that costs should lie where they fall should stand, for the following reasons:

(a)Haldon failed to file a statement of defence after it had been served with a statement of claim, despite its claim that it knew it had a defence;

(b)Haldon only corresponded with Hansa after the judgment was obtained and served against it; and

(c)An award of costs in favour of Haldon would be contrary to the principle of fairness and my finding that Haldon “must share some of the burden and blame for the present circumstances”.

Analysis

[10]              As discussed in Young v KPSS New Zealand Ltd, “[a] party seeking to set aside a judgment entered because of its own default is seeking the Court’s indulgence. Thus, costs are generally award to the other side even if the application is granted”.2 In making this statement French J cites Doogue J in Callis v Ward McCulloch:3

In the ordinary course, when a party seeks the indulgence of the Court because of its own default, the other party would be entitled to costs. That is not, however, the case here, where the defendants have had to apply to the Court because of the plaintiff’s error. On the other hand, if the defendants had filed their defence within the appropriate time, the difficulties would never have occurred. This is not a case, therefore, where it is appropriate that there be any order as to costs, and neither party is ordered to pay costs.

[11]              The situation described here by Doogue J bears marked similarity to the issue at hand. There are other cases where both parties have been at fault in the setting aside of a judgment obtained by default, and no costs orders were made.4

[12]              Nothing in the parties’ submissions has altered my preliminary view that both parties are at fault for the costs incurred in this proceeding. Hansa filed a statement of claim which, in some respects, was deficient. Haldon neglected to defend that, despite its view it had a defence. In the end, it had to seek the Court’s indulgence to have the judgment set aside. When Haldon filed proceedings to have the judgment set aside, Hansa elected to defend that claim despite being made aware of the reasons for the

2      Young v KPSS New Zealand Ltd [2012] NZHC 305 at [3].

3      Callis v Ward McCulloch (1993) 7 PRNZ 175 (HC) at 176.

4      See, for example, Owens v Coleman [2017] NZHC 2575.

application, including that the claim was not amenable to the default judgment procedure.

[13]              Ultimately, I have a discretion as to costs.5 Reasons justifying a refusal to make an order for costs include the catch all “some other reason … which justifies the court refusing costs”.6 I am satisfied that the overall justice of this case, bearing in mind that Haldon was seeking the indulgence of the Court but was successful in doing so, points to costs lying where they fall, and I so order.

Solicitors:
C Whitnall QC

Copy To:

Waterstone Insolvency, Auckland

5      Rule 14.1 High Court Rules.

6      Rule 14.7.