Ismail v DDL Homes Ormiston Limited (in receivership and liquidation)

[2022] NZHC 3118

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV2021-404-2442

[2022] NZHC 3118

BETWEEN

MOHAMMED IRSHAD ISMAIL and NEETU NIRVANA ISMAIL
Plaintiffs

AND

DDL HOMES ORMISTON LIMITED (IN RECEIVERSHIP AND LIQUIDATION)

Defendant

CIV-2022-404-110

UNDER

Section 143 of the Land Transfer Act 2017

BETWEEN

MOHAMMED IRSHAD ISMAIL and NEETU NIRVANA ISMAIL

Plaintiffs

AND

DDL HOMES ORMISTON LIMITED (IN RECEIVERSHIP AND LIQUIDATION)

Defendant

Hearing:	On the papers
Counsel:	A Kashyap and SCR Raju for the Plaintiffs in both proceedings M D Arthur for the Receivers in both proceedings
Judgment:	28 November 2022

JUDGMENT OF GAULT J

(Costs)

This judgment was delivered by me on 28 November 2022 at 4:00 pm pursuant to r 11.5 of the High Court Rules 2016.

Registrar/Deputy Registrar

……………………………………

ISMAIL v DDL HOMES ORMISTON LIMITED [2022] NZHC 3118 [28 November 2022]

[1]        The plaintiffs in these two proceedings seek costs following their discontinuance of the proceedings.

Background

[2]        On 10  February  2021,  the  plaintiffs,  as  purchasers,  and  the  defendant,  as vendor, entered into an agreement for sale and purchase of a parcel of land (Lot 14) in the subdivision of the land at 397 Ormiston Road, Flat Bush, Auckland.

[3]        By notice dated 7 December 2021, the defendant purported to cancel the agreement pursuant to an alleged right of cancellation under s 225(1) of the Resource Management Act 1991.

[4]On 10 December 2021, the plaintiffs lodged a caveat.

[5]        On 23 December 2021, the plaintiffs commenced substantive proceedings (CIV-2021-404-2442) alleging that the defendant had repudiated the agreement and seeking specific performance of the agreement or damages in lieu.

[6]On 1 February 2022, the defendant applied to lapse the caveat.

[7]        On 17 February 2022, the plaintiffs filed an originating application (CIV-2022-404-110) seeking an order to sustain the caveat over the property.

[8]        On 25 May 2022, the parties executed a deed of settlement conditional on the defendant reaching certain arrangements with its mortgagee. The defendant failed to reach the required arrangements and the deed of settlement was terminated.

[9]On 3 June 2022, the defendant was placed into receivership.

[10]      On 5 June 2022, the defendant was placed into voluntary administration, ending on 12 July 2022.

[11]On 12 July 2022, the defendant was placed into liquidation.

[12]On 1 September 2022, the plaintiffs discontinued both proceedings.

[13]      The receivers have continued to progress the subdivision. Settlement of the agreement for sale and purchase may proceed. The receivers have not taken steps to remove the caveat. Instead, they have sought the plaintiffs’ consent to deposit of the survey plan(s), registration of relevant instruments and other dealings with the title required to complete the subdivision.

Costs sought

[14]      The plaintiffs say that a change in the defendant’s position following receivership and liquidation has resulted in the plaintiffs achieving the relief sought in both proceedings. They seek 2B  costs  and  disbursements  totalling  $19,320.50. The plaintiffs do not seek costs for the period since June 2022.

Receivers’ position

[15]      Mr Arthur, for  the  receivers,  filed  a  memorandum  to  assist  the  Court. He submitted that any costs against the defendant would be an unsecured obligation of the company, would not be enforceable against the mortgagee and so cannot be taken into account at any settlement of the sale of the property by the receivers or the mortgagee. On that basis, the receivers expressed no comment on whether and in what sum costs ought to be awarded.

Discussion

[16]      On a discontinuance, there is a presumption in favour of awarding costs to a defendant against whom a proceeding has been discontinued, but it may be displaced if there are just and equitable circumstances not to apply it.1 As the Court of Appeal has said,2 the Court does not lightly allow a plaintiff to displace the presumption, but the Court is prepared, in a clear case, to recognise that the plaintiff may have achieved its end by other means or otherwise discontinued for reasons not connected to the merits. Also, the Court may consider, in a clear case, why the parties brought and

1      Kroma Colour Prints Ltd v Tridonicato NZ Ltd [2008] NZCA 150 at [12].

2      Powell v Hally Labels Ltd [2014] NZCA 572 at [20]–[24]. See also Morley (as trustees of the Waimana Trust) v Browne [2019] NZHC 3170 at [13].

defended  the  proceeding  and  whether  steps  taken  in   it   were   reasonable.   This recognises that the interests of justice occasionally may require that such matters be taken into account. It is not to invite a general inquiry into the reasonableness of the parties’ conduct. A plaintiff cannot generally displace the presumption by showing that it had some merit on its side. The Court ordinarily refuses to consider the merits unless they are immediately apparent. The reluctance to enquire into the merits or conduct reflects the objectives of the rules, which allow a plaintiff by discontinuance to end its proceeding unilaterally and fix its liability for costs at that point in a predictable way. To conduct a post-discontinuance inquiry into the merits or the reasonableness of the parties’ conduct is ordinarily contrary to these objectives.

[17]      Here, I recognise that the plaintiffs have faced a change of circumstances such that they no longer require the Court’s intervention. The receivers have been working towards completing the agreement for sale and purchase, which is consistent with the plaintiffs’ position in relation to the agreement and caveat. In that sense, the plaintiffs have achieved their end by consent rather than judgment and I consider they have displaced the presumption. But it does not necessarily follow that the defendant should pay costs. A post-discontinuance inquiry into the reasonableness of the parties’ conduct in order to assess the plaintiffs’ claim for costs would ordinarily be inconsistent with the objectives of the cost rules.

[18]      However, entitlement to costs in the caveat proceeding is relatively easily ascertained given the nature of the caveat application, the interim order granted, the relatively low arguable case threshold for a final order, the fact that the receivers have not disputed the caveat and that they  and  the  liquidators  do  not  oppose  costs. The position is less self-evident in relation to the substantive proceeding but the receivers’ position in relation to completion also indicates that they do not maintain the defendant’s earlier stance. Given that and in the absence of any opposition from the liquidators, I consider the plaintiffs are entitled to 2B costs against the defendant company in both proceedings.

Result

[19]The plaintiffs are entitled to 2B costs and disbursements of $19,320.50.

Gault J

Solicitors:

Mr A Kashyap, Solicitor, Auckland

Mr D Hoskin, Steindle Williams Legal, Auckland Mr M D Arthur, Chapman Tripp, Auckland