Trustees of the Link Trust no.1 v Haines

[2022] NZHC 957

IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY

I TE KŌTI MATUA O AOTEAROA TE WHANGANUI-A-TARA ROHE

CIV-2021-485-459

[2022] NZHC 957

BETWEEN

THE TRUSTEES OF THE LINK TRUST

NO.1, presently being CISCA FORSTER and HARRY MEMELINK
Applicant

AND

QUENTIN STOBART HAINES

First Respondent

BPE TRUSTEES (NO.1) LIMITED
Second Respondent

EASTLIGHT ASSET TRADING NO.5 LIMITED
Third Respondent

STOBART HOLDINGS LIMITED

Fourth Respondent

On the papers:

Counsel:

D Livingston for Applicant

J D Dallas for First, Second and Third Respondents A O’Connor for Fourth Respondent

Judgment:

6 May 2022

JUDGMENT OF CHURCHMAN J (COSTS)

[1]        This is an application for costs by the respondents. As a result of a decision issued on 23 March 2022, the applicants were unsuccessful in their applications for a caveat not to lapse, and for an interim injunction preventing the fourth respondent from dealing with a residential property near Otaki.

THE TRUSTEES OF THE LINK TRUST NO.1 v HAINES & ORS (COSTS) [2022] NZHC 957 [6 May 2022]

[2]        Counsel were invited to settle costs between them. Agreement was not reached, and now the parties have filed submissions for costs to be dealt with on the papers.

Procedural background

[3]Some detail regarding the procedural background is necessary.

[4]        This judgment on costs involves two files, CIV-2021-485-459 and CIV-2021-485-457.1

[5]        The applicants in both proceedings were Cisca Forster and Harry Memelink as trustees of the Link Trust (No. 1). They were represented by Mr Livingston.

[6]        The respondents in the 459 proceeding were Quentin Haines, BPE Trustees (No. 1) Limited, Eastlight Asset Trading No. 5 Limited, and Stobart Holdings Limited. The respondent in the 457 proceeding was Stobart Holdings Limited.

[7]        Mr Haines represented his own interests. Mr Dallas appeared for BPE Trustees and Eastlight. Mr O’Connor represented Stobart. However, as will be apparent, there was some cooperation between counsel.

[8]        In a minute of 9 February 2022, Associate Judge Johnson joined the two proceedings so that they could be heard together. Following a hearing, judgment was issued on 23 March 2022.

Arguments at hearing

[9]        In order to justify the sustaining of the caveat or the award of an interim injunction, at hearing, Mr Livingston, on Mr Memelink’s behalf, alleged that the respondents at various points had committed fraud in their dispositions of the subject property. A number of the submissions in this respect were considered “untenable” when assessed alongside the objective evidence.2 Following discussion of the

1      Forster v Haines [2022] NZHC 549.

2 At [55].

standard required for fraud as formulated by Heath J in Pepper New Zealand (Custodians) Limited v Schmidt, the Court stated:3

There are no primary or undisputed facts established which could result in an inference of fraud. There is nothing that could support a finding of actual dishonesty on the part of the registered proprietor or a director of the registered proprietor. For the purpose of this interlocutory application, the applicants have been unable to meet the tests that would justify the Court in granting the application that the caveat not lapse on the grounds of there being primary facts which would support an argument of fraud.

[10]      Mr Livingston’s arguments on other grounds were similarly unsuccessful, the overall conclusion being that there was no evidence to support them.4

[11]      In [16] of his memorandum in relation to costs, Mr Livingston refers to a finding in the substantive decision that no valuation of the property in issue at

$1,250,000 was placed before the Court. His submission says:

The valuation was filed in the initial disclosure bundle (including in hard copy with the High Court), discovered by both parties, and not in dispute.

[12]      This submission appears to conflate discovery with the filing of documents in Court. The fact that the parties may have listed a document in their discovery does not mean that it has been placed before the Court.

[13]      Mr Livingston’s submission that a copy of such a valuation was filed in hard copy with the Court is incorrect. There was a reference in Mr Livingston’s submissions to such a valuation by a Mr Wagenaar.5 Neither counsel took me to any copy of the document during the course of the hearing, or suggested that a copy was on the Court file. I was unable to locate any copy of such a valuation when I looked for it on the file at the conclusion of the hearing.

[14]      As a result of the assertion by Mr Livingston in [16] of his submissions on the costs application, I have caused the Registrar who was responsible for this file to carefully check to see whether any hard copy had been filed with the Court. He has

3      At [80]-[82].

4 See [85]; [88]; [96]; and [100].

5      At [70] and [71].

confirmed that there is no hard copy on the file. Neither does the Court have any electronic copy.

[15]      Mr Livingston’s submission that the defendant’s reference to unsubstantiated allegations of fraud is undermined because there was a copy of a valuation at

$1,250,000 on the Court file is therefore incorrect.

Submissions on costs

Respondents – Mr O’Connor

[16]      Mr O’Connor filed submissions on behalf of the respondents, who seek orders for costs on a 2B basis with an uplift of 50 per cent. Costs are sought separately for Stobart, and jointly for Mr Haines, BPE Trustees and Eastlight. There are tables prepared on the basis that the two proceedings were separate.

[17]      Stobart is seeking two orders. They seek $36,746.25 in respect of the Caveat matter and $22,944.00 in respect of the interim injunction, plus disbursements of $320.

[18]      Mr Haines, BPE and Eastlight collectively seek a single costs order in the injunction matter of $25,632.75.

[19]      The 50 per cent uplift is sought in reliance on Soshi Gakuen New Zealand Incorporated v Vo6 and on the basis that the applicants acted vexatiously, frivolously, improperly, or unnecessarily in commencing, continuing, or defending a proceeding.7 Mr O’Connor submits that the applications relied on unsubstantiated allegations of fraud without merit, which historically give rise to indemnity costs.   In addition,   Mr O’Connor argues that the conduct of the appellant has added considerably to the respondents’ costs. This conduct included filing affidavit evidence late or not at all, not preparing a common bundle, and failing to attend case management conferences.

6      Soshi Gakuen New Zealand Incorporated v Vo [2020] NZHC 2218.

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

Applicants – Mr Livingston

[20]      Mr Livingston accepted that costs were appropriate. However, he sought to dispute Mr O’Connor’s approach to costs as between the respondents, the structuring of the costs as between the two proceedings, and the appropriateness of an uplift.

[21]      Mr Livingston submits that Stobart is the only party that should be awarded costs because it was the only party directly affected by the application (being the registered proprietor). He views the approach of counsel for the respondents as ‘intertwined’ so that the Court should hesitate before awarding full costs for each party when multiple parties have sought to advance submissions on behalf of one particular party. He accepted that Mr Haines may be entitled to an apportionment of costs given his involvement in Stobart’s defence.

[22]      Mr Livingston submits that the approach by which the respondents have calculated their costs, duplicates and overstates the correct position. He submits that given there was a one-day hearing with two causes of action relating to the same subject matter, it is appropriate for costs to be awarded in an apportioned manner reflecting the time taken for hearing, instead of being awarded as if there were two separate hearings on different matters.

[23]      Mr Livingston contests the propositions relating to uplift and the argument that the appellants significantly increased the costs of the proceeding.

Analysis

[24]      The power of the Court to impose costs or the general principles associated with liability for costs are not in dispute as between the parties.

Entitlement and approach

[25]I do not accept the submission that Stobart is the only party entitled to costs.

The files clearly show that Mr O’Connor, and Mr Dallas were engaged in the

majority of the preparation. Mr Haines appeared at the hearing on his own behalf. Mr Dallas appeared for BPE Trustees and Eastlight, and Mr O’Connor represented Stobart. Although there was a single day hearing for two applications covering

much the same subject matter, that subject matter was complex. It involved a number of parties who were engaged at different points in the factual matrix. It would not represent the reality of the work done in these proceedings to only allow costs for Stobart, and on a reduced basis, Mr Haines. While Stobart is the registered proprietor, the argument advanced by Mr Livingston involved allegations of fraud

against all of the respondents, and so it is not appropriate to say that Stobart was the only party directly affected by the application.

[26]      Although the arguments as to fraud were unfocussed, all the respondents were at risk of having such a finding made against them, if the Court had accepted the case advanced by the applicants.

[27]      The approach taken by Mr O’Connor and Mr Dallas in their cost schedules, was that the caveat issue and the injunction issue were two entirely separate proceedings. While they were determined at the same fixture, I am of the view that this is the appropriate approach, given that both proceedings were on foot for some time prior to Associate Judge Johnston’s minute of 9 February 2022 directing a joint hearing.8 BPE, Eastlight and Mr Haines were not respondents in the 457 caveat proceeding, despite the same factual matrix being relevant as to the 459 injunction proceeding in which they were respondents. It would not be appropriate to take an approach whereby the two proceedings were entirely merged for the purpose of costs given chronologically this happened only shortly before the hearing and because this would result in the respondents sharing in costs relative to events to which they had no connection.

[28]      However, there is a basis for the respondents to share in some of the costs, given that in fact, the proceedings were heard together. Mr O’Connor for Stobart has claimed twice for the preparation of written submissions, when his submissions for both matters were filed together, as a single document. Mr Dallas has also claimed for the preparation of written submissions when in substance, the submissions for the respondents for hearing were filed on a joint basis by Mr O’Connor, and then spoken to by Mr Dallas and Mr Haines at hearing. On that basis, I would divide a single award

8      Both applications were filed 12 August 2021.

of costs between the parties under step 40 for the preparation of written submissions. As such, the amount in each costs schedule should be reduced by $2,546.28, to allow an award of costs for the preparation of written submissions of $1,038.72 each.

[29]      I am also inclined to allow Stobart only to claim once for the preparation of the defence bundle and sealing of orders.

Uplift

[30]In Soshi, Grice J discussed indemnity and increased costs, stating that:

[11]              A Court has an overarching discretion to award indemnity under      r 14.6(4)(a) of the Rules, when a party has acted “vexatiously, frivolously, improperly, or unnecessarily in commencing, continuing, or defending a proceeding or a step in a proceeding”. This section has been engaged in several cases where serious allegations such as fraud which were made without a proper foundation.⁹

[12]              Acting “unnecessarily” incorporates distinctly bad behaviour, and includes unfounded or irrelevant allegations of fraud or deceit.¹⁰ Indemnity costs may also be awarded when a party fails to abandon a claim involving fraudulent allegations when they lack substance which becomes apparent at a preliminary stage.¹¹

...

[17]      Pursuant to r 14.6(3)(b) of the Rules, increased costs may be awarded for taking or pursuing an argument that lacks merit or which unnecessarily contributes to the time and expense of the proceeding or quantum should be determined by scale costs rather than actual costs, with an uplift that should not normally exceed 50 per cent.¹²

[18]      Increased costs may also be awarded if there is some other reason to justify a court imposing increased costs (r 14.6(3)(d)). This may include fraud when there is a lack of substance behind the allegations.¹³

[31]      In the present case, and Soshi, there are allegations of fraud that were not supported by the evidence. As noted above, these allegations were not upheld at hearing.

9      Smithkline Beecham (NZ) Ltd v Minister of Health [2002] 16 PRNZ 361 (HC); and Hedley v Kiwi Co-operative Dairies Ltd (Costs) [2002] 16 PRNZ 694 (HC).

10     Hedley, above n 9, at [8]; citing Hawkins Construction Ltd v Chan [2002] 20 NZTC 17,669 (HC).

11     Tri Media International Ltd v Wellington  Company Ltd  HC Wellington CIV-2008-485-2768,  15 July 2009; and Baxter v RMC Group PLC HC Auckland CP262/01, 9 September 2003 at [56].

12     Holdfast N Ltd v Selleys Pty Ltd [2005] 17 PRNZ 897 (CA); and Bradbury v Westpac Banking Corp [2009] 3 NZLR 400 (CA).

13     Baxter v RMC Group PLC HC Auckland CP262/01, 9 September 2003 at [31] and [56].

[32]      I turn also to the arguments made by Mr Livingston in contesting the possibility of uplift. I have already dealt with Mr Livingston’s claim that there was a valuation showing the subject property had a value of $1,250,000 which had been placed before the Court and that somehow the existence of such a valuation provided evidence of fraud.

[33]      The second argument advanced by Mr Livingston in support of his contention that there was evidence of fraud is that Mr Memelink was unaware of how the loans he guaranteed for Mr Haines were to be used. This is a direct challenge to the Court’s factual finding14 as is the third ground that, generally, that there was an evidential foundation for the applicant’s claims.15

[34]      In my view an uplift is appropriate. As in Soshi, the “issue of fraud was not the sole issue in dispute, but it was the vehicle used to argue for the sustenance of the caveat”, and the award of an interim injunction.16 There was no evidential basis for the serious allegation of fraud against the respondents. The interlocutory context does not preclude an uplift, and the complexity of the matters would seem to support it. I consider that an uplift in the order of 50 per cent is appropriate.

Result

[35]      Increased costs are awarded to the respondents by a way of an uplift of 50 per cent on a 2B basis together with disbursements as claimed, reduced by $2,546.28 as noted above.

[36]The first to third respondents are jointly awarded costs in the sum of

$22,888.83.

14     At [53] and [54].

15 At [82].

16     Soshi Gakuen New Zealand Incorporated v Vo above n 6, at [28].

[37]      The  fourth respondent is awarded costs in the sum  of $33,086.83 for the  457 proceeding, and $16,416.58 for the 459 proceeding.

Churchman J

Solicitors:

Livingston & Livingston, Wellington for Applicant

J D Dallas, Wellington for First, Second and Third Respondents Iorns Legal, Porirua for Fourth Respondent