West Harbour Holdings Limited v Tamihere
[2013] NZHC 2279
•2 September 2013
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV-2012-404-4474 [2013] NZHC 2279
BETWEEN WEST HARBOUR HOLDINGS LIMITED (IN LIQUIDATION) Plaintiff AND
JOHN HENRY TAMIHERE Defendant
AND
BRENT ALEXANDER IVIL First Counterclaim Defendant
AND
NICHOLAS ANTONIUS HENDRIKUS Van DIJK
Second Counterclaim Defendant
AND
THE COVE LIMITED
Third Counterclaim Defendant
Hearing: 2 September 2013 Appearances:
D E Smyth for Plaintiff
T J G Allan for Defendant
J Perry for First, Second and Third Counterclaim DefendantsJudgment:
2 September 2013
ORAL JUDGMENT OF ASSOCIATE JUDGE BELL
Solicitors:
McDonald Law (Stephen McDonald), Remuera, Auckland, for Plaintiff
Grove Darlow (TJG Allan) Auckland, for Defendant
Keegan Alexander, Auckland for 1st-3rd Counterclaim Defendants
WEST HARBOUR HOLDINGS LIMITED (IN LIQ) v TAMIHERE [2013] NZHC 2279 [2 September 2013]
[1] Mr Tamihere, the defendant, has applied for security for costs to be provided by the plaintiff. The case has some added features which take it out of the run-of- the-mill for an application for security for costs.
[2] Mr Tamihere is sued for $500,000 plus interest. The interest is said to amount to $122,875 as at September 2011. Daily interest from then plus costs are also claimed. Mr Tamihere’s case is that he did receive a loan for $500,000. However, he says that the person who lent him the money was not West Harbour Holdings Ltd, the plaintiff. His case is:
(a) the person who lent him the money was Brent Alexander Ivil, the first counterclaim defendant;
(b) the arrangement was interest-free; and
(c) he is entitled to set-off against his liability to Mr Ivil the sum of
$210,000 that he had earlier lent to Mr Ivil.
[3] West Harbour Holdings Ltd applied for summary judgment. Andrews J dismissed the application. She found that Mr Tamihere had arguable defences. In particular she found there were issues of credibility which could only be determined at trial.
[4] It is relevant to note the different roles of the different parties in this proceeding.
(a) West Harbour Holdings Ltd is in liquidation. It went into liquidation by shareholder resolution. It is acknowledged to be insolvent. The liquidators are Damien Grant and Kirsten Smith at Waterstone Insolvency. West Harbour Holdings Ltd says that it is suing as a bare trustee for The Cove Ltd, the third counterclaim defendant.
including The Cove Ltd and West Harbour Holdings Ltd. Mr Ivil
presently faces significant proceedings against him personally. One is
based on a guarantee he gave to support West Harbour Holdings Ltd’s
borrowing from Waipareira Investments Ltd. Mr Ivil says that he has
no assets to his name. If the proceedings against him are successful
he is likely to face bankruptcy. I have taken into account the potential
for him to be adjudicated bankrupt in this decision. (c)
The Cove Ltd is the entity which carried out the bulk of the
development at Clearwater Cove. The Cove Ltd transferred seven
units which it was developing to West Harbour Holdings Ltd without
consideration. That was done to allow it to refinance borrowings.
The seven units were transferred to West Harbour Holdings Ltd which
then took out a loan from Waipareira Investments Ltd. Mr Tamihere
is the chief executive officer of the Waipareira Trust which is
associated with Waipareira Investments Ltd. (d)
The shareholders of The Cove Ltd are Mr van Dijk and a Mr Palmer.
Mr van Dijk and Mr Palmer are trustees of a trust called The Cove
Trust. That trust is for the benefit of the Ivil family.
[5]
It is
relevant to mention these matters because of the way that Mr Tamihere
has defended this proceeding. He says that West Harbour Holdings Ltd is not the correct creditor, but another person lent him the funds. In particular, he names Mr Ivil as the person to whom he owes the money but he also notes that there are others who may have potential claims to the funds in issue. He identifies them as The Cove Ltd and the trustees of The Cove Trust. To that end, he has joined Mr van Dijk as one of the trustees.
[6] To enable the court to determine the issues amongst all the parties, he has brought by way of counterclaim what he calls an interpleader. It is not a standard
proceeding. The role of the fund-holder in such cases is strictly neutral, to abide the decision of the court as to the persons who are rightfully entitled to the funds.
[7] That is not the case here. Mr Tamihere is not a disinterested fund-holder. He will advocate strongly for the position that the person he owes the money to is Mr Ivil. That is so that he can limit his liability to $290,000. If the court were to find that some other person is the creditor, he is less likely to be able to raise his defence of a set-off for $210,000 because of a lack of mutuality.
[8] To show that he is in good faith as to the $290,000 he has paid that sum into his solicitor’s trust account with undertakings on the basis that it not be paid out pending further court order or agreement of the parties. I also understand that other creditors have obtained charging orders against that fund as well.
[9] West Harbour Holdings Ltd was not in liquidation when it started this proceeding. Now that it is in liquidation, the liquidators will need to determine how the proceeds of any judgment are to be applied if the claim against Mr Tamihere is successful. There may be issues whether the proceeds of any judgment obtained against Mr Tamihere are to be paid to The Cove Ltd, as the beneficiary of the bare trust, or to trust creditors which might include Waipareira Investments Ltd, or to general creditors of West Harbour Holdings Ltd. I note these questions as matters that may need to be addressed later.
[10] In response to Mr Tamihere’s quasi interpleader, the plaintiff and the first, second and third counterclaim defendants all say that the proceeding was properly brought by West Harbour Holdings Ltd. Each of them disclaims any interest in the proceeding. I comment on those positions.
(a) West Harbour Holdings Ltd says that it is bringing the proceeding as a trustee. It says that the beneficiary of the trust is The Cove Ltd. To that extent there is an identity of interest between West Harbour
(b)I treat Mr Ivil’s disclaimer with the same caution that Andrews J treated his disclaimer in the summary judgment application. He acknowledges his indebtedness to Mr Tamihere for $210,000. He frankly says that he is not in a position to repay that. He is a man without assets and may shortly become bankrupt. In that situation, he may well prefer that the subject matter of this proceeding not be held to be his because any finding that the debt is his rather than that of West Harbour Holdings Ltd may not benefit himself personally but only his creditors.
(c) On the other hand, I do place some value on the disclaimer by Mr van Dijk that the Cove Trustees do not lay any claim to the funds advanced to Mr Tamihere. At this stage only Mr van Dijk has spoken. If the trustees of the Cove Trust intend to maintain that position it is obviously important that Mr Palmer, the other trustee, also confirms that position. If The Cove Trustees disclaim any interest in the fund in issue in this proceeding, then it may be appropriate for the parties to consider that the trustees be withdrawn from the proceeding.
(d) As to The Cove Ltd, it has an identity of interest with West Harbour
Holdings Ltd and its disclaimer has to be discounted accordingly.
[11] Mr Tamihere has applied for security for costs on the basis that he is being sued by an insolvent company. He initially made his application for security for costs with his opposition to a summary judgment application but he has renewed his security for costs application. Obviously his application takes on added strength now that West Harbour Holdings Ltd is in liquidation. There is no dispute that he has at least established the threshold that there is reason to believe that West Harbour Holdings Ltd will not be able to pay any order for costs made against it. There was no submission from any of the parties to the contrary.
[12] Instead, the matter turns on how the court ought to exercise its discretion.
[13] The risk which the court addresses in an application for security for costs is that a successful defendant may obtain a barren order for costs. The court has to weigh up that risk against barring plaintiffs from having their cases heard in court. In this case, the plaintiff and the first, second and third counterclaim defendants have addressed the risk by giving undertakings to the court. Those undertakings are that if Mr Tamihere should succeed in his defence of the claim, Mr Tamihere will be able to have recourse to the fund of $290,000 to meet any order for costs in his favour.
[14] For that proposal to work properly there must be unanimity amongst all parties. At present there is that unanimity. The effect of the undertakings is that if Mr Tamihere succeeds the court will not have to consider making any orders for costs against any of the claimants or potential claimants, but can simply allow Mr Tamihere to recover costs out of the fund. On that basis, I accept that there is no risk to Mr Tamihere of ending up with an unenforceable order for costs.
[15] There is, however, one qualification to be noted. It is foreseeable that Mr Ivil may become bankrupt. In that event, the Official Assignee will become an interested party. While Mr Ivil has disclaimed any interest in the fund, the Official Assignee may take a more positive view of the case. The Official Assignee may contend that the loan of $500,000 was a personal arrangement between Mr Tamihere and Mr Ivil and that the $290,000 ought to be paid to him to be made available for Mr Ivil’s creditors. Consistent with that stance, he may also contend that the fund should be made over intact, without any deduction for costs in favour of Mr Tamihere.
[16] In my view it would not be proper to hold the Official Assignee bound by the undertaking given by Mr Ivil if Mr Ivil should later be adjudicated bankrupt. Accordingly, I will treat Mr Ivil’s undertaking as being in force only so long as he is not adjudicated bankrupt. With that qualification, I consider that Mr Tamihere’s interests are adequately protected by the undertakings that have been given. Accordingly, I do not make any order giving Mr Tamihere security for costs. I do so on the basis that the plaintiff and first, second and third counterclaim defendants have undertaken to the court that the funds held by Mr Tamihere’s solicitors may be
made available to meet any order for costs in favour of Mr Tamihere. I do however not dismiss the application. Instead, I stand it over to allow the application to be brought on for hearing again in case Mr Ivil is later adjudicated bankrupt and the Official Assignee wishes to contend that the fund should not be available to meet any order for costs in favour of Mr Tamihere.
[17] Following this decision Mr Smyth has raised the point that if the Official Assignee were to submit that the funds should be made over intact to the Official Assignee on Mr Ivil’s bankruptcy, Mr Smyth will reserve the right to submit that there should be some allowance in the nature of a salvage claim in favour of the liquidators of West Harbour Holdings Ltd. I simply note the point and make no comment about it. The matter does not require consideration now.
[18] I give these further case management directions:
(a) By 23 September 2013 the parties are to decide whether it is necessary to leave the trustees of the Cove Trust in as parties to the proceeding.
(b)After the parties have agreed that, they are to attend to standard discovery in electronic form and on usual terms. I expect discovery to be completed, including inspection, by 14 October 2013.
(c) The next case management telephone conference will be held on Wednesday, 16 October 2013 at 9:00am. I expect the parties then to be in a position to discuss arrangements for setting-down for hearing, including pre-trial directions.
[19] Mr Allan has sought costs. He points out that it was only at a late development during the hearing itself that it became clear that the plaintiff and the first, second and third counterclaim defendants all agreed to undertakings that the fund held by Mr Tamihere’s solicitors could be used for costs in favour of Mr Tamihere if an order for costs were made in his favour. The possibility of such an arrangement had been signalled at an earlier stage in correspondence between
counsel, but had never matured into a firm arrangement. Mr Allan says that the inference to be drawn from that is that although the possibility of such arrangement had been flagged the matter had not become firmer than that. I also note that time was required for the first, second and third counterclaim defendants to arrange alternative representation so they could be independently advised.
[20] I accept Mr Allan’s point that given that Mr Tamihere had earlier applied for security for costs, the parties could have put their minds to this earlier and worked out a reasonable arrangement. In opposition Mr Smyth submitted that what had been produced by the undertaking would follow as a matter of course anyway. I do not accept that submission. Rule 4.64 of the High Court Rules makes it clear that the court has a discretion as to where costs should fall on an interpleader proceeding. I do not regard this as a straightforward interpleader proceeding. In the absence of agreement among the parties, the court would have had to give careful thought to where the burden of costs should fall.
[21] Accordingly, it is only as a result of the submissions today that the matter has been resolved. To that extent then Mr Tamihere has been put to work on this application, even though the outcome is that he has been given protection for costs in a way that does not impact on the other parties’ rights to be heard in court.
[22] In the circumstances I make an award of costs in his favour on a 2B basis, but allow only a quarter of a day for the hearing of the matter. That is a discount for the consent that was produced today. While I order costs to be fixed, I do not order them to be paid. That can await the final outcome of the proceeding .
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Associate Judge R M Bell
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