Noyce v Parnell Property Investments Limited

[2015] NZHC 2926

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2013-404-4965 [2015] NZHC 2926

BETWEEN

DIGBY JOHN NOYCE AS

LIQUIDATOR OF PARNELL PROPERTY INVESTMENTS LIMITED (IN LIQUIDATION) AND AS LIQUIDATOR OF ST STEPHENS INVESTMENTS LIMITED (IN LIQUIDATION)

Plaintiff

AND

PARNELL PROPERTY INVESTMENTS LIMITED

First Defendant

ST STEPHENS INVESTMENTS LIMITED

Second Defendant

Continued …

Hearing:	(on the papers)
Appearances:	H L Thompson and J R Rutherford for the Plaintiff Z G Kennedy and N A Chamberlain for the Seventh Defendant P G Alexander in Person
Judgment:	23 November 2015

JUDGMENT OF WOODHOUSE J (Costs)

This judgment was delivered by me on 23 November 2015 at 3:00 pm pursuant to r 11.5 of the High Court Rules 1985.

Registrar/Deputy Registrar

……………………………………

Solicitors / Counsel / Parties:

Mr H L Thompson, McMahon Butterworth Thompson, Solicitors, Auckland

Mr Z G Kennedy and Ms N A Chamberlain, Minter Ellison, Solicitors, Auckland

Mr P G Alexander

NOYCE v PARNELL PROPERTY INVESTMENTS LIMITED [2015] NZHC 2926 [23 November 2015]

Continued …

ANDPARNELL STORAGE & PARKING LIMITED

Third Defendant

SECOND GENERATION LIMITED Fourth Defendant

FIFER RESIDENTIAL LIMITED Fifth Defendant

COMPARK PROPERTIES LIMITED Sixth Defendant

BANK OF NEW ZEALAND LIMITED Seventh Defendant

PAUL GRAEME ALEXANDER Eighth Defendant

[1]      In my judgment of 27 August 2015 I held that the seventh defendant, BNZ, is entitled to costs against the fifth defendant (Fifer), the sixth defendant (Compark) and the eighth defendant (Mr Alexander).1    BNZ now seeks indemnity costs or, in the alternative, increased costs.  It also seeks an order that funds held by the plaintiff liquidator on behalf of Fifer, Compark and Mr Alexander be paid to BNZ in payment or reduction of the costs as fixed.   Mr Alexander, for himself and for Fifer and Compark, opposes the application for indemnity or increased costs.   He accepts, given the judgment, that BNZ is entitled to some costs which he submits should be

fixed on a 2B basis.

[2]      Rule  14.6(4)  of  the  High  Court  Rules  makes  provision  for  an  award  of indemnity costs.  BNZ relies in particular on paragraphs (a) and (f) of Rule 14.6(4). These provide that 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

…

(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.

[3]      The leading decision on paragraph (a) is the decision of the Court of Appeal in Bradbury v Westpac Banking Corporation.2    BNZ, in its memorandum on costs, summarised the principles from this decision as follows:

Bradbury  v  Westpac  Banking  Corporation  held  that  the  word “unnecessarily”  in  r  14.6(4)(a)  takes  its  meaning  and  flavour  from  the adverbs preceding it. Accordingly, for indemnity costs to be awarded it must be demonstrated that the defendant’s misconduct was “flagrantly” bad.  The Court of Appeal endorsed Sheppard J’s summary in Colgate-Palmolive Co v Cussons Pty Ltd of the following conduct that was likely to justify an award of indemnity costs:

(a)       the making of allegations of fraud knowing them to be false and the making of irrelevant allegations of fraud;

(b)       particular misconduct that causes loss of time to the Court and to other parties;

1      Noyce v Parnell Property Investments Ltd [2015] NZHC 2037 (the substantive judgment), at

[82]-[83].

2      Bradbury v Westpac Banking Corporation [2009] NZCA 234, [2009] 3 NZLR 400.

(c)       commencing or continuing proceedings for some ulterior motive;

(d)       doing so in wilful disregard of known facts or clearly-established law; and

(e)       making allegations which ought never to have been made or unduly prolonging a case by groundless contentions, summarised by French J’s “hopeless case” test.

[4]      That is an accurate summary of the relevant principles.   I am satisfied that they apply in this case to justify an award of indemnity costs in favour of BNZ.  In large measure Mr Alexander’s conduct, which also was conduct of Fifer and Compark, is captured in the expression given emphasis by BNZ – the conduct was

“flagrantly bad”.3   BNZ submitted that Mr Alexander’s conduct of and in respect of

the proceeding was flagrantly bad in three main respects:

(a)      He knowingly presented forged documents to the Court, being the letter purportedly from BNZ consenting to the lease of the property at St Stephens Avenue to Fifer.

(b)His case was always hopeless and based on groundless contentions in two main respects: (1) that there was serious impropriety by BNZ but this was not supported by any contemporaneous documentary record or even by Mr Alexander’s previous evidence in earlier but related proceedings; and (2) that Fifer and Compark were entitled to priority under Schedule 7 of the Companies Act 1993.

(c)       Mr Alexander’s  conduct  throughout  the  proceeding  was  frivolous,

vexatious and wasteful of the resources of the Court and the parties.

[5]      I agree with those submissions. The reasons I agree are set out in detail in the substantive  judgment.    I have  taken  account  of  Mr Alexander’s  submissions  in

response.  I am unpersuaded by them.

3      An expression used by the Supreme Court in Prebble v Awatere Huata (No 2) [2005] NZSC 18, [2005] 2 NZLR 467 at [6] and adopted by the Supreme Court in Bradbury, above n 2, at [28].

[6]      BNZ also submitted, relying on paragraph (f) of r 14.6(4), that indemnity costs are justified by Mr Alexander’s rejection of two Calderbank offers from BNZ. The first, made approximately ten months before the hearing, would have provided Mr Alexander, Compark and Fifer with more in the liquidation than the liquidator’s assessment, with that increase coming from BNZ’s share which is over half of the available sum for creditors.  This offer was made on the basis that Mr Alexander and companies,  other  entities  and  people  associated  with  him,  withdrew  all  claims against  BNZ.     The  offer  was  not  accepted.     The  second  offer  was  made approximately one month before the hearing.  BNZ offered to withdraw its claim in the liquidation if Mr Fifer withdrew all claims against BNZ.  The second offer, had it been accepted, would have resulted in Mr Alexander, Fifer and Compark receiving approximately 85% of the distribution amount, compared with just over 36% in accordance with the liquidator’s calculation of entitlements for all accepted proofs of debt.   The BNZ’s entitlement is 57.15%.   The amount available for creditors is

$324,136.  The benefit to Mr Alexander, Fifer and Compark, in relation to the total available, would have been significant had the offer been accepted when compared with the outcome of the proceeding.

[7]      BNZ faced very serious allegations advanced by Mr Alexander.  Contrary to submissions now made by Mr Alexander on the question of costs, BNZ’s response to Mr  Alexander’s  allegations  was  understandable,  entirely  justified,  and  did  not involve unnecessary or inappropriate steps in the proceeding.

[8]      BNZ’s total costs and disbursements from 22 November 2013, when the proceeding was filed, are $265,874.23 excluding GST.  It seeks costs in that sum.  It has produced its invoices with a degree of itemisation.  I am satisfied that these costs are reasonable.   I have come to that conclusion having taken account of Mr Alexander’s submissions as to quantum, including his understandable comparison of the actual costs as against scale.  I am also satisfied that in this case, having regard to the seriousness of the allegations against BNZ in particular, BNZ was entitled to engage second counsel to assist Mr Kennedy in Court.

[9]      I am also satisfied that BNZ is entitled to an order directing the liquidator to pay the funds held by the liquidator on behalf of Fifer, Compark and Mr Alexander

to BNZ in reduction of BNZ’s costs judgment.   The liquidator has filed a memorandum recording that no funds will be paid out pending disposal of the appeal by  Mr  Alexander,  Compark  and  Fifer  against  the  substantive  judgment.    My direction for payment to BNZ is subject to the liquidator’s entitlement to hold all funds pending disposal of the appeal, but BNZ has leave to apply further in that regard if it wishes to be heard on the point.

[10]     There are orders accordingly.

Woodhouse J