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High Court of New Zealand Decisions |
Last Updated: 21 July 2023
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IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY
I TE KŌTI MATUA O AOTEAROA TE WHANGANUI-A-TARA ROHE
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CIV-2022-485-605
[2023] NZHC 1659 |
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IN THE MATTER
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of s 143 of the Land Transfer Act 2017
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BETWEEN
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JOE & CO BUILDERS LIMITED
Applicant
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AND
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CHARLES RONALD THOMPSON
First respondent
SANDRA MICHELLE LESLEY THOMPSON
Second respondent
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Hearing:
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On the papers
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Appearances:
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J D Dallas for Applicant
M J Borcoski and C W Martin for Respondents
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Judgment:
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10 July 2023
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JUDGMENT OF ASSOCIATE JUDGE SKELTON
[1] In a judgment dated 17 February 2023, Associate Judge Johnston declined to sustain the caveat lodged by the applicant over a property owned by the respondents in Lower Hutt.1
[2] Regarding costs, Associate Judge Johnston stated:
[58] As to costs, the application has been unsuccessful and my preliminary view is that the applicant must pay the respondent’s costs on a 2B basis
1 Joe & Co Builders Ltd v Thompson [2023] NZHC 224.
JOE & CO BUILDERS LIMITED v THOMPSON [2023] NZHC 1659 [10 July 2023]
together with such disbursements as may be fixed by the Registrar. However, as I have not heard counsel in relation to costs I reserve them. If counsel are unable to resolve costs, then they may file memoranda in the usual way.
[3] Counsel have been unable to resolve costs and have filed memoranda.
Relevant legal principles
[4] Costs are ultimately a matter of the court’s discretion, the overall objective being to achieve an outcome that best meets the interest of justice.2 However, that discretion is qualified by the applicable costs rules, contained in pt 14 of the High Court Rules 2016. The primary principle applying to the determination of costs is that costs follow the event – meaning that a party who is unsuccessful pays costs to a party who is successful.3
[5] The Court may order a party to pay increased costs where the party opposing costs has contributed unnecessarily to the time or expense of the proceeding or a step in it.4 Increased costs may be awarded where there is a failure by the paying party to act reasonably.5 An example is failing without reasonable justification to accept an offer of settlement, whether in the form of an offer under r 14.10, or some other offer to settle or dispose of the proceeding.6
[6] The Court may also award the actual costs reasonably incurred by a party (indemnity costs).7 Indemnity costs may be awarded where a party has behaved either badly or very unreasonably.8 For example, indemnity costs may be ordered if the party has acted vexatiously, frivolously, improperly, or unnecessarily in commencing, continuing, or defending a proceeding or step in a proceeding.9
3 Rule 14.2(1)(a).
4 Rule 14.6(3)(b).
5 See Bradbury v Westpac Banking Corp [2009] NZCA 234, [2009] 3 NZLR 400 at [27].
6 Rule 14.6(3)(b)(v).
7 Rule 14.6(1)(b).
8 Bradbury v Westpac Banking Corp, above n 6, at [27]–[28]; and Prebble v Awatere Huata (No. 2)
[2005] NZSC 18, [2005] 2 NZLR 467 at [6].
9 Rule 14.6(4)(a).
Summary of the parties’ positions
[7] The respondents seek costs jointly and severally against the applicant and Catherine Foot and Michael Kooiman. Ms Foot is the director of the applicant. Mr Kooiman holds all the shares in Maximus Trustee Company Ltd which is a 100 per cent shareholder in the applicant.
[8] The respondents seek indemnity costs, or alternatively increased costs, against these parties on a category 2B basis ($10,396.50) with a 100 per cent uplift. Counsel for the respondents confirms that the respondents’ costs are in excess of the amount claimed.
[9] The respondents also seek an order under r 14.12 of the High Court Rules 2016 for a portion of the fees of a registered surveyor engaged by them in relation to the application.
[10] Finally, the respondents seek the costs of preparing their memorandum on costs, on a category 2C basis.
[11] The applicant accepts that it is liable for scale costs on a 2B basis. The applicant opposes indemnity costs or an uplift on costs and opposes an order that Ms Foot and Mr Kooiman are liable for costs. The applicant opposes the surveyor’s fee as a disbursement. If the Court rejects the indemnity costs or increased costs sought by the respondents, the applicant seeks costs on a 2C basis for filing its costs memorandum in response.
Indemnity costs
[12] The respondents submit that the applicant’s originating application was a “hopeless case” and that the applicant acted vexatiously, frivolously, improperly, or unnecessarily in commencing and continuing the proceeding.
[13] Counsel for the respondents sets out in some detail the various arguments advanced by the applicant which he submits were devoid of merit. An issue which is emphasised in the respondents’ memorandum and reply submissions on costs is that
the applicant disregarded relevant High Court authority in commencing the proceeding and, in continuing its proceeding, failed to bring to the attention of the Court portions of that authority which were fatal to its argument.10 The respondents submit that the application was inconsistent with any genuine concern about defects in the property or a desire to complete the purchase, and that issues were raised “merely as a technicality”.
[14] Counsel for the respondents also submits that allegations directed against Mr McCarthy (the respondents’ surveyor) which suggested impropriety by him were easily capable of being disproven from a review of Mr McCarthy’s own evidence. Counsel for the respondents says that at the hearing on 3 February 2023, he raised concerns about the fact that the allegations made by the applicant had not been substantiated, were contradicted by the evidence before the Court and were not advanced in cross-examination.
[15] Mr Dallas, for the applicant, submits that this was an application to sustain a caveat that was lodged because the contract for sale of purchase of the property was cancelled. He submits that the applicant believed it had reasonable grounds to support the caveat and, although the application was unsuccessful, there is nothing in the conduct of the applicant that warrants indemnity costs.
[16] Having considered the submissions on behalf of parties my assessment is that the issues raised by the respondents do not meet the high threshold for an award of indemnity costs.
[17] On the substantive issue, Associate Judge Johnston found:11
[55] For those reasons, I am not satisfied that the applicant can establish an arguable case to the effect that it retains an equitable interest in the property as purchaser. Putting the matter in an alternative way, I am satisfied that following the survey work carried out by Mr McCarthy, as at the date that the respondents issued their settlement notice, they had satisfied their obligations under cl 6.1, with the result that they were entitled subsequently to cancel the contract.
10 The relevant authority is Kumar v Bahramitash (2004) 5 NZCPR 387.
11 Joe & Co Builders Ltd v Thompson, above n 1.
[18] The applicant was unsuccessful, but I am not satisfied that the applicant’s case can be said to have been a “hopeless case” in the sense that it was “totally without merit” and “bound to fail”.12
[19] Nor am I satisfied that the applicant acted in wilful disregard of established law in commencing or continuing the proceeding.13 The authority referred to by counsel for the respondents was brought to the attention of Associate Judge Johnston by counsel for the applicant, albeit that counsel for the applicant only relied on the case for one proposition, whereas the respondents say that the case was fatal to the applicant’s argument and the applicant should have attempted to distinguish the case on the facts.14 It seems that counsel for the applicant did not expressly seek to distinguish Kumar on the facts. However, he put forward a series of arguments as to why the respondents had not satisfied their contractual obligations in this case which were rejected by Associate Judge Johnston.
[20] With regard to the allegations made against Mr McCarthy, Mr Dallas submits that Mr McCarthy had sent a letter to the applicant which was not referred to in his evidence, and the applicant based a number of its submissions on this letter. I am not satisfied that the applicant made allegations knowing them to be false and/or irrelevant.15
[21] Nor am I satisfied that the applicant commenced or continued the proceeding for some ulterior motive.
[22] My assessment is buttressed by the fact that Associate Judge Johnston expressed the preliminary view that the applicant must pay the respondents’ costs on a 2B basis together with disbursements. There is no suggestion in the judgment of any circumstances existing which might entitle the respondents to an award of indemnity costs.
13 McGechan on Procedure, above n 12, [HR14.6.03(1)(c)].
14 Joe & Co Builders Ltd v Thompson, above n 1, at [25] –[29].
15 McGechan on Procedure, above n 12, [HR14.6.03(1)(c)].
Increased costs
[23] The respondents’ argument for increased costs is based on the following factors:
(a) the applicant persistently failed to comply with timetabling directions made by the Court;
(b) the application lacked merit and the applicant followed unnecessary steps including issuing a notice to cross-examine which it then withdrew the day before the hearing, and seeking further time to file evidence which it did not file;
(c) the applicant failed without reasonable justification to admit facts, evidence, documents or accept a legal argument;
(d) the applicant elected to attack the evidence of Mr McCarthy without foundation and without cross-examining him or producing expert evidence of its own; and
(e) the applicant failed without reasonable justification to accept the Calderbank offer made on 8 December 2022.
[24] In response, Mr Dallas submits that there was some confusion with regard to the date for filing reply evidence. This was said to be because the matter was timetabled for a hearing in April 2023, but an earlier date became available in February 2023, and the applicant then assumed that the default timetable in the High Court Rules applied. He submits that the applicant was under no obligation to file any evidence in reply if it did not consider it was necessary to do so. He further submits that the notice to cross-examine the expert witness was issued prior to seeing the submissions of the respondent, and on seeing those submissions the applicant determined that cross-examination was not necessary. As noted above, Mr Dallas submits that the allegations against the respondents’ expert were based on the contents of a letter the expert sent to the applicants, which he did not refer to in his own affidavit evidence.
[25] I do not consider that this is case in the same category as, for example, ETB Realty Ltd v Eastlight Asset Trading No 3 Ltd,16 where an uplift of 50 per cent on a 2B calculation was awarded. In that case, a statutory demand was issued by the respondent, but withdrawn in advance of the first call of the application for an order setting it aside. The respondent acknowledged that there would be a cost consequence for the “ill-advised actions”.
[26] In this case, Mr Dallas submits that the applicant, while unsuccessful, believed it had reasonable grounds to support the caveat. He has given an explanation regarding the various procedural issues raised and why allegations were made against the respondents’ expert.
[27] On balance, my assessment is that the issues raised in 23(a)–(d) above do not meet the threshold for an award of increased costs. Again, my assessment is buttressed by the preliminary view of Associate Judge Johnston who heard the case and was familiar with the procedural history and considered costs on a 2B basis to be appropriate.
[28] The respondents also rely on the failure of the applicant to accept or respond to a Calderbank offer. On 8 December 2022, the respondents by their lawyer sent a letter marked “without prejudice save as to costs” to counsel for the applicant. The respondents offered to sell the subject property to the applicant for the original price, provided the applicant would agree to pay the legal and expert costs incurred by the respondents in dealing with the dispute. The offer was open for acceptance for three working days.
[29] The reasonableness of a failure to accept an offer must be assessed at the relevant time, not against the subsequent result.17
[30] Mr Dallas submits that the offer required the applicant to settle the purchase of the property when it was not satisfied that the cadastral survey had been properly
16 ETB Realty Ltd v Eastlight Asset Trading No 3 Ltd [2016] NZHC 609.
17 McGechan on Procedure, above n 12, at [HR14.6.02(3)(a)(iii)].
completed in accordance with the relevant legislation, and it also required the applicant to pay the respondents’ costs on an indemnity basis.
[31] I do not consider that it was unreasonable for the applicant not to accept this offer in December 2022. The offer required the applicant to pay indemnity costs to that stage of the proceedings, which are not commonly awarded. It seems that the applicant would have been required to purchase the property when it was not satisfied that the survey has been properly completed in accordance with the relevant legislation (which was recognised in the substantive judgment as a separate issue from whether the respondents had complied with their contractual obligations and were entitled to cancel the contract).18 I understand from counsel for the applicant’s memorandum as to costs that whether the survey has been properly completed in accordance with the relevant legislation remains an issue between the parties. Further, the offer was only open for acceptance for three working days which seems to me to be a short period in the circumstances.
[32] In summary, I find that an award of increased costs is not justified in this case.
Expert disbursement cost
[33] The respondents claim a proportion of the costs of their registered surveyor, Mr McCarthy, in the sum of $2,070.00.
[34] Mr Dallas submits that this cost is included in the scale allowance for time spent for the filing of supporting affidavits, and given the revising of the invoice and the lack of clear time recording and narration, the disbursement should not be allowed.
[35] The respondents have provided a breakdown of Mr McCarthy’s costs with their memorandum in reply and only seek that portion of his costs that relate to the Court process. The respondents also submit that the scale costs for preparing affidavits in respect of an originating application do not include an expert’s fee.
18 Joe & Co Builders Ltd v Thompson, above n 1, at [34]-[40] and [55].
[36] I consider that this disbursement cost meets the requirements of r 14.12 and it is allowed.
Non-party costs
[37] The respondents seek costs jointly and severally against the applicant and Catherine Foot and Michael Kooiman. As noted above, Ms Foot is the director of the applicant and Mr Kooiman holds all the shares in Maximus Trustee Company Ltd which is a 100 per cent shareholder in the applicant.
[38] The broad discretion as to costs contained in r 14.1 of the High Court Rules may be exercised against non-parties to litigation.19
[39] The respondents submit that:
(a) Mr Kooiman, with the consent of Ms Foot, has “driven” the proceedings and they have promoted and controlled the proceedings for their own benefit;
(b) Mr Kooiman was, up until 14 January 2023, an undischarged bankrupt who should not, without prior approval of the Official Assignee or the Court, have been carrying out or taking part in the management or control of any business;
(c) Mr Kooiman is the beneficial owner of the shares in the applicant;20
(d) Ms Foot, as director of the applicant, was required to conduct the business in compliance with the law and in the best interests of the company, but instead ceded her authority as director to Mr Kooiman;
19 Dymocks Franchise Systems (NSW) Pty Ltd v Todd (No 2) [2004] UKPC 39, [2005] 1 NZLR 145 (PC), (2004) 17 PRNZ 115 (approved in Mana Property Trustee Ltd v James Developments Ltd [2010] NZSC 124, [2011] 2 NZLR 25, (2010) 20 PRNZ 715 and S H Lock (NZ) Ltd v New Zealand Bloodstock Leasing Ltd [2011] NZCA 675). See also Knight v FP Special Assets Ltd (Knight’s Case) [1992] HCA 28, (1992) 174 CLR 178, at 192-193.
20 The respondents refer to ETB Realty Ltd v Eastlight Asset Trading No 3 Ltd, above n 16, at [25]-[26].
(e) it is inappropriate for Mr Kooiman to utilise the applicant as a vehicle for his own interests and inappropriate for Ms Foot to permit such conduct and to abrogate her directorship responsibilities in favour of Mr Kooiman;
(f) the applicant owns no real property and is indebted to another company; and
(g) Mr Kooiman has previously operated a string of companies which have been placed into liquidation, often in the nature of phoenix companies.
[40] Mr Dallas submits that there is no evidence at this stage that the applicant cannot or will not settle any costs order. He submits that the respondents’ application for non-party costs is premature and it would only be necessary to consider a non-party costs order if the applicant fails to pay any costs order made. Mr Dallas refers to Eastern Agriculture Ltd v Manawatu-Wanganui Regional Council.21 In that case, an application was made for a non-party costs order against a receiver. Kòs J held that:
[51] Secondly, such application may well be premature. No order for security for costs was made in this case. The plaintiffs may meet the costs awards in their own right. Only if they do not is it really necessary to consider the appropriateness of a non-party costs order.
[52] I will reserve leave to the Council to apply subsequently, and formally, for costs against the receiver of the second plaintiff.
[41] In the present case, while the respondents have raised issues with the financial position of the applicant and the financial history of those responsible for the management of the applicant, the applicant is not in liquidation and there is no evidence before the Court that it is unable to meet an award of costs.
[42] In the circumstances, I am not satisfied that the interests of justice require that an order for non-party costs be made at this stage.
[43] However, as requested by the respondents, I will reserve leave to apply subsequently and formally for non-party costs against Catherine Mary Foot and Michael Edwin Kooiman if that becomes necessary.
Costs memoranda
[44] Both parties have sought to recover the scale costs of preparation of their respective costs memoranda on a 2C basis.
[45] It is recognised that costs may be awarded on a costs application.22
[46] While the respondents have been successful on the costs application overall, they have not been successful in relation to indemnity or increased costs or non-party costs (although leave will be reserved to apply subsequently for non-party costs if necessary). The applicant has acknowledged it is liable for scale costs on a 2B basis but unsuccessfully opposed the respondents’ disbursement claim.
[47] In the circumstances, I do not consider that either party is entitled to costs for preparing their respective costs memoranda.
Respondents’ updating memorandum
[48] On 26 June 2023, the respondents filed an updating memorandum regarding costs. I gave the applicant an opportunity to file and serve a memorandum in response and the applicant filed and served a second memorandum as to costs dated 7 July 2023. The respondents filed and served a further memorandum in reply on 7 July 2023.
[49] The respondents raise further concerns regarding the financial position of the applicant based on the fact that security for costs for the appeal of the substantive judgment of Associate Judge Johnston dated 17 February 2023 (now abandoned) was paid by an entirely different entity. The respondents note that counsel for the applicant submitted in his memorandum on costs dated 24 May 2023 that the Court should take
22 For example, see Body Corporate Administration Ltd v Mehta (No. 4) [2013] NZHC 213 at [85], affirmed in Strata Title Administration Ltd v Body Corporate Administration Ltd [2014] NZCA 96 at [10]–[14].
some comfort from the fact that the applicant had lodged an appeal and paid security for costs. The respondents submit that in fact this offers no reassurance as to the applicant’s financial position.
[50] The updating memorandum does not change my view as to an order for non-party costs at this stage. I am not satisfied that there is evidence before the Court establishing that the applicant is unable to meet an award of costs. I am not satisfied that the interests of justice require that an order for non-party costs be made at this stage. Leave will be reserved for the respondents to apply subsequently for non-party costs if that becomes necessary.
[51] The respondents also seek indemnity costs in the sum of $2,803.70 on the application by the applicant to stay the judgment of 17 February 2023. The applicant has discontinued this application. The applicant acknowledges that the respondents are entitled to some additional costs in this regard and essentially accepts items 2 and 3 of the respondents’ schedule of costs in the sum of $960.
[52] I consider that the respondents are also entitled to the costs of preparing their memorandum responding to the stay application ($354) which is item 1 in the schedule of costs, and half the costs of preparing the updating memorandum dated 26 June 2023 ($562) which is item 4 in the schedule of costs.
Result
[53] The applicant is to pay the respondents’ costs and disbursements of this proceeding which I fix in the sums of $12,272.50 and $2,070 respectively.
[54] Leave is reserved to the respondents to apply for costs against Catherine Mary Foot and Michael Edwin Kooiman.
Associate Judge Skelton
Solicitors and counsel:
J D Dallas, Wellington for applicant
Saunders Robinson Brown, Christchurch for respondents
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