Rabobank New Zealand Limited v Komene

[2013] NZHC 1647

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV 2013-443-000232 [2013] NZHC 1647

BETWEEN

RABOBANK NEW ZEALAND LIMITED

Plaintiff

AND

ROY KOMENE Defendant

Hearing:	By Memoranda
Appearances:	G J Toebes for plaintiff S R Ebert for defendant
Judgment:	2 July 2013

COSTS JUDGMENT OF ASSOCIATE JUDGE ABBOTT

This judgment was delivered by me on 2 July 2013 at 4.30pm, pursuant to Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar

Date……………

Solicitors:

J Toebes, J T Law, Wellington

S R Ebert, Billings, New Plymouth

RABOBANK NEW ZEALAND LIMITED v KOMENE [2013] NZHC 1647 [2 July 2013]

[1]      On 31 May 2013  I gave judgment for the plaintiff on an  application to discharge a caveat lodged by the defendant over land that the plaintiff was selling as mortgagee.1  The matter is back before the Court for a determination on costs.

[2]      The defendant claimed an interest as a beneficiary under an express oral trust allegedly created in the late 19th century.  I found that there was no evidence to establish an arguable case for the claimed trust, and also that the interest claimed (access to and use of areas of the land) did not give rise to a proprietary interest capable  of  supporting  the  caveat.    I  also  rejected  an  argument  that  the  fraud exception to the principle of defeasibility applied.

[3]      The plaintiff seeks  an  order for indemnity costs  in  the sum  of $13,760, together with disbursements of $1,377.50.   The essential ground advanced for indemnity costs is that the caveat should never have been lodged because there was no basis for the claimed caveatable interest. Furthermore it was deliberately lodged just before the defendant anticipated that the plaintiff would be entering into a sale of the caveated property (as mortgagee) and after it had in fact done so (and the defendant’s solicitors had received advice of that fact).  In addition the plaintiff says that it was put to extra effort because there was no, or misleading, advice as to the claimed caveatable interest, and the lack of clarity carried through to the hearing. The plaintiff says that the indemnity costs it seeks can be considered reasonable as they are only slightly more than the costs that would be payable on a scale 2 time band C basis.

[4]      The  defendant  does  not  dispute  that  he  is  liable  for  costs,  but  opposes indemnity costs.  He says that he was not being deliberately disruptive (he had raised the prospect of a caveat some six weeks before), and pointed out that there were only minutes separating the time of advice of sale and the time of lodging the caveat (from which I infer that the decision and instructions to lodge the caveat had been

made before the defendant received advice of the sale). The defendant also noted the

1 Rabobank NZ Ltd v Komene [2013] NZHC 1285.

recognition in the judgment2 that the contention of an express oral trust was no more than speculation “however well intentioned”.

[5]      The Court has a discretion to award indemnity costs if a party against whom costs are ordered has acted vexatiously, frivolously, improperly, or unnecessarily in commencing, continuing, or defending a proceeding or step in a proceeding,3  or where some other reason exists which justifies that order.4 It is an accepted principle that indemnity costs will be awarded where a party has behaved either badly or very

unreasonably, for example where there has been a breach of confidence or flagrant misconduct.5    The circumstances in which indemnity costs can be ordered can include:6

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

(b)Particular misconduct causing loss of time to the Court and to other parties.

(c)       Commencing or continuing a proceeding for some ulterior motive.

(d)Commencing or continuing a proceeding in wilful disregard of known facts or clearly established law.

(e)      Making allegations that ought never to have been made or unduly prolonging a case by groundless contentions – essentially, the “hopeless case” situation.

[6]      The first matter to consider is whether the defendant acted unreasonably in the first instance in lodging his caveat.  I am not persuaded that it quite reaches the

2 At [29].

3 High Court Rules, r 14.6(4)(a).

4 Rule 14.6(4)(f).

5 Prebble v Awatere Huata (No 2) [2005] NZSC 18, [2005] 2 NZLR 467 at [6]; Bradbury v Westpac

Banking Corp [2009] NZCA 342, [2009] 3 NZLR 400 at [27] – [28].

6  Bradbury v Westpac Banking Corp at [29] endorsing this Court’s adoption (in Hedley v Kiwi Co- operative Dairies Ltd (2002) 16 PRNZ 694 (HC) at [11]) of a summary given by the Federal Court of Australia in Colgate Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225; refer RA McGechan McGechan on Procedure (looseleaf ed, Brookers) at [14.6.03(1)(c)].

level of a “hopeless case”, although it must be viewed as “a long shot”.  The defendant had not fully researched the background at the time the caveat was lodged. Although he could be criticised for not completing his factual investigation at that point (about six weeks after he had engaged a solicitor to write to the plaintiff about a possible caveatable interest) I accept that there was some difficulty tracing old documents: indeed, investigation was still ongoing at the time of the hearing.  For that reason I am not prepared to find that lodging of the caveat was sufficient to justify an order for indemnity costs.

[7]      The next aspect to consider is whether it was unreasonable then to oppose the application to remove the caveat.  To justify an order for indemnity costs I need to be satisfied that the opposition was in wilful disregard of known facts or clearly established law, or that the defendant’s contentions ought never to have been made. By the time of the hearing itself, the facts had only just been marshalled.  It was a weak case, but it had some factual basis, even though it fell well short of establishing an arguable case.

[8]      I am not persuaded, on the facts before the Court, that the conduct in this case was so flagrant as to warrant imposition of indemnity costs.  However, I accept that the defendant’s conduct did cause the plaintiff to spend additional time trying to understand the precise basis of the caveatable interest, and in endeavouring to extract further historical documents from land records to address the opposition.  The Court has power to order increased costs where a party has contributed unnecessarily to the time or expense of the proceeding, or a step in it, by: taking or pursuing an unnecessary step or an argument that lacks merit; or failing without reasonable justification to admit facts, evidence, documents or a legal argument; or where the proceeding is of general importance to persons other than that parties and it was necessary for the party claiming costs to bring the proceeding in the interest of those

affected.7

[9]      I see no reason to increase the costs for bringing the application, but do accept that the plaintiff is entitled to increased time for preparation for the defended

hearing.  I consider an uplift of 50% on the time allocation for preparation (1.5 days

7 High Court Rules, rr 14.6(3)(b)(ii) and (iii) and (c).

to 2.25 days) is appropriate for preparation of written submissions (being item 40 of schedule  3  to  the  High  Court  Rules)  but  otherwise  that  the  plaintiff should  be awarded costs on a scale 2B basis as set out in the schedule to the plaintiff’s memorandum.  It is also entitled to the disbursements sought.

[10]     I make an order accordingly that the defendant pay the plaintiff costs in the sum of $9,751 together with disbursements of $1,377.50.

Associate Judge Abbott