Suricata Trust Services Limited (in liquidation) v Vaealiki
[2020] NZHC 1275
•9 June 2020
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2018-404-1615
[2020] NZHC 1275
BETWEEN SURICATA TRUST SERVICES LIMITED (IN LIQUIDATION)
Plaintiff
AND
ISRAEL SEKONE VAEALIKI as executor of the estate of MATTHEW JAMES BUTTERFIELD
First Defendant
ISRAEL SEKONE VAEALIKI as executor of the estate of MATTHEW JAMES BUTTERFIELD and DAVENPORTS HARBOUR TRUSTEE (2012) NO.7
LIMITED
Second DefendantSARAH-MAY ELISE BUTTERFIELD (nee VAEALIKI)
Third Defendant
MATTHEW CHARLES HITCHMAN
Fourth Defendant
Hearing: On the papers Appearances:
Sean McAnally and N Coyle for Suricata Trust Services Ltd (in liquidation)
David Jones QC for the First defendant
Michael Cavanaugh/Mathew Francis for Davenports Harbour Trustee (2012) Ltd
Kate Davenport QC/AM Cameron for Sarah-May Butterfield Sally Morris/Freya McKechnie for Matthew Charles Hitchman
Judgment:
9 June 2020
COSTS JUDGMENT OF ASSOCIATE JUDGE R M BELL
SURICATA TRUST SERVICES LIMITED (IN LIQUIDATION) v VAEALIKI as executor of the estate of MATTHEW JAMES BUTTERFIELD [2020] NZHC 1275 [9 June 2020]
This judgment was delivered by me on 9 June 2020 at 4:00pm
pursuant to Rule 11.5 of the High Court Rules
………………………….
Registrar/Deputy Registrar
[1] On 23 April 2020 I dismissed the plaintiff’s application for summary judgment against the first and third defendants.1 I did not decide costs but gave the parties the opportunity to file submissions if they could not reach agreement.
[2] Mrs Butterfield, the third defendant, seeks costs on the unsuccessful summary judgment application of $14,000 including a component for increased costs under r 14.6(3)(b)(iii) of the High Court Rules, plus costs on a solicitor/client basis on the costs application. She also seeks an order for non-party costs against Equinor Trust Limited (in liq) and Kiwi Deposit Building Society (in dissolution) as funders of the litigation. Mrs Butterfield has properly made a formal application on notice for non- party costs. For the plaintiff, Mr McAnally has filed submissions in opposition but has not expressly addressed the application for non-party costs. The main issue is whether costs should be reserved under the Court of Appeal’s decision in NZI Bank v Philpott.2 The other defendants have not sought costs.
[3] The proceeding is about misappropriation of funds from Suricata Trust Services Ltd. The company went into insolvent liquidation in July 2017. Its directors were Mr Matthew Charles Hitchman and the late Matthew James Butterfield. At the start of the proceeding, the defendants were Mr Butterfield, sued in his own right; Mr Butterfield and Davenports Harbour Trustee (2012) No. 7 Limited, sued as trustees of the Vaikuntha Trust, Mrs Butterfield and Mr Hitchman. The liquidators say that Mr Butterfield misappropriated NZD 873,528.47 from USD and AUD accounts with the National Australia Bank in Australia. Suricata applied for summary judgment
1 Suricata Trust Services Ltd (in liq) v Vaealiki [2020] NZHC 818.
2 NZI Bank v Philpott [1990] 2 NZLR 403 (CA).
against the first, second and third defendants, but not Mr Hitchman. Mr Butterfield and Davenports Harbour Trustee (2012) No. 7 Limited had separate representation. Suricata withdrew its summary judgment application against Davenports Harbour Trustee (2012) No. 7 Limited after it filed its notice of opposition and affidavits.
[4] Mr Butterfield died. Mr Vaealiki is the executor and trustee of his estate and has replaced Mr Butterfield as trustee of the Vaikuntha Trust.
In its claims against the first, second and third defendants Suricata sued:
(a)Mr Butterfield for breach of fiduciary obligations he owed Suricata as its director,
(b)the Vaikuntha Trustees for knowing receipt and money had and received, and
(c)Mrs Butterfield for knowing receipt and money had and received.
[6] Suricata proved to the summary judgment standard that Mr Butterfield had misappropriated the money. It also proved that some of the misappropriated funds passed through a joint bank account of which Mrs Butterfield was an account-holder and signatory. I dismissed the application for summary judgment because of affirmative defences by Mr and Mr Butterfield. While counsel for Mr Butterfield called it a set-off defence, I held that Mr Butterfield had an arguable defence of satisfaction in the light of evidence showing that he had repaid Mr Cotton, the investor whose funds had apparently been misappropriated. Mrs Butterfield had an arguable defence to the knowing receipt claim that she did not know about the payments passing through the account. For the money had and received claim, she had an arguable change of position defence. Since the summary judgment hearing, directions have been given for the case to go to trial.
[7] For Mrs Butterfield it is acknowledged that under NZI Bank v Philpott it is common not to award costs to a defendant when a plaintiff’s summary judgment application is dismissed, but instead to reserve costs. The Court of Appeal said:3
As with most questions of cost, they should be approached on broad principles. Whilst a defendant may be regarded as successful in one sense in resisting an application for summary judgment, it is of course not a final determination in the proceeding itself. If ultimately the plaintiff does succeed, it seems to us in the general run of cases that the defendant should pay for both proceedings, the court paying particular attention to the reasons why the plaintiff was unsuccessful in the first place. If those reasons include some fault on the part of the plaintiff, then it may be appropriate to reduce or even eliminate an entitlement to costs for that part of the proceedings so far as the plaintiff is concerned. Where, however, the defendant has raised defences which cannot by their nature be resolved at a summary judgment application but ultimately turn out to have no basis, then costs on both sets of proceedings belong to the plaintiff.
There will be other cases where the plaintiff has embarked on summary judgment proceeding erroneously, in the sense that the rules do not allow the summary judgment procedure, or in the certain knowledge that there is a bona fide question of fact or law which can be determined only after a trial. In those circumstances the Court should be able in its discretion to deprive the plaintiff of costs in those unsuccessful and aborted proceedings and award costs to the defendant.
Having regard to the difficulty in determining those matters until the case itself is concluded, in many cases the best course will be for the Judge or Master to reserve the question of costs until the litigation is determined … We repeat that the incidence of costs is best settled when the result of the litigation is known, hence the widespread practice as we see it of reserving costs in such situations …
Rule 14.8(3) of the High Court Rules allows for the practice under NZI Bank v Philpott
to continue.
[8] In support of her costs application, Mrs Butterfield says that she was entirely successful in her opposition. At a relatively early stage it was apparent that the application against her had no realistic prospect of succeeding. The proper course was to withdraw then. Instead the plaintiff advanced arguments that had no merit. She refers to GG & GE Blackburn Trustee Ltd v Crowe Horwath (NZ) Ltd4 as a case where costs were awarded against a plaintiff after dismissal of a summary judgment
3 NZI Bank v Philpott [1990] 2 NZLR 403 (CA).
4 GG & GE Blackburn Trustee Ltd v Crowe Horwath (NZ) Ltd [2018] NZHC 366.
application where there was not a realistic prospect of the application succeeding. That was a professional negligence claim.
[9] For this decision I put to one side Mr Butterfield’s satisfaction defence. While Mrs Butterfield has the benefit of that defence, she left the estate to run it and did not incur any costs of her own in that defence. Her efforts were directed at showing she had no knowledge of receipt of the payments (as a defence to the knowing receipt claim), and that she had not received the money and had a change of position defence (as defences to the money had and received claim).
[10] At the hearing the focus was on Suricata’s claim for money had and received against Mrs Butterfield. It accepted for summary judgment purposes that she had an arguable defence to the claim for knowing receipt, namely she did not know. For the money had and received claim, Suricata argued that absence of knowledge was no defence. For that it had support in the Court of Appeal’s decision in Napier v Torbay Holdings Ltd.5 It also argued that a change of position defence was not plausible.
[11] This case does not come within the circumstances where the Court of Appeal suggested that costs might be ordered against an unsuccessful plaintiff. Suricata did not embark on the summary judgment application erroneously. Nor can it be said that its case was so hopeless that it was staring defeat in the face. It had a prima facie case for liability but failed because it could not show that the affirmative defences were not arguable. Its position would be weaker if there were gaps in its own case, as happened in GG & GE Blackburn Trustee Ltd v Crowe Horwath (NZ) Ltd.
[12] I bear in mind the plaintiff’s difficulties. It had earlier sought summary judgment against Mr Butterfield for misappropriating company funds, but he had given it misleading information to show that he had not taken any money. Suricata discontinued that proceeding and carried out further investigations from which it established that he had stolen the money. This time he did not challenge the claim that he had stolen from his company. Suricata could understandably be suspicious of fresh defences advanced by Mr Butterfield and those associated with him, when they had
5 Napier v Torbay Holdings Ltd [2016] NZCA 608, [2017] NZAR 108.
not been raised before and where Mr Butterfield now accepted that he had taken money from the company.
[13] I accepted on the evidence at present that Mrs Butterfield has a defence of change of position, but it remains to be seen what will come to light at trial. If it turns out that she has benefitted from the money her husband stole, her change of position defence will be weakened. It would not be appropriate to award her costs now when, after discovery and a full hearing, she may be found liable. The safer course is to reserve costs.
[14] Accordingly, I dismiss Mrs Butterfield’s costs application for costs. As there is no order for costs, there can likewise be no order for increased costs, nor for costs on the costs application. Equally, as Suricata is not liable, there is no reason for ordering Equinor Trust Limited (in liq) and Kiwi Deposit Building Society (in dissolution) to pay costs.
[15] I note a minor matter, in case it arises later. The steps taken by Mrs Butterfield straddle the changes in daily rates under r 14.3 on 1 August 2019. Under category 2, she should have claimed at $2,230 per day up to 31 July 2019 and at $2,390 after that date.
……………………………….
Associate Judge R M Bell
Solicitors:
Keegan Alexander (Sean McAnally), Auckland, for the Plaintiff
Jackson Russell (Israel Vaealiki/Caroline Harris), Auckland, for the 1st Defendant (given leave to withdraw) Cook Morris Quinn (Chris Morris), Auckland, for the 1st Defendant and first-named 2nd Defendant
Wotton Kearney (M J Francis/M A Cavanaugh) for Davenports Harbour Trustee (2012) No 7 Ltd, 2nd defendant Sellars & Co (Bruce Wyber), Helensville, for the 3rd Defendant
Morris Legal (Sally R Morris/Freya J McKechnie), Auckland, for the 4th Defendant
Copy for:
David Jones QC for the 1st Defendant Kate Davenport QC for the 3rd Defendant
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