Spackman v Martin

[2020] NZHC 2148

IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY

I TE KŌTI MATUA O AOTEAROA ŌTAUTAHI ROHE

CIV-2020-409-142

[2020] NZHC 2148

UNDER

the Fair Trading Act 1986

IN THE MATTER

of SOLAR BRIGHT LIMITED (in liq)

BETWEEN

MURRAY SPACKMAN

First Plaintiff

AND

THOMAS MOORE

Second Plaintiff

AND

PATRICK MARTIN

First Defendant

AND

NICOLA MARTIN

Second Defendant

AND

ROBERT SNOEP

Third Defendant

AND

CREATEIP

Fourth Defendant

Hearing:

On the papers

Counsel:

G E Slevin for First and Second Plaintiffs

E L Keeble for Third and Fourth Defendants

Judgment:

24 August 2020

JUDGMENT OF ASSOCIATE JUDGE LESTER

(costs)

This judgment was delivered by me on 24 August 2020 at 2.00 pm pursuant to Rule 11.5 of the High Court Rules

Registrar/Deputy Registrar 24 August 2020

SPACKMAN v MARTIN [2020] NZHC 2148 [24 August 2020 ]

[1]    On 5 May 2020, the third and fourth defendants (the applicants), made an application for security for costs against the second plaintiff, Mr Moore, on the basis that he is resident out of New Zealand.

[2]    Counsel for the plaintiffs, Mr Slevin, upon receiving the application for security, sent an email to counsel for the applicants which began:

It is disappointing to see that you have filed an application for security for costs without bothering to first enquire whether that would be necessary, which it is not.

[3]    That email went on to suggest that Mr Moore would provide security but queried the amount sought, and sought a breakdown of how the sum proposed for security was made up.

[4]    Having received the applicants’ explanation as to the sum sought for security, Mr Slevin replied by email noting that the first and second plaintiffs’ claims were identical in every respect except for quantum and it was therefore likely that if their claims failed, only one costs award would be made against both plaintiffs.

[5]    Mr Slevin, in his reply email, noted that given the plaintiffs’ cost liability would be joint and several and that one of the plaintiffs is in New Zealand and would be able to satisfy a costs award, it was most unlikely that an order for security would be made and he referred to Chiu Chui-I v Tang Shuo Development Co Ltd.1 Mr Slevin advised in light of that factor, the second plaintiff would oppose the application for security, but would consent to it being discontinued without issue as to costs, provided that was done promptly. Notices of opposition were then filed which relied on the grounds identified by Mr Slevin in his last email.

[6]    Following the filing of the papers in opposition, the applicants raised some queries about the first plaintiff’s financial position. A further affidavit of the first plaintiff was filed to address those issues and the applicants withdrew their application. Both parties seek costs.

1      Chiu  Chui-I  v   Tang   Shuo   Development   Co   Ltd   HC   Wellington,   CIV-2006-485-1824, 3 March 2008.

[7]    The applicants for security seek costs, essentially saying they were the successful party and as they obtained sufficient assurance, after probing the first plaintiff’s evidence, that a costs order against the plaintiffs would not be barren. The applicants say it was a reasonable response to withdraw the security for costs application having had what they took to be an assurance from the first plaintiff that he would be good for costs against both plaintiffs.

[8]    The second plaintiff seeks costs on the basis that the application for security failed, having been discontinued. Mr Slevin relies on r 15.23 of the High Court  Rules 2016, which provides that upon discontinuing a proceeding, a defendant is prima facie liable for costs.

[9]    Mr Slevin notes that r 15.23 has been applied to interlocutory applications and relies on MV Celebre Ltd v Airwork Flight Operations Ltd.2 Accordingly, Mr Slevin relies on the presumption that the application having been discontinued, his clients are entitled to costs.

[10]   Mr Slevin submits it was unreasonable of the applicants to file their application without first exploring the possibility of resolving security informally. He refers to the correspondence that followed the application as indicative of his clients’ preparedness to negotiate the issue of security.

[11]   Counsel for the applicants accepts that in general, applicants should explore the issue of security for costs informally before applying to the Court, otherwise they risk being denied the costs of their application even if successful.3

[12]Ms Keeble, counsel for the applicants says:

That decision can be distinguished here as the second plaintiff formally opposed the provision of security, indicating that the issue of security was unlikely to have been resolved by agreement had it been raised beforehand on an informal basis; and the paucity of information provided initially by the first plaintiff indicated cooperation on this issue was unlikely to be forthcoming from the plaintiffs.

2      MV Celebre Ltd v Airwork Flight Operations Ltd [2015] NZHC 1400 at [9].

3      Morrell v World Solar Ltd [2018] NZHC 518.

[13]   I cannot accept this submission. The fact is the applicants took no steps to raise the issue of security prior to filing their application. Mr Slevin’s response, set out at

[10] above, records his disappointment at the applicants’ failure to explore the matter beforehand. Mr Slevin was faced with an application that he had to respond to.

[14]              The general rule in civil litigation is that there should be a “letter before action”. Unnecessarily commencing a step in a proceeding is a ground for indemnity costs.4

[15]              Mr Slevin’s first email, upon receiving the application, concluded with the following observation:

In terms of further steps your client may feel inclined to take, I hope you would agree with me that we should try to avoid causing unnecessary costs to the parties by involving the court in matters that should be capable of informal resolution, through cooperation between counsel.

[16]I can only endorse Mr Slevin’s sentiments.

[17]              Associate Judge Osborne (as he then was) declined costs to a successful applicant for security on the basis they had not raised the issue of security with the respondent prior to filing the application, saying:5

[22] Except sometimes in situations of clear urgency, the Court expects plaintiffs and applicants, before issuing proceedings or making applications, to explore resolution informally. In relation to general proceedings, this is frequently done through a “letter before action”. A failure to pursue resolution through either a non-litigious approach or through a less expensive course of proceeding may attract the Court’s invocation of r 14.7. The Australian commentary in Professor Dal Pont’s Law of Costs, in relation to the disallowance of costs in certain cases, includes the following:6

8.18      The court’s general costs discretion dictates that, where in accordance with its proper exercise, a court deems that costs should be disallowed to a litigant, even if he or she is ultimately successful, it may make an order to this effect. What costs should be disallowed depend on the circumstances of each case. For instance, Courts have disallowed costs incurred:

…

4      High Court Rules 2016, r 14.6(4)(a).

5      Morrell v World Solar Ltd, above n 3.

6      G E Dal Point Law of Costs (3rd ed, LexisNexis, Butterworths Australia, 2013) at [8.18].

·that might fairly have been rendered unnecessary by a little forethought (see, for example, Re Commissioners for Railways   (1902)   18   WN   (NSW)   296   at   297   per    A H Simpson CJ);

·as a result of an unnecessary application (see, for example,

Re Ewer (1903) 4 SR (NSW) 240);

·where a less expensive course of effecting the same outcome was readily available (see, for example, Dore v Gormley (1962) 9 LGRA 187 at 190 per Gibbs J (SC(Qld)); Commissioner of Stamp Duties v Edmunds [1989] 1 QdR 271 at 273 per Matthews J (FC));

…

[18]              The fact is, the applicants commenced an application without forewarning and were forced to withdraw it upon reviewing the materials in opposition filed by the plaintiffs. As the applicants had to withdraw their application, I accept Mr Slevin’s submission that the discontinuance rules apply. I do not accept this was a case where the applicants had to bring the application to achieve the outcome that was reached. Mr Slevin’s immediate response showed a preparedness to deal with the issue of security constructively. That opportunity was lost because the application was filed without prior notice. Such is not the manner in which civil litigation should be conducted.

Order

[19]              There is an order that the third and fourth defendants (the applicants) are jointly and severally liable to pay to the plaintiffs costs on a 2B basis in respect of the application, together with 0.4 of a day in respect of the costs memoranda itself and disbursements as fixed by the Registrar.

Associate Judge Lester

Solicitors:

Maciaszek Brown Law, Christchurch (for First and Second Plaintiffs) Peter C Gilbert, Wellington (for First and Second Defendants)

Parker Cowan, Queenstown (for Third and Fourth Defendants)

Copy to counsel:

G Slevin, Barrister, Christchurch (for First and Second Plaintiffs)

J Moss and H Weston, Barristers, Christchurch (for First and Second Defendants)