Kookmin Bank v Bourke HC Auckland CIV-2011-470-146
[2011] NZHC 523
•26 May 2011
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV-2011-470-146
BETWEEN KOOKMIN BANK Plaintiff
ANDJOHN BOURKE First Defendant
ANDANTHONY GRANT HARVEY Second Defendant
CIV-2011-404-2186
AND BETWEEN KOOKMIN BANK Plaintiff
ANDCHARIOT WHEEL LIMITED Defendant
Hearing: On the papers
Appearances: Mr B Clarke for plaintiff (in CIV-2011-470-146) Mr N Moffatt for plaintiff (in CIV-2011-404-2186)
No appearance for first defendant (in CIV-2011-470-146)
Mr T Richardson for second defendant (in CIV-2011-470-146) Mr P O'Neill for defendant (in CIV-2011-404-2186)
Judgment: 26 May 2011 at 4:00 PM
JUDGMENT OF LANG J [on costs]
This judgment was delivered by me on 26 May 2011 at 4 pm, pursuant to Rule 11.5 of the High Court Rules.
Registrar/Deputy Registrar
Date……………
KOOKMIN BANK V BOURKE & ANOR HC AK CIV-2011-470-146 26 May 2011
[1] On 12 April 2011 I granted an application by the Kookmin Bank[1] for an order removing a caveat that Mr Bourke and Mr Harvey, the defendants in CIV-2011-470-
146, had lodged against a property situated a short distance outside Rotorua. That
property is known as the Wynn’s Block.
[1] Kookmin Bank v Bourke & Anor HC Tauranga CIV-2011-470-146, 12 April 2011
[2] On 20 April 2011 I granted a similar application by the bank, this time in respect of a caveat registered against the same property by Chariot Wheel Limited, the defendant in CIV-2011-404-2186[2]. Chariot Wheel had lodged that caveat against the title to the Wynn’s Block very shortly after I ordered Mr Bourke’s caveat to be removed. Mr Bourke, the first defendant in CIV-2011-470-146, is the controlling force behind Chariot Wheel Limited.
[2] Kookmin Bank v Chariot Wheel Ltd HC Auckland CIV-2011-404-2186, 20 April 2011
[3] Kookmin Bank now seeks an order requiring Mr Bourke to pay costs in relation to both proceedings on a solicitor-client basis. It also seeks an order that Chariot Wheel Limited be jointly liable in respect of the costs in relation to CIV
2011 44 2186. The bank contends that neither caveat was sustainable, and that it should be reimbursed in full for the expenses that it has incurred in having them removed. It has incurred legal costs amounting to $33,443 in relation to the first proceeding and $7,600 in relation to the second.
[4] Mr Bourke and Chariot Wheel were given the opportunity to make submissions regarding costs, but have elected not to be heard on that issue.
Factual background
[5] The factual background to each proceeding is to be found in the substantive judgments. I do not propose to traverse that background again in this judgment.
[6] The essential point for present purposes is that in CIV-2011-470-146 I determined that Mr Bourke had failed to establish that he had an arguable interest in the property as mortgagee under an unregistered agreement to mortgage. In CIV-
2011-404-2186 I determined that an earlier agreement for sale and purchase between
the bank and Chariot Wheel Limited had been validly terminated when Chariot Wheel Limited failed to complete the purchase of the property. As a result, Chariot Wheel Limited had no caveatable interest in the property when it lodged its caveat.
Jurisdiction
[7] All matters are at the discretion of the Court if they relate to costs[3]. The Court is required, however, to have regard to the principles set out in r 14.2 regarding the determination of costs. To the forefront of these is the principle that a party who fails with respect to a proceeding should pay costs to the party who succeeds[4].
[3] R 14.1
[4] R 14.2(a)
[8] In the present case there can be no dispute that the bank was the successful party in both proceedings. As a result, it follows that it is prima facie entitled to an award of costs in each proceeding. The only issue is whether the Court should award increased or indemnity costs.
CIV 2011-470-146
Indemnity costs
[9] Rule 14.6(4)(a) provides:
(4) The court may order a party to pay indemnity costs if—
(a) the party has acted vexatiously, frivolously, improperly, or unnecessarily in commencing, continuing, or defending a proceeding or a step in a proceeding; or
[10] As counsel for the bank points out, the Court of Appeal recently considered the circumstances in which indemnity costs may be awarded in Bradbury v Westpac Banking Corporation[5]. In that case the Court noted that awards of indemnity costs have been made in the past in proceedings where the party against whom costs are
[5] [2009] 3 NZLR 400
sought has engaged in conduct such as:
(a) The making of allegations of fraud knowing them to be false and the making of irrelevant allegations of fraud;
(b) Particular misconduct that causes loss of time to the court and to other parties;
(c) Commencing or continuing proceedings for some ulterior motive;
(d) Doing so in wilful disregard of known facts or clearly established law;
(e) Making allegations which ought never to have been made or unduly
prolonging a case by groundless contentions i.e. the “hopeless case”.
[11] The bank contends that Mr Bourke has been guilty of each of these types of conduct.
[12] I am not satisfied that Mr Bourke’s conduct in relation to the first proceeding justified an award of indemnity costs. The evidence that he adduced in opposition to the bank’s application fell well short of establishing that he had an arguable interest in the land against which he had lodged his caveat. I also remain suspicious that Mr Bourke’s primary intention in opposing the bank’s application was to prevent the bank from completing the sale of the property to a third party. I do not consider, however, that his conduct in defending the proceeding can be categorised as being so grave as to warrant an award of indemnity costs.
Increased costs
[13] The Court may award increased costs where a party has taken or pursued an unnecessary step or an argument that lacks merit[6]. It may also make an increased award where a party fails without reasonable justification to accept a legal argument[7].
[6] Under r 14.6(3)(b)(ii)
[7] Under r 14.6(3)(b)(iii)
[14] I am satisfied that Mr Bourke ought to have re-examined his position and abandoned his opposition to the application once the bank filed its application. By that stage he should have realised that he was not party to a written agreement to
mortgage. Even if he genuinely believed that he was party to such a document, he
ought to have appreciated that the bank’s registered mortgage would take priority
over his own unregistered instrument.
[15] In continuing to defend the proceeding he pursued an unnecessary step and an argument that lacked merit. He also failed without reasonable justification to accept the bank’s legal arguments. Having regard to those factors I am satisfied that an award of increased costs is appropriate.
[16] I therefore direct that Mr Bourke (but not Mr Harvey) is to pay costs in relation to the first proceeding on a Category 2 Band B basis uplifted by 200 per cent. Counsel for the bank is to note that costs are to be calculated in accordance with Items 25 to 30 in Schedule 3 of the High Court Rules.
CIV 201- 404-2186
[17] Mr Bourke must have known that the case for Chariot Wheel Limited was virtually unarguable. It was based on the premise that the bank was never in a position to complete the sale to Chariot Wheel because of the existence of the caveat that Mr Bourke had lodged earlier to protect his alleged interest under the unregistered agreement to mortgage. As I pointed out in my judgment, the bank was always in a position to have the caveat removed because it did not protect a
caveatable interest[8]. The only reason that the bank did not take that step was because
[8] Kookmin Bank v Chariot Wheel Ltd HC Auckland CIV-2011-404-2186 20 April 2011 at [17]
Chariot Wheel had made it clear well before the date for settlement that it was not in a position to complete the purchase. The argument for Chariot Wheel therefore fell squarely within the “hopeless case” category.
[18] The fact that Mr Bourke caused Chariot Wheel to lodge the second caveat so soon after I directed the removal of his own caveat also raises the irresistible inference that he was determined to derail the agreement for the sale of the property by any means possible. It amounted to a cynical use of the caveat procedure for an
ulterior commercial motive.
[19] In those circumstances an award of indemnity costs in relation to the second proceeding is entirely appropriate. Mr Bourke is responsible for Chariot Wheel’s actions in this context. I therefore direct that both he and Chariot Wheel are to meet the bank’s costs in relation to CIV 2011 404 2186 on a solicitor-client basis..
[20] The bank is also entitled to disbursements in relation to both proceedings.
Lang J
Solicitors:
Bell Gully, Wellington
Mr T Richardson, TaurangaTony Harvey, Solicitor, Greerton
Lee Salmon Long, Auckland
0
0
1