Reid v Commissioner of Inland Revenue no.3

[2012] NZHC 3595

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV 2006-404-004222 [2012] NZHC 3595

BETWEEN  JOHN ANTHONY REID First Plaintiff

ANDHUGH MILLOY Second Plaintiff

ANDMILLOY, REID, WONG & COMPANY LIMITED

Third Plaintiff

ANDCOMMISSIONER OF INLAND REVENUE

Defendant

On the papers.

Judgment:      20 December 2012

JUDGMENT (NO. 3) OF ANDREWS J

[Application by second plaintiff for leave to discontinue proceeding]

Solicitors:           J A Reid, c/o CMW & Company Limited  [email protected] Christopher Taylor, Auckland  [email protected] Crown Law, Wellington  [email protected]

Counsel:            K F Gould, Auckland  [email protected]

Copy to:             Chapman Tripp, Auckland  [email protected]

Meredith Connell, Auckland  [email protected]

REID & ORS V COMMISSIONER OF INLAND REVENUE HC AK CIV 2006-404-004222 [20 December

2012]

[1]      There are, at present, three plaintiffs in this proceeding.  The first and second plaintiffs (Mr Reid and Mr Milloy) were, at the time the proceeding was issued, and up until 2011, directors of the third plaintiff.

[2]      Mr Milloy now seeks the Court’s leave to discontinue his proceeding against the defendant, on the grounds that he has settled issues between himself and the defendant, and that the first and third plaintiffs have declined, without any proper basis, to consent to the discontinuance.  Mr Reid opposes leave being given, except upon certain terms, which are not acceptable to Mr Milloy.  The third plaintiff abides the decision of the Court.

[3] costs	The , and (a)	differences between Mr Milloy and Mr Reid centre on the question of are as follows: Mr Milloy agrees to pay Mr Reid a one-third share of a costs award of
$15,000 made in favour of the defendant on 29 March 2012 (“the costs award”), which was paid by Mr Reid.  Mr Reid seeks an order
that Mr Milloy pay him a one-half share of the costs award, on the basis that the third plaintiff has no funds, and cannot contribute to the
costs order.
(b)	Mr Milloy is willing to undertake to meet the terms of any costs order
that might be made against him for costs in the proceeding up until the date of his settlement with the defendant, subject to his being served
with any such application for costs, and having the opportunity to be heard.   Mr Reid seeks an order that Mr Milloy remains personally
liable to meet a half share of any adverse costs award made against Mr Reid, or that is required to be paid by Mr Reid, for the period up to
and including the date of this judgment.
(c)	Mr Reid seeks an order that Mr Milloy advise the Court whether or
not he consents to waive any indirect interest he may have (by virtue of the fact that he remains a shareholder of the third plaintiff, and his
family trust holds a security over the third plaintiff) in any funds that

may later be received as a consequence of the litigation.  Mr Milloy says that this is not a basis on which leave to discontinue may be refused.  He says that any allocation of the benefit or burden of the litigation is between the third plaintiff, its shareholders, and secured creditors, is a matter for them, not this litigation.

(d)Mr Milloy seeks an order that Mr Reid pay indemnity costs in his application for leave to discontinue, and that such costs be set off against any costs Mr Milloy is ordered to pay Mr Reid.  Mr Reid has not made submissions on this point.

[4]      I turn to consider these four issues.

Reimbursement of the costs award

[5]      On behalf of Mr Milloy it was submitted that there was no evidence as to the third plaintiff’s financial position and that, therefore, the Court should not accept Mr Reid’s contention that it cannot contribute to the costs award.

[6]      I accept Mr Reid’s submission that the third plaintiff’s financial position is well-known to Mr Milloy, he having been a director up until 2011, and having maintained its cash books.  I am satisfied that it is appropriate that Mr Milloy and Mr Reid should equally bear the burden of the costs award.

Liability for any future costs award

[7]      I accept Mr Milloy’s submission that it is inappropriate at this stage to fix liability for contribution to a hypothetical order for costs.  I also accept that Mr Milloy should have the opportunity to be heard on any application for contribution.

[8]      I accept that an order should be made recording Mr Milloy’s undertaking as

to future costs, on the terms set out in the submissions on his behalf.

Waiver of any indirect interest

[9]      Having reviewed the parties’ respective submissions, it is not clear to me that there  is  any  substantial  difference  between  them.    As  Mr  Reid  said  in  his submissions, any issue as to Mr Milloy’s interest in the litigation, through a direct or indirect interest in the third plaintiff, cannot be resolved in this proceeding.

[10]     I decline to make any order in respect of this issue.

Mr Milloy’s request for indemnity costs

[11]     Mr Milloy seeks solicitor/client costs in respect of his application for leave to discontinue, on the grounds that Mr Reid has:

(a)      acted vexactiously, improperly, and unnecessarily in opposing the application; and

(b)used the opposition to the application to attempt to have Mr Milloy and the trustees of his family trust give up rights they have in the third plaintiff.

[12]     Mr Milloy annexes invoices totalling $7,006.31.

[13]     I am not satisfied that indemnity costs should be awarded.  In particular, I am not satisfied that Mr Reid has acted vexatiously, improperly, or unnecessarily in opposing Mr Milloy’s application, or that he has misused Mr Milloy’s application. However, it is appropriate that Mr Reid should pay scale costs, as his opposition to leave being given has not, in the event, succeeded.

Result

[14]     Accordingly, I order as follows:

(a)       Mr Milloy is given leave to discontinue his proceeding against the defendant on the basis that:

(i)Mr Milloy is to pay Mr Reid $7,500 as contribution to the costs award of $15,000 paid by Mr Reid to the defendant,

(ii)Mr Milloy’s undertaking is recorded, to the effect that he will meet the terms of any costs order that might be made against him for costs incurred in this proceeding up to and including the date on which he agreed settlement terms with the defendant, subject to Mr Milloy being served with any such application for costs, and having an opportunity to be heard on any such application.

(b)Mr Milloy is entitled to be paid costs on a 2B basis in respect of the application for leave to discontinue, together with disbursements as

fixed by the Registrar.

Andrews  J