Rosedale Holdings Limited (in liquidation) v 102 Rosedale Limited

[2012] NZHC 2523

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2011-404-6888 [2012] NZHC 2523

UNDER  the Companies Act 1993

IN THE MATTER OF     of the liquidation of ROSEDALE HOLDINGS LIMITED (in liquidation)

BETWEEN  ROSEDALE HOLDINGS LIMITED (IN LIQUIDATION)

Plaintiff

AND102 ROSEDALE LIMITED Defendant

Hearing:         (on the papers) Judgment:        1 October 2012

JUDGMENT OF ASSOCIATE JUDGE SARGISSON (on costs)

This judgment was delivered by me on 1 October 2012 at 12 pm pursuant to

Rule 11.5 of the High Court Rules

Registrar/Deputy Registrar

Date ..........................

Solicitors:

Meredith Connell, PO Box 2213, Auckland

McVeagh Fleming, PO Box 300 844, Albany

ROSEDALE HOLDINGS LIMITED (IN LIQUIDATION) V 102 ROSEDALE LIMITED HC AK CIV-2011-

404-6888 [1 October 2012]

[1]      At the 25 June 2012 hearing, I made an order setting aside the defendant’s,

102 Rosedale Limited’s, protest to jurisdiction.   The application to set aside the protest was brought by the liquidators of the plaintiff, Rosedale Holdings Limited. The liquidators now apply to have costs fixed on their successful application.  They seek  indemnity  costs  in  reliance  on  r  14.6(4)(a).    In  the  alternative  they  seek increased costs under r 14.6(3)(b).

[2]      102 Rosedale opposes the application for costs.   It accepts that costs will ordinarily follow the event.  However it contends that in this instance, costs should not be awarded at all, or at least not at this stage.  That is because the determination of costs on Rosedale Holdings’ counterclaim in an earlier proceeding, as well as payment of those costs if they are ordered, are pending.  If costs are awarded in this proceeding, 102 Rosedale submits that they be assessed on a Category 2 Band B basis and be restricted to steps that the liquidators took up to and including 8 June

2012. Counsel for 102 Rosedale submits that is when it “conceded jurisdiction, so as

to obviate a hearing and costs”.

[3]      The statutory costs regime contained in the High Court Rules is subject to r

14.1,  which  provides  that  costs  are  in  the  Court’s  discretion.  In  Mansfield Drycleaners Ltd v Quinny’s Drycleaning (Dentice Drycleaning Upper Hutt) Ltd the Court of Appeal, in noting the Court’s over-riding discretion, said:[1]

there is a strong implication that a Court is to apply the regime in the absence of some reason to the contrary: Body Corporate 97010 v Auckland City Council (30 August 2001 CA 234/00). We do not think that a Court should hesitate to depart from the regime where appropriate but we agree that some articulation of the reason for doing so is to be expected, however succinct. If no reason is given it will expose the award to close appellate scrutiny.

[1] (2002) 16 PRNZ 662 at [27].

[4]      The general principles to be applied in the exercise of that discretion are those contained r 14.2.  The first general principle is that the party who fails with respect to a proceeding should pay the costs to the party who succeeds.  Having been successful in the application brought by its liquidators, Rosedale Holdings is prima facie entitled to costs.  However, given the parties’ positions, it is necessary that I go

further.

[5]      These are the essential issues to be determined:

(a)      Should Rosedale Holdings’ prima facie entitlement to costs stand, or are there discretionary reasons against ordering 102 Rosedale to pay the costs, or at least to defer an order?

(b)      If there are no such reasons, should costs for steps taken after 8 June

2012 be disallowed in any event?

(c)       Have the liquidators demonstrated that there are grounds to increase

2B costs or to award indemnity costs?

[6]      It is necessary to refer to the background before dealing with these issues.

Background

This proceeding

[7]      Rosedale  Holdings  is  in  voluntary  liquidation.     Its  liquidators,  Vivian Madsen-Ries and Henry Levin of Deliottes, were appointed in November 2010.  On Rosedale Holdings’ behalf, they commenced this proceeding 102 Rosedale on 28

October 2011.

Related earlier proceeding

[8]      Rosedale Holdings and 102 Rosedale are parties to an earlier proceeding brought by 102 Rosedale and filed under CIV-2010-404-446.   In that earlier proceeding:

(a)      102  Rosedale  sought  judgment  against  Rosedale  Holdings  and  a solicitor, Mr Lloyd, for a sum in excess of $9 million for their alleged failure to complete the purchase of a property under the parties’ agreement for sale and purchase.

(b)Mr Lloyd and Rosedale Holdings filed a joint statement of defence and a counterclaim. The counterclaim alleges that:

(i)the agreement for sale and purchase is collateral to another agreement between companies associated with 102 Rosedale and   Rosedale   Holdings   for   the   sale   of   a   yacht   for approximately $12 million;

(ii)there have been various breaches of the collateral contract by the company associated with 102 Rosedale; and

(iii)the  consequence  of  those  breaches  is  that  Mr  Lloyd  and Rosedale Holdings are not obliged to complete the purchase of the property.

[9]      In November 2010, the proceeding was stayed against Rosedale Holdings upon its liquidation under s 243 Companies Act 1993.  The liquidators declined to give consent to 102 Rosedale to continue to pursue its claim, and it has not sought leave of the court to do so.

[10]     On  2  December  2010,  the  liquidators  discontinued  Rosedale  Holdings’

counterclaim against 102 Rosedale.

Protest to jurisdiction

[11]     The  discontinuance  did  not  bring  an  end  to  the  issues  raised  in  the counterclaim. On 28 November 2011, the liquidators commenced the present proceeding. Their claim essentially amounts to the first proceeding’s counterclaim, repackaged as a fresh claim.

[12]     102 Rosedale was concerned by this development. On 21 December 2011, it filed and served a notice of appearance to protest jurisdiction essentially on grounds

that the “repackaged counterclaim” is barred by r 15.23[2] until the liquidators pay any

costs on the discontinuance of the counterclaim.  Materially however, 102 Rosedale made no application for costs in the first proceeding until some months after the commencement of the present proceeding.  It did not have the liquidators’ agreement to proceed with a costs application.  Nor, it seems, did the liquidators accept that 102

Rosedale’s claim for costs would be accepted on proof of the debt.

[2] Rule 15.23 states:

Unless the defendant otherwise agrees or the court otherwise orders, a plaintiff who discontinues a proceeding against a defendant must pay costs to the defendant of and incidental to the proceeding up to and including the discontinuance.

[13]     On 2 March 2012, the liquidators filed their interlocutory application to set aside the protest.   102 Rosedale filed documents in opposition.   Associate Judge Faire made timetable directions on 27 April 2012 at a chambers list hearing and allocated a 1 day defended fixture for 27 June 2012 (which was later re-allocated to

25 June).  He further directed that:

b)The plaintiff shall file and serve by 16 May 2012 an indexed and paginated casebook of the application, notice of opposition pleadings together  with  all  affidavits,  plus submissions in  support together with all authorities referred to;

c)The defendant shall file and serve by 30 May 2012 submissions in opposition which will include the submissions supporting the application to cross-examine Mr Levin together copies of all authorities referred to;

d)The plaintiff shall file and serve by 13 June 2012 submissions in reply.

[14]     As matters turned out, there was no need for a defended hearing on the application to set aside the protest to jurisdiction.  The position is as recorded in my minute of 25 June 2012:

[3]      The plaintiff’s application is able to be dealt with in short order.  On

8 June Mr Turner responsibly filed a memorandum advising that “following the Redcliffe decision the defendant accepts the jurisdiction of the court”.

[4]       Mr Turner has in discussion today confirmed that there is now no opposition  to   the   court’s   making  an   order   setting  aside  the defendant’s   protest   as   to   jurisdiction   and   I   make   an   order accordingly.  The order is made without prejudice to the defendant’s argument that the proceeding should be stayed or adjourned pending resolution of an outstanding costs issue on the plaintiff’s discontinuance of its counterclaim in an earlier proceeding.

[5]       I come back to that argument later in this minute, but I pause here to deal with the matter of costs on the plaintiff’s application.

Costs

[6]       I have discussed with counsel my preliminary thinking as to costs.  It is this: under the default rules the plaintiff is entitled to costs on its application as the successful party.  There would therefore need to be very sound reasons why the plaintiff should not have scale costs in the normal way and why those costs should not be 2B costs.

Decision

[15]     I deal first with 102 Rosedale’s submission that costs should be refused or deferred.  I am not persuaded that either is appropriate.  The liquidators’ application to set aside the protest was successful and there is no reason to refuse costs.  102

Rosedale capitulated, and through counsel it has expressly conceded that the court has jurisdiction in the matter.  The liquidators for Rosedale Holdings are therefore entitled to be treated as a successful party.  Further, I am not persuaded that questions of costs should be deferred. Arguably, fairness may require the earlier proceeding’s costs issues to be fixed and paid (if costs are ordered) before 102 Rosedale is able to proceed with the new proceeding.  However, though 102 Rosedale has suggested it may seek a stay of this proceeding until any costs are met, it has not actually made an application to that end.  As matters stand on the application before me there is therefore no basis to defer costs.

[16]     I come next to the question whether costs should be limited to costs for steps up to and including 8 June 2012.

[17]     I accept that in its memorandum of 8 June, 102 Rosedale helpfully conceded that it accepts the court’s jurisdiction.   However, the memorandum is somewhat equivocal.  It submits that but for 102 Rosedale’s concession, the court would have no jurisdiction and this proceeding could not have continued until any issues as to costs in the earlier proceeding had been dealt with.  The submission is suggestive of a party that “wants to have its cake and eat it”.

[18]     I  do  not  think  102  Rosedale  can  reasonably  complain  that  counsel  for

Rosedale Holdings’ liquidators spent time preparing for hearing. In accordance with

the timetable directions that were made, the liquidators were ready for hearing by 8

June  2012.    By then,  they would  have  prepared  submissions,  authorities  and  a casebook.    Assuming  for  the  moment  that  there  is  no  proper  basis  to  award indemnity or increased costs, I accept that the liquidators are entitled to costs on the application on a 2B basis.  I am satisfied that the liquidators are entitled, at least, to those costs.

[19]     I turn  to  the question  whether the liquidators  have made out  a  case  for indemnity or increased costs.

[20]     On balance, I do not think this is a case where indemnity costs are justified.

Despite  counsel  for  the  liquidators’  submission,  the  equivocal  nature  of  102

Rosedale’s memorandum is not an extreme circumstance that warrants indemnity costs.  Counsel for the liquidators also points out that the present proceedings were commenced before the application for costs was made.   However, that argument relies on a technicality.   Furthermore, there is some reason to suspect that the liquidators are using this proceeding to circumvent potential liability for costs (on the discontinuance of the counterclaim) under r 15.23 and the restriction on subsequent proceedings under r 15.24.

[21]     For the same reasons, I do not I think this is a case where increased costs are warranted.

Result

[22]     For the above reasons, I am satisfied that Rosedale Holdings is entitled costs on its successful application. I am also satisfied that costs on a 2B basis would provide adequate compensation.  I make orders to that effect.

[23]     I allow for steps 22, 24 and 25 (filing interlocutory application, preparation of written submissions and preparation by applicant of bundle for hearing) in Schedule

3 to the High Court Rules.  I also allow a hearing of 0.25 of a day (as the full 0.5 of a day  that  was  allocated  was  not  required)  and  lastly,  0.4  of  a  day  for  a  costs

memorandum.  That  comes  to  a  total  amount  of  $6,666.50.     I  also  award

disbursements which are to be fixed by the Registrar.

Associate Judge Sargisson