Prince & Partners Trustee Company Limited v Samnic Forest Management Ltd
[2019] NZHC 2324
•13 September 2019
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV 2018-404-2485
[2019] NZHC 2324
UNDER The Arbitration Act 1996 BETWEEN
PRINCE & PARTNERS TRUSTEE COMPANY LIMITED AS TRUSTEE OF THE SAMNIC WAINGAROMIA FOREST JOINT VENTURE
Applicant
AND
SAMNIC FOREST MANAGEMENT LTD
Respondent
Hearing: On the papers Counsel:
M Heard and E Armstrong for Applicants P Spring for Respondents
Judgment:
13 September 2019
JUDGMENT OF DUFFY J
[Costs]
This judgment is delivered by me on 13 September 2019 at 4.30 pm pursuant to r 11.5 of the High Court Rules.
.....................................................
Registrar / Deputy Registrar
Solicitors/Counsel:
LeeSalmonLong, Auckland Keegan Alexander, Auckland
PRINCE & PARTNERS TRUSTEE COMPANY LIMITED AS TRUSTEE OF THE SAMNIC WAINGAROMIA FOREST JOINT VENTURE v SAMNIC FOREST MANAGEMENT LTD [2019] NZHC 2324 [13 September 2019]
[1] On Friday 9 November 2018 the respondent Samnic Forest Management Ltd (Samnic), appeared in this Court on a Pickwick basis and successfully resisted a without notice originating application for urgent interim relief which the applicant, Prince & Partners Trustee Company Ltd (the custodial trustee), brought against Samnic.1
[2] Samnic now seeks an award of costs. The costs award, which in principle would follow the success that Samnic enjoyed, has been complicated by Samnic first seeking an award of indemnity costs and latterly in the alternative an award of increased costs. The costs issue has been further complicated by the parties’ arguments regarding whether the custodial trustee must bear personal responsibility for payment of the costs award or whether it is entitled to be indemnified by the joint venture.2 Samnic opposes the latter course.
[3] I see no reason why the general rule that costs follow the event should not apply here. Accordingly, I am satisfied that Samnic is entitled to an award of costs.
[4] As to the quantum of those costs I consider it helpful first to identify what the quantum of scale costs would be. The issues underlying the originating application were not complex. Ordinarily, I consider the application would attract no more than category 2B costs. Samnic has calculated these at $10,313.75. The custodial trustee has not disputed this calculation. Accordingly, I am satisfied that category 2B costs for this proceeding come to the sum of $10,313.75.
[5] The next question is whether Samnic is entitled to an uplift or to the indemnity costs it seeks.
[6] The originating application was brought on urgently. It was filed on Thursday 8 November 2018 on a without notice basis. It was called in the duty judge list on the morning of 9 Friday 2018. At this time, Samnic appeared to register its opposition to the application. The application was argued in the afternoon of Friday 9 November 2018 with the Court sitting beyond its usual hours.
1 Pickwick International Inc (GB) Ltd v Multiple Sound Distributors Ltd [1972] 1 WLR 1213 (Ch).
2 See discussion of joint venture and custodial trustees’ role in Prince & Partners Trustee Company Limited v Samnic Forest Management Limited [2018] NZHC 2979.
[7] The need for urgency arose from the parties’ dispute as to whether a meeting of the joint venture participants should take place on Saturday 10 November 2018 or not. The custodial trustee wanted to stop the meeting taking place. Samnic maintained that under the terms of the joint venture the meeting was lawfully scheduled and so had to proceed. I found for Samnic.
[8] Earlier on 2 November 2018 the custodial trustee had purported to remove Samnic from the role of manager of the joint venture. The meeting of 10 November 2018 was originally scheduled for the purpose of the joint venture participants deciding on whether there should be a replacement for Samnic. Samnic wanted this meeting to proceed because it viewed the meeting as the opportunity for it to raise the question of whether it remained as manager of the joint venture. Accordingly, much rested on the outcome of the originating application for Samnic.
[9] The significant preparation and strength of the opposition Samnic advanced at the hearing was a major contributing factor to its success. The short space of time that was available to Samnic to achieve its successful opposition satisfies me that it should receive a higher sum than category 2B costs. Its legal team would have had to work hard under very tight time pressure. This must necessarily have attracted a premium fee, which was warranted in the circumstances.
[10] Samnic’s actual legal costs came to $87,112.50, which was a reasonable fee for it to be charged given the circumstances.
[11] Samnic wants indemnity costs in the sum of $35,000 inclusive of GST. It does so on the following bases. Samnic alleges the custodial trustee acted vexatiously, frivolously, improperly or unnecessarily on commencing and arguing the originating application in that it was brought in wilful disregard of known facts or clearly established law; and it was commenced and continued for an ulterior motive. In this regard Samnic contends the custodial trustee sought to “entrench the will” of the custodial trustee by denying the joint venture participants their right to have the joint venture conducted as they saw fit. Samnic also alleges the custodial trustee sought to usurp the decision whether or not to adjourn the meeting which, in Samnic’s view, rightfully lay with the participants. Secondly, Samnic contends that the custodial
trustee had no standing to commence the originating application as unbeknown to Samnic until recently, the custodial trustee has not validly held this office since 24 September 2012.
[12] In support of the contention that the custodial trustee acted with wilful disregard of known facts or clearly established law, Samnic relies on the findings I made at paragraphs [35], [39], [40] and [41] of the judgment giving reasons for dismissing the originating application.3
[13] I am not satisfied the custodial trustee acted in wilful disregard of known facts or clearly established law. Like many parties in litigation, in this case each had strongly held views as to the strength and merits of their respective cases. The custodial trustee took the view that it had authority to schedule the 10 November 2018 meeting and this carried with it implicit authority to adjourn the meeting to a later date. The custodial trustee also considered that once it had acted to purportedly remove Samnic as manager of the joint venture, there was no need for the meeting to take place on 10 November 2018, and therefore it did not need to proceed then. Samnic on the other hand, considered that the joint venture participants who chose to attend the scheduled meeting were the persons with whom rested the ultimate decision as to whether Samnic’s role in the joint venture should be terminated or not. It saw the 10 November 2018 meeting as the opportunity for those participants to determine whether Samnic should remain as manager of the joint venture.
[14] In the end I found the 10 November 2018 meeting should proceed because subsequent to the custodial trustee’s action some joint venture participants had also given formal notice under the joint venture to have the meeting of 10 November 2018. They had taken no steps to retract their notices. Nor were they parties in the proceeding. I was not prepared to make orders that affected the actions taken by those persons.4
3 Prince & Partners Trustee Company Limited v Samnic Forest Management Limited, above n 2.
4 At [38].
[15] I acknowledge I expressed doubts about the custodial trustee’s authority to adjourn a properly notified meeting. However, this was said in the context of me finding that I did not need to determine this legal issue.5
[16] Once parties become engaged in an adversarial dispute the fog of combat can often obscure their respective abilities to comprehend the opposing parties’ stance and assess its strength. There is a difference between acting with a genuine but misguided belief in the merits of one’s case, as opposed to acting with a wilful disregard of the factors that weigh against its success. The conclusions I reached at paragraphs [35], [39], [40] and [41] of the judgment were arrived at only after I had heard the benefit of full argument from counsel for both parties and I had the opportunity to test the arguments of each party. Such process can often lead to weaknesses emerging from what may previously have appeared to be a worthwhile and winnable case.
[17] The hearing was conducted by reliance on affidavit evidence and hearing legal submissions from counsel. None of the disputed evidence was tested by cross- examination, which is to be expected in an originating application for interim relief, particularly when it has started its life on a without notice basis. The procedure that was followed is not one that would enable me to reach a view on whether the custodial trustee had brought the originating application with wilful disregard for the facts and law.
[18] To find a trustee company has acted in wilful disregard of its beneficiary’s interests is a serious finding to make. The urgency of the hearing did not allow for exploration of the custodial trustee’s mental state or motivation for bringing the originating application. Moreover, the outcome of the application was determined without me addressing those matters. In such circumstances, I am not equipped let alone prepared, to find the custodial trustee acted with wilful disregard of the known facts or clearly established law.
[19] Samnic contends the custodial trustee brought the application with an ulterior motive. It was clear to me that during the hearing that this was how Samnic viewed matters. However, as I have already found the custodial trustee’s motivation for
5 At [37].
bringing the proceeding is not something to which I turned my mind. Accordingly, I find this ground does not provide an appropriate basis for an award of indemnity costs.
[20] Finally, Samnic contends that the custodial trustee had not validly held office since 24 September 2012. The custodial trustee has filed a protest to jurisdiction on this issue. The issue was not raised at the hearing on 9 November 2018 and it formed no part of the decision. The custodial trustee does not accept it has not been validly in office since 24 September 2012. No one has had a proper opportunity to be heard on this topic. It was not known to Samnic at the time of the originating application. In the context of a costs application, which is necessarily dealt with on the papers, I am not prepared to make a ruling on whether the custodial trustee was validly appointed at the time I heard the originating application and knew this to be so. If Samnic was to pursue the custodial trustee for acting in this role unlawfully Samnic will need to do so by separate proceedings. These will afford the custodial trustee a proper opportunity in which to be heard. Accordingly, I uphold the custodial trustee’s protest as to jurisdiction.
[21]It follows that the application for indemnity costs fails.
[22] There remains the question of an award of increased costs. The approach to an award of increased costs is well established.6 The need for Samnic to act with urgency, the thoroughness of Samnic’s preparation and delivery of its argument at the hearing all point to scale costs of $10,313.75 being inadequate. I am satisfied that Samnic should receive more than scale costs. I am also satisfied that the 50 per cent increase which Samnic seeks is appropriate. This would bring the sum of the costs award to
$15,470.63.
[23]Accordingly, the custodial trustee is to pay Samnic costs of $15,470.63.
[24] There remain other issues for determination. Samnic seeks an order that the custodial trustee be personally responsible for paying the costs award against it. The custodial trustee seeks orders that it is entitled to be indemnified by the joint venture:
6 See Holdfast NZ Ltd v Selleys Pty Ltd (2005) 17 PRNZ 897 (CA).
(a) for payment of the costs awarded against the custodial trustee; and (b) for the costs it incurred in bringing the originating application.
[25] The resolution of these issues hinges on an assessment of the custodial trustee’s purpose and motivation for bringing the originating application. I do not consider a costs application which follows the disposition of the originating application is the appropriate process for determining these issues. The present process entails an assessment of whether the successful party in litigation is entitled to costs. Such processes are usually done on the papers, which has been the case here. These processes do not readily allow the Court to make the type of assessments that it would need to make before it made orders relating to the indemnification of the custodial trustee. I acknowledge that on occasion litigation involving a trustee may reveal evidence that supports the making of such orders, in which case the Court may then, in the context of a costs application, proceed to deal with issues of trustee indemnification. However, the present proceeding has not been such a case.
[26] Whether the custodial trustee is entitled to be indemnified or not for any of the costs it has incurred in bringing the originating application is a matter to be resolved between the custodial trustee and the joint venture participants. If the matter cannot be resolved between them they will need to find a forum where their disputed matter can be resolved. It is not for me to comment on what that forum might be.
Result
[27] The custodial trustee is to pay Samnic costs of $15,470.63. together with reasonable disbursements. Any dispute over the sum of the disbursements is to be resolved by the Registrar.
Duffy J
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