Superthriller Jet Sprint Limited v Coggan

[2019] NZHC 1624

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2018-404-2840

[2019] NZHC 1624

BETWEEN

SUPERTHRILLER JET SPRINT LIMITED

Plaintiff

AND

MARK REGINALD COGGAN

Defendant

On the papers

Appearances:

AF Drake and DJ Pine for the Plaintiff/Applicant

MR Coggan representing himself as Defendant/Respondent

Judgment:

12 July 2019

COSTS JUDGMENT OF TOOGOOD J

This judgment was delivered by me on 12 July 2019 at 3.00 pm Pursuant to Rule 11.5 High Court Rules

Registrar/Deputy Registrar

SUPERTHRILLER JET SPRINT LIMITED v COGGAN [2019] NZHC 1624 [12 July 2019]

Introduction

[1]This is a costs judgment.

[2]        On 21 March 2019, I granted Superthriller Jet Sprint Ltd (Superthriller or the Company) an interim injunction against Mark Coggan that required him to surrender to Superthriller certain of the Company’s property he had in his possession.1

[3]I said in the judgment:

[34] … The plaintiff having succeeded in its claim for interim relief, the primary rule is that it is entitled to costs. Any application for costs shall be made by memorandum filed and served not later than 19 April 2019. Any reply memorandum shall be filed and served not later than 10 May 2019. Costs shall be determined on the papers unless the Court directs otherwise.

(Citations omitted)

[4]        Superthriller  has  filed  a  memorandum.    It  seeks  indemnity  costs  under  r 14.6(1)(b) of the High Court Rules 2016 or, in the alternative, scale costs on a category 3B basis. Mr Coggan, who has represented himself throughout, has filed a memorandum opposing the award of any costs to the Company.

Background

[5]        To decide whether an award of indemnity costs is appropriate, it is necessary to outline Mr Coggan’s conduct in the lead-up to the interim orders being made. That requires a summary of the relevant background.

[6]        Mr Coggan founded Coggan & Williams Ltd in 1981. The company specialised in the manufacturing of jet units for jet boat engines. Mr Coggan appears to have been the sole shareholder and director. Coggan & Williams designed and arranged for the third-party manufacture of 100-horsepower jet sprint boats using the Coggan & Williams jet units.

[7]        In 2006, Mr Coggan sold one-third of the shares in Coggan & Williams to each of Ms Teresa Farac-Ciprian and Mr Danny Chan, while retaining one-third of the

1      Superthriller Jet Sprint Ltd v Coggan [2019] NZHC 494.

shares himself. In 2016 Coggan & Williams changed its name to Superthriller and designed and constructed a purpose-built race circuit in Wiri where individuals or teams could race the Superthriller jet boats.

[8]        The plaintiff alleged that Superthriller suffered setbacks prior to opening the jet boat park and that the business relationships between Mr Coggan, on the one hand, and Ms Farac-Ciprian and Mr Chan, on the other, became strained. It alleged that  Mr Coggan refused to engage with the operation and development of the business and that he undermined the reputation of Mr Chan and Ms Farac-Ciprian to third-party suppliers.

[9]        In January 2018, Mr Coggan notified Superthriller of his intention to sell his one-third shareholding in Superthriller. Ms Farac-Ciprian offered to purchase the shareholding at a much lower price than she had paid in 2006. Her counter-offer was not accepted, and Mr Coggan resigned as a director, leaving Ms Farac-Ciprian as the sole director of Superthriller.

[10]      At the time of his resignation, Mr Coggan held a substantial amount of Company property. Further, it is  alleged  that  on  or  around  7  November  2018, Mr Coggan held himself out as an agent of Superthriller and collected important plans from a third-party supplier belonging to Superthriller. The plaintiff demanded that Mr Coggan return the Company property. He refused to do so and consistently denied Superthriller the ability to exercise its property rights over the property he held.

[11]      The plaintiff has sued Mr Coggan in conversion and it relies also on a second cause of action in misrepresentation.

[12]      On 21 December 2018, Superthriller filed a without notice interim interlocutory application  for  a  mandatory  injunction,  seeking  orders  directing  Mr Coggan to return all property belonging to Superthriller then in his possession. Duffy J directed that Mr Coggan should be served.

[13]      The matter was set down for hearing before me on 21 February 2019. In the meantime, Mr Coggan swore and filed an affidavit responding to the plaintiffs’ claims

for interim relief. He did not deny that he was in possession of property belonging to Superthriller but addressed instead assertions by the plaintiff about the significance of the property for the operation of the plaintiff’s business and matters related to the dispute over his shareholding and related loans.

[14]      On the morning of the injunction hearing, Mr Coggan informed the Registrar that he was unable to attend the Court because of ill health. He acknowledged that there was nothing he could add to the written material he had filed and said that he would await and abide by the Court’s decisions on the interlocutory application.

[15]      At the hearing, I advised counsel for the plaintiff that I did not consider it would be appropriate to engage in any discussion about the merits of the plaintiff’s and    Mr Coggan’s respective positions in Mr Coggan’s absence and said that the Court would deal with the application for an injunction on the papers.

[16]      Without obtaining the leave of the Court, Mr Coggan then filed another affidavit which he sought to have read in further response to the plaintiff’s allegations. The affidavit, dated 28 February 2019, did not address the principal points at issue in the interlocutory proceeding. Its contents were wholly irrelevant.

[17]      Mr Coggan filed further affidavits on 26 February and 5 March 2019. When referring to Company property in his possession, Mr Coggan confined himself to alleging that the Company did not need it to conduct its operations. He did not assert any right by which he retained the property in his possession or control.

[18]      In granting the plaintiff an interim injunction, I was satisfied that there was an arguable case that:

(a)Mr Coggan was intentionally in possession of the property despite being requested to return it and having no right to retain it; and

(b)that was inconsistent with Superthriller’s property rights such that it was excluded from possession.

[19]The balance of convenience weighed heavily in Superthriller’s favour.

Legal principles

[20]      Costs are at the discretion of the Court.2 Generally, costs go to the winner.3 An award of costs should reflect the complexity and significance of the proceeding4 and should not exceed the costs actually incurred.5

[21]      The Court may order a party to pay indemnity costs if they have acted vexatiously, frivolously, improperly or unnecessarily in commencing a proceeding.6 In Bradbury v Westpac Banking Corp the Court of Appeal set out the following circumstances in which indemnity costs had been awarded, while recognising that the categories are not closed:7

(a)The making of irrelevant allegations of fraud or those known to be false.

(b)Particular misconduct that causes loss of time to the Court and other parties.

(c)Commencing or continuing proceedings for an ulterior motive or doing so in wilful disregard of known facts or clearly established law.

(d)Making allegations which never ought to have been made or unduly prolonging a case by groundless contentions (the “hopeless case” test).

Submissions

[22]      The plaintiff points out that Mr Coggan was put on notice that he was wrongfully retaining possession of Superthriller’s property and afforded every opportunity to return it before injunction proceedings were commenced. He did not do so. Instead, without claiming any right to retain the property, he held onto it to procure leverage over Superthriller in the shareholding dispute, filing a significant

2      High Court Rules, r 14.1.

3      Rule 14.2(1)(a).

4      Rule 14.2(1)(b).

5      Rule 14.2(1)(f).

6      Rule 14.6(4)(a).

7      Bradbury v Westpac Banking Corp [2009] NZCA 234, [2009] 3 NZLR 400 at [29].

body of irrelevant material about why Superthriller did not need the property to conduct its business.

[23]      According to the plaintiff, Mr Coggan’s position was hopeless and he should be ordered to pay indemnity costs

[24]      Mr Coggan filed a document dated 13 May 2019 and titled “statement of defence” in which he makes various allegations concerning:

(a)his previous correspondence with the plaintiffs having been made under duress;

(b)the dire financial straits in which he finds himself and the futility of any costs order made against him;

(c)the success or otherwise of Superthriller as a business venture, both in the past and the future; and

(d)the property, no longer in his possession, being left to languish in storage.

[25]These matters are largely irrelevant to the determination of costs.

Discussion

[26]      As I noted in the judgment granting the plaintiff’s application for interim orders, Mr Coggan maintained possession of the property despite being requested to return it to the Company on numerous occasions.8 His only stated reason for doing so was that the property was not strictly necessary for the proper functioning of Superthriller. This was a wholly  irrelevant  consideration  and,  in  any  case,  not Mr Coggan’s decision to make.9

8 At [25].

9 At [26].

[27]      But Mr Coggan’s adherence to this position throughout the interlocutory proceeding has been unwavering, for no valid reason. I am satisfied he knew full well that he had no right to hold onto the property. Whether he did so with the ulterior motive of procuring leverage over the Company in the shareholding dispute is not something that I have to decide, though it seems likely. It is apparent on the affidavit evidence and from the findings I made in the judgment that the position taken by   Mr Coggan in respect of the proceeding and the earlier correspondence with Superthriller had the effect of unduly prolonging the proceeding. That was in wilful ignorance of the facts and law that meant he had no defensible claim to withholding the property. To borrow the language from Bradbury, Mr Coggan’s basis for opposing the interlocutory application was entirely groundless and his case could readily be described as hopeless.

Result

[28]      It follows that I accept the plaintiff’s submission that the Company should receive indemnity costs. Under r 14.6(1)(b), Superthriller is entitled an order that it should be paid the actual costs and disbursements reasonably incurred on the interim injunction. Indemnity costs are calculated not on the basis of the costs rules, but on the basis of a reasonable allocation of actual costs having regard to the appropriate time taken, the significance and complexity of the work, and a median hourly rate reasonably applicable.10 The plaintiff claims in its costs memorandum that they approximate $64,000 and $4,000 respectively but the Court has not been provided with any basis for determining, as it must, whether the costs sought are reasonable.11 More information is required, therefore, before the Court may make a specific order as to costs.

[29]      I direct counsel for the plaintiff to file a further memorandum, with appropriate attachments, providing the Court with such information as will enable it to assess whether the costs claimed are reasonable.   I draw counsel’s attention to Harrison  J’s

10   Edel Metals Group Ltd v Geier Ltd [2018] NZCA 494 at [58], accepting counsel’s submission in

reliance on Bradbury v Westpac Banking Corp (2008) 18 PRNZ 859 (HC) at [204] and [209].

11 At [62].

judgment in Bradbury at [209] – [212] as providing guidance about what is required.12 The memorandum shall be filed and served by 23 July 2019.

……….……………..

Toogood J

12     Bradbury v Westpac Banking Corp (2008) 18 PRNZ 859 (HC).