Whitford Properties Limited (in liquidation) v Coumat Limited
[2019] NZHC 2199
•3 September 2019
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV 2018-404-1053
[2019] NZHC 2199
BETWEEN WHITFORD PROPERTIES LIMITED (IN LIQUIDATION)
PlaintiffAND
COUMAT LIMITED
First Defendant
GREGORY BRUCE HAYHOW
Second Defendant
Hearing: On the papers Counsel:
M C Black for the Plaintiff
G D Stringer for the Defendants
Judgment:
3 September 2019
COSTS JUDGMENT OF PETERS J
This judgment was delivered by Justice Peters on 3 September 2019 at 5 pm pursuant to r 11.5 of the High Court Rules
Registrar/Deputy Registrar Date: ...................................
Solicitors: Craig Griffin and Lord, Auckland
Inder Lynch, Auckland
Counsel: M C Black, Auckland
WHITFORD PROPERTIES LTD (IN LIQUIDATION) v COUMAT LTD [2019] NZHC 2199 [3 September 2019]
Introduction
[1] On 8 May 2019 I granted an application by the defendants, to whom I shall refer as “Coumat”, to strike out this proceeding on the ground that it was an abuse of process.1 At the same time I dismissed the plaintiff’s (“Whitford”) application for summary judgment on its claim; an application Whitford had made in the alternative for discovery; and Coumat’s application for summary judgment on its statement of defence.
[2] Whitford is appealing my decision to the Court of Appeal and has asked that I delay fixing costs pending the outcome of that appeal. It is best to fix them now, however, whilst the matter is still reasonably fresh.
[3] Whitford does not dispute Coumat’s entitlement to costs on a 2B basis. However, Coumat seeks an award of indemnity or increased costs and an order that Whitford’s liquidator, Mr T J Whittfield, be liable personally for payment of the costs. Coumat’s costs total $166,264.35, plus disbursements, excluding GST.
Background
[4] Whitford is the prior owner of a large parcel of land. It defaulted on its mortgage obligations, following which Coumat acquired the land. Coumat did not pay the full price due under its agreement to purchase and retained some $2.5 million that would otherwise have been due to Whitford as its equity in the land. Whitford commenced what I refer to as the “2014 proceeding” and succeeded in recovering the unpaid balance, obtaining judgment in April 2017.2 Coumat’s subsequent appeal was unsuccessful. The Court of Appeal delivered its judgment in February 2018 and Coumat paid the sum due to Whitford, plus interest and costs, in March 2018.3
[5] By this time, Coumat had itself sold the land to a third party. This sale settled in July 2017. In the period between Coumat’s purchase and its sale, the local authority
1 Whitford Properties Ltd (in liq) v Coumat Ltd [2019] NZHC 1001.
2 Whitford Properties Ltd (in liq) v Bruce [2017] NZHC 625.
3 Coumat Ltd v Whitford Properties Ltd [2018] NZCA 15.
had granted resource consent(s) for redevelopment of the land, and thus Coumat was able to sell the land for substantially more than it had paid.
[6] Whitford commenced this proceeding in May 2018. Whitford claimed a share of the difference between the sum for which Coumat purchased the land and that for which it sold, and of deposits forfeited to Coumat by prior would-be purchasers. The share claimed was proportionate to the share of the purchase price Coumat had retained, referred to above. In round terms, the sum Whitford claimed was $3 million.
[7] On 3 July 2018, Coumat made a Calderbank offer under High Court Rules 2016, r 4.10 of $20,000 in “full and final settlement of all issues between our respective clients, including any other claims that it may have in any other respect in respect of our clients”. The offer was expressed to be open until 11 July 2018 and, if accepted, Whitford was to discontinue the proceeding on payment of the offered sum, with no issue as to costs. Coumat stated that it considered this proceeding an abuse of process on the basis Whitford had previously litigated “the claims and issues in this current proceeding”; said that there was no basis legally on which Whitford could obtain the remedy sought; and said that it would seek summary judgment, alternatively that the proceeding be struck out, if Whitford did not accept Coumat’s offer.
[8] Although Coumat also said it would seek indemnity costs if Whitford did not accept the offer, Coumat acknowledges in its submissions that such an offer does not in itself entitle a party to increased, let alone indemnity, costs.4
[9]Whitford did not reply to Coumat’s letter or otherwise respond to the offer.
My Judgment
[10] I granted Coumat’s application to strike out as I was satisfied that Whitford could and should have made its claim in this proceeding in the course of the 2014 proceeding. This was because, by the time the 2014 proceeding was heard, Whitford was in possession of all the information it required to bring its present claim. I also said that it was not clear that Whitford had not, in fact, brought the present claim in
4 High Court Rules 2016, rr 14.11(1) – (3).
the 2014 proceeding, given its pleading in that proceeding, statements that Duffy J made in her judgment in the 2014 proceeding, and the Court of Appeal’s refusal to accept evidence of Coumat’s sale of the land on the ground that such was irrelevant.
Submissions
[11] Coumat submits it should have an award of indemnity or increased costs for these (summarised) reasons.
[12] First, Whitford’s proceeding was so deficient and lacking in merit that it was struck out.
[13]Secondly, Coumat relies on its Calderbank offer.
[14] Thirdly, Coumat submits that the proceeding was of significant commercial concern, warranting all the steps it took to defend itself. The parties have been in dispute for a lengthy period, and the sum at stake, being at least $3 million, was substantial.
[15] Coumat submits that I should make an order against the liquidator personally on the ground the liquidator acted “incautiously and recklessly” in commencing the proceeding. Coumat again submits that the fact I struck out the proceeding was evidence of the weakness of the claim, and constitutes an “exceptional circumstance” in which the Court may make an order for costs against a non-party. Coumat alleges the liquidator acted “vexatiously, frivolously, improperly, or unnecessarily” in commencing and continuing the proceeding after the date of the offer. I have footnoted below the cases to which Coumat referred me in support of its submissions vis-à-vis the liquidator.5
5 Mana Property Trustees Ltd v James Developments Ltd [2010] NZSC 124, [2011] 2 NZLR 25; Metalloy Supplies Ltd v MA (UK) [1997] 1 WLR 1613 (EWCA); Stephen Marr Management Ltd v Boutique Hair & Beauty Ltd (in rec and liq) [2018] NZHC 660; and Health and Life Care Ltd v South Australian Asset Management Corporation 18 ACSR 153 (SCSA).
Indemnity costs
[16] The circumstances in which the Court may order a party to pay indemnity costs are set out in r 14.6 (4) which, to the extent relevant, provides:
14.6Increased costs and indemnity costs
[…]
(4)The court may order a party to pay indemnity costs if—
(a)the party has acted vexatiously, frivolously, improperly, or unnecessarily in commencing, continuing, or defending a proceeding or a step in a proceeding; or
[...]
(f) some other reason exists which justifies the court making an order for indemnity costs despite the principle that the determination of costs should be predictable and expeditious.
[17] Subject to some exceptions not applicable here, an award of indemnity costs is reserved for situations in which a party has behaved very badly or unreasonably.6
[18] Coumat relies heavily on the fact that it made a successful application to strike out. However, Coumat did not succeed because Whitford’s claim was utterly devoid of merit, which is the tenor of Coumat’s submission. Coumat succeeded for the reasons I have given, namely that if the claim were to be made, it could and should have been made in the 2014 proceeding.
[19] Quite separately, success on an application to strike out does not, without more, entitle the successful party to indemnity costs, or even increased costs for that matter.7 Coumat needs to identify conduct that is egregious if it is to have indemnity costs. I do not consider there is anything of that nature in Whitford’s actions in commencing the proceeding.
[20] The fact that I decline to award indemnity costs makes it unnecessary for me to consider Mr Black’s submission for Whitford as to apparent “overlap” in work done
6 Bradbury v Westpac Banking Corp [2009] NZCA 234, [2009] 3 NZLR 400 at [27]–[28].
7 Minister of Education v James Hardie New Zealand [2018] NZHC 2960 at [21].
by Coumat’s solicitors and by counsel, and what Mr Black contends is the grossly excessive quantum claimed.
Increased costs
[21] The relevant parts of r 14.6(3), governing the circumstances in which the Court may order a party to pay increased costs, provide:
14.6 Increased costs and indemnity costs
…
(3) The court may order a party to pay increased costs if—
…
(b)the party opposing costs has contributed unnecessarily to the time or expense of the proceeding or step in it 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; or
…
(v) failing, without reasonable justification, to accept an offer of settlement whether in the form of an offer under rule 14.10 or some other offer to settle or dispose of the proceeding; or
…
(d) some other reason exists which justifies the court making an order for increased costs despite the principle that the determination of costs should be predictable and expeditious.
[22] The comments I have made in [18] and [19] above apply equally to Coumat’s application for increased costs on the basis of success on the application to strike out. Success without more is insufficient.
[23] Coming to Coumat’s Calderbank offer, a failure to accept an offer of settlement without reasonable justification may warrant an award of increased costs.8 However, I do not consider it was unreasonable for Whitford to reject Coumat’s offer. First, the offer was not confined to the proceeding at hand but was in respect of “any other claims”. Secondly, and as Mr Black submitted, it was reasonable for Whitford to decline the offer given the difference between the sum that Whitford claimed in the proceeding and the amount offered.
[24] What is important about Coumat’s letter is its correct statement that the issues and claim in this proceeding have already been litigated. In this particular case, I consider Whitford’s failure to confront that issue and respond to Coumat does warrant a significant award of increased costs. Had it turned its mind to the issue, Whitford may well have recognised the validity of Coumat’s position. This brings the case within r 14.6(3)(b)(iii).
[25] I do not consider there is anything else in Whitford’s conduct that warrants an award of increased costs. The importance of the case to Coumat does not alter the position. The issues on the application to strike out were straightforward. The important documents were the pleadings and judgments in the 2014 proceeding.
Costs against the liquidator personally
[26] As Coumat acknowledged in its submissions, something exceptional is required before the Court will order a liquidator to pay costs.9
[27] For all the reasons I have given, I do not consider this comes close to being such a case. There is no basis for a suggestion that Mr Whittfield was not acting bona fide or that he was improperly motivated. He has no personal connection with any of the parties. The situation in this case is quite distinct from one in which a liquidator uses his or her position for personal or collateral purposes such as, for example, bringing an action in the name of the company to challenge the appointment of a liquidator in a second company in which the first has no interest, or bringing claims
8 High Court Rules 2016, above n 4.
9 Mana Property Trustees Ltd v James Developments Ltd, above n 5, at [10].
solely to ensure that the company is able to pay professional fees and/or disbursements.10
Quantum
[28] Annexed marked “A” is a copy of Coumat’s self-explanatory schedule of its costs on a 2B basis.
[29] I note the following. First, I shall allow Coumat its costs on its application for summary judgment (line 4 of the schedule). That was a reasonable application to make in the circumstances, even though I dismissed the application. Secondly, it is not clear to me what the claim is for in line 9 of the schedule. That matter can be resolved with the Registrar (see below) in the event of dispute. Thirdly, the item in line 10 might better be classified as a claim under item 23, rather than item 9, but it makes no difference because the time allocation is the same. As to line 13, I allow for second and subsequent counsel. Mr Black questioned whether Mr Wright only had appeared for Coumat. However, Mr Stringer also appeared and that was reasonable in the circumstances. I note also that, on my calculation, the “Days” column adds up to 9.8.
[30] I also allow Coumat one day for preparation of an affidavit comprising the pleadings and judgments in the 2014 proceeding, also on a category 2 basis.
[31] For the reason given in [24] above, Coumat is to have a 50 per cent uplift on its costs. I also allow Coumat all reasonable disbursements. Any dispute is to be determined by the Registrar.
Peters J
10 Stephen Marr Management Ltd v Boutique Hair & Beauty Ltd (in rec and liq), above n 5, at [12]– [14]; and RFD Finance Ltd v Sol Management Ltd (in liq) [2014] NZHC 2983 at [50]–[52].
- 10 -
Schedule
L !
Item Step Days Amount Commencement of defence by Defendants 2 4460.00 23 Filing opposition to interlocutory Application for Summary Judgment 0.6 1338.00 Filing interlocutory Application for an Order to strike out proceedings 0.6 1338.00 Filing interlocutory Application for an Order for Defendants’ Summary Judgment 0.6 1338.00 11 Filing Memorandum for first mention hearing 0.4 892.00 12 Appearanceatmentionhearing 0.2 446.00 23 Filing Opposition to Interlocutory Application for Inspection and Discovery 0.6 1338.00 9 Pleading in response to amended pleading (Statement of Defence) 0.6 1338.00 Pleading in response to amended pleading (Interlocutory Application) O.6 1338.00 9 Pleading in response to amended pleading (Notice of Opposition) 0.6 1338.00 24 Preparation of written Submissions 1.5 3345.00 26 Appearance at hearing of defended Application for Principal Counsel 1 2230.00 Second and subsequent Counsel (if allowed by Court) 0.5 1115.00 Total 2B costs 9.2 20,516.00
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