NOYCE v PARNELL PROPERTY INVESTMENTS LIMITED [2015] NZHC 2926

NOYCE v PARNELL PROPERTY INVESTMENTS LIMITED [2015] NZHC 2926 [23 November 2015]IN THE HIGH COURT OF NEW ZEALANDAUCKLAND REGISTRYCIV-2013-404-4965[2015] NZHC 2926BETWEEN DIGBY JOHN NOYCE ASLIQUIDATOR OF PARNELLPROPERTY INVESTMENTS LIMITED(IN LIQUIDATION) AND ASLIQUIDATOR OF ST STEPHENSINVESTMENTS LIMITED (INLIQUIDATION)PlaintiffAND PARNELL PROPERTY INVESTMENTSLIMITEDFirst DefendantST STEPHENS INVESTMENTSLIMITEDSecond DefendantContinued Hearing: (on the papers)Appearances: H L Thompson and J R Rutherford for the PlaintiffZ G Kennedy and N A Chamberlain for the Seventh DefendantP G Alexander in PersonJudgment: 23 November 2015JUDGMENT OF WOODHOUSE J(Costs)This judgment was delivered by me on 23 November 2015 at 3:00 pm pursuant to r 11.5 of the High Court Rules 1985.Registrar/Deputy RegistrarSolicitors / Counsel / Parties: Mr H L Thompson, McMahon Butterworth Thompson, Solicitors, Auckland Mr Z G Kennedy and Ms N A Chamberlain, Minter Ellison, Solicitors, Auckland Mr P G AlexanderContinued AND PARNELL STORAGE & PARKING LIMITEDThird DefendantSECOND GENERATION LIMITEDFourth DefendantFIFER RESIDENTIAL LIMITEDFifth DefendantCOMPARK PROPERTIES LIMITEDSixth DefendantBANK OF NEW ZEALAND LIMITEDSeventh DefendantPAUL GRAEME ALEXANDEREighth Defendant[1] In my judgment of 27 August 2015 I held that the seventh defendant, BNZ, isentitled to costs against the fifth defendant (Fifer), the sixth defendant (Compark)and the eighth defendant (Mr Alexander).1 BNZ now seeks indemnity costs or, inthe alternative, increased costs. It also seeks an order that funds held by the plaintiffliquidator on behalf of Fifer, Compark and Mr Alexander be paid to BNZ in paymentor reduction of the costs as fixed. Mr Alexander, for himself and for Fifer andCompark, opposes the application for indemnity or increased costs. He accepts,given the judgment, that BNZ is entitled to some costs which he submits should befixed on a 2B basis.[2] Rule 14.6(4) of the High Court Rules makes provision for an award of indemnity costs. BNZ relies in particular on paragraphs (a) and (f) of Rule 14.6(4). These provide that the Court may order a party to pay indemnity costs if:(a) the party has acted vexatiously, frivolously, improperly, or unnecessarily in commencing, continuing, or defending a proceedingor a step in a proceeding; or(f) some other reason exists which justifies the Court making an order for indemnity costs despite the principle that the determination ofcosts should be predictable and expeditious.[3] The leading decision on paragraph (a) is the decision of the Court of Appeal in Bradbury v Westpac Banking Corporation.2 BNZ, in its memorandum on costs, summarised the principles from this decision as follows:Bradbury v Westpac Banking Corporation held that the word"unnecessarily" in r 14.6(4)(a) takes its meaning and flavour from the adverbs preceding it. Accordingly, for indemnity costs to be awarded it must be demonstrated that the defendant's misconduct was "flagrantly" bad. TheCourt of Appeal endorsed Sheppard J's summary in Colgate-Palmolive Co vCussons Pty Ltd of the following conduct that was likely to justify an awardof indemnity costs:(a) the making of allegations of fraud knowing them to be false and the making of irrelevant allegations of fraud;(b) particular misconduct that causes loss of time to the Court and to other parties;1 Noyce v Parnell Property Investments Ltd [2015] NZHC 2037 (the substantive judgment), at [82]-[83].2 Bradbury v Westpac Banking Corporation [2009] NZCA 234, [2009] 3 NZLR 400.(c) commencing or continuing proceedings for some ulterior motive;(d) doing so in wilful disregard of known facts or clearly-established law; and(e) making allegations which ought never to have been made or unduly prolonging a case by groundless contentions, summarised by FrenchJ's "hopeless case" test.[4] That is an accurate summary of the relevant principles. I am satisfied thatthey apply in this case to justify an award of indemnity costs in favour of BNZ. Inlarge measure Mr Alexander's conduct, which also was conduct of Fifer andCompark, is captured in the expression given emphasis by BNZ – the conduct was"flagrantly bad".3 BNZ submitted that Mr Alexander's conduct of and in respect ofthe proceeding was flagrantly bad in three main respects:(a) He knowingly presented forged documents to the Court, being theletter purportedly from BNZ consenting to the lease of the property atSt Stephens Avenue to Fifer.(b) His case was always hopeless and based on groundless contentions in two main respects: (1) that there was serious impropriety by BNZ but this was not supported by any contemporaneous documentary recordor even by Mr Alexander's previous evidence in earlier but relatedproceedings; and (2) that Fifer and Compark were entitled to priorityunder Schedule 7 of the Companies Act 1993.(c) Mr Alexander's conduct throughout the proceeding was frivolous,vexatious and wasteful of the resources of the Court and the parties.[5] I agree with those submissions. The reasons I agree are set out in detail in the substantive judgment. I have taken account of Mr Alexander's submissions inresponse. I am unpersuaded by them.3 An expression used by the Supreme Court in Prebble v Awatere Huata (No 2) [2005] NZSC 18, [2005] 2 NZLR 467 at [6] and adopted by the Supreme Court in Bradbury, above n 2, at [28].[6] BNZ also submitted, relying on paragraph (f) of r 14.6(4), that indemnitycosts are justified by Mr Alexander's rejection of two Calderbank offers from BNZ. The first, made approximately ten months before the hearing, would have providedMr Alexander, Compark and Fifer with more in the liquidation than the liquidator'sassessment, with that increase coming from BNZ's share which is over half of the available sum for creditors. This offer was made on the basis that Mr Alexander and companies, other entities and people associated with him, withdrew all claims against BNZ. The offer was not accepted. The second offer was made approximately one month before the hearing. BNZ offered to withdraw its claim in the liquidation if Mr Fifer withdrew all claims against BNZ. The second offer, had it been accepted, would have resulted in Mr Alexander, Fifer and Compark receiving approximately 85% of the distribution amount, compared with just over 36% inaccordance with the liquidator's calculation of entitlements for all accepted proofs of debt. The BNZ's entitlement is 57.15%. The amount available for creditors is$324,136. The benefit to Mr Alexander, Fifer and Compark, in relation to the total available, would have been significant had the offer been accepted when compared with the outcome of the proceeding.[7] BNZ faced very serious allegations advanced by Mr Alexander. Contrary to submissions now made by Mr Alexander on the question of costs, BNZ's response to Mr Alexander's allegations was understandable, entirely justified, and did notinvolve unnecessary or inappropriate steps in the proceeding.[8] BNZ's total costs and disbursements from 22 November 2013, when theproceeding was filed, are $265,874.23 excluding GST. It seeks costs in that sum. Ithas produced its invoices with a degree of itemisation. I am satisfied that these costsare reasonable. I have come to that conclusion having taken account of MrAlexander's submissions as to quantum, including his understandable comparison ofthe actual costs as against scale. I am also satisfied that in this case, having regard tothe seriousness of the allegations against BNZ in particular, BNZ was entitled toengage second counsel to assist Mr Kennedy in Court.[9] I am also satisfied that BNZ is entitled to an order directing the liquidator to pay the funds held by the liquidator on behalf of Fifer, Compark and Mr Alexanderto BNZ in reduction of BNZ's costs judgment. The liquidator has filed amemorandum recording that no funds will be paid out pending disposal of the appeal by Mr Alexander, Compark and Fifer against the substantive judgment. My direction for payment to BNZ is subject to the liquidator's entitlement to hold allfunds pending disposal of the appeal, but BNZ has leave to apply further in that regard if it wishes to be heard on the point.[10] There are orders accordingly._______________________________________Woodhouse J