Leeming v Newport HC Wellington CIV-2005-485-633

[2007] NZHC 1914

IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY

CIV-2005-485-633

BETWEEN  GEOFFREY OWEN JAMES LEEMING,SHARON TRACEY LEEMING, ALLAN COBURN, DALE MARGARET COBURN & INSTALLER SERVICES (MANAWATU)LIMITED Plaintiffs

ANDDAVID ALAN NEWPORT First Defendant

ANDDAVID ALAN NEWPORT & STEPHEN COLIN FURLONG

Second Defendants

Hearing:         On the Papers

Judgment:      25 June 2007 at 12.30 pm

In accordance with r540(4) I direct the Registrar to endorse this judgment with a delivery time of 12.30 pm on the 25th day of June 2007.

JUDGMENT AS TO COSTS OF ASSOCIATE JUDGE D.I. GENDALL

[1]      This decision relates to costs sought in this proceeding by the defendants with respect to the plaintiffs’ discontinuance.

[2]      The  costs  sought  by  the  defendants  are  $10,240  quantified  as  6.4  days calculated on a category 2B scale basis at $1,600 per day.

[3]      These costs are opposed by the plaintiffs who submit that costs should lie where they fall.  Detailed written submissions have been filed by counsel for each

party.  I now give my decision based upon the material filed.

LEEMING AND ORS V DAVID ALAN NEWPORT AND ANOR HC WN CIV-2005-485-633 25 June 2007

[4]      The  present  proceeding  was  brought  by  the  plaintiffs  pursuant  to  s  60

Property Law Act 1952 seeking declarations and orders regarding what was said to be an improper alienation by the first defendant to the second defendant of a property with intent to defeat the first defendant’s creditors specifically the plaintiffs.

[5]      Originally the plaintiffs had obtained a judgment from this Court against the first defendant which I understand was for damages of approximately $50,000 and costs of approximately $140,000.

[6]      The first defendant appealed that judgment to the Court of Appeal and the appeal was ultimately successful.  This resulted in the first defendant no longer being a debtor to the plaintiffs.  The present proceedings with respect to the property and the plaintiffs’ suggestions that the property had been alienated with intent to defraud creditors therefore became nugatory.

[7]      These proceedings were therefore discontinued by the plaintiffs.

[8]      In seeking costs here, the defendants rely upon r 476C High Court Rules which provides:

Unless the defendant otherwise agrees or the Court otherwise orders, a plaintiff who discontinues a proceeding against a defendant must pay costs to the defendant of and incidental to the proceeding up to and including the discontinuance.

[9]      The presumption is clear that a discontinuing plaintiff must pay costs to the defendant.  It is for a plaintiff to establish that the presumption should not apply.

[10]     The principles to be applied in considering r 476C are set out in McGechan on Procedure para HR476C.02 as follows:

The following emerge from Oggi Advertising Ltd v MacKenzie [1998] 12

PRNZ 535 and North Shore CC v Local Government Commission [1995] 9

PRNZ 182:

(a) Whether the plaintiff acted reasonably in commencing the proceeding, and the defendant in defending it.  Thus, where the defendant acted reasonably in taking a step negating the point of the proceeding, and the plaintiff then discontinued, costs are likely to lie where they fall as in Olive Francis Retirement Home

Ltd v Director General of Health 13 July 2005 Simon France J HC AK CIV-2005-404-1367.

(b) The Court will not speculate on the merits of a case it never heard; only in the exceptional case where the merits are clear will they influence the Court’s costs decision upon a discontinuance.

[11]     In the present case, the defendants contend that the plaintiffs did not act reasonably in bringing the proceedings.

[12]     At the time the proceedings were issued in April 2005 the plaintiffs had a judgment in their favour against the first defendant which as I understand it had found him to have been dishonest and in deliberate breach of the Fair Trading Act

1986.

[13]     The  defendants  complain  that  these  proceedings  were  brought  when  the appeal to the Court of Appeal was on foot and the plaintiffs knew that leave had been granted for the appeal.  They suggest that at the very least the plaintiffs must have been aware that there was a prospect that the debt that formed the basis for the s 60 proceedings was in some doubt.

[14]     Additionally, the defendants note that the plaintiffs had security for any debt owed to them.   They had a charging order over the first defendant’s property in question.   They contend there was no prospect that the property could be sold or even further encumbered.  The defendants argue therefore that there was no need for these proceedings to be commenced, and further that there was no proper evidence to support the contentions put forward by the plaintiffs here.

[15]     What does appear clear however is that as a result of the Court of Appeal decision, there was a proper basis for the present proceedings to be brought to an end because:

a)        The appeal to the Court of Appeal was successful in the case of Mr

Leeming and the debt owing to the plaintiffs was extinguished;

b)The appeal resulted in the consequent reduction of Mr Newport’s liability to Mr Coburn; and

c)       Mr  Newport  subsequently  paid  the  significantly  reduced  debt  of around $23,500 to Mr  Coburn  –but  of  course  he  had  remained  a judgment debtor to this extent perhaps justifying the continuation of the present s 60 proceeding up to the time this debt was paid.

[16]     The defendants’ contention is that the present case is not a situation such as that which prevailed in Olive Francis Retirement Home where the plaintiffs’ proceeding was rendered moot by an action unrelated to the dispute.  The proceeding here, according to the defendants, was rendered moot because of steps that were to be expected and/or foreseen by the plaintiffs, that is payment of the debt and the success of the appeal.   In my view, however, some question must lie over these contentions, and this is heightened first by the critical comments about the first defendant’s credibility made in the judgment of Durie J in the original proceedings and secondly by the decisions taken by the first defendant in June 2003 in the midst of the original proceeding to pass his property to the Trust and commence gifting decisions  not  otherwise  reasonably  explained  than  perhaps  as  an  attempt  to “judgment proof” Mr Newport.

[17]     Further, the statement of defence which the defendants filed in response to the plaintiffs’ statement of claim here can only be seen as scanty and virtually pro forma.  It simply denies the critical allegations pleaded by the plaintiff in para (16) of their statement of claim.  These allegations suggested that the steps taken by the first defendant were intended to defraud his creditors.  Detailed particulars of this are set out in that para (16) but remain unanswered.  The bare denials by the defendants, their basic pleading and the fact that they provided no documentary evidence to explain the actions taken by the first defendant in the circumstances prevailing here must be seen as questionable.

[18]     In this case the discontinuance by the plaintiff occurred it appears because the plaintiffs finally received financial satisfaction from the defendants.  Because of this

payment the issue had become moot and the point of testing the first defendant’s conduct in transferring the property to a family trust had disappeared.

[19]     In all these matters I come back to the fact that the plaintiffs at the operative time at issue in these proceedings had a judgment in their favour against the first defendant  and in my view  it was not unreasonable for them  to  commence  and advance these proceedings pending the outcome of the Court of Appeal judgment. There was no stay or prohibition on that occurring.   In any event, it was not until some 21 months after the August 2004 judgment that the Court of Appeal decision on the appeal was delivered.

[20]     And further, the charging order over the property to which the defendants refer had been challenged by the defendants in that they had brought an application to set aside this order.

[21]     Under  all  these  circumstances,  I  am  satisfied  that  the  plaintiff  acted reasonably  in  commencing  and  pursuing  the  present  proceeding.     It  was  the defendant who took a step which ultimately negated the point of this proceeding by pursuing its (successful) appeal to the Court of Appeal.  It was this which resulted in the discontinuance.   As Simon France J noted in Olive Francis Retirement Home Ltd, this is an appropriate situation, therefore, where costs should lie where they fall.

[22]     There is to be no order as to costs in this matter.

“Associate Judge D.I. Gendall”

Solicitors:        MacDonald Pilcher Partnership, Auckland for Plaintiffs

LeeSalmonLong, Auckland for Defendants