Low Vehicle Technical Association Incorporated v Brett
[2020] NZHC 1821
•28 July 2020
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2015-404-1925
[2020] NZHC 1821
BETWEEN LOW VOLUME VEHICLE TECHNICAL ASSOCIATION INCORPORATED
First PlaintiffAND
ANTHONY PETER JOHNSON
Second Plaintiff
AND
JOHN BERNARD BRETT
Defendant
Hearing: On the papers Appearances:
D P MacKenzie for the plaintiffs The defendant in person
P C Murray for affected persons
Judgment:
28 July 2020
JUDGMENT NO 4 OF PALMER J
This judgment was delivered by me on Tuesday 28 July 2020 at 3.00pm.
Pursuant to Rule 11.5 of the High Court Rules.
………………………… Registrar/Deputy Registrar
Solicitors/Parties:
MinterEllisonRuddWatts, Wellington P Murray, Barrister, Auckland
Schnauer & Co, Auckland Mr Brett in person
LOW VOLUME VEHICLE TECHNICAL ASSOCIATION INC v BRETT NO 4 [2020] NZHC 1821 [28 July 2020]
Proceedings and charging orders
[1] In a judgment issued on 20 November 2017, I ordered Mr Brett to pay Mr Johnson $100,000 in damages for defamation as well as costs and issued a permanent injunction that Mr Brett not repeat the defamatory statements.1 On 26 March 2019, the Court of Appeal upheld LVVTA’s appeal and dismissed Mr Brett’s appeal.2 It granted a permanent injunction to the LVVTA prohibiting Mr Brett from any further breach of a settlement agreement, awarded costs to the LVVTA and remitted a cause of action to the High Court for re-trial. On 9 December 2019, following the LVVTA’s pursuit of Mr Brett for the costs awards, Mr Brett was adjudged bankrupt. Accordingly, under s 76 of the Insolvency Act 2006, the proceeding against him was automatically stayed by operation of law. The LVVTA did not seek to have it continued.3
[2] In January 2018, Mr Johnson obtained a charging order from this Court, as security over the damages and costs award. The order was over Mr Brett’s 50 per cent shareholding in a company, MJT 14 Ltd (MJT), which owns an investment property in Papakura.
[3] On 1 and 3 April 2019, the Companies Office recorded that Mr Brett’s shareholding in MJT was transferred to his de facto partner, Mrs Wallace-Deane, and then to the John Brett Family Trust (the Trust). On 8 and 20 April 2019, MJT filed annual returns stating Mr Brett was no longer a shareholder and his shareholding had been transferred to the Trust.4 On 11 April 2019, I held a teleconference regarding the proceedings at which Mr Gordon, for Mr Johnson and the LVVTA, raised the issue of the apparent transfer of ownership.5 Mr Brett explained that he “was just correcting a mistake made five years ago about who owned the company”.6 As recorded in my minute:
[4] I advised Mr Brett that he and Mrs Wallace-Dean (who also attended the teleconference) needed to take seriously the question of breach of the charging order. Courts do not take breaches of their orders lightly. He indicated they
1 Low Volume Vehicle Technical Association Inc v Brett [2017] NZHC 2846, [2018] 2 NZLR 587.
2 Low Volume Vehicle Technical Association Inc v Brett [2019] NZCA 67, [2019] 2 NZLR 808.
3 Minute No 11, 14 February 2020, at [8].
4 Annexure A to the Memorandum of Counsel for Second Plaintiff Re: Costs, 15 May 2020.
5 Minute, 11 April 2019, at [2].
6 At [3].
would discuss the matter with Mr Gordon. If it remains unresolved after that it will be up to the plaintiffs to determine what further steps to take.
[4] Following that, Mr Brett advised Mr Gordon that the “falsity” of he and Mrs Wallace-Deane owning the shareholding personally had been corrected.7 In January 2020, the Official Assignee issued a report which also recorded the Trust owned the shareholding.8 On 5 February 2020, the LVVTA and Mr Johnson made an interlocutory application for orders against Mr Brett, Mrs Wallace Dean, MJT and the trustees of the Trust (the affected persons), regarding the alleged breach of charging orders issued in the course of the proceeding. On 14 February 2020, I vacated the re- trial and replaced it with a one-day hearing on that date, of the plaintiffs’ interlocutory application in relation to an alleged breach of charging orders.
[5] On 28 February 2020, Mr Brett emailed to the Registry and counsel a notice of opposition to the application, on the grounds the charging orders had lapsed and no legal transfer had occurred. On 3 March 2020, he also emailed a “notice of application for leave of the court” which sought leave for him to represent the affected persons, advised he was seeking a barrister to represent them, noted that if a barrister were not found they would be unrepresented, and sought leave for Mr Brett to appear as “Self Litigant”.
[6] On 19 March 2020, Mr Johnson’s counsel emailed to the Registry an advance soft copy of his notice of opposition to the application regarding representation. On 20 March 2020, Mr Brett advised the Registry and counsel for Mr Johnson the application should be regarded as “on hold” and was expected to be withdrawn, because the interested persons were in the process of arranging legal aid. In April 2020, the affected persons obtained legal representation. On 30 April 2020, the affected persons opposed the application through counsel, asserting no transfer of the shareholding occurred and the Companies Office records had been corrected. Their opposition was supported by affidavits:
7 Affidavit of Anthony Peter Johnson, 5 February 2020, at [18].
8 Official Assignee Insolvency Detail Report with Asset Progress Updates New Zealand Insolvency and Trustee Service (January 2020).
(a)Mrs Wallace-Deane, in an affidavit of 6 March 2020, stated that Mr Brett “foolishly” changed the shareholding without her knowledge.9 She filed a second affidavit, of 30 April 2020, stating that Mr Brett changed the Companies Office website details for MJT 14 Limited twice in April 2019 without her knowledge or consent, first to record that his share had been transferred to her, and then to record that it had been transferred to the John Brett Family Trust.10 She advised she has now corrected the Companies Office website.11
(b)Mr Brett’s affidavit of 30 April 2020 recorded that he had changed the details on the Companies Office website without Ms Wallace-Deane’s knowledge or consent and that he did not explain the changes to her until she was served with the documents for these proceedings in February 2020.12
[7] On 6 May 2020, the LVVTA and Mr Johnson withdrew their application and I vacated the hearing scheduled for 18 May 2020.13 I invited memoranda as to costs.
Submissions on costs
Mr Johnson’s submissions
[8] Mr MacKenzie, for Mr Johnson, submits that on 5 February 2020, on its face, there had been a clear breach of the charging order and Mr Johnson had no choice but to bring an application to enforce the charging orders, which would not have been necessary had the most recent explanation been provided sooner. He submits Mr Johnson has been entirely successful and not to award him costs would be most unjust. Mr Johnson seeks costs of $3,346 on a 2B basis and $1,148 of disbursements from all the affected persons or, alternatively, against MJT.
9 Affidavit of Miriam Wallace-Deane, 6 March 2020, at [7].
10 Second Affidavit of Miriam Wallace-Deane, 30 April 2020, at [2]-[5].
11 At [6].
12 Affidavit of John Bernard Brett, 3 April 2020, at [2]-[6].
13 Minute No 12, 6 May 2020, at [3].
[9] Mr Johnson also seeks costs of $1,434 on a 2B basis against the affected persons jointly and severally, for opposing the application by Mr Brett to represent the affected persons. Mr MacKenzie submits the application offended the rule in Re G J Mannix that a company should be represented by counsel, was inconsistent with r 24(1)(b) of the Lawyers and Conveyancers Act 2006, and should never have been made.14
[10] In respect of both sets of costs, Mr MacKenzie acknowledges that, if Mrs Wallace-Deane received legal aid in her personal capacity, costs may not be awarded against her unless there are exceptional circumstances under s 45(3) of the Legal Services Act 2011. He submits there are such exceptional circumstances because Mrs Wallace-Deane attended the teleconference where I warned about the consequences of breaching the charging orders and she was misleading in failing to set the record straight.
Affected persons’ submissions
[11] Mr Murray, for the affected persons, opposes Mr Johnson’s application for costs. He submits there was no legal transfer of the shareholding because Mrs Wallace-Deane and the director of the professional trustee of the Trust had no knowledge of the purported transfers and the requirements of ss 84, 89 and 96 of the Companies Act 1993 were not met. Mr Murray submits the application was not reasonably necessary because Mr Johnson was unable to retain the benefit of the charging order due to Mr Brett’s bankruptcy and, if it had been necessary, it should have been made immediately following the breach, rather than after the bankruptcy. He submits the application did not achieve its purpose, because it sought payment rather than the outcome which was achieved, of returning the shareholding to Mr Brett’s estate. Accordingly, he submits costs should lie where they fall.
[12]Mr Murray also submits:
(a)The affected persons oppose costs being awarded to Mr Johnson in respect of Mr Brett’s representation application because there was no
14 Re G J Mannix Ltd [1984] 1 NZLR 309 (CA).
formal application, so no formal opposition was required and there was no obligation to oppose it.
(b)There are no exceptional circumstances justifying an award of costs against Mrs Wallace-Deane when the changes to the Companies Office website were made without her knowledge or consent and not explained to her until after the application had been served.
(c)It would be unjust to award costs against the trustees of the Trust, as Mrs Wallace-Deane and the professional trustee had no knowledge of the purported transfers.
(d)Overall, costs should lie where they fall. To the extent any costs award is made, it should be made against Mr Brett in his personal capacity, to be provable in his bankruptcy.
[13] Mr Brett also filed submissions which relitigate his grievances against the LVVTA and Mr Johnson, attach references from others about him and support Mr Murray’s opposition to costs.
Should costs be awarded and to whom?
[14] The general principle under r 14.2 of the High Court Rules 2016 is that the party who fails with respect to an interlocutory application should pay costs to the party who succeeds. Under r 14.7, the Court may reduce costs otherwise payable if the party claiming costs contributed unnecessarily to the time or expense of the relevant step. Under r 14.14, liability for costs is joint and several unless the Court otherwise directs.
[15] Mr Johnson’s application to enforce the charging orders was eventually withdrawn. But I consider Mr Brett’s conduct, behind the back of his partner and professional trustee, made the application necessary. Mr Johnson has an interest in Mr Brett’s estate retaining the shareholding in MJT and did achieve that purpose through the application. The delay in applying does not alter that. The purported transfer was not rectified until that application was made. It appears that Mr Brett did
not even tell his partner what he had done until after the application was made. I award costs on a 2B basis against Mr Brett in his personal capacity for the application to enforce the charging order. That award will now be provable in Mr Brett’s bankruptcy.
[16] I do not award costs for Mr Johnson’s opposition to Mr Brett’s application to represent the affected persons. Mr Brett’s representation of the other affected persons would have been misconceived but it was not clear from his confused notice that he was necessarily intending to represent them. It is not clear it was formally filed. And in any event, the day after Mr Johnson’s informal opposition, Mr Brett stated it was on hold and was expected to be withdrawn. Mr Johnson’s formal opposition was not required.
[17] I do not award costs against Mrs Wallace-Deane or the trustees of the Trust. I accept they were not aware of, and did not consent to, Mr Brett’s actions. Given this, I do not consider there are exceptional circumstances justifying an award of costs against Mrs Wallace-Deane under the Legal Services Act 2011.
Palmer J
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