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New Zealand Greyhound Racing Association Inc v Manawatu Greyhound Racing Club Inc [2012] NZHC 1352; [2012] NZCCLR 17 (18 June 2012)

Last Updated: 11 July 2012

IN THE HIGH COURT OF NEW ZEALAND PALMERSTON NORTH REGISTRY

CIV-2011-454-529 [2012] NZHC 1352

BETWEEN NEW ZEALAND GREYHOUND RACING ASSOCIATION INCORPORATED

Plaintiff

AND MANAWATU GREYHOUND RACING CLUB INCORPORATED

Defendant

Hearing: 14 June 2012

(Heard at Palmerston North)

Counsel: P. Drummond - Counsel for Plaintiff

A. Pandey - The Third Party in person

Judgment: 18 June 2012

_{JUDGMENT OF ASSOCIATE JUDGE D.I. GENDALL}

This judgment of Associate Judge Gendall was delivered by the Registrar on 18 June

2012 at 3.00 pm under r 11.5 of the High Court Rules.

_{Solicitors: JT Law, Solicitors, PO Box 25443, Wellington 6146}

NEW ZEALAND GREYHOUND RACING ASSOCIATION INCORPORATED V MANAWATU GREYHOUND RACING CLUB INCORPORATED HC PMN CIV-2011-454-529 [18 June 2012]

Introduction

[1] Before the Court is an application by the plaintiff for an order seeking costs against a non-party to these proceedings, Mr Ashoka Kant Pandey (Mr Pandey), who it seems is or was the secretary/manager of the defendant society, Manawatu Greyhound Racing Club Inc (in liquidation) (the defendant).

[2] On 9 December 2011 I made an order following the substantive hearing of

the plaintiff’s liquidation application in this proceeding:

(a) Placing the defendant incorporated society into liquidation; and

(b) Awarding costs to the plaintiff against the defendant on a category 2B

basis amounting to $2,632.00 together with disbursements totalling

$1,145.93.

(c) Granting leave to the plaintiff to bring the present application against

Mr Pandey.

[3] According to the plaintiff the defendant which is in liquidation has no funds and it is not expected that the costs awarded in favour of the plaintiff will be paid.

[4] In its present application the plaintiff seeks costs against Mr Pandey personally on a 2B basis for a slightly lesser costs amount totalling $2,256.00 and disbursements totalling $1,145.93. The plaintiff notes that it does not seek costs on an indemnity basis as would ordinarily be the case for an application such as the present one on the basis that costs were only awarded against the defendant to these proceedings on a 2B basis. Furthermore, despite the plaintiff indicating it has incurred significant costs on other matters it adbvises that it has elected not to pursue Mr Pandey for the costs of the following:

(a) Mr Pandey’s unsuccessful application on behalf of the defendant to set-aside the statutory demand on which these proceedings were based – proceeding CIV-2011-454-150.

(b) The defendant’s/Mr Pandey’s unsuccessful appeal of the decision dismissing the application to set-aside the statutory demand and its unsuccessful urgent application for a stay of that decision – proceeding CA415/2011.

(c) The defendant’s/Mr Pandey’s unsuccessful urgent application for a stay of the final judgment in these proceedings placing the defendant incorporated society into liquidation – proceeding CA29/2012.

[5] The plaintiff says that the costs of pursuing Mr Pandey for costs on those additional proceedings is simply prohibitive. It merely seeks costs from Mr Pandey now in respect of the liquidation proceeding itself (and not every step in that proceeding).

[6] The plaintiff contends that its wish to obtain costs from Mr Pandey here is to vindicate its position that the defendant’s defence of the liquidation proceedings (and indeed the proceedings noted at para [4] above) were the promulgation of what was in reality a series of personal claims by Mr Pandey against the plaintiff.

[7] The present costs application is opposed by Mr Pandey.

Counsels’ Arguments and My Decision

[8] In applying s 51G Judicature Act 1908, Courts in this country have determined that the jurisdiction to award costs on a civil proceeding extends to non- parties to a proceeding. On this, McGechan on Procedure at para J51G.02 states:

J51G.02 Scope

The Court, relying on English authority, has found no reason to limit its costs jurisdiction to parties to the proceeding, but has held that it encompasses non- parties: Hamilton v Papakura DC (1997) 11 PRNZ 333 at pages 338-339 (parties financially supporting the plaintiff ’s proceeding); Carborundum Abrasives Limited v BNZ (No. 2) [1992] 3 NZLR 757 .... (costs awarded against the directors of the plaintiff).

[9] It is clear also that the broadly based costs discretion contained in r 14.1 High Court Rules can be exercised against or in favour of non-parties to civil litigation – Erwood v Maxted [2010] NZCA 93 at [18].

[10] Further, there can be little doubt, as noted in McGechan on Procedure at para HR Pt 14.09(1)(b) that this jurisdiction can be exercised after judgment has been sealed (as is the case here) and is then supplemental to the judgment – Dymocks Franchise Systems (NSW) Pty Limited v Todd (No. 2) [2005] 1 NZLR 145.

[11] The prevailing authority on applications for costs orders against non-parties to proceedings is SH Lock (NZ) Limited v New Zealand Bloodstock Leasing Limited [2011] NZCA 675 following Dymocks Franchise Systems (NSW) Pty Ltd v Todd (No

2) [2005] 1 NZLR 145.

[12] The judgment of the Court in SH Lock (NZ) Limited was given by Justice Harrison who sets out at [14] the principles established in Dymocks relevant to the Court exercising its discretionary power to award costs against a non-party:

(a) Costs orders against non-parties are exceptional in the sense that they are outside the ordinary class of cases where parties pursue claims for their own benefit and at their own expense;

(b) The ultimate question in any exceptional case is whether in all the circumstances it is just to make the order, thereby requiring a fact specific inquiry;

(c) As a general rule, third party litigation funders are liable for costs where they not only fund proceedings but substantially control it or

‘at any rate [are] to benefit from them’ – that is because the funder is gaining access to justice for its own purposes and is in effect the real party to litigation ...”.

(a) A “but for” approach to causation is appropriate ... whether, but for the funder’s involvement, the plaintiff [here the defendant] would have pursued its appeal [or proceeding]; and

(b) Approval of Arklow Investments Ltd v MacLean HC, Auckland, CP49/97, 19 May 2000 in particular (inter alia), “... [costs orders against third parties] are warranted ... where there would otherwise be a situation in which a person could fund litigation in order to pursue his or her own interests and without risk to himself or herself should the proceedings fail or be discontinued.

[14] In Carborundum Abrasives Limited v BNZ (No. 2) [1992] 3 NZLR 757 His Honour Justice Tompkins found that the discretion to order costs against a non-party should only be exercised against a person standing behind a company litigant in exceptional circumstances. He went on to note that costs may be awarded against a non-party in cases where that party had acted without impropriety or without mala fides.

[15] In Carborundum Abrasives Limited the Court found that under the circumstances prevailing there, no order for costs should be made against third party directors of the company as they had no financial interest in the proceedings. Their motive in having the company commence the action in question was simply to act in what they then conceived to be the best interests of the shareholders and creditors, secured or unsecured, (other than the first defendant alone who was a substantial creditor of the plaintiff).

[16] In the present case, the situation differs from that which prevailed in the Dymocks case and in the SH Lock (NZ) Limited case. Both those cases involved proceedings where a secured third party had funded the litigation participant with the result that they stood to financially benefit from the proceeding.

(a) Did not fund the proceedings in a conventional sense;

(b) Nor did he stand to financially benefit from the defendant’s success in

these proceedings as argued in Dymocks and SH Lock (NZ) Limited.

[18] Notwithstanding this, the plaintiff contends this is still an “exceptional case”

for a number of reasons:

(a) It contends the defendant is and has been insolvent for at least the duration of the present proceedings.

(b) The plaintiff also contends that the defendant never advanced an arguable defence to the claims against it.

(c) The defendant’s defence to those proceedings would not have happened it is suggested “but for” Mr Pandey’s actions in the following respects:

(i) Mr Pandey was effectively the “funder” of this proceeding in that he gave his time and energy entirely (and indeed it seems he amongst others also gave a personal guarantee of legal fees incurred earlier by the defendant in the proceeding).

(ii) Throughout, Mr Pandey alleges he represented the defendant in his capacity as the secretary/manager of the defendant but the plaintiff disputes that he in fact had this role. Evidence before this Court from Mr Pandey himself however would seem to suggest that he was in fact appointed as secretary/manager of the defendant. But, I make no finding on this aspect here as in my view nothing essentially turns on this.

(iii) In reality the plaintiff contends Mr Pandey was not advocating for the defendant but was in fact advocating for himself.

(iv) It is said that it was Mr Pandey who stood to benefit if the defendant was successful, although in my view it is difficult to see here how this would be so.

(v) The plaintiff does go on to clarify this aspect further. It suggests that it was Mr Pandey who stood to gain in an emotional sense if the defendant avoided liquidation, in that the depth of Mr Pandey’s personal displeasure with the plaintiff throughout these and other proceedings has been quite clear. He wanted a “win” and to be vindicated.

[19] In all of this it is clear that Mr Pandey carried zero litigation risk. He may, however, have suffered the loss of his time, his own money and health in pursuing this action albeit he says he did so entirely for and in the name of the defendant.

[20] For all these reasons, the plaintiff contends that this is indeed an exceptional case and an order for costs against the non-party Mr Pandey should be made here.

[21] The ultimate consideration in applications of this type must always be whether an order against a non-party is just – McGechan on Procedure para HR Pt

14.09(5)(a).

[22] In the present case, although Mr Pandey and others did guarantee earlier legal costs incurred by the defendant in opposing the plaintiff’s proceeding, it is difficult to conclude that he constituted a “funder” of this litigation in a real financial sense. There is no doubt in my mind that on many occasions Mr Pandey ran the defendant’s defence single-handedly and generally his evidence throughout is that he did so as an employee secretary/manager of the defendant. It is difficult here to go past this contention.

[23] What is clear in this case is that Mr Pandey here has raised a number of obstacles for the plaintiff and certainly throughout he had personal feelings of significant animosity towards the plaintiff and its officers. Whether however this amounted to a vendetta as suggested by the plaintiff is unclear.

[24] As to personal interest in the litigation, as an employee of the defendant, Mr Pandey stood to lose his employment if the defendant was placed into liquidation so to that extent it could be said he did have a personal interest. He did not, however, stand to gain in any major financial way it seems to me from the litigation (other than by way of wages as an employee). This was not a case where a substantial shareholder/owner for example of a privately owned company financed and controlled litigation on behalf of that company.

[25] Costs orders against non-parties are outside the ordinary run and this is a jurisdiction generally based on the rationale that it is wrong to allow a funder of litigation potentially to benefit from it unless they shoulder the corresponding costs risks if the proceeding fails – see McGechan on Procedure HR Pt 14.09(3).

[26] As I have noted above, on the one hand, I find in this case that it cannot be said unequivocally that Mr Pandey was the funder of the defendant’s defence in the present litigation.

[27] On the other hand, there can be no doubt in my view that Mr Pandey had a significant degree of personal animosity towards the plaintiff here and thus may well have carried on arguments against the plaintiff in situations where arguably they may not have been wholly justified.

[28] Notwithstanding this I find here, but only by a rather fine margin, that this is not one of those cases where circumstances exist to justify an order for costs being made against a non-party.

[29] The plaintiff’s present application therefore must fail.

[30] In his submissions before me, Mr Pandey went on to argue that if the present application were to be dismissed, he should receive costs on this matter. Mr Pandey however was self-represented and there was no evidence before me of any kind that he has incurred costs in this matter. There is to be no order made as to costs. Costs are to lie where they fall.

‘Associate Judge D.I. Gendall’