Soncam Limited (in liquidation) v Mad Butcher Holdings Limited

[2020] NZHC 1313

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2019-404-000946

[2020] NZHC 1313

UNDER

Section 97 of the Property Law Act 2007 and section 177 of the Personal Property Securities Act 1999

BETWEEN

SONCAM LIMITED (IN LIQUIDATION)

Plaintiff

AND

MAD BUTCHER HOLDINGS LIMITED

Defendant

PETER REGINALD JOLLANDS and CATHERINE JANE JOLLANDS

Counterclaim Defendants

Hearing:

18 November 2019

Appearances:

R B Hucker and R Selby for the Plaintiff and Counterclaim Defendants

M Tingey and S Sussman for the Defendant

Judgment:

12 June 2020

COSTS JUDGMENT OF ASSOCIATE JUDGE SARGISSON

This judgment was delivered by me on 11 June 2020 at 11.30 a.m. pursuant to Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar Date.......................................

Solicitors:

Jackson Russell Lawyers, Auckland M Tingey, Auckland

SONCAM LTD (IN LIQUIDATION) v MAD BUTCHER HOLDINGS LTD [2020] NZHC 1313 [12 June 2020]

Introduction

[1]    The plaintiff, Soncam Ltd (in liq), applied for summary judgment on its statement of claim against the defendant, Mad Butcher Holdings Ltd. Soncam’s liquidators, the defendants to Mad Butcher’s counterclaim, applied for summary judgment dismissing the counterclaim. I granted both applications.1 In the substantive judgment, I noted that, “[a]s costs follow the event under the statutory costs regime, the plaintiff and the counterclaim defendants, as the successful parties, are entitled to costs and disbursements in the proceeding.”2 However, the parties have been unable to agree upon quantum and have filed and served memoranda as to costs.

What amount is the plaintiff entitled to in scale costs?

[2]    The parties agree that the plaintiff is entitled to scale costs on a 2B basis. But the defendant submits the plaintiff’s calculation of scale costs is incorrect for two reasons. First, the plaintiff has applied the incorrect daily recovery rate for certain steps — the current daily recovery rate of $2,390, set out in sch 2 of the High Court Rules 2016, only applies to steps taken after 1 August 2019; for steps taken before that date, the previous daily recovery rate of $2,230 applies.

[3]    Secondly, the defendant disputes two steps claimed by the plaintiff. The first is a claim for step 11, “Filing Memorandum of Counsel for Plaintiff in Reply of 4 June [2019]”. The plaintiff has accidentally claimed this step twice. Therefore, one should be removed. The second is a claim for step 36, “Appearance at hearing of defended application for interim injunction by sole counsel on 25/09/2019”. The defendant says it has no record of a hearing or appearance on this date. Registry also has no record of a hearing or an appearance on this date, and no minute was recorded for this date. Therefore, this step should also be removed from the plaintiff’s claim for scale costs.

[4]The plaintiff is entitled to 2B scale costs subject to the above amendments.

1      Soncam Ltd (in liq) v Mad Butcher Holdings Ltd [2020] NZHC 1041.

2 At [41].

Should there be an uplift on scale costs?

[5]    Rule 14.6(3)(b)(ii) of the High Court Rules provides that the Court may order a party to pay increased costs if the party opposing costs has contributed unnecessarily to the time or expense of the proceeding, or step in it, by taking or pursuing an unnecessary step or an argument that lacks merit. The Court should consider the extent to which the failure to act reasonably contributed to the time and expense of the proceeding; an uplift from scale is justified only to that extent.3 The party claiming increased costs carries the onus of persuading the Court that their award is justified.4

[6]    The plaintiff submits that an uplift is justified as the defendant contributed unnecessarily to the time and expense of the proceeding by taking unnecessary steps and an argument that lacks merit. The defendant contends that an uplift is not justified in this case.

[7]    First, the plaintiff says the defendant added to the time and expense of the proceeding by putting into issue the form of the Deed Poll release despite it having no relation to the issue at hand, being the quantum the plaintiff needed to pay in order to redeem the security. The plaintiff says this point was unnecessary and without merit.

[8]    In reply, the defendant says it was entitled to put into issue the form of the Deed Poll release. In order to redeem the security, the liquidators repeatedly insisted that the defendant execute a Deed Poll release. The defendant resisted signing the liquidators’ form of Deed Poll release because it would have effectively released all claims that the defendant had against the plaintiff. The Deed Poll release, as prepared by the liquidators, was not restricted to the defendant’s liquidated claim for $40,021 (which the plaintiff said was all that it owed to the defendant). Having regard to the defendant’s outstanding claims, which they were pursuing by way of counterclaim against the liquidators, the defendant was justified in protecting its position by maintaining its security interest and declining to sign the Deed Poll release.

3      Commissioner of Inland Revenue v Chesterfields Preschools Ltd [2010] NZCA 400 at [165].

4      Strachan v Denbigh Property Ltd HC Palmerston North CIV-2010-454-232, 3 June 2011 at [27].

[9]    Secondly, the plaintiff says the defendant’s attempt to repossess the fixed assets required the plaintiff to apply for an injunction to prevent the assets effectively being seized by the defendant. Accordingly, the plaintiff had to apply for and obtain an interim order from Hinton J and the continuation of that order by Palmer J. This, the plaintiff says, unnecessarily added to the time and expense of the proceeding.

[10]   However, the plaintiff has already claimed, in its scale costs, the steps taken in relation to its application for an interim order and its continuation. It must also be remembered that the defendant took those steps as a direct reaction to the liquidators’ alleged conversion of the defendant’s security prior to redemption. In the circumstances, I do not consider those steps unnecessary or without merit.

[11]   Thirdly, the plaintiff says the defendant denied that the quantum owed by the plaintiff was $40,021 based on allegations that the liquidators had purposely acted against the defendant’s interests due to a vendetta and an intention to favour the defendant’s competitor, Wholesale Meats Ltd.

[12]   However, the essence of the defendant’s opposition was that it was owed a greater quantum than what the plaintiff admitted because it suffered loss as a result of the liquidators selling the business allegedly in breach of the Franchise Agreement. Therefore, the primary issue was whether the business had in fact been sold in breach of the Franchise Agreement. The liquidators’ alleged motivations for selling the business was tangential to that primary issue.

[13]   Finally, and related to the third point, the plaintiff says the defendant made serious allegations of professional misconduct against the liquidators without merit. These include allegations that the liquidators:

(a)did not disclose the terms of the sale of the business to conceal the full amount of the defendant’s claim under the Franchise Agreement;

(b)converted the assets of the business;

(c)acted in bad faith and had a preconceived vendetta against the defendant;

(d)acted in an obstructive and unlawful manner; and

(e)secretly sold the plaintiff’s tangible and intangible assets despite the liquidators’ express knowledge of the defendant’s rights.

[14]   In reply, the defendant says that its allegations were not improper or unacceptable so as to justify an uplift. It framed its allegations in factual terms and with regard to established legal principles. The allegations involved matters of disputed fact and I accept their correctness would turn on careful analysis, for which the defendant did proffer an evidential foundation. Indeed, the defendant’s point was that these issues could not be fully examined or determined at the summary judgment stage. And I did not make any factual findings on these points. It was unnecessary for me to do so given my finding that the defendant had failed to exercise its option under cl 21 of the Franchise Agreement. The allegations essentially formed the factual basis of the defendant’s counterclaim against the liquidators. Ultimately, the allegations did not add materially to the length of the hearing.

[15]For the above reasons, I decline to grant an uplift on scale costs.

Order for costs

[16]   The plaintiff, Soncam Ltd (in liq), and its liquidators are entitled to scale costs on a 2B basis as set out in the attached schedule.

Associate Judge Sargisson

Schedule

Scale costs

Plaintiff’s application
Step	Description	Category 2	Band B	Sum
1	Commencement of proceeding by plaintiff	$2,230	3	$6,690
22	Filing interlocutory application for    interim     injunction     and summary judgment by plaintiff	$2,230	0.6	$1,338
11	Filing memorandum of counsel for the plaintiff for mentions hearing  or   callover   (dated 29 May 2019)	$2,230	0.4	$892
12	Appearance      at      mentions hearing     or    callover     (dated 29 May 2019)	$2,230	0.2	$446
36	Filing memorandum of counsel for plaintiff (dated 30 May 2019)	$2,230	0.4	$892
36	Filing memorandum of counsel for  plaintiff  in   reply   (dated 4 June 2019)	$2,230	0.4	$892
26	Appearance at interlocutory hearing of defended application by sole counsel (one hour) (dated 20 June 2019)	$2,230	0.25	$557.50
3	Reply to statement of defence (dated 1 November 2019)	$2,390	0.8	$1,912
24	Preparation        of        written submissions	$2,390	1.5	$3,585
25	Preparation    by    applicant    of bundle	$2,390	0.6	$1,434
11	Filing costs memorandum	$2,390	0.4	$956
29	Sealing judgment	$2,390	0.2	$478
29	Sealing costs Order	$2,390	0.2	$478
$20,550.50
Counterclaim defendant’s application
2	Commencement of defence by counterclaim defendants (dated 1 November 2019)	$2,390	2	$4,780
22	Filing interlocutory application for summary judgment by counterclaim defendants (dated 1 November 2019)	$2,390	0.6	$1,434

$6,214

Disbursements

Description	Sum
Filing fee for statement of claim	$1,350
Filing fee for statement of defence by counterclaim defendants	$110
High Court sealing fee for judgment	$50
High    Court    sealing    fee    for    costs judgment	$50
$1,560

Total awarded: $28,325 (rounded up)