Jodrell Holdings Limited v USAR Apartments Limited
[2015] NZHC 1100
•21 May 2015
IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY
CIV-2014-485-7635 [2015] NZHC 1100
BETWEEN JODRELL HOLDINGS LIMITED
Intended Plaintiff
AND
USAR APARTMENTS LIMITED Intended First Defendant
RAMAN KUMAR SARIN Intended Second Defendant
On the papers Counsel:
D D Vincent for Intended Plaintiff
J Long for Intended First and Second DefendantsJudgment:
21 May 2015
COSTS JUDGMENT OF CLIFFORD J
Introduction
[1] The intended defendants, USAR Apartments Ltd (USAR) and Raman Kumar Sarin, apply for indemnity costs against the intended plaintiff, Jodrell Holdings Ltd (Jodrell) in relation to Jodrell’s application for pre-commencement discovery, of
$43,990.27 or, alternatively, scale costs of $19,701.
Background
[2] Jodrell applied for pre-commencement discovery against USAR and Mr Sarin on 18 June 2014.
[3] The grounds for that application were that Jodrell intended to sue USAR for breach of contract in connection with Jodrell’s purchase of a business known as
Quest Wellington from USAR in December 2009. Mr Sarin had been the director of
JODRELL HOLDINGS LTD v USAR APARTMENTS LTD [2015] NZHC 1100 [21 May 2015]
USAR who Jodrell had dealt with most extensively. Jodrell asserted in its notice of application that it was impractical and/or impossible for it to formulate its claims against the intended defendants without receipt of the documentation sought.
[4] Notwithstanding that assertion, and reflecting the well-recognised tension between the basis for such an application and the practice that has grown up, Jodrell accompanied that application with a draft statement of claim. In particular, in that draft statement of claim, Jodrell alleged that USAR and Mr Sarin had manipulated pre-sale turnover figures in the following manner:
17.For the period between 1 April 2007 and 31 March 2008 turnover for the First Defendant was increased by the following steps:
17.1 Additional occupancy was paid for by the First Defendant or a person authorised by the First Defendant using a credit card;
17.2 The credit card was used to pay for additional nights for genuine customers when those guests did not stay for those additional nights or for fictitious customers;
17.3 Money was actually received by the First Defendant and was recorded as turnover for the financial accounts;
17.4 GST returns and financial accounts were prepared on the basis of those payments being turnover;
17.5 The number of the credit card and all identifying details of it were removed from the bank statements.
[5] As a result, the actual turnover of the business of between $1.6 and $1.7 million was represented in information provided to Jodrell as being $2.1 million and was warranted to be such by USAR. That warranty was relied on when the purchase price of $1.215 million was paid. The business, in fact, had been making losses and was worthless. Jodrell sought damages in the amount of the purchase price it had paid and the profits it had reasonably expected to make on the basis of the information provided.
[6] That application for pre-commencement discovery has, however, never been considered by the Court. USAR and Mr Sarin, once they received that application, agreed to provide documentation voluntarily. The original hearing date of 21 July
2014 was adjourned to allow that process to continue. Consent orders were made in terms of memoranda filed detailing the arrangements that were agreed to then and
subsequently. At one point the matter was set down for a call on 13 October. One joint memorandum recorded that “costs are reserved”.
[7] On 8 October 2014 counsel for Jodrell filed a memorandum seeking orders against a non-party and in respect of what it described as “residual documentation” held by USAR and Mr Sarin. Counsel’s memorandum stated:
6.It is requested that the Court make an order that the First and Second Intended Defendants file an affidavit stating whether the following documents are in their control and, if they are no longer in their control, when they ceased having control and who does now exercise control:
6.1 The printed reservation recording forms for bookings at
Quest Wellington on Hunter Street, Wellington, between
1 April 2007 and 31 March 2008;
6.2Letters, facsimiles, emails, notes of telephone calls and any other electronic or paper documents or notes in support of all reservations at Quest Apartments, Hunter Street, Wellington, between 1 April 2007 and 31 March 2008.
6.3Any other electronic or paper documents recording the manner in which such bookings were paid for and, where relevant, the number of the credit card used.
7. Those orders will resolve matters with the Intended First and Second
Defendants.
[8] Counsel for USAR and Mr Sarin replied to that memorandum the next day. He said:
2.While the Defendants have adopted a transparent and cooperative approach to this point, their position has always been that the application is misguided and without basis. The cost burden that the Intended Plaintiff seems to expect the Defendants to bear is a matter that continues to be left unaddressed by the Intended Plaintiff.
3.In the circumstances, the Defendants are left with little option but to formally oppose the orders sought. Given the admitted impecuniosity of the Intended Plaintiff, a counter-application for security for costs is to be made.
[9] The memorandum asked for the entire application to be re-listed for mention in six weeks, said that within that time USAR and Mr Sarin would file and serve their notice of opposition and counter-application, with supporting affidavits, and
sought a half day fixture for the “entire application” to be heard. On 13 October
2014, Mallon J made “orders by consent” in terms of that memorandum.
[10] On 20 October 2014, USAR and Mr Sarin applied for security for costs in the amount of $20,000. The same day they filed their notice of opposition to Jodrell’s (amended) application of 8 October 2014 for pre-commencement discovery.
[11] On 20 November 2014, Jodrell filed its notice of opposition to the application for security for costs. That application recorded, amongst other things:
As the Intended Plaintiff no longer seeks an order for pre-commencement discovery against the Intended Defendants, there is no basis nor any need for an order for security for costs.
[12] As best as I can tell, that notice of opposition was not accompanied by a memorandum of counsel or any further affidavit.
[13] On 26 November 2014 counsel for Jodrell did file a further memorandum. That memorandum did not refer to the notice of opposition to the application for security for costs, but rather to the discovery application of 8 October 2014. In regard to the application for security for costs, counsel wrote:
10.In respect of the Intended Defendants’ Application for security for costs, the following directions are sought:
10.1That the Application for security for costs be adjourned until the documentation has been received by the Intended Plaintiff from Paymark and Wotif [non-parties against whom by consent orders were obtained].
10.2That the Intended Plaintiff also has leave to file further evidence, if it wishes, before the next call of the matter. The scope of evidence is able to include reply evidence (in respect of the Intended Defendants’ recent affidavits), but also can refer to any further documentation to be received from Paymark and/or Wotif.
10.3The determination of the security for costs issue is to be on the papers (at a later stage); with the parties given leave to file written submissions for the Court’s consideration.
11. For completeness, Counsel confirms that the Intended Plaintiff is not seeking any further documentation from the Intended Defendants at this stage.
[14] Continuing the “ping pong” of memoranda in this matter, counsel for USAR and Mr Sarin filed a further memorandum dated 27 November 2014. Not surprisingly, USAR and Mr Sarin were confused, given the terms of the orders sought as recently as 8 October 2014 and the later statement that no further documentation was sought. Counsel summarised the intended defendants’ position as follows:
4.The Defendants provided substantial voluntary disclosure on the basis that their right to costs on the application and the voluntary disclosure exercise was reserved. They were not prepared to provide the “industry standard paper trail” (an onerous exercise) without a proposal from the Intended Plaintiff as to costs.
5.The Defendants sought a costs proposal from the Intended Plaintiff, who ignored this request and instead sought further orders from the Court (as set out in Mr Vincent’s 13 October 2014 memorandum of counsel).
6. The Defendants were left with little option but to oppose and seek
security for the costs on the Intended Plaintiff’s application.
7.The Intended Plaintiff apparently now considers that the application as against the Defendants is resolved. If this is the case, then it is for the Intended Plaintiff to clearly and unambiguously withdraw its application against the Defendants.
8. The issue of the Defendants’ costs will then need to be addressed.
The determination of the costs issue on the pre-commencement
discovery application will dispose of the Defendants’ security for
costs application.
[15] As the unsuspecting Duty Judge, I presided at a 1 December 2014 scheduled call of this matter.
[16] In the minute of that call, I made orders for discovery against a non-party, and then referred to matters as they stood between Jodrell and USAR and Mr Sarin. I incorrectly referred to the 17 October 2014 application as one for costs, and not as it was an application for security for costs. I can only infer that I made that mistake on the grounds, amongst other things, of the comment in counsel’s memorandum of
27 November 2014 that the determination of that costs issue would dispose of USAR and Mr Sarin’s application for security for costs. Be that as it may, I set down a hearing of the application for costs for 26 February 2015, and reserved leave for Jodrell to apply for an adjournment of that hearing if it was making substantive
progress in formulating its claim by reference to further information it had sought. I
received no such application.
[17] I note that at the call on 1 December 2014 I had not reviewed in any great detail the lengthy affidavits filed by Jodrell, nor the content of its draft statement of claim which was an attachment to one of those affidavits.
[18] Subsequently, I made orders accordingly in terms of a joint memorandum of counsel asking for the issue of costs to be decided on the papers.
Analysis
[19] This is a very messy situation. On the one hand, Jodrell in my view had no basis to apply for pre-commencement discovery. Its draft statement of claim demonstrates that. At the same time, USAR and Mr Sarin voluntarily provided information. I do not see how someone can voluntarily provide information on the one hand, and yet on the other purport to reserve the question of costs on an application for pre-commencement discovery that, because of that voluntary action, may never be heard.
[20] I do not know whether Jodrell intends to file its claim.
[21] The costs that USAR and Mr Sarin have incurred seem high: I can only infer they reflect work voluntarily undertaken to provide information to Jodrell.
[22] By the same token, I think USAR and Mr Sarin did take a proper step when they filed their application for security for costs.
[23] The submissions that counsel have filed contain detailed but contested narratives of events. I am not in a position to resolve those matters of factual dispute, as I would have thought would have been apparent to counsel.
[24] In these circumstances, I will deal with the question of costs on this application as if it were being made by USAR and Mr Sarin following a successful application for security for costs.
[25] Approaching the matter “in the round” I would award USAR and Mr Sarin scale 2B costs on a successful interlocutory application involving a half day hearing,
namely:
Step Allowance
(Days)
Filing 0.6 Preparation of submissions 1.5 Preparation of bundle 0.6 Appearance 0.5 Sealing 0.2 Total 3.4
[26] Recognising that, at the outset, Jodrell applied without basis for pre- commencement discovery, I increase that award by doubling it. That is, Jodrell will
pay USAR costs of $13,532 (6.8 x $1,990).
Clifford J
Solicitors:
Thomas Dewar Sziranyi Letts, Wellington for Jodrell. Lee Salmon Long, Auckland for USAR and Mr Sarin.
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