Isola Vineyards Limited v Mainzeal Property and Construction Limited (in receivership and in liquidation)

[2015] NZHC 1699

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2015-404-000285 [2015] NZHC 1699

BETWEEN

ISOLA VINEYARDS LIMITED

Applicant

AND

MAINZEAL PROPERTY AND CONSTRUCTION LIMITED (IN REC AND IN LIQ)

First Respondent

KING FAÇADE LIMITED (IN LIQ) Second Respondent

THE REGISTRAR OF COMPANIES Third Respondent

Hearing:	(On the papers)
Counsel:	C Hadlee for Applicant M Pascariu for First and Second Respondents J Cairney for Third Respondent
Judgment:	23 July 2015

COSTS JUDGMENT OF VENNING J

This judgment was delivered by me on 23 July 2015 at 11 am, pursuant to Rule 11.5 of the High

Court Rules.

Registrar/Deputy Registrar

Date……………

Solicitors:           Lee Salmon Long, Auckland

Minter Ellison Rudd Watts, Auckland
Meredith Connell, Auckland

Copy to:            D Chisholm QC, Auckland

ISOLA VINEYARDS LTD v MAINZEAL PROPERTY AND CONSTRUCTION LTD (IN REC AND IN LIQ) [2015] NZHC 1699 [23 July 2015]

[1]      This proceeding is at an end. The one remaining issue is costs.

[2]      Isola  Vineyards  Limited  (IVL)  commenced  this  originating  application seeking directions for:

(a)       the release of all funds currently held on trust by Russell McVeagh pursuant to cl 3 of a Deed dated 17 June 2013;  and

(b)directing that IVL be released from all undertakings given to the first, second and third respondents.

[3]      The application was opposed by the first and second respondents.  The third respondent abided the decision of the Court.

[4]      After IVL issued these proceedings, the first and second respondent issued substantive proceedings which IVL accepts may engage the undertakings the subject of this proceeding.  In light of those proceedings IVL determined not to proceed to the fixture of this application.  It accepts it would have been pointless to do so.  The scheduled fixture was vacated by consent.

[5]      It does not appear the application has yet been formally withdrawn.   To clarify the position I dismiss it but reserve the issue of costs.

[6]      I now deal with the issue of costs on the basis of counsels’ memoranda.

[7]      IVL seeks costs on the basis that it was required to bring these proceedings to effectively trigger the recent application filed by the first and second respondents. At the time it made the application its assets had been frozen for almost two years. There were no live proceedings against it.

[8]      IVL  seeks  costs  calculated  on  a  2B  basis  including  the  costs  of  the memorandum and disbursements.

[9]      The first and second respondents oppose IVL’s application for costs.  They

submit they should have costs awarded to them.   They argue IVL has effectively

discontinued these proceedings and should be liable for their costs in relation to the proceedings.   They submit that IVL was aware of the particulars of the intended claim.  It was canvassed fully before the Court of Appeal and, further, the Court of Appeal (and High Court) had relied on the undertakings given by IVL in dealing with the application to liquidate IVL. The first and second respondents seek costs.

[10]     In this case the Court’s  discretion in relation to the issue of  costs is an important factor given the considerable background and history to the current proceedings.

[11]     I do not accept the respondents’ submissions that the present situation is equivalent to the case of a plaintiff who discontinues without the merits being determined.    IVL was  faced  with  the  situation  that  its  assets  were  frozen  and unavailable to it by reason of the deed providing for moneys to be held by Russell McVeagh and the undertaking.  The assets were frozen even though there were no extant proceedings before the Court to have any issues between IVL and the first and second respondents resolved in order to trigger the release of the funds.   It was reasonable for IVL to take steps to trigger the release of the funds and to place pressure on the first and second respondents to file the proceedings to resolve the issue, particularly after giving notice of its intention to do  so.   The originating application was an efficient and practical way to do so.

[12]     While  I accept  there  is  some  force  in  the  first  and  second  respondents’ position that IVL may have been aware of the general nature of the claim the first and  second  respondents  intended  to  pursue  against  it  because  of  the  previous hearings, (particularly the discussion before the Court of Appeal), nevertheless the short point is that the first and second respondents had not issued any such proceedings.

[13]     IVL’s solicitors wrote to the defendants’ solicitors on 18 November 2014 requesting release of the undertaking as no proceedings had been issued.  The first and  second  respondents’  solicitors  responded  by  letter  of  12  December  2014 advising that the liquidators of the first and second respondents intended to seek

recovery of the loss suffered by the second respondent and the proceedings would be

“drafted and filed in due course”.

[14]     IVL then instructed litigation solicitors who wrote again on 16 January 2015 requesting the first and second respondents either consent to the release of the funds or alternatively file and serve the foreshadowed proceedings on or before 30 January

2015.

[15]    A response of 3 February was received in which the first and second respondents’ solicitors advised that the validity of the transactions involving KFL was and remains disputed and that the liquidators will issue proceedings but would not accept a time line in relation to the issue.

[16]     In the circumstances I consider that IVL’s issue of these proceedings on 18

February 2015 was a reasonable step for it to take.

[17]     The  suggestion  by  the  respondents  that  they  were  waiting  for  litigation funding is not a matter of concern to the applicants.

[18]     It follows that I accept it was reasonable for IVL to issue the proceedings to precipitate the response from the first and second respondents.   In response to the issue of these proceedings by IVL the first and second respondents have issued the proceedings.   To that extent IVL has achieved its purpose with the issue of these proceedings in that the issue of the ultimate right to the funds will be resolved.

[19]     I  also  note  IVL initially  offered  for  costs  to  lie  where  they  fell  on  the application.   That offer should have been accepted by the first and second respondents.   Their failure to do so is unreasonable which also supports IVL’s application for costs.

Result/orders

[20]     IVL is to have costs against the first and second respondents calculated on a

2B basis to scale, together with disbursements.

[21]     To  avoid  the  problem  of  the  funds  being  captured  by  the  existing undertakings there will be an order consistent with an order made previously in Mainzeal Property & Construction Limited v Richina Global Real Estate & Ors1 that the costs be payable to Richina Pacific Limited, the party that is funding IVL’s legal costs.  I accept such an order is also consistent with the provisions of the High Court

Rules, particularly rr 14.2 and 1.2.

Venning J

1      Mainzeal Property & Construction Limited v Richina Global Real Estate & Ors [2014] NZHC

3104.