Worldwide NZ LLC v QPAM Limited HC Auckland CIV 2006 404 001827
[2008] NZHC 2536
•27 August 2008
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV 2006 404 001827
UNDER the Companies Act 1993
BETWEEN WORLDWIDE NZ LLC First Plaintiff
ANDJ J GOSNEY Second Plaintiff
ANDQPAM LIMITED First Defendant
ANDJACOBSEN VENUE MANAGEMENT NEW ZEALAND LIMITED
Second Defendant
ANDJACOBSENT F.T. PTY LIMITED Third Defendant
ANDJACOBSEN VENUE MANAGEMENT PTY LIMITED
Fourth Defendant
Hearing: [on the papers]
Counsel: Michael J Fisher and for plaintiffs
Alan Sorrell for First Defendant
Chris P Browne for Second Defendant
Judgment: 27 August 2008 at 12 midday
RESERVED JUDGMENT OF WILLIAMS J [Re: Application for Costs]
This judgment was delivered by
The Hon. Justice Williams on
27 August 2008 at 12 midday pursuant to R 540(5) of the High Court Rules
……………………………………………..
Registrar/Deputy Registrar
WORLDWIDE NZ LLC AND ANOR V QPAM LIMITED AND ORS HC AK CIV 2006 404 001827 27
August 2008
A.First and Second Defendants are entitled to orders for costs against the Plaintiffs in relation to the hearings on 15, 26 and 30 May 2006 at thrice the scale costs on a Category 2B basis with an allowance for second counsel and for disbursements.
B.The First Defendant is entitled to costs against the Plaintiffs of the hearings before Frater J on a 2B basis (preparation and hearing) plus disbursements.
_
Introduction
[1] On 15 May 2006 (orally) and 26 May and 30 May 2006 (reserved) judgments were delivered by Williams J concerning the admissibility of affidavits in this claim, a stay of execution and the plaintiffs’ application for injunctive relief.
[2] The affidavit ruling produced mixed results. Stay of execution was refused, with costs to the defendants. The plaintiffs’ application for injunctive relief was refused, with a timetable designed to lead to an agreement on costs being put in place.
[3] Agreement on costs eluded the parties. Memoranda were filed for the second defendant on 21 and 22 June 2006, for the first defendant on 2 August 2006, and for the plaintiffs on 10 August 2006.
[4] Summaries of those memoranda were not referred to Williams J until
11 September 2007. Other matters stood in the way of delivery of this judgment until now. To the extent the delays in dealing with issues of costs are on account of the Registry or the Court the delay is regretted.
Indemnity Costs
[5] The defendants seek indemnity costs against the first-named plaintiff, Worldwide NZ, on the basis the proceeding was improperly or unnecessarily begun and continued (R 48C(4) (a)) and for other breaches of R 48C.
[6] Worldwide NZ opposes on the basis that it began and continued this litigation at the behest of a Mr Goldberg who was appointed receiver of the Worldwide Entertainment Inc – of which Worldwide NZ is a member – and the Entertainment Group Fund Inc, pursuant to an order made on 18 January 2006 by the United States District Court of the Southern District of Florida.
[7] The plaintiffs made the point the defendants’ assertion is a very serious allegation to make against a person who is fulfilling a Court-appointed office and that, were the Court prepared to consider their assertion seriously, all parties should have an opportunity to adduce evidence on the point and a hearing would be required.
[8] Having reflected on the material contained in the memoranda and having regard to Williams J’s familiarity with the file during the period with which he was associated with it, the conclusion is that although – for the reasons later discussed – it must be said the litigation was run on a basis not customarily found in litigation in this country, it could not be concluded that the claim was commenced or continued for an ulterior motive on the material taken into account in preparing this judgment. Accordingly the indemnity costs application is refused.
Increased or scale costs?
[9] Even if they are held not to be entitled to indemnity costs, the defendants nonetheless seek an award of increased costs.
[10] For the second defendant, Jacobsen Venue Management NZ Ltd, Mr Browne submitted the following matters were germane to that application:
a) The delay between the receivership order and advice to first defendant, QPAM, of it in March 2006;
b)The commencement of these proceedings on 4 April 2006 seeking an ex parte interim injunction concerning the provision of information to the second plaintiff, Mr Gosney, and the holding of QPAM board
meetings. Jacobsen Venue Management was not a party to the proceedings at that stage, all of which required an urgent hearing before Frater J.
c) A letter written by the solicitors for Jacobsen Venue Management to Mr Goldberg on 26 April 2006 asserting the receivership amounted to a change in control of Worldwide NZ which triggered Jacobsen Venue Management’s pre-emptive rights to acquire Worldwide NZ’s interest in QPAM. The letter purported to exercise the option and offered fair value for the interest so transferred. Mr Browne submitted that amounted to a settlement offer to which there was no reply, pointing to the fact that, in essence, Jacobsen Venue Management’s stance was upheld by the 30 May 2006 judgment (that in its turn being upheld by the Court of Appeal dismissing Worldwide NZ’s appeal on 14 November 2006).
d) The service of the proceedings on Jacobsen Venue Management on
10 May 2006 when they were set down for hearing the following day. Jacobsen Venue Management’s officers are based overseas.
e) On 11 May 2006 Baragwanath J ordered that the substantive application be heard on Monday,15 May 2006, with timetabling for affidavits stretching through the preceding weekend.
f) On 12 May 2006 Worldwide NZ arranged two telephone conferences with Baragwanath J concerning the provision of accounting information and a suggested conflict of interest on the part of the accountants.
g) With significant work by solicitors and counsel for QPAM and Jacobsen Venue Management over the weekend, a number of affidavits were filed on the morning of 15 May 2006. Some of the plaintiffs’ affidavits gave rise to the ruling that day.
h)The plaintiffs proceeded on notice but effectively had the injunction application dealt with as if it were an ex parte application. The plaintiffs filed no undertaking as to damages when, so Mr Browne submitted, as a result of the 26 April letter, damages were effectively the only matter in issue.
i)During the injunction hearing counsel for Worldwide NZ conceded – though said only to be for the purposes of the injunction hearing – that Mr Goldberg’s appointment as receiver amounted to a change in the control of Worldwide within the terms of the QPAM trust deed.
j)The estoppel basis on which the injunction application proceeded was, in all the circumstances, entirely without merit, not least because the agency agreement on which it was, in part, based, lacked evidential foundation. Jacobsen Venue Management’s solicitors sought costs of
$2568 on the stay application and $26,030 on the injunction application.
[11] For QPAM, its then senior counsel, Mr Woodhouse QC, adopted Jacobsen Venue Management’s submission. He said QPAM, too, was faced with the same unreasonably short notice by late service for the interlocutory and the injunction hearings. He set out QPAM’s involvement – rather more long-standing than Jacobsen Venue Management’s – at some length and submitted that the timing of various filings and swearing of affidavits implied they were prepared well beforehand but filed only shortly before the hearings in order to disadvantage the defendants.
[12] QPAM sought costs of $5926 on the stay application and $80,033 on the injunction application.
[13] For the plaintiffs, Mr Fisher, their leading counsel, refuted any suggestion the proceeding was commenced for an ulterior purpose. He said the relief sought in the claim was intended to be declaratory of the relationship between the parties and was clearly arguable; that the qualified concession of change in control was just that,
qualified; and that the plaintiff was concerned not as to the consideration payable for the transfer of its interest to the Jacobsen interests but whether the latter was able to pay.
[14] He asserted the plaintiffs complied with their obligation to disclose all available material; that their interpretative argument under the trust deed and QPAM’s constitution was tenable, even though the Court ruled against it; and the agency point was also seriously arguable. He similarly submitted the plaintiffs had a respectable argument in relation to the affidavits which were ruled admissible. The
26 April letter was not a settlement offer as it attributed no value to Worldwide’s interests in QPAM and all Mr Goldberg was doing, as an appointee of the Federal Court, was taking appropriate steps to try to preserve the status quo and safeguard the value of Worldwide NZ’s assets.
[15] On the undertaking point, Mr Fisher submitted that QPAM breached an undertaking it gave Frater J and accordingly QPAM’s objection lacked merit.
[16] He also reviewed the history of the matter in an endeavour to refute the suggestion that documents were unreasonably delayed to disadvantage the defendants. He submitted that there was true urgency in the issues raised before various Judges, particularly relating to what he submitted was QPAM’s breach of its undertaking.
Discussion and Decision
[17] Only a brief resumé if the facts of this matter is in the foregoing narrative. For a fuller consideration of the facts, reference should be made to the 30 May 2006 judgment, the details of which are applied to this judgment by reference.
[18] Having regard to all the issues relevant to costs, the Court has concluded that an award of costs increased above scale in favour of both QPAM and Jacobsen Venue Management is warranted.
[19] The principal reasons for taking that view are:
a) There is a certain amount of evidence supporting the submission that service of documents on the defendants was late and might have been designed to put additional pressure on them, given pending hearing dates, in order to achieve an advantage for the plaintiffs.
b)The facts imply urgency was sought by the plaintiffs on a number of occasions when it is arguable urgency to that a degree was not justifiable. This placed additional pressure on solicitors, counsel and witnesses for QPAM and Jacobsen Venue Management that could have been alleviated by the plaintiffs pressing for less severe timetables. The timetable the plaintiffs managed to obtain for the hearing on 15 May 2006 was a particularly difficult one for QPAM and Jacobsen Venture Management to meet and involved significant additional weekend effort by counsel, solicitors and witnesses. The defendants, however, sensibly shared the arguments at the substantive hearing so as not to attenuate it.
c) The concession concerning change in control in QPAM following Mr Goldberg’s appointment was, however limited, a major concession which significantly diminished the plaintiffs chances of obtaining the injunctive relief they sought. And it is not as if the plaintiffs were taken by surprise as to the defendants’ stance on that point: the
26 April letter made the Jacobsens’ interests stance unmistakably clear. While the plaintiffs still had an arguable case following receipt of that letter, a re-reading the 30 May judgment makes clear (and as was confirmed by the Court of Appeal) the chances of success were materially lessened by the concession and, following receipt of the
26 April letter, the plaintiffs should have taken time for serious re- consideration of their position before pressing on.
d)The plaintiffs failure to file an undertaking as to damages is also significant.
[20] The defendants were awarded costs against the plaintiffs in the stay of execution judgment and as para [133] p 39 of the injunction judgment made clear the Court had in mind that the defendants would also be entitled to the costs of that hearing.
[21] In light of all of the above, the next question is the quantum of the orders to be made against the plaintiffs.
[22] Significant additional time, out of normal hours and under pressure, was required to be expended by solicitors, counsel and witnesses for the defendants. The plaintiffs failed to reconsider their position following receipt of the 26 April letter and adjust their approach to the claim accordingly or to recognise the letter as an offer of settlement and to negotiate over the means by which the value of Worldwide NZ’s interests in QPAM would be objectively valued. Those and the other factors discussed earlier and in the 30 May 2006 judgment entitle the defendants to an increased costs order under R 48C(3).
[23] Having reflected on the issue, the Court’s view is that an appropriate award would be to direct the plaintiffs to pay QPAM and Jacobsen Venue Management costs on the 15, 26 and 30 May 2006 judgments equal to thrice scale costs calculated on a Category 2B basis with an allowance for second counsel in favour of both. Disbursements are also payable. The plaintiffs are also to pay the first defendants’ costs of the hearings before Frater J on the basis sought; namely that appearing in counsel’s memorandum of 20 August 2008.
…………………………………
WILLIAMS J.
Solicitors:
Brookfields (David Neutze), P O Box 240 Auckland 1140, for plaintiffs
Email: [email protected]
Stewart Germann Law Office, P O Box 1542 Auckland 1001, for First Defendant
Email: [email protected]
Wilson Harle (Chris F Browne/Kerryn Sparrow), P O Box 4539 Shortland Street, Auckland 1001, for Second Defendant
Email: chri[email protected] / kerry[email protected]
Copy for:
Michael J Fisher, P O Box 3236 Shortland Street Auckland 1001, for Plaintiffs
Email: [email protected]
Alan Sorrell, P O Box 3810 Auckland 1140
Email: [email protected]
Suzanne Robertson, P O Box 854 Shortland Street Auckland 1001, for First Defendant
Email: [email protected]
Wendy Pukeiti, Case Officer, Civil Registry, Auckland High Court
Email: Wendy[email protected]
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