Montgomerie v Montgomerie

[2021] NZCA 639

IN THE COURT OF APPEAL OF NEW ZEALAND

I TE KŌTI PĪRA O AOTEAROA

 CA69/2021
 [2021] NZCA 639

BETWEEN	ANDREW LAURIE MONTGOMERIE Appellant
AND	JAMES LESTER MONTGOMERIE Respondent

Counsel:	A R Gilchrist for Appellant D J Neutze for Respondent
Judgment: (On the papers)	1 December 2021 at 2.00 pm

JUDGMENT OF GODDARD J

A        The Registrar is to pay $1,195 of the security for costs to the respondent. 

BThe Registrar is to advise the Official Assignee that the Registrar is holding the balance of the security for costs, and pay that balance to the Official Assignee on request.

____________________________________________________________________

REASONS

Background

1. The appellant, Andrew Montgomerie, was adjudicated bankrupt on 11 December 2020.  On 16 February 2021 he filed an application for leave to appeal out of time to this Court against that adjudication.  The respondent consented to the grant of leave to appeal out of time, but opposed the appeal.  The appellant paid security for costs of $7,060.  The case on appeal was filed.  On 2 June 2021 a fixture was allocated for a hearing on 1 September 2021. 

2. The appeal was abandoned on 8 July 2021.  The appellant had advised the respondent of his intention to abandon the appeal a few weeks earlier, and sought agreement on the costs consequences of an abandonment.  No agreement could be reached as to costs.  The appellant proceeded to file a notice abandoning his appeal, leaving the question of costs to be resolved subsequently. 

Competing claims to security for costs

1. The Registrar holds the security for costs of $7,060.  There are competing claims to those funds.

2. The appellant claims that it should be repaid to him, on the basis that:

   (a)the respondent has not been required to take any steps in respect of which costs are properly payable on the appeal; and

   (b)the funds were provided by a third party, and should be repaid to the appellant’s solicitor for payment to that third party.

3. The Official Assignee has advised the Registrar that the appellant has not provided sufficient evidence to satisfy the Official Assignee that the funds should be returned to a third party, rather than paid to the Official Assignee.

4. The respondent says that the security for costs should be paid to him, on the basis that:

   (a)He incurred costs in responding to the application for leave to appeal out of time, engaging in relation to the preparation of the case on appeal and the issues to be determined on appeal, and liaising with the Court in relation to a fixture date and timetabling matters.  The respondent should receive costs in respect of those matters.

   (b)Those costs should be paid on an indemnity basis, as the respondent is entitled to indemnity costs under a loan agreement between the parties. 
   
   Alternatively, indemnity costs should be awarded under r 53E(3)(a) or (f) of the Court of Appeal (Civil) Rules 2005 (Rules) on the basis that the appeal was improperly brought.  It was an attempt by the appellant to delay meeting his obligations, in circumstances where the appeal was hopeless.  The amount claimed for costs on an indemnity basis is $6,165.50.

   (c)The balance of the security for costs should be paid out to the respondent to satisfy an unpaid award of costs in the High Court.  Those costs were awarded in respect of the appellant’s withdrawn application for a stay of the judgment adjudicating him bankrupt pending the appeal to this Court, in the sum of $2,390.

Discussion

Costs to be paid to the respondent

1. The court has a discretionary jurisdiction to award costs on an indemnity basis, where a contract so provides.[1]  However it is unlikely that the court will do so in circumstances where the payment may amount to a preference for the judgment creditor in respect of a contractual entitlement to costs over and above the costs ordinarily payable under the Rules.[2] 

   [1]Court of Appeal (Civil) Rules 2005, r 53E(3)(e). 

   [2]Ensom v Downtown House (No 2) Ltd [2020] NZCA 51 at [4].

2. On the basis of the limited material before the Court, it is not clear whether an award of contractual indemnity costs would result in a preference.  But bearing in mind that note of caution, and in circumstances where the appeal does not relate directly to enforcement of the loan agreement, I consider that an award of indemnity costs to be paid out of the security for costs held by this Court, on the basis of a contractual entitlement, would be inappropriate.

3. The grounds for the appeal appear to have been weak.  But they are not so self‑evidently hopeless that the appeal can be described as vexatious or frivolous for the purposes of r 53E(3)(a).  Nor is there any other special reason justifying an award of indemnity costs under r 53E(3)(f).

4. However I accept that some costs have been incurred by the respondent before the abandonment of the appeal.  The Rules do not fix an amount payable for the steps taken.  More was done by the respondent in this case than by the respondent in Ensom v Downtown House (No 2) Ltd, where costs of $478 were awarded.[3]  I consider that an award of 0.5 days of costs for a standard appeal on a band A basis is reasonable.[4]  That comes to $1,195.

   [3]At [7].

   [4]Court of Appeal (Civil) Rules, r 53C(1)(a) and sch 2; and High Court Rules 2016, sch 2.

5. The respondent also says that he should receive costs in respect of this application for costs.  However I have not accepted the claim that indemnity costs should be paid out of the security for costs held by the Court, and I do not consider that any further allowance for costs incurred in connection with resolution of this costs matter would be appropriate.

Balance of security for costs

1. In the ordinary course, the balance of the security for costs held by the Court would be paid to the appellant. However in circumstances where an appellant is bankrupt, any amount payable to the bankrupt should be paid to the Official Assignee.  There is no evidence before this Court that establishes a beneficial entitlement on the part of a third party to the security for costs paid to the Registrar.  Nor would it be appropriate to determine that issue without hearing from the relevant third party and from the Official Assignee, as well as from the appellant.  That is not an issue that can, or should, be resolved in the context of this costs application. 

2. Rather, the appropriate course is for the balance of the security for costs to be paid to the Official Assignee.  If a third party wishes to assert a beneficial interest in those funds, the third party can pursue that claim with the Official Assignee.  Otherwise, the Official Assignee will deal with the funds as part of the appellant’s bankrupt estate.

Result

1. The Registrar is to pay $1,195 of the security of costs to the respondent. 

2. The Registrar is to advise the Official Assignee that she is holding the balance of the security for costs, and pay that balance to the Official Assignee on request.

Solicitors:
Douglas M A Burgess, Auckland for Appellant
Brookfields Lawyers, Auckland for Respondent