Millward v Wilson & Co HC Wellington CIV 2010-485-33

[2010] NZHC 1959

IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY

CIV 2010-485-033

IN THE MATTER OF     section 72 of the District Courts Act 1947

AND

IN THE MATTER OF     an appeal against a decision of the District

Court

BETWEEN  KENNEDY MILLWARD

JOHN WILLIAM BALMFORTH PETER SHERIDAN BRINSLEY Appellants

ANDWILSON & CO First Respondent

ANDCLIFFORD JAMES CONDREN AND CRYSTAL LAKE LIMITED

Second Respondents

Hearing:         27 October 2010

Counsel:         M A F Gilkison for New Parties/Appellants

L H Pratley for First Respondent
J A Langford for Second Respondent

Judgment:      29 October 2010

JUDGMENT OF SIMON FRANCE J

KENNEDY MILLWARD AND ORS V WILSON & CO AND ORS HC WN CIV 2010-485-033  29 October

2010

Procedural background to appeal

[1]      The first respondent is a law firm.   Pursuant to the settlement of a dispute involving the second respondents, it received a payment of $300,000 which it lodged in its trust account to the credit of one of the second respondents, Crystal Lakes Limited.    $100,000  of  this  money  was  then  disbursed  to  the  plaintiff,[1]   (then Mr Davies) and to the other second respondent Mr Condren.  Each received $50,000, and there is no issue as regards that.

[1] The plaintiff was originally Mr Alan Davies.  He passed away and the current plaintiffs are the executors of his estate.

[2]      Mr Davies claimed that $110,000 of the remaining $200,000 was intended not for the company, but for him personally.  He is a shareholder of the company but also had other transactions with the relevant third party through whom the funds can be traced.   Mr Davies claimed that this third party owed him $110,000, and this surplus of $200,000 was intended to, and did, include that money.  By contrast the company said the whole sum was a payment it received for giving up its interest in the underlying transaction (a property deal).

[3]      Mr Davies brought a claim against the law firm for $110,000.   Somewhat hopefully, I consider, he also sought summary judgment for the sum.  The law firm replied by applying for leave to interplead.  It essentially wanted the parties to sort out who owned the money.

[4]      This interpleader application was granted.   Directions were made, and the filing of affidavit evidence timetabled.  The matter proceeded to a hearing.

The hearing

[5]      The arrangement was that parties would file their evidence by affidavit, and then indicate as to whether witnesses were required for cross-examination.   There was no direction made for pleadings, and nothing that really articulated the dispute between the actual claimants.

[6]      It now transpires that the parties have different views on what the hearing was about:

a)       Mr Langford for the company says it was only ever about establishing on whose behalf Wilson & Co (the law firm) received the money.  It is apparent that the District Court Judge also held this view;

b)Mr Gilkison for the plaintiff says it was about establishing the true owner of the money and so much more elaborate in scope than the narrow issue suggested by Mr Langford;

c)       Mr Pratley  (for  the  law  firm)  initially  supported  Mr Langford  but accepted there was a case for Mr Gilkison’s position.   To be fair to Mr Pratley it is important to note that his client was indifferent to the issue; it just wanted to know to whom to pay the money.

[7]      The hearing proceeded.   To me, reviewing it with the benefit of hindsight, one can see the different perceptions in what happened.  Mr Gilkison was expansive in the areas he was seeking to cover in cross-examination.  By contrast the Court was querying relevance, and the point of it all.

[8]      Anyway, halfway through cross-examination of an important witness, there was a further interaction with the bench.  This coincided with lunch, and when the parties returned they announced the proceeding was to end.   The Judge wanted clarity about what that meant and how it was to end.   The parties wanted costs rulings and the Judge understandably insisted on some clear finality before that could happen.

[9]      So there emerged consent orders.  These were put to the parties orally by the Judge and all agreed.  They were then confirmed in a final order, and sealed.  They provide:

a)       concerning the interpleader issue, the money was to be transferred from Wilson & Co to an independent firm for it to hold to the credit of Crystal Lake Limited;

b)        concerning the claim against Wilson & Co, it was discontinued;

c)        concerning costs, memoranda could be filed.

[10]     These  were  duly  filed.    The  Judge  issued  a  costs  decision.    In  that  he indicated that he considered the effect of the consent orders was that all the present proceedings were at an end.  He then made costs awarded in favour of the law firm (full costs) and the second respondent (scale costs).

The appeal

[11]     Mr Davies was unhappy with the suggestion in the Judge’s minute that the effect of the consent order was that the interpleader issue was at an end.   The plaintiff  believed  he  remained  entitled  to  have  the  hearing  recommenced  if settlement could not be reached.

[12]     Concerning  costs,  it  is  claimed  that  Wilson  &  Co  was  not  a  traditional “innocent stakeholder”.  Rather, its evidence was partisan, and proved to be wrong in a significant way.  Because of this, the usual approach of full costs to the stakeholder should not apply.

[13]     In relation to the costs in favour of the second respondent it is submitted they are premature because the issues between them are not resolved.

Decision

(a)      The consent order

[14]     There is nothing to appeal.   The District Court has not given judgment. Rather it has made consent orders as requested.  If there is a dispute as to their effect, that needs to be tested in the appropriate forum, and then appealed if there is dissatisfaction with the answer.   Mr Gilkison accepted there was no aspect of the consent order itself he challenged.

[15]     That  said,  I observed  to  Mr Gilkison  that  the plaintiffs’  position  is  now untenable.  This hearing was stopped, by the parties, on 9 October last year.  Even if the plaintiffs are right and the consent order did not have the effect others believe it had, it would not be possible to resume this hearing.   One witness was stopped mid-way through cross-examination.  The evidence requires credibility assessments and a Court would not countenance simply resuming the hearing.

[16]     The consent order will have the effect that a different firm holds the money on behalf of the company.  Nothing has changed.  The plaintiffs will seemingly need to commence proceedings against, or in relation to, the company if they wish to pursue the matter.  That, however, is of course for them to decide.  Apart from the costs appeal there is nothing for this Court to determine.

Costs – Wilson & Co

[17]     The appellant challenges the payment of full costs because it submits that the first respondent should not be seen as an innocent stakeholder.  Some background is required.

[18]     The context to these events was a property development which was failing. Crystal Lake was an investor.  There were mortgagees who were seeking to take the project over and who wanted to buy out the investors.  The investors had put funds in

by way of pre-purchasing floors of the building, and it was this interest in the project that the new purchaser’s wanted removed.

[19]     Mr Davis’ position was that a Mr Stratford had negotiated the out package on behalf  of  Crystal  Lake  and  the  investors.    It  was  also  Mr Stratford  who  owed Mr Davis the $110,000, and the plaintiff’s position was that Mr Stratford negotiated payment of this debt as part of the package.

[20]     Wilson & Co acted for Crystal Lake.  Over the four to five weeks prior to settlement,  it  is  plain  that  Mr Wilson  of  that  firm  was  doing  the  work  and negotiations.  An affidavit filed by a different partner of the firm, later confirmed by Mr Wilson, says that Mr Wilson negotiated the deal.  Counsel for Mr Davis took that evidence to be a challenge to Mr Stratford’s claimed role.  Counsel made it plain in a letter that that was how he read the evidence and he was not corrected on his interpretation prior to trial.

[21]     However, at trial it was put to Mr Wilson by Mr Gilkison that he, Mr Wilson, was  only  bringing  to  fruition  what  Mr Stratford  had  already  put  in  place. Mr Gilkison reads Mr Wilsons answers as confirmation that was so.

[22]     If correct in this, Mr Gilkison submits it was crucial evidence that, had it been made plain from the outset, might have affected the course of the proceedings, and limited everyone’s costs.  He submits that at best the Wilson & Co evidence was poorly worded, it caused unnecessary problems and costs should not be awarded.

[23]     There are difficulties with this submission.   First, Mr Wilson’s evidence is incomplete.  He was the witness on the stand when matters stopped.  There was no opportunity for re-examination.  I consider his answers to be inconclusive, and if I were trial Judge would have sought clarification had it not emerged from the balance of the testimony.  None of this was possible because Mr Wilson never completed his evidence.   For this reason alone I decline to give the answers the significance the appellant claims.

[24]     Second, with all the parties now armed with this claimed clarification by Mr Wilson, one year later matters have not progressed.  I am unconcerned with the reasons for this, but plainly the evidence cannot have been a definitive clarification.

[25]     I agree with the Judge.  The law firm was entitled to full costs recovery in the normal way as an innocent stakeholder pulled into litigation.

(b)      The second respondents

[26]     For the reasons given earlier, I tend to favour the view that all aspects of the present proceedings are at an end.  That would mean the award of costs to the second respondent was not premature.  Further, I consider it was well open to the Court to take  the  view  there  had  been  wasted  endeavour  forced  on  the  parties  by  the plaintiff’s approach to the issue, and by the procedure followed.

[27]     It emerges on appeal that the plaintiffs have an understanding of the effect of the consent orders that differs from everyone else.   I do not consider the other participants are at fault in this.  I have the benefit of a transcript of the exchanges at the time between the bench and counsel.  In my view the responsibility for no-one appreciating the plaintiffs’ understanding of matters lies with the plaintiffs.

[28]     The District Court rejected a claim by the second respondent for full costs and awarded scale costs.  It was a fair decision and the appeal is dismissed.

Fresh evidence

[29]     Shortly  before  the  appeal,  the  appellants  sought  leave  to  admit  fresh evidence.   I deferred consideration of the matter until I had a better grasp of the scope of the appeal.   As it happens, the issue was not then addressed at all until raised by Mr Gilkison in reply.

[30]     I do not consider the evidence meets the test for fresh evidence on an appeal. Primarily, in my view, it lacks relevance to what I need to decide on the appeal and is more directed at the substantive merits.  It is true the Judge made comment in his

costs ruling about the relative lack of merit of the case, but that has to be seen in light of the Judge’s much narrower view of what the proceedings were about.  I am able to confirm the costs rulings without reference to merit, other than my view that summary judgment was unrealistic.

[31]     For these reasons the application to admit further evidence is dismissed.

Conclusion

[32]     The appeal fails.

[33]     The respondents are entitled to costs.  If agreement cannot be reached then memoranda may be filed.

Simon France J

Solicitors:

M A F Gilkison, MacKay & Gilkison, Solicitors, PO Box 5240, Wellington email:  [email protected]

L H Pratley, Principal, Lance Pratley Law, Wellington, email: [email protected]

J A Langford, Principal, Langford Law, Wellington, email:  [email protected]