Mason v McKay

[2021] NZHC 2440

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2021-404-1265

[2021] NZHC 2440

IN THE MATTER

of Sacred Hill Marlborough Vineyard Limited (in Receivership and in Administration) and Sacred Hill Vineyard Limited (in Receivership)

BETWEEN

DAVID HAMILTON MASON

Plaintiff

AND

ANDREW MCKAY and REES LOGAN

First defendants

WESTPAC NEW ZEALAND
Second defendant

LEONARD MAGINNESS and JARED WAIATA BOOTH

Third defendants

VINLINK MARLBOROUGH LIMITED

Fourth defendant

Hearing:

On the papers

Counsel:

B O’Callahan for plaintiff

M Kersey and C F Butters first defendants SCDS Gollin for second defendant

E C Gellert and R A Morris for third defendants L H Scott for fourth defendant

M D O’Brien QC for Mach Flynt Inc

Date of judgment:

17 September 2021

JUDGMENT OF JAGOSE J

[Costs]

This judgment was delivered by me on 17 September 2021 at 10.00am. Pursuant to Rule 11.5 of the High Court Rules.

…………………………

Registrar/Deputy Registrar

MASON v MCKAY – Costs [2021] NZHC 2440 [17 September 2021]

[1]                 My 15 July 2021 judgment, dismissing the plaintiff’s 14 July 2021 without notice interlocutory application for an interim injunction, reserved costs while noting:1

In principle, being unsuccessful, Mr Mason is liable to pay the other parties’ costs. In my preliminary view, as the proceeding was conducted on a Pickwick basis, that is only for their two-hour appearances before me today, including second counsel.

[2]                 In the event only the first defendant receivers seek their costs, but there of an award of indemnity — alternatively, increased — costs. Observing scale costs for the Pickwick hearing amount only to $1,195,2  indemnity costs of “$22,165 (plus GST)”3

— or scale costs for an opposed application of $5,377.50, uplifted by 75 per cent to

$9,410.63 — are sought. Necessarily if successful in opposing indemnity or increased costs, Mr Mason would seek $956 costs on his opposition,4 but proposes costs lie where they fall.

[3]                 As relied on by the receivers, r 14.6(3) and (4) of the High Court Rules 2016 provides:

(3)    The court may order a party to pay increased costs if—

…

(b) the party opposing costs has contributed unnecessarily to the time or expense of the proceeding or step in it by—

(ii) taking or pursuing an unnecessary step or an argument that lacks merit

… .

(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

…

1      Mason v McKay [2021] NZHC 1794 at [16].

2      That is, a half-day calculated at category 2. Mr Mason accepts that calculation to be correct. But I allowed also for second counsel, which brings the calculation to $1,792.50.

3      Assuming the receivers to be GST-registered, GST would not be recoverable: New Zealand Venue and Event Management Ltd v Worldwide NZ LLC [2016] NZCA 282, (2016) 27 NZTC 22-058 at [17].

4      Costs for preparation of written submissions on costs may be exceptional in following the event (Strata Title Administration Ltd v Body Corporate Administration Ltd [2014] NZCA 96 at [10]– [14]; and Hojsgaard v Chief Executive of Land Information New Zealand [2019] NZCA 84, [2019] 2 NZLR 864 at [130]), and on which coordinate authority is conflicting (David Bullock and Julian Long “Costs of costs applications” [2014] NZLJ 348).

(f) some other reason exists which justifies the court making an order for indemnity costs despite the principle that the determination of costs should be predictable and expeditious.

[4]                 The receivers contend Mr Mason improperly failed to disclose “all material that is relevant to the application”;5 specifically, “the companies’ earlier terms agreed for sale to Vinlink”, in terms similar to those sought to be impugned here.6 Had that been known at the outset, as the receivers were able to put before me, the receivers suggest the orders would not earlier have been made. Further, the absence of any real prospect of alternative funding meant his case was “hopeless”.7

[5]                 The statutory threshold for indemnity costs is such actions be taken in “commencing [or] continuing”, here, a step in a proceeding. As I held, Mr Mason’s allegation the receivers are in breach of their duties offered a serious question for trial.8 Mr Mason was entitled to seek an interim injunction in its support, even if only for the “alternative or supplementary benefit” formerly open to pursuit.9 That it was not successful, or may not have been at the outset, is not to elevate his actions in bringing the application to the requisite threshold. In particular, “improperly” in connection with indemnity costs carries with it the meaning of “distinctly bad behaviour”,10 not merely unfounded optimism. There is nothing in Mr Mason’s conduct constituting the “flagrant” or “very unreasonable” misconduct threshold for consideration of indemnity costs.11

[6]                 So far as increased costs is concerned, there is nothing justifying the receivers’ conversion of their Pickwick appearance into full-blown opposition by analogy, although “a comparatively large amount of time for the particular step is considered reasonable”, 12 even “substantially exceeding the time allocated under band C”.13 The Court of Appeal considers the uplift “logically” should not be more than 50 per cent.14

5      High Court Rules 2016, r 7.23(2)(b).

6      Mason v McKay, above n 1, at [9].

7      Bradbury v Westpac Banking Corporation [2009] 3 NZLR 400 (CA) at [29].

8      Mason v McKay, above n 1, at [9].

9 At [9].

10     Bradbury v Westpac Banking Corporation, above n 7, at [26].

11     Prebble v Huata (No 2) [2005] NZSC 18, [2005] 2 NZLR 467 at [6]; and Flujo Holdings Pty Ltd v Merisant Co Inc [2018] NZCA 226 at [34].

12     High Court Rules, r 14.5(2)(c).

13     Rule 14.6(3)(a).

14     Holdfast NZ Ltd v Selleys Pty Ltd (2005) 17 PRNZ 897 (CA) at [46]–[48].

‘Logically’ also, it must be an uplift on “the time allocated under band C”. That maximum may apply here. Thus the calculation is $2,647.50, uplifted to $3,971.25.

[7]I therefore order Mr Mason to pay the receivers increased costs of $3,971.25.

—Jagose J

Counsel/Solicitors:

M D O’Brien QC, Auckland

B O’Callahan, Barrister, Auckland Norling Law, Auckland

Russell McVeagh, Auckland MinterEllisonRuddWatts, Auckland Lowndes Jordan, Auckland Anthony Harper, Auckland