Tupangaia v Taakoka Island Villas Limited HC Napier CIV 2007-441-598

[2008] NZHC 2640

IN THE HIGH COURT OF NEW ZEALAND NAPIER REGISTRY

CIV 2007-441-598

IN THE MATTER OF     the Insolvency Act 1967

AND

IN THE MATTER OF     the bankruptcy of RUTA TEREORA TUPANGAIA

Judgment Debtor

ANDTAAKOKA ISLAND VILLAS LIMITED Judgment Creditor

Judgment:      23 October 2008 at 3.30 pm

JUDGMENT AS TO COSTS OF ASSOCIATE JUDGE D.I. GENDALL

This judgment was delivered by the Registrar on 23 October 2008 at 3.30  pm pursuant to r 540(4) of the High Court Rules 1985.

Solicitors:           Hesketh Henry, Lawyers, Private Bag 92093, Auckland

TUPANGAIA V TAAKOKA ISLAND VILLAS LIMITED HC NAP CIV 2007-441-598  23 October 2008

[1]      In a judgment I gave in this proceeding dated 15 August 2008 I dismissed the judgment  debtor’s  application  for  an  annulment  of  her  bankruptcy  dated  15

November 2007.

[2]      In that judgment I reserved costs and indicated that if they were in issue here the parties could file appropriate memoranda sequentially and I would decide the question on the material before the Court.

[3]      Counsel for the judgment creditor, Taakoka Island Villas Limited, has now filed memoranda dated 28 August 2008, 17 September 2008 and 14 October 2008. The bankrupt, Ms Tupangaia, has had memoranda filed on her behalf on this costs issue on 15 September 2008 and 23 September 2008.

[4]      In his memorandum dated 28 August 2008 counsel for the judgment creditor appears to seek here actual solicitor/client costs totalling $14,392.00 together with agency fee disbursement of $2,153.25.

[5]      That memorandum does go on to state that “the Petitioning Creditor seeks increased costs of $8,000.00”.   On the basis that total costs awarded cannot exceed actual  costs,  I  propose  to  ignore  this  aspect  –  see  r.  47(f)  and  McGechan  on Procedure HR47.01 – “no party should ‘profit’ from the conduct of litigation”.

[6]      In his further memorandum dated 14 October 2008 counsel for the judgment creditor seeks additional costs of $1,000.00.   This is because he maintains the judgment creditor has been put to additional expense being required to file further costs memoranda with regard to what he says are misconceived allegations advanced in the memoranda filed on behalf of the judgment debtor.

[7]      In overall response, the 15 September 2008 memorandum filed on behalf of the  judgment  debtor  submits  that  “reasonable  costs  should  be  no  more  than

$2,000.00”.

[8]      The starting point in the present costs consideration must be to recognise that although the judgment debtor in this proceeding was effectively a lay litigant here,

where  appropriate  costs  are  recoverable  from  an  unsuccessful  lay  litigant.    As

McGechan on Procedure at para. HR46 Intro .08(3) notes:

“In Belling v Belling (1996) 9 PRNZ 296, Hammond J. endorsed Fisher J’s. comment in Aplin v Lagan (1993) 10FRNZ 562, at page 576 that:

‘While an unrepresented party should not be penalised on that account alone, if the result has been to throw an extra burden of legal cost upon the represented party, there is no reason why some recognition should not be given to that.’”.

[9]      Here  the  judgment  creditor  succeeded  in  its  opposition  to  the  judgment debtor’s annulment application.  As a starting point, in terms of r. 47(a) High Court Rules the judgment debtor being the party who failed with respect to this application is required to pay costs to the judgment creditor as the successful party.

[10]     So far as those costs are concerned, if they were to be calculated on a scale basis then in my view Category 2B is the appropriate calculation category.

[11]     On  a  2B  basis  counsel,  the  judgment  creditor  calculates  scale  costs  at

$3,840.00.  This represents 0.6 of a day for preparing and filing an opposition to the annulment application and supporting affidavits, 0.5 of a day for preparation for the hearing of the application, 0.5 of a day for attendance at the hearing and 0.8 of a day for completing and filing 2 memoranda.

[12]     In the present case, however, the judgment creditor seeks increased costs pursuant to r. 48C(1) High Court Rules.   This is on the basis as outlined in r.

48C(3)(b)  that  the  judgment  debtor  here,  as  the  party  opposing  costs  “has contributed unnecessarily to the time or expense of the proceeding or a step in the proceeding by ……  (ii) Taking or pursuing an unnecessary step or an argument that lacks  merit;  or  (iii)  Failing,  without  reasonable  justification,  to  admit  facts, evidence, documents or accept a legal argument.”

[13]     On these aspects, the judgment creditor contends that the application for annulment was not brought by the judgment debtor or pursued in good faith.

[14]     The judgment creditor argues that the judgment debtor’s strategy with the application appears to have been to have the annulment application heard before the decision of Justice Grice in the Cook Islands High Court on reinstatement of the judgment creditor company was released and so to avoid the unwanted consequences (from the judgment debtor’s point of view) of an adverse decision restoring the company to the register.

[15]     As it turned out, Justice Grice’s decision was available to this Court when the annulment application was called on 24 July 2008, it having been released to the parties earlier that day.  Faced with that decision, the judgment creditor contends that the proper course should have been for the judgment debtor to withdraw her annulment application.  Instead, Mr Morley for the judgment creditor maintains that Mr Tupangaia continued with arguments which flew in the face of clear legal authority and were doomed to failure from the outset.

[16]     In my view there is substance in these contentions.  The result of the various manoeuvrings which have taken place on behalf of the judgment debtor in this proceeding as I see it have resulted in the judgment creditor being involved unnecessarily in what has been another costly piece of litigation.  In my judgment it is reasonable to suggest here that the judgment debtor, who remains an undischarged bankrupt, has simply continued her efforts to delay or avoid having to meet the costs judgments made against her in both the High Court and the Court of Appeal of the Cook Islands.

[17]     The memoranda dated 15 September 2008 and 23 September 2008 filed on behalf of the judgment debtor, in my judgment provide little assistance here.  The judgment debtor remains an undischarged bankrupt with unpaid debts totalling approximately $140,000 according to the Official Assignee, together with Official Assignee’s costs of over $24,000.  Her annulment application was not made on the basis that she had settled or could satisfy those debts.  The grounds advanced for that application were without merit.  It is difficult to escape the conclusion here that the

judgment debtor in bringing and pursuing that application has taken an unnecessary step entirely lacking in merit.  In addition, as I see it, as matters unfolded she has failed without reasonable justification to accept legal arguments advanced against her on that application, all of which has contributed unnecessarily to the expense incurred by the judgment creditor in opposing her application in terms of r. 48C High Court Rules.

[18]     As  such  I am  satisfied  that  the  judgment  creditor  here  is  entitled  to  its indemnity costs notwithstanding the high threshold that must be passed before an order for indemnity costs is made – Paper Reclaim Limited v Aotearoa International Limited [2006] 3 NZLR 188. For the reasons outlined above, in my view this is a case where “truly exceptional circumstances exist” as identified by Goddard J. in Hedley v Kiwi Co-Operative Dairies Limited (2002) 16 PRNZ 694 at para. 8.

[19]     The actual solicitor and client costs identified by the judgment creditor here in counsel’s 28 August 2008 memorandum totalled $12,750.00 plus GST and an agency fee disbursement of $2,153.25.   The judgment debtor raises no query or comment as to the actual quantum of those costs in either the 15 September 2008 or

23  September  2008  memoranda  filed  on  her  behalf.    In  addition  the  judgment creditor seeks a further $1,000.00 for the costs involved in filing additional memoranda  which  have  proved  necessary  with  regard  to  the  present  costs application.   In my view, this latter claim is excessive.   An additional $500.00 is awarded for that purpose.

[20]     Costs on an indemnity basis are  therefore  awarded  against  the  judgment debtor in favour of the judgment  creditor  totalling $13,250.00  together  with  an agency disbursement of $2,153.25 making a total of $15,403.25.

‘Associate Judge D.I. Gendall’