Lighter Quay Residents Society Incorporated v Lighter Quay Hotel Management Limited HC Auckland CIV 2010-404-1193

[2010] NZHC 603

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2010-404-001193

UNDER  the Companies Act 1993

BETWEEN  LIGHTER QUAY RESIDENTS SOCIETY INCORPORATED

Plaintiff

ANDLIGHTER QUAY HOTEL MANAGEMENT LIMITED Defendant

Hearing:         12 April 2010

Appearances: J A McMillan for Plaintiff

P Davey for Defendant

Judgment:      12 April 2010

ORAL JUDGMENT OF VENNING J

Solicitors:           Chapman Tripp, PO Box 2206, Shortland Street Auckland 1140

Steindle Williams Legal Limited, PO Box 47858, Ponsonby, Auckland 1144

Copy to:            P Davey, PO Box 3320 Shortland Street, Auckland 1140

LIGHTER QUAY RESIDENTS SOCIETY INCORPORATED V LIGHTER QUAY HOTEL MANAGEMENT LIMITED HC AK CIV-2010-404-001193  12 April 2010

[1]      These liquidation proceedings have effectively been settled.  The defendant has  paid  the  sum  underlying  the  statutory  demand  together  with  interest  that supported the liquidation proceedings.  In the circumstances the plaintiff accepts the proceedings should properly be discontinued and seeks leave of the Court to discontinue the proceedings subject to costs.

[2]      As  the  debt  underlying  the  proceedings  has  been  settled  in  full  it  is appropriate the proceedings be dismissed.   Leave is granted to the plaintiff to discontinue the proceedings accordingly They are therefore at an end.

[3]      That leaves the issue of costs.  The plaintiff seeks costs on an indemnity basis for solicitor/client costs in the sum of $54,662.94.   The plaintiff relies on clause

11.2.3 of the Society’s Constitution, which provides that upon any breach:

All money paid and expenses incurred by the Society (including any legal costs of the Society) in remedying, or attempting to remedy, any breach by a [unit owner] of this Constitution, or incurred in the exercise, or attempted exercise, or enforcement or attempted enforcement of any power, right or remedy of the Society in respect of such breach, shall be a debt due from a [unit owner] to the Society.

[4]      The plaintiff’s position is that the legal costs incurred in the issue of the statutory demand in these proceedings were incurred as a consequence of the breach by the defendant in failing to pay the levy so that the costs are recoverable under that clause.

[5]      While Mr Davey accepted that costs were properly payable he submitted they should be no more than scale costs.  He submitted that indemnity costs should not be awarded for a number of reasons.  First, because as a matter of pleading the issue had not been raised in the statement of claim seeking liquidation of the defendant.  Next, the quantum was not accepted.   Finally he submitted that the defendant did not concede that it was in breach of the Constitution and that is a matter which is yet to be determined on the merits.

[6]      I note that the plaintiff has recently issued a separate statutory demand for the balance of levies it says is due.  In that statutory demand, the plaintiff also seeks the same legal costs on a solicitor/client indemnity basis.

[7]      I accept Mr McMillan’s point that of itself, the fact there is that overlap, is no bar in principle to the application for indemnity costs before the Court.

[8]      As to the pleading point Mr Davey referred to the decision of Jefferies v Ernest and Young Nominees1  where the Court noted it was well established that if costs are claimed pursuant to a contract they should be specifically pleaded.  I note that that case predates the amendments to the High Court Rules which now provide a code in relation to costs.  Rule 14.6 applies.  The issue seems to me to be one of fairness and whether a party is aware that they are at risk, in the litigation before the

Court, of an order for costs on a solicitor/client basis.

[9]      In the present case, apart from the provision in the Constitution, there was correspondence prior to the issue of the proceedings referring to the costs associated with recovery or enforcement action being sought from the defendant.

[10]     I do not  consider that the fact the plaintiff’s statement of claim did  not expressly refer to costs being sought on a solicitor/client or indemnity basis to be a bar to such an order.

[11]     Nor is the issue of the quantum a matter which should prevent an order for solicitor/client costs on an indemnity basis in an appropriate case.  The party charged with payment of the costs must have the right to challenge or have those costs reviewed.  The appropriate body to review the costs is the Law Society.

[12]     The best argument advanced on behalf of the defendant is that the particular merits of the plaintiff’s case for payment of the levies has not yet been ruled on by the Court.  Whilst these proceedings have been settled by payment in full of the sum claimed in the statutory demand, that came about because the defendant failed to respond to the statutory demand in time and was then faced with these liquidation proceedings.   The defendant was forced to respond to the liquidation proceedings, rather than have the issue of the appropriateness of the levy and validity of the charge determined on a disputed statutory demand.  For that reason the issue of the plaintiff’s claim to charge and recover the levies is yet to be formally decided and

ruled on by a Court.  That no doubt will occur given that the plaintiff has issued the further statutory demand against the defendant in relation to levies.

[13]     As that matter is still outstanding, it seems to me that in this case, in these particular circumstances, an order for solicitor/client indemnity costs is not appropriate at this time in these proceedings.   I decline to make such an order.   I make it expressly clear, however, that the plaintiff’s position to seek such costs in the statutory demand as they have sought to do is reserved.  I am not saying the plaintiff may not be entitled to those costs, I am simply declining to order them as a term of the resolution of these particular liquidation proceedings.

[14]     In the alternative the plaintiff seeks costs on an increased basis.  I agree that given the failure of the defendant to respond to the statutory demand and given the issues between the parties it was inevitable the defendant would have to pay the money claimed or face liquidation.  It took the defendant some time to come to that realisation.  An order for the increased costs is appropriate.  In terms of the Court of Appeal decision of Holdfast NZ Ltd v Selleys Pty Ltd2  an uplift of 50 per cent is appropriate in this case.

[15]     There will be an order for costs in the plaintiff’s favour of $5,040.00 together with disbursements of $2,222.06.  The defendant is to pay those costs forthwith.

[16]     The remaining issue is the issue of the interim order made by the Court in response to the defendant’s application for orders restraining advertising and staying the proceedings.  The Court made an interim order that there was to be no report or publication of the fact of the liquidation proceedings.  Given that the matter has now been resolved on the basis that the defendant has paid the amount claimed in full, together with interest, and that the proceedings are at an end I can see no reason why that interim order which was made to preserve the defendant’s position pending the final outcome of the proceedings, should be continued.

[17]     I rule that the interim order for suppression of the report to publication of these proceedings is at an end and has lapsed.

Addendum

[18]     At  Mr  Davey’s  request  the  order  in  relation  to  the  lifting  of  the  non publication of certain details at [17] is to lie in Court until 5 o’clock today.   If he wishes to pursue the non publication order a memorandum is to be filed by 3 o’clock

today.  I will then deal with the matter on the papers.

Venning J