FOTHERINGHAME AND ANOR V SINGH FARMS NEW ZEALAND LIMITED HC AK CIV 2008-404-002215

FOTHERINGHAME AND ANOR V SINGH FARMS NEW ZEALAND LIMITED HC AK CIV 2008-404- 002215 5 November 2008IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY CIV 2008-404-002215BETWEEN CLYDE PETER FOTHERINGHAME PAMELA MARY FOTHERINGHAME Plaintiffs AND SINGH FARMS NEW ZEALAND LIMITED Defendant Hearing: 5 November 2008 Counsel: DPH Jones QC and DM Cross for Plaintiffs S Singh for Defendant Judgment: 5 November 2008ORAL JUDGMENT OF JOHN HANSEN JSolicitors: Mr DPH Jones QC, P O Box 1750, Shortland Street, Auckland 1140 for Plaintiffs Shean Singh, P O Box 10018, Dominion Road, Auckland 1003 for Defendant[1] These proceedings between the plaintiffs and defendant concern the sale of rural land in Kaukapakapa. It is necessary, even though this is only a cost application, to traverse the chronology in some detail.Chronology[2] Initially the parties entered into a conditional agreement on 6 October 2006 which, shortly thereafter, was cancelled. On 5 December 2006 the parties entered into an unconditional agreement for the purchase of the entire farm property for the sum of $3.9m plus GST. The settlement date was to be no earlier than 1 June 2007 and no later than 30 November 2007. Following the signing of that agreement, on a regular basis, Mr Jarnail Singh, who seems to have been the shareholder and director responsible for the conduct of all matters relating to the agreement, regularly entered onto the property with a view to promoting some development. [3] On 22 December 2006 there was a written variation reducing the price slightly because of an error in the amount of land involved. In January 2007 the defendant paid $205,000 by way of deposit. On 24 January it lodged a caveat and then on 22 March 2007 the balance of the deposit of $100,000 was paid. [4] On 30 November 2007 the defendant failed to settle. Up until that date apparently the defendant advised the plaintiff that the only issue was the source of funding which would be utilised for the purchase. On that date, however, it appears, for the first time, there was a notification that funding may be problematic. A settlement notice was issued requiring settlement on 19 December 2007. It was issued immediately after 5.00 p.m. on 30 November. It will be necessary to return to the date of 30 November and 1 December in due course. [5] On 5 December 2007 the defendant's solicitor sought an extension of time. This was refused by the plaintiffs' solicitor on 7 December, the same letter requiring settlement in accordance with the terms of the agreement. In March 2008, it appears from the affidavits, the plaintiffs became aware that three other rural propertiesowned by the defendant were being offered for sale and that there was an indication that the defendant's principal and his wife were intending to travel and live overseas. [6] On 18 April the plaintiffs filed proceedings in the High Court at Auckland seeking, by way of summary judgment, specific performance. A Mareva injunction was sought to freeze the assets of the defendant and, in particular, the three rural properties on the market for sale. They were served that day and the matters were listed for the following Thursday, 24 April 2008. [7] On 21 April the defendant transferred all three properties into the name of an associated company, Daughters and Parents Limited, and the Westpac mortgatges registered against the three properties were also transferred. On the same day the defendant registered second mortgages against all three properties relating to purported shareholder advances made to the defendant. [8] On 23 April a notice of opposition and affidavit of Mr Singh were served on the plaintiff's solicitor. What was advanced, and advanced for the very first time, was an allegation that there was an agreement between the parties that the settlement date was extended till the end of 2008. For somewhat obvious reasons, given that it had never been suggested in earlier correspondence over settlement, Harrison J described this at a later date as a defence with little likelihood of success. On 24 April Woodhouse J in the Duty Judge List made Mareva and ancillary orders by consent against both the defendant and relevant third parties, Daughters and Parents Limited, Mr Singh and his wife. [9] On 15 May an affidavit was filed. The plaintiff took issue with it as being incomplete. Correspondence followed. The defendant's solicitor advised that there would be no further amended or supplementary document. The Court was requested to deal with it. The matter was adjourned because of counsel for the defendant being overseas. On 19 June, in the Duty Judge List, the defendant maintained its position and the plaintiff made clear its intention to make a formal application to enforce the interlocutory order. On 7 July the plaintiff wrote requiring strict compliance with the order by 5.00 p.m. on 10 July or a formal application would be made for enforcement. That was done on the 15 th . A further affidavit was filed on 16 July byMr Singh and on the 17 th Harrison J reluctantly adjourned the hearing to give the plaintiffs' counsel further time. [10] On 22 July a third affidavit of Mr Singh was served. On 1 August the plaintiffs filed a memorandum identifying defaults in compliance with interlocutory orders. On 5 August there was a hearing before Harrison J. He recorded in that that the defendant's solicitor's advice was that the defendant was ready, willing and able to settle, the only impediment being the plaintiff's insistence on penal interest. The Judge made an unless order to enforce compliance with the substituted orders he made. [11] On 13 August a further affidavit was filed and then on the 19 th the plaintiffs' solicitors cancelled the contract and requested the caveats be withdrawn. They also advised that matters would be brought back to deal with the summary judgment with the Mareva orders and questions of cost. They did so because it became apparent that the defendant company was in fact worthless. In those circumstances, it is accepted by Mr Jones that the summary judgment application should properly be dismissed by this Court and that the Mareva injunction should be discharged. He also seeks an order that the undertaking given by the plaintiffs should be discharged. I am satisfied that all of those orders should be made for the reasons I will turn to.Application for costs[12] The substantive argument today is an application for costs by the plaintiffs on an indemnity basis in relation to the summary judgment proceedings and the Mareva injunction proceedings, notwithstanding that the plaintiffs have requested the Court to effectively dismiss those applications and injunction. [13] It is opposed. Mr Singh submits that these costs should simply lie where they fall, be reserved, be set at a 2B basis and be dealt with in the substantive proceedings. Mr Jones accepts that the substantive proceedings remain afoot and should proceed, although that will involve the consideration of how worthwhile it would be to proceed against the defendant and whether or not other parties should be joined.[14] Mr Singh takes the position that the Mareva injunction should not have been applied for because the transfer to Daughters and Parents Limited was something that had been contemplated for sometime and he points to the fact that the company had been formed earlier and the Westpac Bank had agreed to what he described as a restructuring before these proceedings were issued. [15] In the first affidavit, all that was made available was essentially the formation of the company and the letter from Westpac Bank. Ultimately, handwritten agreements relating to the sale of the three properties from the defendant, Daughters and Parents Limited, were produced. In my view, it is clearly not coincidence that they were dated 1 December, the day after the defendant failed to settle and was then being confronted by a settlement notice. I also concur with Harrison J's assessment that the proposed defence to the summary judgment proceeding for specific performance had little chance of success. If indeed there had been an agreement between the parties that the settlement date was to be extended to the end of 2008, it is inconceivable that the defendant would not have notified its solicitor who, in response to the settlement notice, would have raised it with the plaintiffs' solicitor. The fact that it did not appear until the affidavit in opposition to the summary judgment proceeding, is telling. [16] Also what is telling is that the plaintiffs were put to considerable effort and expense to obtain the necessary information in relation to the transfer of the three related properties from the defendant to Daughters and Parents Limited. From that I am satisfied that it was proper for the plaintiffs to bring the summary judgment proceedings for specific performance and to apply to this Court for a Mareva injunction. Having reviewed all the matters on this file, I concur in Mr Jones' submission that the defendant has, in reality, led the plaintiffs on a merry dance throughout. [17] Under the relevant rules in the High Court Rules, that is, rr 46 and 47, costs are at the discretion of the Court. In the normal course of proceedings, as the Court of Appeal pointed out in Holdfast New Zealand Limited v Sallies (2005) 17 PRNZ 897, the normal approach to such a matter is to categorise the proceedings under rr 47 and 48B; to consider the time reasonably required for the steps involved; andincrease the amount of time only if it exceeds that allocated in band C. And, finally, whether considering the costs award it would be entitled to at this point a party can argue for additional costs under r 48C(3)(b), (c) or (d) and say they are additional to and distinct from an uplift based on time reasonably required. [18] It is clear from what I have said, that I agree with the submission of the plaintiff that the defendant's conduct has exacerbated this situation, particularly in relation to the Mareva proceedings. The defendant has manoeuvred itself to create difficulties for the plaintiff and has failed to comply with Court orders resulting in substituted unless orders. In those circumstances, this is a case that cries out for indemnity costs and I am satisfied that they should be awarded.Result[19] Accordingly, there will be costs to the plaintiff against the second defendant. The invoices from both the plaintiffs' solicitor and counsel are before the Court. There are disbursements of High Court filing fees totalling $2,300. It is apparent that the first invoice relates to matters aside from and apart from the summary judgment and the Mareva injunction proceedings. However, the other invoices clearly relate to the summary judgment and Mareva proceedings. They are, in my view, reasonable solicitor/client costs so there will be an award of costs, plus disbursements of $2,300, to the plaintiffs in the sum of $66,298.71.[20] It was also necessary for the plaintiff to have an accountant's report prepared. The cost of that was $3,813.75. The invoice for those professional services from Hays Knight are attached. Again, it appears to me to be reasonable so there will be an additional disbursements allowance to cover the accounting fees of $3,813.75. ..........................................John Hansen J