Walters v Taylor Marine Limited HC Auckland CIV 2006-404-2772

[2008] NZHC 2507

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV 2006-404-2772

BETWEEN  BARRY WALTERS First Plaintiff

ANDBARRINGTON CHARTERS LIMITED Second Plaintiff

ANDTAYLOR MARINE LIMITED First Defendant

ANDLAWRIE ABEL Second Defendant

ANDLR ABEL & COMPANY LIMITED Third Defendant

ANDKEN DAVIDSON Fourth Defendant

ANDJOHN HAYMAN Fifth Defendant

Hearing:         18 June 2008

Appearances: N Heard for Plaintiffs

P J Dale for Fourth Defendant

Judgment:      14 August 2008 at 5.30pm

JUDGMENT OF ASSOCIATE JUDGE ROBINSON

This judgment was delivered by me on 14 August 2008 at 5.30 pm, Pursuant to Rule 540(4) of the High Court Rules

Registrar/Deputy Registrar

Date……

Solicitors:           Richard Allen Law, PO Box 8344, Symonds Street, Auckland

Hesketh Henry, Private Bag 92093, Auckland

BARRY WALTERS AND ANOR V TAYLOR MARINE LIMITED AND ORS HC AK CIV 2006-404-2772

14 August 2008

[1]      In July 2003, the plaintiff’s purchased a sixty foot yacht “Blaze” from David Bishop. The purchase was negotiated with the assistance of Taylor Marine, the first defendant, during the course of negotiations for the purchase of the vessel,  the plaintiff claims that Taylor Marine Limited and Ken Davidson, the fourth defendant, would undertake the necessary checks to ensure that the vessel was free of encumbrances. The plaintiff claims that in reliance on those representations, they purchased the vessel.

[2]      In September 2005, the plaintiff’s sold the vessel to Barrington. It was a condition of the sale of the vessel that ownership would be passed on to Barrington free from any mortgage, instrument by way of security or other charge or encumbrance.

[3]      In April 2006, the vessel was arrested at the suit of Key Bank National Association of Cleveland Ohio who had a charge over the vessel. The plaintiff’s claim that they had to pay $150,000 to Key Bank to release the vessel from that charge.

[4]      The plaintiff’s bring these proceedings to recover from the defendant’s the money they had to pay to discharge Key Bank’s charge over the vessel.

[5]      The claim against the fourth defendant is based on representations claimed to have been made by the fourth defendant that were misleading, deceptive or were likely to mislead and deceive in that the fourth defendant represented he would make checks to ensure that the vessel was free of encumbrance and in breach of those representations did not make appropriate investigations. There was a further claim against the fourth defendant based on negligence.

[6]      The fourth defendant applied to strike out the plaintiff’s claim against him and for entry of summary judgment in his favour. He denied making any representation relating to the sale of the vessel to the plaintiffs.

[7]      At the time the proceedings were issued, the solicitors for the plaintiffs had obtained a statement from Neil Whitcomb to the effect that the fourth defendant Ken Davidson, was responsible for running checks on vessels sold by Taylor Marine when  the  Blaze  was  purchased  by the  plaintiffs.  According  to  the  brief  of  Mr Whitcomb’s evidence obtained by the solicitors for the plaintiffs, Mr Whitcomb recalled that the first plaintiff asked Mr Abel and Mr Whitcomb to ensure that the vessel was free of encumbrance. Mr Whitcomb is reported as saying that Mr Abel confirmed that such checks would be undertaken. Mr Whitcomb also states that Mr Abel told the first plaintiff it was Taylor Marine’s standard practice to make their independent checks.

[8]      The application to strike out the plaintiffs claim against the fourth defendant was scheduled for hearing on 18 June 2008. On 17 June 2008, Mr Whitcomb swore an affidavit in support of the fourth defendant’s application to dismiss the plaintiff’s claim against him. In that affidavit, Mr Whitcomb deposes that at no time during the sale’s process period did the first plaintiff ask him to undertake personally or to ask any other marine broker or staff member at Taylor Marine Limited to undertake title due diligence for the vessel Blaze. He goes on to say that at no time whilst at Taylor Marine Limited did Mr Whitcomb ask Ken Davidson to search the titles of the vendor’s vessels. He further deposes that it was not company policy for Taylor Marine Limited’s marine brokers to undertake such work on behalf of clients.

[9]      On being served with that affidavit, counsel for the plaintiff applied to discontinue the proceedings against the fourth defendant. There being no opposition by other defendants leave was granted to the plaintiff to discontinue the proceedings against the fourth defendant.

[10]     Counsel for the fourth defendant now seeks  costs from  the  plaintiffs.  In seeking costs, counsel for the plaintiff submits that costs should be fixed on an indemnity basis.  The  costs  on  an  indemnity  basis  inclusive  of  GST  amount  to

$14,625. Costs however on a 2B basis according to counsel for the fourth defendant amount to $6,080.

[11]     Counsel for the plaintiff accepts that the fourth defendant is entitled to costs but submits that such costs should be calculated on a 2B basis and should not be increased to costs on an indemnity basis. Furthermore, counsel for the plaintiffs contest a claim for costs on a 2B basis of $3,200 in connection with commencement of the defence by the defendant because no formal statement of defence had been filed by the defendant.

[12]     In support of the claim for indemnity costs, counsel for the fourth defendant emphasises that the plaintiff’s cause of action against the fourth defendant had no chance of success. In support of the claim for indemnity costs, the fourth defendant’s counsel referred to Bradbury v Westpac Banking Corporation & Wilcock HC Auck, CIV 2006-404-1328, decision of Harrison J 23 May 2008. In that case, the court was dealing with an application for indemnity costs following a trial where opening addresses and evidence from both sides occupied six days. In closing submissions on the seventh day the plaintiff’s junior counsel progressively abandoned each cause of action leading inexorably to the inference that the plaintiff recognised its case was hopeless. In that case, Harrison J emphasised that the practical test for determining a claim for indemnity costs remains whether the losing party has pursued a wholly unmeritorious or hopeless case.

[13]     It is the plaintiff’s contention that until they received the affidavit of Neil Whitcomb they had, on the basis of the brief of his evidence, reasonable grounds for believing that the representations relied upon in the statement of claim had been made. Once they became aware of Mr Whitcomb’s evidence, they decided to discontinue the claim against the fourth defendant.

[14]     Thus it can hardly be suggested that they persisted with a hopeless case. On the contrary, once they became aware that Mr Whitcomb’s evidence would not come up to brief, they adopted the responsible course of seeking to withdraw the proceedings against the fourth defendant.

[15]     Consequently, I can see no justification for any increase in the costs to be paid by the plaintiffs. As a result, I direct that the plaintiff shall pay the fourth defendant’s costs assessed on a 2B basis.

[16]     Whilst it is correct that the fourth defendant did not need to file a formal statement of defence, I am satisfied that the fourth defendant’s counsel would have needed to receive instructions, research the facts and the law and decide whether to proceed to strike out the plaintiffs’ claim or to seek summary judgment or to file a formal statement of defence. Those circumstances while some time would have been avoided in preparing and filing a formal statement of defence, there would have also been time spent in researching the law, investigating the facts and so on. In those circumstances, I consider that the appropriate time to allow for the preparation of the defence at that stage is one and a half days and the claim for costs in respect of that item is to be reduced from two days to one and a half days. I am also satisfied that the time required for the hearing of the application to strike out or enter summary judgment would be one half a day and not a quarter of a day and I allow a half a day in those circumstances. In summary therefore, the fourth defendant is entitled to costs on a 2B basis made up as follows:

a)        Commencement of defence by defendant being one and a half days.

$3,200

b)        Filing memorandum for case management conference 21 April 2008.

$640

c)        Appearance at case management conference 21 April 2008.

$480

d)Preparing and filing interlocutory application to strike out summary judgment and supporting affidavits

$960

e)        Preparation for hearing of defended interlocutory application for half a day.

$800

[17]     In  addition,  the  defendant  is  entitled  to  disbursements  as  fixed  by  the

registrar.

Associate Judge Robinson