Ridge v Parore
[2014] NZHC 708
•9 April 2014
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV 2012-404-000957 [2014] NZHC 708
UNDER Section 174 of the Companies Act 1993 BETWEEN
SALLY ANNE JUDITH RIDGE and
JAMIE DILLON RIDGE First Plaintiffs
SALLY ANNE J UDITH RIDGE Second Plaintiff
AND
ADAM CRAIG PARORE and AARON LLOYD as Trustees of the Adam Parore Family Trust
First Defendants
ADAM CRAIG PARORE Second Defendant
SMALL BUSINESS ACCOUNTING (NZ) LIMITED
Third Defendant
Hearing: On the papers. Counsel:
D W Grove for the Plaintiffs
Z G Kennedy and R W Harris for the DefendantsJudgment:
9 April 2014
COSTS JUDGMENT OF GILBERT J
This judgment is delivered by me on 9 April 2004 at 2.30pm pursuant to r 11.5 of the High Court Rules.
..................................................... Registrar / Deputy Registrar
RIDGE & Anor v PARORE & Ors [2014] NZHC 708 [9 April 2014]
Introduction
[1] I dismissed the plaintiffs’ claims in a judgment delivered on
28 February 2014.1
This judgment deals with costs.
[2] There is no dispute that this is a category 2 proceeding and that band B allows a reasonable amount of time for all relevant steps. Scale costs calculated on that basis amount to $73,232 plus disbursements of $31,610.15. The plaintiffs do
not dispute this calculation.
[3] The defendants seek a 50 per cent uplift on the grounds that the plaintiffs’ claims lacked merit and they unreasonably refused to accept settlement offers. The plaintiffs submit that no uplift is justified.
[4] In Bradbury v Westpac Banking Corp, the Court of Appeal observed that increased costs may be ordered in cases where a party has failed to act reasonably.2
Did the plaintiffs’ claims lack merit?
[5] Rule 14.6(3)(b)(ii) of the High Court Rules permits the Court to order increased costs against a party who has contributed unnecessarily to the time or expense of the proceeding by pursuing arguments that lack merit.
[6] At the commencement of the trial, the plaintiffs advanced six causes of action:
(a) Breach of trust – based on an assertion that 50 per cent of the shares in Small Business Accounting (NZ) Limited (SBA) were held by the trustees of the Parore Family Trust on trust for Ms Ridge or the trustees of the Sally Ridge Family Trust.
(b) Estoppel – based on an alleged representation by Mr Parore on behalf of the Parore Family Trust that Ms Ridge, or the trustees of the
Sally Ridge Family Trust, held a 50 per cent shareholding in SBA.
1 Ridge v Parore [2014] NZHC 318.
2 Bradbury v Westpac Banking Corp [2009] 3 NZLR 400 at [27].
(c) Oppressive conduct – s 174 of the Companies Act 1993 – based on an allegation that the trustees of the Parore Family Trust had wrongfully refused to pay 50 per cent of the SBA dividends to the plaintiffs.
(d) Breach of an alleged property sharing agreement.
(e) Alternative claim for breach of the alleged property sharing agreement.
(f) Claim under the Property (Relationships) Act 1976.
[7] By the time the plaintiffs delivered their closing submissions, they had abandoned all but the first of these causes of action. It was clear to me that the abandoned causes of action had no prospect of succeeding and inevitably would have failed. Nevertheless, the defendants were required to prepare fully to respond to these causes of action. They also pursued a number of counterclaims to meet the prospect that one or more of the plaintiffs’ claims may have succeeded. There is no doubt that the addition of these causes of action, all of which lacked merit, significantly increased the costs reasonably incurred by the defendants.
[8] The sole remaining cause of action was equally hopeless. As noted, it was based on the surprising and inherently unlikely contention that the trustees of the Parore Family Trust held shares in SBA, not only for the benefit of the beneficiaries of that trust, but also for the benefit of the beneficiaries of the Sally Ridge Family Trust. The submission was that, contrary to the terms of the trust deeds, all assets of both trusts were effectively pooled and held for the benefit of the beneficiaries of both trusts, irrespective of which trust paid for or legally owned the asset. As I noted
in my judgment,3 one of the difficulties confronting the plaintiffs in their attempt to
establish any such intention on the part of the trustees of the two trusts, was their inability to plead this clearly and consistently. Even by the time they filed the first version of their fourth amended statement of claim, which was during the course of
the trial, the plaintiffs remained unclear as to whether the SBA shares were held for
3 At [22].
Ms Ridge personally or the Ridge Trust. This claim lacked merit and was always doomed to fail.
[9] The plaintiffs have contributed unnecessarily to the time and expense of the proceeding by pursuing claims that had no realistic prospect of succeeding. This is an appropriate case for the award of increased costs on this ground alone.
Did the plaintiffs fail, without reasonable justification, to accept settlement offers?
[10] Rule 14.6(3)(b)(v) allows an award of increased costs to be made against a party who unreasonably refuses a settlement offer and thereby contributes unnecessarily to the time or expense of the proceeding.
[11] The defendants made a number of settlement offers, all of which were rejected by the plaintiffs. The proceeding commenced on 24 February 2012. On
15 November 2012 the defendants made an offer, marked “without prejudice save as to costs”, to pay $240,000, in 24 monthly instalments of $10,000, in full and final settlement of the plaintiffs’ claims. This offer was rejected the following day.
[12] On 16 April 2013, the defendants made a further settlement offer which they calculated represented a cash benefit of $500,000. The defendants estimated that this offer, if accepted, would result in a 75/25 allocation in Ms Ridge’s favour of all assets at the date of their separation. The plaintiffs did not respond to this offer.
[13] A further settlement offer was made by the defendants on 6 September 2013. They calculated that this offer would provide a cash benefit to the plaintiffs of approximately $250,000. This offer was rejected on 9 September 2013, one week prior to the commencement of the trial.
[14] The defendants’ offers were accompanied by detailed explanations of why the plaintiffs’ claims were likely to fail and therefore why the offers should be accepted. The plaintiffs did not engage with the defendants in relation to these offers. In rejecting them summarily, the plaintiffs exposed themselves to the risk of an increased costs award in the event that their claims failed. While the assessment
must be made at the time the offer is rejected, I consider that the plaintiffs acted unreasonably in rejecting these offers for the reasons explained by the defendants’ solicitors in their correspondence. The plaintiffs must now accept the consequences of failing to accept these offers without reasonable justification. I am satisfied that an award of increased costs is also justified on this ground.
What uplift is appropriate?
[15] In my view, the plaintiffs’ claims were misconceived and never had any realistic prospect of succeeding. The defendants have been put to unnecessary expense in resisting the claims. The defendants made a number of generous offers accompanied by well-reasoned arguments as to why they should be accepted. In making these offers the defendants sought to avoid the trouble and expense of meeting the claims, including preparing for and conducting the trial.
[16] I consider that an uplift of 50 per cent on scale costs is appropriate in this case for all steps from January 2013. I have chosen this date on the basis that the plaintiffs acted unreasonably in not accepting the defendants’ settlement offer made in mid-November 2012 and in pursuing claims which lacked merit thereafter.
Result
[17] The defendants are entitled to costs calculated on a 2B basis for all steps up to 1 January 2013.
[18] The defendants are entitled to costs calculated on a 2B basis with a
50 per cent uplift for all steps taken from 1 January 2013.
[19] The defendants are also entitled to their disbursements as claimed.
M.A. Gilbert J