Tompkins v Wensley Developments the Marina Limited (in liq) HC Invercargill CIV 2009-425-000101
[2011] NZHC 1567
•11 July 2011
IN THE HIGH COURT OF NEW ZEALAND INVERCARGILL REGISTRY
CIV 2009-425-000101
BETWEEN PHILIP JOHN TOMPKINS JULIE ANNE TOMPKINS Plaintiffs
AND WENSLEY DEVELOPMENTS THE MARINA LTD (IN LIQUIDATION) Defendant
CIV 2009-425-000711
AND BETWEEN WENSLEY DEVELOPMENTS THE MARINA LIMITED (IN LIQUIDATION) Plaintiff
AND GREGORY MARK JANSEN First Defendant
AND CHRISTOPHER PAUL JANSEN Second Defendant
Hearing: 6 July 2011
Appearances: S N McKenzie for 875 Frankton Road Limited
S M Dwight for P J & J A Tompkins and G M & C P Jansen
Judgment: 11 July 2011
JUDGMENT OF ASSOCIATE JUDGE OSBORNE
as to new parties and other matters
[1] Because the opposing parties in these two proceedings are represented respectively by the same firms, interlocutory applications were for convenience heard together. They are however not consolidated and will continue to be treated as separate proceedings except where, for convenience, the case management matters
may be dealt with at the same time.
TOMPKINS V WENSLEY DEVELOPMENTS THE MARINA LTD(IN LIQUIDATION) HC INV CIV 2009-
425-000101 & 711 11 July 2011
[2] Wensley Developments The Marina Limited (“Wensley”) developed the units at “The Marina”, Queenstown.
[3] The Tompkins entered into an agreement to purchase Unit 104 in May 2007. The Jansens entered into an agreement to purchase Unit 403 in December 2007. Each purchase price was over $1,200,000.00 and each set of purchasers paid a 10 percent deposit. In the case of the Tompkins, the deposit is now held on agreed stakeholding terms between the Tompkins and Wensley by Preston Russell.
[4] In the case of the Jansens, the deposit was released to Wensley but the Jansens have caveated the Title to the Unit upon the basis of an equitable lien for the return of the deposit.
[5] Completion did not occur on either contract.
[6] In each case, the opposing parties say that the other was in breach of the contract and the contract was cancelled. Damages are claimed in each case.
[7] On 27 October 2010, Wensley entered into deeds of assignment with 875
Frankton Road Limited (“875”). All Wensley’s interest in these two (and other)
contracts involving the Marina was assigned to 875.
[8] On the following day, 28 October 2010, Wensley was put into liquidation by order of this Court.
[9] The liquidators have subsequently investigated the assignments and have concluded that there was no value to unsecured creditors of Wensley in seeking to have the transactions in question set aside. The liquidators have accordingly disclaimed any interest.
[10] The Tompkins and the Jansens have each applied for leave to continue with their claim or counter-claim against Wensley. They have also each applied for security for costs against Wensley on the basis that there is good reason to suspect that Wensley will not be able to pay costs in the event that it is unsuccessful with its claim/counter-claim.
[11] Ms McKenzie informed me that the liquidators’ solicitor (Mr Russell of Lane Neave) has authorised her to indicate to the Court that the liquidators neither consent to nor oppose the making of the orders sought. If Wensley remains a party to the litigation Wensley intends to take no active part.
[12] Wensley, after its liquidation, applied for an order that 875 be substituted as the sole defendant or plaintiff (as the case may be) in each proceeding. That application was effectively abandoned and replaced by an application made by 875 whereby it sought in each case that 875 be substituted as the sole plaintiff/defendant as the case may be or, alternatively that 875 be added as a second defendant/plaintiff as the case may be.
[13] The Jansens and the Tompkins oppose substitution orders as they wish to continue to have rights against Wensley (in liquidation). Wensley was the contracting party with liabilities which cannot be assigned by Wensley to another. Wensley has also been, until its liquidation, an active party in these proceedings with potential costs liabilities.
[14] On the other hand, the Jansens and the Tompkins neither consent to nor oppose an order adding 875 as a party to the proceeding provided the Jansens/Tompkins’ position is not made worse by the order.
Outcome of submissions
[15] Having received written submissions from counsel before the hearing and having had most constructive discussions with counsel in the course of a short
hearing, it became clear to me that the following orders should be justly made for the disposal of the issues in these proceedings and having regard to the objective of the High Court Rules as set out in r 1.2.
Security and the quantum of security
[16] Because Wensley had abandoned pursuit of its application for a new parties’ order and 875 had become applicant, the Tompkins/Jansens’ applications for an order for security for costs against Wensley became otiose.
[17] It was nevertheless common ground between counsel that the Court generally ought not to make new parties orders under r 4.52 except on conditions which prevent injustice to other parties: see, for instance, Colonial Patent Cheese Hoop Co Ltd v Alexander Harvey and Sons Ltd [1927] NZLR 459, at pp 461-462; McGechan on Procedure at HR 4.52.05.
[18] The Tompkins and Jansens had properly put before the Court verified evidence as to likely scale costs (on a 2B basis) and disbursements arising from their involvement in these proceedings. Wensley had not itself responded to that evidence and in the way matters developed 875 had also not responded. In that sense, the quantum of calculations was not challenged but the nature of the calculations lent themselves to being dealt with by submission rather than further evidence.
[19] In these circumstances, I reserved to Ms McKenzie a short time in which to provide an analysis of the Jansen/Tompkins’ calculations and a short time thereafter for Ms Dwight to respond. I am indebted to counsel for their prompt and succinct responses.
[20] The evidence discloses a likelihood that 875 would be unable to meet costs awards if unsuccessful in these proceedings. 875 has not put any evidence forward in relation to its balance sheet or finances generally. What is self-evident is that 875 came into existence to take over the Wensley project which is physically situated at
875 Frankton Road, Queenstown. There is no suggestion that it had a prior existence of its own or significant assets of its own. Given the number of assignments it has
taken for significant consideration, there is a probability that its liabilities wil l exceed its assets unless it is successful in the various proceedings and claims it brings on contracts relating to the project. In this security context, success in those claims cannot be counted on.
[21] I am satisfied that there ought to be security orders in favour of the Jansens and the Tompkins.
Costs looking backwards (from the date of application for security)
[22] A significant feature of the calculations proffered by the Jansens and the Tompkins is that they comprehensively cover all scale items from commencement to judgment. Many of the items included in the calculations related to interlocutory attendances such as discovery, inspection and case management conferences, which had occurred before any application for security was contemplated.
[23] It is unusual for this Court to make a backward-looking security order: see Pickard v Ambrose CIV 2003-091-143 High Court Wellington 13 August 2009, per McKenzie J at [9].
[24] I was referred to the judgment of Associate Judge Sargisson in Redhill
Developments (NZ) Limited v SK Brothers Builders & Developers Ltd CIV 2008-
404-6510 Auckland High Court 25 February 2011 at [55]. In that case, the original plaintiff had also been put into liquidation shortly after assigning its relevant interests to another company. The other company was to be substituted as plaintiff. The Associate Judge proposed to make an order for security for costs both in respect of costs incurred to date and in respect of the costs of the defendant if the (substituted) plaintiff were unsuccessful in the litigation. Her Honour invited further submissions as to quantum. In the event, the final form of judgment (31 March
2011) at [3] followed agreement between the parties as to the quantum of security, without further discussion as to how the quantum was arrived at.
[25] Each application for security will turn, to some extent, on its own facts.
[26] Here, a plaintiff is being added, rather than substituted. Ms McKenzie submits that that is a feature that is a factor against a backward-looking security order. I do not consider that such a distinction weighs significantly in this case. There appears to be a real likelihood in this case that in the event the vendor is unsuccessful, neither Wensley nor 875 would be in a position to pay costs.
[27] A consideration of justice which, in my judgment, does weigh in the present context is that the vendor associated with this property development and with these sales has, after issuing this proceeding, gone into liquidation. While Wensley had the conduct of the vendor’s claims, the Jansens’ and the Tompkins’ costs have been built up without any certainty of knowledge concerning Wensley’s ultimate demise. The same or similar people appear to be behind 875 as were behind Wensley.
[28] It is just that if 875 wishes to effectively take over this litigation that it should provide security which has regard to the attendances which preceded as well as those which came after the security applications. Given the relationship between Wensley and 875, it is a reasonable incident of 875’s inheritance of the vendor’s claims that it should provide some measure of security in relation to the whole of the litigation rather than only the forward-looking part.
[29] I therefore consider it just in this case that the security not be solely forward - looking as from the date of the application. In relation to security for backward- looking costs I consider a sum calculated of approximately one half of the security to be ordered for forward-looking aspects would be appropriate.
Access to justice?
[30] I am conscious that issues of access to justice count for little in this case where 875 must be taken to have entered these transactions and this litigation in knowledge of the likelihood of an application for an order that it provide security for costs.
Costs forward-looking (from the date of the application for security) - amount of security
[31] The amount of the security which the Jansens and the Tompkins were proposing equated to approximately 70 percent of a full scale award for all attendances. With matters now having moved on to the extent that Wensley has been effectively replaced as the active participant in this litigation by 875 – purpose designed to take over choses in action, but having no demonstrated trading history or means to meet costs award – there is a strong case to be made that a security order should now be towards the top of a 2B calculation.
[32] I consider it just that Wensley provide in relation to the forward-looking aspects of security a sum of approximately 80 percent of the scale award together with disbursements. This approach produces a rounded figure of $25,000.00 (on account of costs).
[33] In relation to backward-looking security, this will equate in terms of the approach I have earlier outlined to approximately 40 percent of the scale award for those attendances. This approach produces a rounded figure of $6,500.00 (on account of costs).
Schedule of all calculations
[34] I set out in the Schedule to this judgment the items of costs and disbursements upon which I base my calculations in this case. Schedule 1 sets out the items of costs for the Tompkins and the Jansens in the earlier period of the litigation (up to the approximate time of the security applications). Schedule 2 sets out what I have referred to in this judgment as the forward-looking costs. In an approximate manner, the increased daily rate (applicable from mid-2010) has been applied to Schedule 1 and not to Schedule 2. Schedule 3 deals with disbursements.
Disbursements
[35] I allow security only for those items which arise from the Tompkins’ and Jansens’ defence of claims against them. I disallow items such as hearing fees which are incurred in the capacity of plaintiff. The purchasers are not entitled to security for their claims against Wensley or 875.
[36] As set out in Schedule 3, in the case of the Tompkins, I assess a disbursement security figure of $1,523.33, and in the case of the Jansens, I assess a disbursement security figure of $2,823.33.
Orders
CIV-2009-425-101
[37] I order –
[a] The application of Wensley for substitution or addition orders is dismissed with no costs.
[b]875 Frankton Road Limited shall be added to this proceeding as second defendant (with Wensley Developments The Marina Limited (in liquidation) becoming first defendant).
[c] The plaintiffs are granted leave to continue this proceeding including against the now first defendant.
[d] The second defendant shall provide security for the plaintiffs’ costs
by payment to the Registrar of the sum of $33,023.33 on or before 5
August 2011 failing which any counter-claim in this proceeding (but not the remaining claims in the proceeding) shall be stayed.
[e] The second defendant shall file and serve by 23 August 2011 its pleading, including any defence and counter-claim.
[f]The second defendant shall file and serve a verified list of documents (covering such documents as have not been previously discovered by the first defendant) by 23 August 2011.
[g] The plaintiffs shall file and serve within 15 working days after receipt of the second defendant’s pleading their defence to any counter-claim and any further amendments to their pleadings.
[h]The parties shall file and serve within ten working days after the filing of the plaintiffs’ further pleading any interlocutory applications with any such application to be given as its hearing date 11.00am 3
October 2011, by telephone (Associate Judge Osborne).
[i] Any opposition to any such interlocutory application shall be filed and served by 30 September 2011.
CIV 2009-425-711
[1] I order –
[j] The application of Wensley for substitution or addition orders is dismissed with no costs.
[k]875 Frankton Road Limited shall be added to this proceeding as second plaintiff (with Wensley Developments The Marina Limited (in liquidation) becoming first plaintiff).
[l] The defendants are granted leave to continue this proceeding including against the now first plaintiff.
[m] The second plaintiff shall provide security for the defendants’ costs
by payment to the Registrar of the sum of $34,323.33 on or before 5
August 2011 failing which any counter-claim in this proceeding shall be stayed.
[n] The second plaintiff shall file and serve by 23 August 2011 its claim.
[o]The second plaintiff shall file and serve a verified list of documents (covering such documents as have not been previously discovered by the first plaintiff) by 23 August 2011.
[p]The defendants shall file and serve within 15 working days after receipt of the second plaintiff’s pleading their defence and any amendments to their earlier pleadings.
[q]The parties shall file and serve within ten working days after the filing of the defendants’ further pleading any interlocutory applications with any such application to be given as its hearing date
11.00am 3 October 2011, by telephone.
[r]Any opposition to any such interlocutory application shall be filed and served by 30 September 2011.
Costs
[38] I invited counsel at the conference to address me on the costs on the various applications I have had. It is common ground that costs should be fixed on a 2B basis.
[39] I consider it just in all the circumstances that the costs of the Jansen/Tompkins applications is fixed on a 2B basis and that they together with disbursements be costs in the cause. I so order.
[40] I consider it just in the circumstances that there be no costs order in favour of
875 in relation to the applications of Wensley and 875 for orders of substitution or addition of a party, notwithstanding that there have been orders adding 875. Those applications and orders have come about because Wensley and 875 for their own commercial reasons entered a contract of assignment. The other parties should have no exposure to costs awards as a consequence of 875’s need to be added as a party.
On the other hand, if the Jansens or Tompkins are ultimately successful they should have the benefit of an order that the costs of opposing the Wensley/875 substitution applications be fixed on a 2B basis and paid to them as costs in the cause (if they are successful). I so order.
Next case management conference
[41] I adjourn the proceeding to a further case management conference at
11.00am 3 October 2011, by telephone.
[42] Counsel are directed to file at least three working days before that conference preferably a joint memorandum dealing with the readiness to proceed for hearing.
The memorandum is to deal with –
any steps necessary for the disposal of interlocutory applications;
the suitability of the case for Judicial Settlement Conference or alternative dispute resolution;
the estimated duration of the hearing and allocation of hearing date;
timetable directions for trial;
the names and number of witnesses (and which are factual and expert);
any particular directions required in relation to experts; and
confirmation that a back-up fixture will be accepted (or if not, why not), subject to prior notification.
Associate Judge Osborne
Solicitors: Preston Russell Law, PO Box 355, Invercargill
Cavell Leitch Pringle & Boyle, PO Box 799, Christchurch
SCHEDULE 1
( For each of CIV 2009-425-101 and 2009-425-711) (Tompkins and Jansen)
(earlier period)
General Civil Proceedings B Total
days
2 Commencement of defence by defendant 2.0 2.0 3.6 Pleading in response 0.6 0.6 4.5 List of documents on discovery (allow for 1) 1.5 1.5 4.6 Production of documents for inspection (allow for 1) 1.0 1.0 4.7 Inspection of documents (allow 2 as supplementary
list)
1.5 3.0 4.10 Filing memorandum for case management conference
or mentions hearing (3)
0.4 1.2 4.11 Appearance at case management conference (4) 0.3 1.2
Total 10.5
x $1,600 per day $16,800.00
x 40 percent c$6,500.00
SCHEDULE 2
For each of CIV 2009-425-101 and 2009-425-711 (Tompkins & Jansen)
(from security applications)
General Civil Proceedings B Total
days
4.10 Filing memorandum for case management conference
or mentions hearing (2)
0.4 0.8 4.11 Appearance at case management conference (2) 0.3 0.6 4.12 Preparing and filing interlocutory application
(excluding summary judgment application) and supporting affidavits
(a) Security for costs (1)
0.6 0.6 4.13 Preparing and filing opposition to interlocutory
application (excluding summary judgment application) and supporting affidavits
(a) Application to set aside injunction (1)
0.6 0.6 4.14 Preparation for hearing of defended interlocutory
application (excluding summary judgment application)
(a) Security for costs
0.5 0.5 4.15 Appearance at hearing of defended interlocutory
application (excluding summary judgment application) for sole or principal counsel
(a) Security for costs
0.5 0.5 4.18 Sealing order or judgment (1) 0.2 0.2 7.3 Defendant’s preparation of affidavits or written or oral
statements of evidence to be used at hearing
2.0 2.0 7.4 Defendant’s preparation of affidavits or lists of issues,
authorities, bundle to be used at hearing
2.0 2.0 8 Preparation for hearing if case proceeds to hearing 6.0 6.0 9 Appearance at hearing 3.0 3.0
Total 16.8
x $1,880.00 per day $31,584.00
x 80 percent c$25,000.00
SCHEDULE 3
Disbursements
For 2009-425-101 (Tompkins)
Defences (2 x)
$180.00
Interlocutory application (1 x) $600.00 Interlocutory application (security) (1 x) $613.33 Opposition to application to set aside injunction $90.00 Sealing judgments (2 x) $40.00 Total $1,523.33
For 2009-425-711 (Jansen)
Defences (2 x)
$180.00
Interlocutory application (security) (1 x) $613.33 Opposition to application for new parties order $90.00 Sealing judgments (2 x) $40.00 Counsel’s airfares (2 x) $1,000.00 Accommodation (3 nights x 2) $900.00 Total $2,823.33
0
0
0