MONTGOMERIE v MONTGOMERIE [2021] NZCA 639

MONTGOMERIE v MONTGOMERIE [2021] NZCA 639 [1 December 2021]IN THE COURT OF APPEAL OF NEW ZEALANDI TE KŌTI PĪRA O AOTEAROACA69/2021[2021] NZCA 639BETWEEN ANDREW LAURIE MONTGOMERIEAppellantAND JAMES LESTER MONTGOMERIERespondentCounsel: A R Gilchrist for AppellantD J Neutze for RespondentJudgment:(On the papers)1 December 2021 at 2.00 pmJUDGMENT OF GODDARD JA The Registrar is to pay $1,195 of the security for costs to the respondent.B The Registrar is to advise the Official Assignee that the Registrar isholding the balance of the security for costs, and pay that balance to theOfficial Assignee on request.____________________________________________________________________REASONSBackground[1] The appellant, Andrew Montgomerie, was adjudicated bankrupt on11 December 2020. On 16 February 2021 he filed an application for leave to appealout of time to this Court against that adjudication. The respondent consented to thegrant of leave to appeal out of time, but opposed the appeal. The appellant paidsecurity for costs of $7,060. The case on appeal was filed. On 2 June 2021 a fixturewas allocated for a hearing on 1 September 2021.[2] The appeal was abandoned on 8 July 2021. The appellant had advised therespondent of his intention to abandon the appeal a few weeks earlier, and soughtagreement on the costs consequences of an abandonment. No agreement could bereached as to costs. The appellant proceeded to file a notice abandoning his appeal,leaving the question of costs to be resolved subsequently.Competing claims to security for costs[3] The Registrar holds the security for costs of $7,060. There are competingclaims to those funds.[4] The appellant claims that it should be repaid to him, on the basis that:(a) the respondent has not been required to take any steps in respect ofwhich costs are properly payable on the appeal; and(b) the funds were provided by a third party, and should be repaid to theappellant's solicitor for payment to that third party.[5] The Official Assignee has advised the Registrar that the appellant has notprovided sufficient evidence to satisfy the Official Assignee that the funds should bereturned to a third party, rather than paid to the Official Assignee.[6] The respondent says that the security for costs should be paid to him, on thebasis that:(a) He incurred costs in responding to the application for leave to appealout of time, engaging in relation to the preparation of the case on appealand the issues to be determined on appeal, and liaising with the Courtin relation to a fixture date and timetabling matters. The respondentshould receive costs in respect of those matters.(b) Those costs should be paid on an indemnity basis, as the respondent isentitled to indemnity costs under a loan agreement between the parties.Alternatively, indemnity costs should be awarded under r 53E(3)(a) or(f) of the Court of Appeal (Civil) Rules 2005 (Rules) on the basis thatthe appeal was improperly brought. It was an attempt by the appellantto delay meeting his obligations, in circumstances where the appeal washopeless. The amount claimed for costs on an indemnity basis is$6,165.50.(c) The balance of the security for costs should be paid out to therespondent to satisfy an unpaid award of costs in the High Court.Those costs were awarded in respect of the appellant's withdrawnapplication for a stay of the judgment adjudicating him bankruptpending the appeal to this Court, in the sum of $2,390.DiscussionCosts to be paid to the respondent[7] The court has a discretionary jurisdiction to award costs on an indemnity basis,where a contract so provides.1 However it is unlikely that the court will do so incircumstances where the payment may amount to a preference for the judgmentcreditor in respect of a contractual entitlement to costs over and above the costsordinarily payable under the Rules.2[8] On the basis of the limited material before the Court, it is not clear whether anaward of contractual indemnity costs would result in a preference. But bearing in mindthat note of caution, and in circumstances where the appeal does not relate directly toenforcement of the loan agreement, I consider that an award of indemnity costs to bepaid out of the security for costs held by this Court, on the basis of a contractualentitlement, would be inappropriate.[9] The grounds for the appeal appear to have been weak. But they are not soself-evidently hopeless that the appeal can be described as vexatious or frivolous for1 Court of Appeal (Civil) Rules 2005, r 53E(3)(e).2 Ensom v Downtown House (No 2) Ltd [2020] NZCA 51 at [4].the purposes of r 53E(3)(a). Nor is there any other special reason justifying an awardof indemnity costs under r 53E(3)(f).[10] However I accept that some costs have been incurred by the respondent beforethe abandonment of the appeal. The Rules do not fix an amount payable for the stepstaken. More was done by the respondent in this case than by the respondent inEnsom v Downtown House (No 2) Ltd, where costs of $478 were awarded.3 I considerthat an award of 0.5 days of costs for a standard appeal on a band A basis isreasonable.4 That comes to $1,195.[11] The respondent also says that he should receive costs in respect of thisapplication for costs. However I have not accepted the claim that indemnity costsshould be paid out of the security for costs held by the Court, and I do not considerthat any further allowance for costs incurred in connection with resolution of this costsmatter would be appropriate.Balance of security for costs[12] In the ordinary course, the balance of the security for costs held by the Courtwould be paid to the appellant. However in circumstances where an appellant isbankrupt, any amount payable to the bankrupt should be paid to the Official Assignee.There is no evidence before this Court that establishes a beneficial entitlement on thepart of a third party to the security for costs paid to the Registrar. Nor would it beappropriate to determine that issue without hearing from the relevant third party andfrom the Official Assignee, as well as from the appellant. That is not an issue that can,or should, be resolved in the context of this costs application.[13] Rather, the appropriate course is for the balance of the security for costs to bepaid to the Official Assignee. If a third party wishes to assert a beneficial interest inthose funds, the third party can pursue that claim with the Official Assignee.Otherwise, the Official Assignee will deal with the funds as part of the appellant'sbankrupt estate.3 At [7].4 Court of Appeal (Civil) Rules, r 53C(1)(a) and sch 2; and High Court Rules 2016, sch 2.Result[14] The Registrar is to pay $1,195 of the security of costs to the respondent.[15] The Registrar is to advise the Official Assignee that she is holding the balanceof the security for costs, and pay that balance to the Official Assignee on request.Solicitors:Douglas M A Burgess, Auckland for AppellantBrookfields Lawyers, Auckland for Respondent