Roquefort James Limited v Northern Trustee Services (BT) Limited HC Auckland CIV 2010-404-975

[2010] NZHC 1460

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2010-404-000975

IN THE MATTER OF     s 167 of the Personal Property Securities

Act 1999

BETWEEN  ROQUEFORT JAMES LIMITED Applicant

ANDNORTHERN TRUSTEE SERVICES (BT) LIMITED

Respondent

Judgment:      11 August 2010 (on papers)

COSTS JUDGMENT OF VENNING J

This judgment was delivered by me on 11 August 2010 at 11.30 am, pursuant to Rule 11.5 of the

High Court Rules.

Registrar/Deputy Registrar

Date……………

Solicitors:           Foley & Hughes, Auckland (J Foley)

Hucker & Associates, Auckland (R B Hucker)

ROQUEFORT JAMES LIMITED V NORTHERN TRUSTEE SERVICES (BT) LIMITED HC AK CIV-2010-

404-000975  11 August 2010

Introduction

[1]      The Registrar has referred this file to me as duty Judge.   On 2 July 2010

Allan J  gave  leave  to  the  applicant  to  discontinue  the  proceeding  against  the respondent.  Allan J reserved the issue of costs directing they were to be dealt with by way of an exchange of memoranda and then to be dealt with on the papers. Counsel have now exchanged memoranda.

Brief background

[2]      The application was made under s 167 of the Personal Property Securities Act 1999 (PPSA).  The applicant sought to maintain the registration of a financing statement recording the interest of the applicant as a secured creditor of a Mr Bain in relation to a Mustang boat.  The application followed the lodging by the respondent of a Change Demand under s 162 of the PPSA in which the respondent maintained there was no security agreement relating to a Mustang boat.

[3]      On  1  March  2010  Williams  J  made  an  interim  order  preserving  the registration and fixed a timetable for affidavits to be filed.

[4]      The respondent breached the order, but Mr Merlo subsequently swore an affidavit for the respondent.  The applicant was awarded costs on the breach.  The costs were not paid which led to another costs order in the applicant’s favour.

[5]      Mr Merlo is an insolvency consultant who, through his company, Merlo Burgess & Co Ltd gave financial and other advice to Mr Bain.  Mr Merlo says he assigned his fee debt to the respondent.

[6]      In seeking leave to discontinue the applicant took the view that in light of further information disclosed in Mr Merlo’s affidavit the applicant no longer needed to maintain its application and rather would seek to have the respondent’s security interest avoided on the bankruptcy of the grantor.

[7]      The respondent seeks costs on the discontinuance in accordance with r 15.23 and also seeks an increased order for costs on the basis of allegations made against Mr Merlo in the affidavit filed to support the application.   The respondent seeks costs on those matters still outstanding on a 2B basis together with a 50 per cent uplift.   Costs of $14,288 are sought although, as the actual solicitor/client costs incurred are $11,943.29, in accordance with r 14.2(f) costs would be capped at that figure.

[8]      On the other hand the applicant submits that the presumption under r 15.23 is displaced and seeks an award of costs against the respondent and an award of non party costs against Mr Merlo and Merlo Burgess & Co Limited.

The non party costs

[9]      In the absence of any formal application before the Court and served on Mr Merlo and Merlo Burgess & Co Ltd seeking non party costs I am not prepared to consider the issue of non party costs.  In any event, for the reasons that follow, such an order is not appropriate in this case.

Decision

[10]     The applicant fails to displace the presumption.  I accept that it brought the proceedings in good faith and wished to clarify the basis for the respondent’s claim to an interest in the security but even on its own documentation the applicant’s claim to an interest in the Mustang boat was tenuous.  In Mr Lowther’s affidavit sworn in support  of  the  application  he  relied  on  an  agreement  confirming the  terms  and conditions for funding to support the claim to the security.  That document recorded the collateral as:

“means all of your right, title and interest in the items listed in clause 2 as securities.

[11]     The items referred to in cl 2 as securities were:

1  x  Caveat  and  second  mortgage  interest  in  394  Airfield  Rd  Ardmore

Auckland

1  x  Caveat  and  second  mortgage  interest  in  111  Motu  Hei  Pauanui

Waterways Pauanui.

Personal Guarantee from Lance John Bain of 394 Airfield Rd Ardmore

Auckland

Any other personal property which may be agreed between us from time to time.

[12]     There is no reference in that document to the Mustang boat in issue.  There is no direct evidence of agreement the Mustang boat was to be part of the security.  Mr Merlo attached a further copy of a terms and conditions for funding in slightly different form in favour of the applicant.  It was not executed by the applicant.  The collateral referred to in that agreement was more detailed.   Among other things it referred to a security interest in a Mustang launch, but the reference was deleted and initialled.

[13]     The applicant’s principal complaint in this case is that the matter could have been  clarified  at  a  much earlier  stage  if  Mr  Merlo  had  provided  the  necessary information  to  the  applicant  rather  than  lodging  a  change  demand.    But  the respondent and Mr Merlo were not required to provide such information.

[14]     The  short  point  is  that  the  applicant,  while  bona  fide  in  bringing  this application, has now resolved that there is no point in pursuing it.  The respondent has been put to costs in responding to the application and is entitled to an order for those costs.

[15]     To the extent that there has been delay or default by the respondent since the issue of these proceedings cost orders have been made against the respondent and they stand.

[16]     There is, however, no justification for an uplift as sought by the respondent. Mr Lowther did, in his affidavit, depose to his suspicions concerning the actions of Mr Bain in particular and Mr Merlo to a degree.  But the allegations are not such as to support an increased order for costs.

Result

[17]     The respondent is entitled to costs in the sum of $5,910 calculated as follows:

Item	Time	Rate	Calculated figure
Commencement of defence	2.0	$1,600	$3,200.00
Appearance at mentions hearing 1 March	.2	$1,600	$320.00
Drafting and filing memorandum 1 July	.4	$1,880	$752.00
Sealing order 2 July	.2	$1,880	$376.00
Preparation of costs memorandum	.4	$1,880	$752.00
Preparation for hearing – (by reference to item 29 and r 14.5(1) by analogy)	.25	$1,880	$470.00
Disbursements- Court fee to seal the order	$40.00
Total:	$5,910.00

Venning J