HEAVYWEIGHT HIRE LTD v FOREST MANAGEMENT LTD [2018] NZHC 2332

HEAVYWEIGHT HIRE LTD v FOREST MANAGEMENT LTD [2018] NZHC 2332 [5 September 2018]IN THE HIGH COURT OF NEW ZEALANDCHRISTCHURCH REGISTRYI TE KŌTI MATUA O AOTEAROAŌTAUTAHI ROHECIV-2016-409-000543[2018] NZHC 2332BETWEEN HEAVYWEIGHT HIRE LIMITEDPlaintiffAND FOREST MANAGEMENT LIMITEDDefendantHearing: 23 – 24 July 2018Appearances: L A Andersen for PlaintiffHDP van Schreven for DefendantJudgment: 5 September 2018INTERIM JUDGMENT OF GENDALL JIntroduction[1] The plaintiff, Heavyweight Hire Limited (Heavyweight), and the defendant,Forest Management Limited (FML), entered into a joint venture in 2013 (the JV). Theterms of this were set out in an agreement signed by the parties (the JV Agreement).The JV Agreement related to the harvesting, logging, marketing, and sale oflogs/timber from forests and related forestry works.1[2] The JV Agreement, amongst other things, provided for the parties to undertakestumpage deals within the forestry industry and thereafter to calculate profit and losson each deal apportioning this between them on agreed percentages.1 Joint Venture Agreement, cl 1.[3] Also, under the JV Agreement, the parties agreed to share in the developmentcost of certain earthworks and bookends2 at Bluff Port (the Bluff Structures). A levywas to be applied to logs using the Bluff Structures in order to repay the parties thisdevelopment cost.[4] In 2015, and outside the JV agreement, Heavyweight purchased a hauler fromFML under a separate sale and time payment financing agreement. However, soonafter the agreement was signed, Heavyweight was unable to make the requiredpayments so FML repossessed and resold the hauler.[5] Heavyweight brings three causes of action against FML. It alleges that:(a) FML breached its duties under the JV Agreement by failing to properlyaccount to Heavyweight for its proper share of the profits;(b) FML converted Heavyweight's interest in the Bluff Structuresfollowing the cessation of the JV without any payment to Heavyweight;and(c) FML failed to properly account to Heavyweight for the surplus it madeon the resale of the hauler.[6] For reasons I will discuss below, I have been unable to determine the secondcause of action. Inadequate information was before the Court to properly address thisissue. More evidence, therefore, needs to be filed by the parties. My explanation asto these matters and directions regarding this will follow. Therefore, this is only aninterim judgment. I am, however, able to decide the other two causes of action beforethe Court, and my findings on these are outlined below.2 "Bookends" are large prefabricated metal stays which are designed to hold in place stacks of logson wharves and other areas.First Cause of Action - Underpayment[7] The parties entered into the JV Agreement in June 2013. It provided that theywould share equal responsibility for the JV and contribute equally to it.3 The JV wasto run until 31 December 2014 unless the parties decided to renew it.4[8] Under the JV Agreement, FML's duties related to the marketing and sale oflogs, and the preparation and submission of bids and proposals. Heavyweight's dutiesincluded setting up the logging gear, managing the port contract work at Bluff Harbourand carting the logs.5[9] The JV Agreement provided that any profit or loss would be apportionedbetween the parties on the following basis:(a) On jobs where Heavyweight is the agreed logger, 75 per cent toHeavyweight and 25 per cent to FML; and(b) On jobs where Heavyweight is not the logger, 50 per cent to each party.Heavyweight's claim[10] Heavyweight claims that FML has breached its duties under the JV Agreementby failing to properly account to Heavyweight for its share of the profits from log salesdockets dated between 2 and 12 March 2015 (the disputed dockets). It claims that itis owed $24,737.45 (GST inclusive). The disputed dockets relate to monies paid toFML by Rayonier New Zealand Ltd (Rayonier) in respect of logs transported and soldby the JV to Rayonier.[11] Heavyweight further claims that this shortfall was only able to be identifiedbecause of documents it obtained on a third party discovery exercise it undertook withRayonier. It therefore also seeks $11,909 (GST exclusive) for the costs payable toRayonier for that discovery.3 Joint Venture Agreement, cls 2 and 7.4 Joint Venture Agreement, cls 5 and 6.5 Joint Venture Agreement, cl 8.FML's defence[12] FML denies, first, that it failed to account to Heavyweight for the relevantprofits and, secondly, that it failed to provide information to Heavyweight tosubstantiate its workings.[13] FML maintains that the process of accounting for costs and expenses operatedon a wash-up basis. The parties were initially allocated income on an estimated saleprocess basis. This was then either topped up or, as in this case, deducted based onthe actual price paid for the logs by the ultimate purchasers. The log price fluctuatedin accordance with market conditions so the price expected when the logs were loadedonto the ships ex-New Zealand ports was not always the same as that when the logswere ultimately sold at their destination.[14] FML maintains that the sum of $58,320.81 was deducted by Rayonier in itsfinal calculation of what was actually paid for the logs covered by the disputeddockets. The initial stipulated return evident in the first sheets prepared by Rayonier(which were discovered by Heavyweight in the third-party discovery exercise) weresubsequently altered in the wash-up exercise. Therefore, FML submits that the actualprofits have been properly accounted to Heavyweight.[15] FML argues, too, that it was not necessary for Heavyweight to undertake third-party discovery here. FML maintains that all the information supplied by Rayonierwas contained in the discovery documents it had provided to Heavyweight. Therefore,FML submits that it should not be liable for that cost.Analysis[16] I accept FML's explanation as to why the amount paid to Heavyweight differedfrom the original sheets prepared by Rayonier. The JV operated on a basis where aninitial price for the logs was quoted and paid to the parties, and then the final actualprice paid later or an adjustment for overpayment made, when the logs were sold. Iaccept that, due to the market forces in operation, the actual price for the logs at issuehere paid to FML, on behalf of the JV, was lower than that originally quoted byRayonier. This necessitated in the particular circumstances prevailing here, areduction in the price paid from FML to Heavyweight for its half share. Thisexplanation of events accords, too, with other records provided (where the reversesituation applied in different batch situations of other log sales where the detailsoutlined showed that an initial payment was later topped up due to a better sale pricethan that first quoted). I find that a reasonable argument exists here that FML properlyaccounted to Heavyweight for its share of the profits in relation to the disputeddockets.[17] Heavyweight has not proved, on the balance of probabilities, that it has beenunderpaid by FML with respect to the disputed dockets. This aspect of its claimtherefore fails.[18] However, in all the circumstances here, I find that it was acceptable forHeavyweight to engage in third party discovery against Rayonier. In cross-examination, David Samuel Janett (Mr Janett), a director and shareholder of FML,largely accepted that the documentation FML provided to Heavyweight in discoverywas insufficient for Heavyweight to be able to determine how FML made the wash upcalculations. FML was not able to show that it had provided the report it held for therelevant cargo ship/s which transported the logs in question and listed the individuallynumbered dockets. Without this, it would be extremely difficult for Heavyweight toascertain what had been paid for those logs. FML also neglected to provide toHeavyweight either the documentation or the calculations it had carried out to fullyascertain what the appropriate wash up would be.[19] In the absence of this information down to the docket level being disclosed byFML, I consider it was reasonable for Heavyweight to seek third party discovery fromRayonier. This was necessary to help it determine what had happened in relation tothe logs in question. While ultimately the documentation discovered from Rayoniermay not have provided those dockets, it was a reasonable step to take. I find that, inthe general interests of justice here, FML should bear the cost of Heavyweight'sdecision to undertake discovery against Rayonier, given its failure to disclose whatwas material documentation. An order to this effect is to follow.Second Cause of Action – Bluff Structures[20] A key aspect of the JV Agreement was the parties' interest in theBluff Structures. The Bluff Structures involved the development of land leased at theBluff Port (the site) and the construction of bookends on the site. This allowed for thestacking of large amounts of logs on the site. The cost of this was noted in the JVAgreement as $124,000, which initially each party was to equally contribute to. Thiswas to be repaid (it was assumed over a two-year period) by means of a levy on thewood stored on the site, shared equally between the parties.[21] The JV Agreement stated that the JV would end on 31 December 2014 subjectto a right to renew it. The JV, it seems, ran on by agreement beyond that date for afew months. Finally, it appears the JV was terminated sometime in about mid-2015.Heavyweight's claim[22] Heavyweight claims that FML has continued to use the Bluff Structureswithout any payment to Heavyweight for the period since the date of termination ofthe JV. Heavyweight denies agreeing to sell its interest in these assets to FML andargues that there is no evidence to indicate specifically what a payment of $15,600 inJune 2015 (said by FML to be a JV termination payment) was for. Heavyweight notesthat an email at the time refers to "refund at Bluff Port for development and bookends",whereas Mr Janett claimed in evidence that the "sale" was for the bookends only.Furthermore, Heavyweight argues that no payments had been made to it either then orlater for the use of the bookends. FML, it is said, only paid Heavyweight its half shareof the levy for the month in question.[23] Heavyweight submits that lack of confirmation in the 12 February 2015 emailand the delay in giving the claimed credit until June 2015 is evidence that there wasno agreement to sell the Bluff Structures.[24] Heavyweight has provided expert evidence from Mr William Apps, a charteredaccountant and director of Staples Rodway Corporate Finance Limited. Mr Apps hasassessed the value of Heavyweight's interest in the Bluff Structures at 31 December2014 as $179,370. However, as this is more than the $134,422 pleaded inHeavyweight's second cause of action, Heavyweight acknowledges its claim islimited to the $134,422 claimed.[25] Heavyweight contends that there is nothing in the JV Agreement that limits thelevy to a simple repayment of the capital costs. It argues that the phrase "at least untilthey are repaid by way of the levy" acknowledges that the levy does not automaticallycease on repayment of the costs. Heavyweight submits that its expectation of anongoing income stream for the JV from the Bluff Structures was a reasonable one and,therefore, the value of this asset as part of the capital of the JV was always significant.FML's defence[26] FML denies any conversion of Heavyweight's interest in the Bluff Structuresand maintains the agreed termination of the JV brought an end to the operation of thelevy. Further, FML claims that the parties agreed that in June 2015 Heavyweightwould transfer its share in the Bluff Structures to FML for a payment of $15,600.FML says it, therefore, owned the Bluff Structures fully from that date. As thispayment reimbursed Heavyweight, FML maintains that it is not open to Heavyweightto claim the levy beyond that point or, indeed, to maintain any continuing claim to thecapital asset itself.[27] As I have noted, Heavyweight provided certain evidence from the accountant,Mr Apps, said to assess the value of its interest in the Bluff Structures at 31 December2014. No quantum evidence was provided by FML, however, to counter Mr Apps'sassessment. However, FML submits that, in any event, the method Mr Apps uses, acalculation of a weighted average cost of capital model, is inappropriate becauseHeavyweight's only interest in the Bluff Structures was to be a reimbursementpayment for the agreed cost of developing them, and that has occurred.[28] According to FML, it has also not charged any levy on the Bluff Structuressince February 2015. FML argues that the levy was only intended to recoup the costof creating the Bluff Structures and it was not intended as a profit-making venture.[29] FML submits that Heavyweight's contention that cl 15 of the JV Agreementmeant a levy would continue to apply beyond the date when the assumed developmentcost had been wholly paid, is to import an interpretation contrary to its terms andconditions. Clause 15 makes reference to a two-year period, consistent with the termof the JV Agreement itself. FML argues that if cl 15 was intended to deal with mattersbeyond the period of time that the assumed development cost was returned to theparties and beyond the period of the JV, this should have been clearly and expresslystated.Analysis[30] The following clauses of the JV Agreement are relevant to this issue:Port Development Costs – Bluff15. Notwithstanding any other term in this Agreement, the parties areagreed on fixing an assumed development cost for work undertakenby HWH at Bluff being $89,000 for earthworks and $35,000 forbookends. This cost will be reduced at $1/jasm3 ("the levy") based ona forecast to the port of a 60,000 tonne volume per annum. It has beenassumed that this cost will be wholly paid over a two year period orsooner, if volumes in relation to the port increase. It is agreed the levywill apply to all wood purchased by FML.Capital Cost Contribution16. In addition to the port development cost referred to in clause 15hereof, FML and HWH acknowledge that the successful securing of aforest block might require payment by either party of bond depositsor other capital costs similar to the port development cost incurred byHWH at Bluff. FML and HWH agree that these costs are to be keptseparate and will not be taken into account in the calculation of anyreconciliation or block by block wash-up. Without limitation thesecapital costs shall include and take into account bonds paid by FMLto Rayonier New Zealand of $200,000 and to Wenita of $100,000 andthe Bluff Port development costs (at least until they are paid by wayof the levy) at $90,000 or the port and $35,000 for the bookends. Theintention between the parties is that they will each share equally insuch capital costs and will also share equally in any share of capitalresulting from (for example) repayment of bonds.Books of account26. Separate books of account shall be kept in respect of the joint ventureto record the receipts and expenses of the joint venture and any assetsallocated to the joint venture by the parties in accordance with thisAgreement, or any assets otherwise acquired by the joint venture, andthe liabilities of the joint venture. To the extent costs are incurred onan annual basis, it is agreed these costs will be apportioned equallybetween the parties.27. Each party shall be entitled to obtain half yearly financial statementsin respect of the joint venture within 30 days after the end of each halfyear, and financial statements for each financial year within 60 daysof the end of such financial year.28. Financial statements are to be prepared on a job by job basis and shallinclude a balance sheet and profit and loss account, and shall beprepared in accordance with generally accepted accounting principlesconsistently applied.[31] The evidence before me clearly indicated the parties' agreement that, becauseFML controlled the finances, it carried the responsibility for preparing and keepingthe accounts. However, those requirements laid out in the JV Agreement concerningthe keeping books of accounts have not been met. Clause 26 requires separate booksof account to be kept recording the receipts, expenses, liabilities and assets of the JV.Financial statements were to be kept on a job by job basis.[32] Mr Janett, for FML, acknowledged in evidence that separate books of accountswere not kept. FML submits that the manner in which the accounts were instead keptwas agreed by discussion. It argues that there is no evidence that position was notaccepted by Heavyweight during the course of the JV. However, no evidence on thiswas before the Court other than FML's assertion that such an alteration to the JVAgreement was made. Heavyweight denies that such an agreement occurred.Significantly, the JV Agreement also provides that any variation to it is not binding onthe parties unless it is in writing and signed. No such written and signed variationappears to exist. Therefore, the obligations on the parties in cls 26 – 28 of the JVAgreement are still binding.[33] The financial documents placed in evidence before this Court are not balancesheets. They are not sufficient to meet the obligations on the parties (and particularlythe obligation on FML which had the task of having financial statements prepared) tohave a balance sheet and profit and loss accounts completed and available within60 days of the end of each financial year.6[34] The bookends and development earthworks making up the Bluff Structures areacknowledged at para 16 of the JV Agreement to be a capital cost of the JV, in which6 As paras 27 and 28 of the JV Agreement provided.each party would "share equally". At the termination of the JV, in the normal courseof events, the assets and all liabilities of the JV would have been split equally betweenthe parties. An accurate balance sheet would have enabled that to happen.Unfortunately, the failure to produce financial statements and a balance sheet for theJV means it is impossible for the Court to currently assess whether a proper wash-upof the JV took place and, specifically to this cause of action, the extent to whichHeavyweight was paid for its half share in the capital assets, including the BluffStructures.[35] Because of the lack of evidence, I cannot be sure that Heavyweight was notappropriately compensated for its share of the Bluff Structures. Equally, I cannot besure that it was. Therefore, to properly be in a position to consider this issue, I directthe parties to carry out the task of preparing proper financial accounts, including abalance sheet for the JV, as they were required to do. This will then need to be suppliedto the Court for consideration, along with any further submissions the parties may wishto provide on the second cause of action here. Directions to this effect are to follow,but in the meantime, a decision on this second cause of action must of necessitycontinue to be reserved.Third Cause of Action – Hauler Purchase Debt[36] This claim relates to the purchase of a hauler from FML by Heavyweight. Thepurchase was governed by a written agreement dated 24 February 2015 (theAgreement). The purchase price was $550,000 (GST exclusive). A deposit of $1,000was required and was paid by Heavyweight on 1 March 2015. The Agreementrequired a further sum of $10,000 be paid on 20 April 2015 with the balance paid overa period of approximately one year. However, Heavyweight failed to pay this further$10,000 payment. FML repossessed the hauler in terms of the Agreement on 19 May2015. FML then resold it for $570,000 (GST exclusive), some $20,000 more than theprice Heavyweight was to pay. Final settlement of this on-sale of the hauler, andclearance of the remaining debt owing between FML and Heavyweight, occurred on2 June 2015.[37] The parties disagree on how penalty interest of 15 per cent imposed by FMLon Heavyweight's debt is to be applied under the Agreement, and Heavyweightaccordingly claims a refund is due to it for what it says is an interest over-payment ithas made here of $18,890.73.[38] On this aspect, the Agreement relevantly provides:Penalty Interest and Call-Up of Purchase Price7. The non-payment by the Purchaser of any payment instalment dueunder this Agreement on the due date for payment (time in respect tosuch payments being strictly of the essence) shall entitle the Vendorto charge penalty interest on the amount unpaid at the rate of 15% perannum from the due date for such payment until payment in full ismade.8. In the event of default by the Purchaser in the payment of anyinstalment due hereunder, then and in such case, and notwithstandingthat the date or dates of payment may not by then have arrived, thewhole of the balance of the purchase price payable by the Purchasershall immediately become due and payable and the Vendor may, inaddition to any other rights it might have, immediately exercise all itsrights and remedies under its security interest including, withoutlimitation, the right to seize and take possession of the Hauler underthe security. This Agreement for Sale and Purchase is deemed toincorporate all the general terms of contract relating to a securityinterest, contained in the Memorandum registered pursuant to Section155A of the Land Transfer Act 1952 under No: 2011/4301.[39] Heavyweight also gave FML a security over the hauler. The terms of thePurchase Security Agreement recording this were adopted into the Agreement by cl 8.In addition, the Purchase Security Agreement relevantly provided:21. Accelerating Payment of Secured Moneys on DefaultIf default occurs, the secured moneys will become due and payable bythe party granting the security in accordance with the provisions inany agreement relating to their payment or, to the extent any notice isrequired by law to be given before the secured moneys becomepayable, immediately on expiry of the relevant notice period, withoutthe need for any further notice or demand together with interestcalculated at the prescribed interest rate for a period of one month inaddition to interest to the date of repayment of the secured moneys.Heavyweight's claim[40] Heavyweight submits that cl 7 of the Agreement means that FML's ability toclaim penalty interest is limited to interest on overdue instalments. Heavyweightfurther argues that it is entitled to the surplus $21,000 obtained by FML on the resaleof the hauler. After deductions are made for FML's costs on sale and the penaltyinterest on the sums of $10,000 owing on both 20 April 2015 and 20 May 2015,Heavyweight claims it is entitled to a refund of $18,890.73.[41] Heavyweight claims, too, that initially FML failed to disclose to Heavyweightthe surplus it made on the resale of the hauler, in breach of its obligation to do so.FML's defence and counterclaim[42] In response, FML contends that cl 8 of the Agreement is an automaticacceleration clause. This means that, upon Heavyweight's non-payment, the entirepurchase price outstanding became due. Therefore, the penalty interest applies to thebalance of the principal sum, $549,000.[43] FML accepts that, under s 117 Personal Property Security Act 1999 (PPSA), ithas an obligation to distribute to Heavyweight any surplus received by it on the resaleof the hauler. However, FML maintains that, after deducting from the proceeds of salethe outstanding principal sum, penalty interest on that principal sum from 1 March2015 to 2 June 2015 and its costs on sale, Heavyweight still owes FML $2,049.47. Itseeks that sum from Heavyweight by way of its counterclaim here.Analysis[44] It is accepted that Heavyweight failed to make its $10,000 payment under theAgreement due on 20 April 2015. Thus, on this date it defaulted on its obligationsunder the Agreement. Clause 8 of the Agreement provides that, in the event of default,"the whole of the balance of the purchase price payable by the Purchaser shallimmediately become due and payable". This occurs "notwithstanding that the date ordates of payment may not by then have arrived". Clause 8 then allowed FML torepossess the hauler, which it did.[45] I find that cl 8 means that the due date for payment of the entire remaining debtis accelerated to be due on the date that default occurred. That is the plain reading ofthe contract. Clause 8 does not require any notice to be given by FML that it isaccelerating the debt. This silence indicates the acceleration happens automatically.Clause 21 of the Purchase Security Agreement also supports this interpretation. Thisclause provides:21. ACCELERATING PAYMENT OF SECURED MONEYS ONDEFAULTIf default occurs, the secured moneys will become due and payable bythe party granting the security in accordance with the provisions inany agreement relating to their payment or, to the extent any notice isrequired by law to be given before the secured moneys becomepayable, immediately on expiry of the relevant notice period, withoutthe need for any further notice or demand together with interestcalculated at the prescribed interest rate for a period of one month inaddition to interest to the date of reparation of the secured moneys.[46] Clause 7 of the Agreement entitles FML to "charge penalty interest on theamount unpaid at the rate of 15% per annum from the due date for such payment untilpayment in full is made". In light of the acceleration of payment brought about bycl 8, the due date for payment of the entire sum outstanding, $549,000, is the date ofdefault, 20 April 2015. Penalty interest is therefore able to be charged on that entiresum from 20 April 2015 until 2 June 2015 when the amount was repaid, a period of43 days. This totals $9,701.51.[47] FML claimed that the penalty interest should be calculated from 1 March 2015,when the initial $1000 deposit was paid. It has not justified why it chose to calculateinterest from this date when actual default did not occur until 20 April 2015.[48] The addition of penalty interest of $9,701.51 and the costs of reselling thehauler ($1,879,13) to the principal sum means that, after subtracting the proceeds ofthe resale, FML has received a surplus of $9,419.36.[49] In cl 6 of the Agreement, Heavyweight agreed to waive its rights as a debtorunder various provisions of the Personal Property Securities Act 1999 (the PPSA),including s 116. Section 116 requires a secured party to provide the debtor with astatement of account in writing showing details of the sale. Because of this waiver,there was no obligation on FML to provide a written account to Heavyweight of thesurplus it achieved on its re-sale of the hauler. Nonetheless, this does not negate thefact that, under s 117 of the PPSA, FML has to pay to Heavyweight any surplus itmade from the resale, after repaying the debt and costs.7 FML has failed to payHeavyweight the surplus of $9,419.36, in breach of its obligation under s 117 of thePPSA. An order to remedy this is to follow.Conclusion[50] As to the Heavyweight's first underpayment cause of action noted at [7] to [19]above, I have found that, on the balance of probabilities, it is likely here that FML hasproperly accounted to Heavyweight for its share of the profits for this 2 – 12 March2015 period in question, and, in any event, Heavyweight has not proved to thisstandard that it was underpaid by FML with respect to the disputed dockets. However,as I note at [19] above, I find that, due to FML's failure to provide full disclosure ofrelevant material, FML should bear the cost to Heavyweight of engaging in third partydiscovery against Rayonier.[51] I now order that FML pay to Heavyweight $11,909 (GST exclusive) asreimbursement of this third party discovery cost.[52] As to Heavyweight's second Bluff Structures cause of action, noted at [20] to[35] above, I find that due to the failure of the parties to keep proper financial accountsincluding a balance sheet of the JV's assets and liabilities, I am currently unable todetermine this cause of action.[53] I direct, therefore, that:(a) Given that FML had the responsibility under the JV to have properfinancial accounts prepared, with all reasonable speed FML is toarrange for such financial accounts, including a balance sheet, to beprepared for the JV and, in particular, to show its true financial positionat the date of termination of the JV.7 Heavyweight did not waive its rights under s 117.(b) Those financial accounts and the balance sheet for the JV (the accounts)once prepared are to be approved by the parties and made available tothe Court forthwith thereafter (the date they are received by the Courtbeing called hereafter the disclosure date).(c) Within 20 working days of the disclosure date, counsel forHeavyweight is to file and serve any further submissions he may wishrelating to the accounts and Heavyweight's second cause of action inthis proceeding.(d) Within a further 15 working days of the date specified in (c) above,counsel for FML is to file and serve any further and reply submissionshe may wish relating to the accounts and Heavyweight's second causeof action in this proceeding.(e) Within a further 10 working days of the date specified in (d) above,counsel for Heavyweight is to file and serve any submissions strictly inreply to those submissions from counsel for FML specified in (d)above.(f) All those submissions, once filed, are to be made available to me and,in the absence of either party indicating they wish to be heard furtheron this issue relating to Heavyweight's second cause of action in thisproceeding, I will give my decision on that matter on the basis of allmaterial which is before the Court including evidence given at theoriginal hearing of this matter and the memoranda filed.[54] As to Heavyweight's third hauler purchase debt cause of action noted at [36]to [49] above, I find that the Agreement provided that penalty interest applied onlyfrom the date of Heavyweight's default, being 20 April 2015, and from that date theinterest accrued on the entire accelerated debt. That said, after penalty interesttotalling some $9,701.51 and the costs of reselling the hauler of $1,879.13 are applied,FML received a net surplus of $9,419.36 from the resale to which it was not entitled.[55] Accordingly, I order that FML pay Heavyweight this net surplus amount of$9,419.36 FML has wrongly retained.Costs[56] Costs are reserved. Before me, counsel indicated that they wished to have anopportunity to make further submissions on costs. Mr van Schreven, counsel for thedefendant, did suggest in passing that this is a matter which could have gone to theDistrict Court and that any award of costs therefore should take into account theappropriate District Court scale rate.[57] I am mindful too that, for the reasons I have outlined above, this judgment isan interim judgment and questions concerning Heavyweight's second cause of actionremain outstanding.[58] In due course, if costs remain an issue here, and counsel are unable to resolvethis question between themselves, then they may file (sequentially) memoranda oncosts (a maximum of five pages each) which are to be referred to me and I will decidethe question of costs based upon the memoranda filed and the material then before theCourt....................................................Gendall JSolicitors:Leonard Andersen, Barrister, DunedinClark Boyce, Christchurch