Wellington v Coffey HC Wellington CIV-2006-485-1759

[2007] NZHC 2001

IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY

CIV-2006-485-1759

BETWEEN  CRAIG EION WELLINGTON Plaintiff

ANDPAUL CORNEL COFFEY Defendant

Hearing:         On the papers

Appearances: P H Bremer for the plaintiff

S M O'Sullivan for the defendant

Judgment:      16 August 2007

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

[1]      The defendant seeks costs form the plaintiff with respect to the plaintiff’s discontinuance of his interlocutory application for an interim injunction in this proceeding.

[2]     These proceedings were commenced by the plaintiff, who was a 50% shareholder in Waterford Security Ltd, against the defendant, the other 50% shareholder, on 4 August 2006.

[3]      At the same time the plaintiff sought an interim injunction ex parte (albeit on a “Pickwick” basis), and two substantial affidavits were filed in support.

[4]      That application for an interim injunction was adjourned on a number of occasions and did not proceed to a hearing.

CE WELLINGTON V PC COFFEY HC WN CIV-2006-485-1759  16 August 2007

[5]      Ultimately  the  mattes  in  dispute  were  resolved  by  the  parties  with  the assistance of a mediation on two or three occasions.  That settlement, however, did not deal with the costs issue.  Indeed, the issue of costs was specifically reserved for the parties to apply, which has now occurred.

[6]      The settlement process between the parties being under way, the plaintiff has now discontinued the interim injunction application, subject only to this issue of costs.

[7]      The  costs  sought  by  the  defendant  here  in  the    alternative    are    either Category 2B scale costs, which  the  defendant  indicates  amount to $2,560, or an increased award of costs on a category 2C basis, amounting to $7,680.

[8]      The plaintiff opposes any award of costs.

[9]      The starting point in this costs consideration must be Rule 476C High Court

Rules, which provides:

“Unless  the  defendant  otherwise  agrees  or the  Court  otherwise  orders,  a plaintiff  who discontinues a proceeding against a defendant must pay costs to the defendant of and incidental to the proceeding up to and including the discontinuance.”

[10]     In  North  Shore  City  Council  v  Local  Government  Commission  (1995)  9

PRNZ 182, Tompkins J applied this rule in the following way:

“It is apparent from the wording of the rule that there is a presumption or, as Master Williams QC put it in Rodwell v Medical Practitioners’ Disciplinary Committee (unreported, 1 May 1991, HC Wellington CP356/90), a clear bias in favour of an award of costs to the defendant.  The onus therefore rests on the plaintiff to satisfy the Court that, because of the particular relevant circumstances, the normal presumption of costs in favour of the defendants should not apply.”

[11]     The defendant’s contention is that there is nothing in the present case to rebut the presumption in Rule 476C that the defendant is entitled to his costs in this proceeding.

[12]     The matters involved in this proceeding have a reasonably long history.  They involve  the  relationship  between  each  shareholder  in  the  company  Waterford

Security Ltd.   Prior to the issue of this proceeding, there was a range of correspondence  and  negotiations  which  occurred  between  the  solicitors  to  the plaintiff and the solicitors to the defendant.

[13]     Ultimately,  as  I  understand  it,  following  issue  of  these  proceedings,  the parties agreed to mediate, and this resulted in a settlement.

[14]     In written submissions put before the Court on this issue of costs, the plaintiff appears to asset that the bringing of the application for an interim injunction was the catalyst for the defendant “finally agreeing to meet to attempt to resolve matters at issue that by then required urgent attention.”

[15]     This  is  disputed  by the  defendant,  however.    Counsel  for  the  defendant contends that it was the defendant who in April 2006, some four months prior to the interim injunction application being filed, sought a meeting to resolve matters.

[16]     The plaintiff’s further contention is that the present application was necessary because the defendant was acting against the best interests of the company, in that specifically he was continuing to incur excessive and/or unauthorised expenditure on behalf of the company, he acted in competition to the business of Waterford Security Ltd through another entity, Gold Plateau, he failed to invoice clients and/or attend to outstanding matters, resulting in problems with debt recovery, and he refused to sign a  deed  of  renewal  of  the  lease  of  Waterford’s  office  in  Wellington.    These contentions are disputed by the defendant.

[17]     What is clear to me is that the relationship between these shareholders clearly broke down in a major way.  Despite negotiations to resolve the impasse between them, the plaintiff then chose to issue these proceedings seeking the interim injunction.   Matters were then resolved by agreement at the successful mediation references arranged by the parties.

[18]     It is acknowledged that this settlement of issues between the plaintiff and the defendant,  although  it  could  have  dealt  with  any issue  of  costs  between  them, specifically did not do so.

[19]     That said, it seems to me that on the basis of the material before the Court the plaintiff has been unable to rebut the presumption in Rule 476C High Court Rules that, as he has elected to discontinue this proceeding, the defendant is entitled to costs against him on such discontinuance.

[20]     In memoranda filed by counsel for the defendant, he suggests that costs here should be awarded on an increased category 2C basis, totalling $7,680, which he notes in any event are less than the plaintiff’s actual costs in this matter which he says total over $10,000.

[21]     Increased costs are dealt with in Rule 48C(3) High Court Rules.

[22]     The party claiming increased or indemnity costs is required to explain why they might  be  justified  –  Radfords  Ltd  v  Advertising  Works  New  Zealand  Ltd, trading as Ogilvy Advertising Works  (High Court,  Auckland, CIV 2006-404-325,

26 April 2005, Associate Judge Faire).  Here, as I have noted above, the defendant seeks that costs be awarded on a category 2C basis.  Although, as I have noted, the defendant’s actual costs in this matter appear to be slightly in excess of $10,000, in my view no convincing reason has been advanced by the defendant for any order for increased costs in terms of Rule 48C(3) to be made.  No exceptional circumstances justifying a departure from the normal costs position exist here.   In my view, this proceeding should receive the normal costs classification pursuant to Rule 48 High Court Rules of category 2B.

[23]     That said, costs are now awarded to the defendant against the plaintiff with respect to the plaintiff’s discontinuance of his application for an interim injunction on a category 2B basis amounting to $2,560, together with disbursements (if any) as

may be approved by the Registrar.

Associate Judge D.I. Gendall

Solicitors:

Treadwells, Wellington, for the plaintiff
DLA Phillips Fox, Wellington, for the defendant