Young v KPSS New Zealand Limited

[2012] NZHC 305

IN THE HIGH COURT OF NEW ZEALAND DUNEDIN REGISTRY

CIV-2011-412-000314 [2012] NZHC 305

UNDER  the District Courts Act 1947

IN THE MATTER OF     an appeal pursuant to s 72 of the District

Courts Act 1947

BETWEEN  PHILIP JOHN YOUNG Appellant

ANDKPSS NEW ZEALAND LIMITED Respondent

Counsel:         L A Andersen for Appellant

B L Gray for Respondent

Judgment:      29 February 2012

JUDGMENT OF HON JUSTICE FRENCH

as to Costs

Introduction

[1]      Mr Young wanted to set aside a judgment obtained against him by KPSS in the District Court.  His solicitors had overlooked filing a statement of defence and KPSS had obtained the judgment by default.  Mr Young applied to have it set aside, but the application was refused by a District Court Judge.  Mr Young then appealed that decision to this Court.  I upheld his appeal and set the judgment aside.

[2]      There is now an argument about the costs of the appeal and about costs in the

District Court.

YOUNG V KPSS NEW ZEALAND LIMITED HC DUN CIV-2011-412-000314 [29 February 2012]

Discussion

[3]      A party seeking to set aside a judgment entered because of its own default is seeking the Court’s indulgence.  Thus, costs are generally awarded to the other side even if the application is granted.[1]

[1] Active Leisure (Sports) Pty Ltd v Crocodile Sports and Leisurewear Ltd [1997] 1 NZLR 350 at

358 (HC); Callis v Ward McCulloch (1993) 7 PRNZ 175 at 176 (HC).

[4]      KPSS accordingly argues that it is entitled to costs on the appeal to this

Court.  It seeks costs in the sum of $2632.

[5]      However,  the  reason  I  set  the  judgment  aside  was  because  I  considered Mr Young had a complete defence to the claim.  Or, to put it another way, KPSS had a judgment to which it was not entitled and would never be entitled.  It was not the usual situation where the default judgment is set aside and the case set down for a defended hearing.  My decision amounted to a final disposition.

[6]      In my view, in those circumstances the general rule about indulgences should not apply.  Rather, costs should follow the event and be awarded to the successful appellant.

[7]      Mr Young’s  costs,  calculated  on  a 2B basis  together  with  disbursements,

amount to $4378.30.

[8]      However, that is not the end of the story.   There are other complicating factors in this case.  In order to explain these I need to set out some more detail of the surrounding facts.

[9]      Mr Young was formerly the director of a company called Ricochet.   On 9

December 2008, Ricochet went into liquidation owing $4436.21 to KPSS.

[10]     In mid-2009, KPSS made demand of Mr Young under a personal guarantee

he  had  signed,  guaranteeing  payment  of  Ricochet’s  debt.    Mr Young  (wrongly)

resisted payment and applied to the Disputes Tribunal for relief.

[11]     The Disputes Tribunal (wrongly) granted him partial relief.  KPSS appealed, and on 19 April 2010 the District Court quashed the Disputes Tribunal decision.  The Judge did not award costs on the appeal, because he was aware that KPSS intended to include its full solicitor/client costs as part of its claim.

[12]     On 25 May 2010 Mr Young paid KPSS the sum of $4436.21.   By that time, however, KPSS had incurred significant legal costs.   It treated the payment as a payment on account and issued proceedings for what it claimed was the balance outstanding. This primarily comprised legal costs.

[13]     Due to an oversight on the part of Mr Young’s solicitors, no defence was filed and KPSS obtained judgment for $10,959.91 by default.  It was this judgment that Mr Young then sought to have set aside in the District Court, on the grounds he had an arguable defence.  His application was unsuccessful, and the District Court Judge awarded KPSS costs on the application of $2467.89.

[14]     Mr Young then filed an appeal to this Court.  He sought a stay pending the appeal.   Another District Court Judge dismissed the stay application and awarded costs of $2065.89 on that application in favour of KPSS.

[15]     The reason I allowed Mr Young’s appeal was because in my view the legal costs incurred by KPSS in enforcing the guarantee were not owing or payable by Ricochet at the time of the liquidation.   If they were not owing by Ricochet, they were not owing by Mr Young.

[16]   Had the District Court Judge known KPSS would be unable to claim solicitor/client costs arising out of its successful appeal from the Disputes Tribunal decision, he would undoubtedly have awarded KPSS scale costs.  Now, as a result of my decision, they will miss out altogether unless this is taken into account in setting the costs otherwise payable to Mr Young in respect of this appeal.   Mr Andersen acknowledged the justice of this.  He submits that an appropriate adjustment would be $500.  However, I see no reason why the adjustment should not be calculated on a District Court 2B basis, which comes to $1950 excluding disbursements.  Mr Gray has not quantified the disbursements.

[17]     Also in contention are the costs awarded by the District Court on the stay application and the application to set aside.

[18]     Mr Gray seeks an order that those costs be paid to KPSS.  Mr Andersen says they will be dealt with by the District Court, and consequently there is no need to make an adjustment for those costs in relation to this appeal.

[19]     This Court does, however, have jurisdiction on an appeal to make any order as to costs, including costs in the Court below.[2]   My view is that the costs orders on the application to set aside and the stay application should be quashed because they cannot stand in light of my decision.  However, I am not prepared to reverse them – that is to say, I am not prepared to award costs in Mr Young’s favour.  He contributed in a significant way to the problematic course this case has unfortunately taken.  The costs of those District Court applications will therefore lie where they fall.

[2] Waitakere City Council v Brunel HC Auckland CIV-2006-404-4504, 5 September 2008.

[20]     That leaves the issue of interest.

[21]     In so far as there was any interest owing on the principal debt of $4436.2 1, Mr Andersen accepted that it would be within the scope of the guarantee and was properly payable by Mr Young.  Mr Andersen had assumed that an interest figure of

$821.21 claimed in the District Court proceeding was interest on the legal costs rather than the principal debt.  Mr Gray’s understanding, however, was that it was indeed interest on the principal debt.

[22]     In my judgment I dealt with the matter by directing as a condition of setting aside the judgment that the Court would hold the security for costs of $940 paid by Mr Young until the interest issue was resolved.  Leave was reserved to either party to come back to me should a ruling be required.

[23]     In  his  subsequent  submissions  on  costs,  Mr Gray  says  KPSS  has  now confirmed that the $821.21 is the interest owing by Mr Young on the unpaid debt up

to 7 May 2010.  Mr Gray seeks an order that it be paid.

[24]     For  his  part,  Mr Andersen  says  it  is  accepted  the  interest  component  of

$821.21 is payable, but again submits that it is a matter that will need to be dealt with in the District Court.

[25]     I disagree.  That would only put the parties to yet more expense over a very modest sum.   There must be some finality to this litigation.   The pragmatic and responsible course is for me to take that into account in quantifying the costs payable to Mr Young.

Outcome

[26]     I award costs to Mr Young on the appeal to this Court.

[27]     The  amount  of  those  costs  is  to  be  calculated  in  accordance  with  the following formula:

$ 4378.30 less     $    1950.00 less     $      821.21

less     KPSS disbursements on appeal

to the District Court to be quantified

[28]     In the event the implementation of this formula causes any difficulty, leave is reserved  for  either party to  come back  to  me  for further directions.    I do  not, however, expect that will be necessary.

[29]     Once counsel agree on  the quantum of the disbursements and hence the amount of the costs, they are to advise the Registrar and the security may then be released.

[30]     The costs awarded by the District Court on the stay application and the application to set aside are quashed.

Solicitors:

Alistair Dunlop Paterson, Dunedin

Counsel: L A Andersen, Dunedin

Farry & Co, Dunedin