MIRAMAR CONSOLIDATED LTD v USC INVESTMENTS LTD [2023] NZHC 1532

MIRAMAR CONSOLIDATED LTD v USC INVESTMENTS LTD [2023] NZHC 1532 [20 June 2023]IN THE HIGH COURT OF NEW ZEALANDCHRISTCHURCH REGISTRYI TE KŌTI MATUA O AOTEAROAŌTAUTAHI ROHECIV-2022-409-277[2023] NZHC 1532BETWEEN MIRAMAR CONSOLIDATED LIMITEDPlaintiffAND USC INVESTMENTS LIMITEDDefendantAND LIANNA-MERIE HAGAMANSecond DefendantAND FJB TRUSTEES LIMITED, GILBRALTARTRUST LIMITED, LIANNA-MERIEHAGAMANThird DefendantsHearing: On the papersCounsel: E D Peers for PlaintiffM C Smith and R A D'Silva for Second and Third DefendantsJudgment: 20 June 2023COSTS JUDGMENT OF ASSOCIATE JUDGE PAULSENThis judgment was delivered by me on 20 June 2023 at 11.00 ampursuant to Rule 11.5 of the High Court RulesRegistrar/Deputy RegistrarDate:[1] Miramar Consolidated Ltd (Miramar) brought this proceeding seekingsummary judgment against the defendants alleging oppressive conduct in breach ofs 174 of the Companies Act 1993. The dispute arose out of the failure by the Boardof the first defendant, USC Investments Ltd (USC), to register the transfer ofMiramar's shares in USC to Keith Hagaman.[2] Very shortly before Miramar's application for summary judgment was to beheard, the defendants agreed the shares could be transferred to Keith. The parties wereunable to agree on costs and have referred that issue to the Court to decide.[3] Miramar seeks either 50 per cent of its indemnity costs or 2B costs with a 100per cent uplift to reflect what it says was the defendants' unreasonable and tacticalconduct in refusing to transfer the shares and then in defending the summary judgmentapplication to a very late stage.[4] The defendants argue they are entitled to 2B costs on the basis that theproceeding was always unfounded. Alternatively, they say costs should lie where theyfall.Background[5] USC is a property investment company set up by Keith and his late father, EarlHagaman. Lani Hagaman was Earl Hagaman's wife. The relations between Keith andLani are not cordial and since Earl's death they have been involved in other litigationconcerning his estate.[6] Lani and Keith are also the directors of USC. There was another director,Bruce Irvine, who resigned as a director in February 2022 as a result of the disputeconcerning the transfer of the shares by Miramar to Keith.[7] Miramar is a company associated with Keith. It has one director, BruceGemmell, and the sole shareholder is Ora Fiduciary (Cook Islands) Ltd as trustee forthe Balboa Trust. The Balboa Trust is a discretionary trust registered in the CookIslands.[8] Miramar held half of the shares in USC and the other half of the shares areowned by Lani, FJB Trustees Ltd and Gilbraltar Trust Ltd (collectively the thirddefendants) as trustees of the Classic Trust.[9] On 4 May 2020, Miramar issued a notice, as required under USC'sconstitution, advising that it wished to transfer its shares for $850,000 subject tocertain adjustments. Under its constitution, USC had three months to find ashareholder willing to buy the shares or Miramar could sell them to any person whowas not a "prohibited person" under the constitution.[10] Mr Irvine and Lani, as directors of USC, questioned whether the transfer noticewas valid. Despite maintaining that the transfer notice was valid, Miramar issued anew share transfer notice on 21 May 2021. This notice stated Miramar wished to sellthe shares for $800,000.[11] The third defendants confirmed on 18 August 2021 that they did not wish topurchase the shares. As a result, Miramar was free to sell or transfer the shares to anyperson (other than a prohibited person) provided it did not do so at a price lower thanthe value specified in the transfer notice.[12] On 17 November 2021, Miramar submitted a share transfer form to USC'sdirectors for registration recording that Miramar was transferring its shares to Keithfor the price of $2,500,000.[13] On 17 December 2021, the third defendants wrote to the directors of USCexpressing concern about "the context, valuations and regulatory compliance aspectsof the proposed sale" because the proposed transfer price was more than three timesthe amount at which the shares had been offered to the third defendants on 21 May2021. They said the valuation of $800,000 was "a good indication of the market valueof the shares as it anticipated an arms length sale to a third party" and:[The third defendants] ask that the Board discusses this further and makesfurther inquiries into the transaction. The class A shareholders request that theBoard exercises its powers under clause 4.4(a) of the Constitution to resolveto delay registration of the share transfer in order to obtain further informationand obtain independent legal advice, if needed. It would assist considerablyif the parties to the transaction were able to provide information as to the basisof valuation, the significant increase in the share price within a few monthsand the context for the re-transfer of shares from Miramar to Keith Hagamanat this time.[14] The directors of USC resolved to delay the registration of the share transfer toobtain further information following receipt of the third defendants' concerns at adirectors' meeting held on 22 December 2021. Miramar and Keith were invited toprovide information by 31 March 2022.[15] Subsequent correspondence from Miramar and Keith to the third defendantsexplained that Miramar was within its rights to sell the shares at a price that was higherthan that offered to the other shareholder, and provided an explanation for thenegotiated transfer price of $2,500,000 (to which I shall return).[16] On 25 February 2022, Mr Irvine resigned as a director of USC apparently dueto the dispute over the transfer of the shares.[17] On 8 March 2022, a barrister employed by the third defendants, Gary Hughes,wrote to USC to outline further the third defendants' concerns. Mr Hughes said theDepartment of Internal Affairs has identified the difference between the declared priceand the actual value of an asset as a "red flag" for compliance under the Anti-MoneyLaundering and Countering Financing of Terrorism Act 2009 (AML/CFT Act) to beinvestigated in its guidelines.1 He said that while USC was unlikely to be considereda "reporting entity" under the AML/CFT Act "all persons acting as trustees anddirectors carry reputational and professional risk if they were to become caught up inthis type of compliance issue these days". Mr Hughes advised that the third defendantsinvited the directors of USC to obtain further information "that would ensuretransparency, and create an audit trail of proper inquiries having been made into thecircumstances of a transaction value that appears, at least on the face of it, to beunusual".[18] On 10 March 2022, and apparently coincidentally, Lani received an emailrequest from the client due diligence unit of the Bank of New Zealand (the Bank) as1 Te Tari Taiwhenua | Department of Internal Affairs "Guideline: Lawyers and Conveyancers"(December 2017) Te Tari Taiwhenua | Department of Internal Affairs <www.dia.govt.nz>.part of the Bank's ongoing customer due diligence in relation to USC. The Bankrequested a company extract of Ora Fiduciary (Cook Islands) Ltd, the sole shareholderof Miramar.[19] There followed communications between Buddle Findlay on behalf ofMiramar and the Bank where Buddle Findlay explained that as Miramar wastransferring its shares to Keith, the due diligence information should no longer berequired by the Bank.[20] Buddle Findlay also wrote to Lani on 17 March 2022 stating that it consideredthe third defendants' concerns were irrelevant and put them on notice that Miramarconsidered USC's affairs were being conducted in a manner that was oppressive,unfairly discriminatory and unfairly prejudicial to it within the meaning of s 174 ofthe Companies Act.[21] In an email sent to Lani and Keith on 13 June 2022, the client director of thecorporate division of the Bank advised that there were two approaches the Bank couldtake to its request for information depending upon whether USC's shareholding wasas then recorded in the Companies Register or following the transfer of Miramar'sshares to Keith. He set out the information the Bank required in each scenario butnoted that if the required information was not provided by 30 June 2022 the Bankwould "be obligated to stop [USC's] account and this account will enter theoffboarding queue".[22] Miramar filed its statement of claim and application for summary judgment on13 July 2022 and the summary judgment application was listed to be first called beforethe Court on 15 September 2022.[23] Miramar pleaded that the affairs of USC had been conducted in a manner thatwas or will be oppressive or unfairly prejudicial to Miramar and that the share transferform had not been registered in breach of the constitution and s 84 of the CompaniesAct. It said the reasons given by the Board of USC for not registering the transferform do not constitute valid reasons under cl 4.4(a)–(b) of the constitution and thedelay in registering the form had been unreasonable. It pleaded that it provided theinformation requested by the defendants and the concerns about anti-moneylaundering compliance were unfounded. It therefore pleaded that Lani was exercisingher powers as a director for an improper purpose and/or was acting contrary to herduties as a director of the company.[24] On 6 September 2022, before the second and third defendants filed theirnotices of opposition to the application for summary judgment, Buddle Findlay wroteto the defendants' solicitors, Gilbert Walker, advising that in an effort to resolve theproceeding, and while Miramar rejected any suggestion that there were in fact anyAML/CFT Act concerns engaged or outstanding, it invited the defendants to provideclarification of what "their specific residual concerns or information requirementsare". Buddle Findlay also advised that Miramar would be amenable to adjourning itsapplication for summary judgment to allow further discussions. Gilbert Walkerresponded by email on 9 September 2022 that they would be proceeding with filingtheir clients' papers in opposition to the application that day.[25] In opposition to Miramar's application for summary judgment, the second andthird defendants pleaded, inter alia, that USC had not refused to register the sharetransfer, rather the Board had resolved to delay registration to obtain furtherinformation regarding concerns that the third defendants had raised about "the context,valuations and regulatory compliance aspects of the proposed sale of Miramar'sshares", which it said Miramar and Keith had failed or refused to provide.[26] On 16 February 2023, Buddle Findlay advised Gilbert Walker that as far as theBank's anti-money laundering requirements were concerned, Miramar had met all theBank's requirements.[27] On 20 February 2023, Gilbert Walker advised Buddle Findlay that:Your letter confirms that, as requested by our clients for several months, yourclient has finally satisfied BNZ's AML requirements.Based on the receipt of this new information, as anticipated in your letter, ourclients are now satisfied that the transfer of 50 per cent of the shares in USCInvestments Limited (USC) from Miramar Consolidated Limited (Miramar)to Keith Hagaman can proceed.The law[28] The starting point is r 15.23 which provides:Unless the defendant otherwise agrees or the court otherwise orders, a plaintiffwho discontinues a proceeding against a defendant must pay costs to thedefendant of and incidental to the proceeding up to and including thediscontinuance.[29] All issues of costs are discretionary but must be exercised on a principledbasis.2 However, r 15.23 establishes an obligation on a plaintiff who discontinues thathe or she must pay costs to the defendant, unless the defendant otherwise agrees, orthe Court otherwise orders.3[30] The presumption is designed to give a predictable outcome upondiscontinuance. It avoids any requirement for the defendant to demonstrate that theplaintiff acted unreasonably in filing and then discontinuing a proceeding. In Yarrallv Earthquake Commission, Wylie J noted there were several other reasons for thepresumption, namely that:4(a) a discontinuance is ordinarily tantamount to a judgment for thedefendant and a successful party in litigation is normally entitled tocosts;(b) a defendant has no choice as to whether they are sued, so where aplaintiff unilaterally discontinues litigation, it will ordinarily be justthat the plaintiff should bear at least some responsibility for thedefendant's unnecessary litigation expenses; and(c) a plaintiff who has discontinued can bring fresh proceedings againstthe defendant on substantially the same facts, so long as the plaintiffpays any costs ordered on the discontinuance. If there is to be a secondproceeding, the defendant's costs of defending the plaintiff's first2 High Court Rules 2016, r 14.1.3 Yarrall v Earthquake Commission [2015] NZHC 1451 at [16], upheld on appeal in Yarrall vEarthquake Commission [2016] NZCA 517, (2016) 23 PRNZ 765 at [12].4 At [18].proceeding will usually be wasted and it would be unfair that thedefendant should have to bear the wasted expenditure.[31] In Earthquake Commission v Whiting, the Court of Appeal noted the twoexceptions to a plaintiff's obligation to pay costs under r 15.23, namely where thedefendant may agree otherwise or the Court may order otherwise.5 Circumstanceswhere the Court has been persuaded that the presumption should not apply includewhere the proceeding has been rendered redundant because of some interveninggovernmental or third party decision or where the defendant's acts or omissions causedthe litigation and then rendered it unnecessary.6[32] Most relevantly to the present case, the Court of Appeal found that in relationto the second exception:7The second exception [the Court ordering the plaintiff does not have to paycosts] applies when a plaintiff successfully seeks an order from the Court thatthe mandatory obligation to pay the defendant's costs on the discontinuedproceeding should not apply. There is no doubt that when considering aplaintiff's application for an order of this nature, the Court has a discretion toorder that costs should lie where they fall or that the defendant should pay thecosts of the plaintiff in whole or in part. This discretion reflects the generalrule that all matters relating to costs are at the discretion of the Court. Thediscretion is not unfettered, but is qualified by the specific costs rules.[33] Therefore, the Court is not limited in the factors it may take into account whendeciding whether the presumption in r 15.23 has been displaced. The Court mayconsider the parties' conduct in the matter and the reasonableness of the parties'respective stances, including the reasons why the plaintiff brought and continued aproceeding and why the defendant opposed it.8 Generally, however, the Court will notconsider the merits of the parties' respective cases, unless they are immediatelyapparent.95 Earthquake Commission v Whiting [2015] NZCA 144, (2015) 23 PRNZ 411 at [63] (footnotesomitted).6 At [69].7 At [65].8 Earthquake Commission v Whiting, above n 5, at [68]; and Kroma Colour Prints Ltd vTridonicatco NZ Ltd [2008] NZCA 150, (2008) 18 PRNZ 973 at [12] and [29].9 Earthquake Commission v Whiting, above n 5, at [71]; and Powell v Hally Labels Ltd [2014]NZCA 572 at [23]–[24].SubmissionsMiramar's submissions[34] Mr Peers asks the Court to consider the parties' conduct going back to the firsttransfer notice. He submits the concerns raised by USC in respect of the first transfernotice were "technical quibbles" designed to delay and frustrate the transfer of sharesfrom Miramar to Keith, and that this is evident in light of the third defendants' conductin relation to the second transfer notice. He points to the third defendants waiting thefull three-month period available under the constitution to confirm "what [they]already knew", that they had no intention of purchasing Miramar's shares. Mr Peerssubmits this "shows the quibbles raised in respect of the first transfer notice were notgenuine".[35] Instead of transferring the shares as required under the second transfer notice,Mr Peers says the defendants engaged in "calculated and delaying actions whichhad no proper basis in law or under the constitution, and which ultimately achievednothing other than to cause enormous cost and frustration for the plaintiff".[36] Mr Peers contends the defendants' concerns about anti-money launderingrequirements were not a genuine explanation for their opposition to the transfer of theshares. Instead, the defendants raised "a panoply of vague and irrelevant reasons"through correspondence, the notice of opposition and evidence for not registering thesecond transfer form.[37] Mr Peers notes the defendants consented to the transfer of the shares on20 February 2023 claiming this was because Miramar had finally satisfied the Bank'santi-money laundering requirements but that, in truth, Miramar's provision ofinformation to the Bank provides no justification for the defendant's obstruction of theregistration of the share transfer.[38] Mr Peers submits an award of increased or indemnity costs is appropriatebecause the defendants acted improperly in defending this proceeding and onlyopposed the application as part of a pattern of conduct calculated to delay and frustratethe transfer of shares. He says this was motivated by Lani's animosity towards Keith.He submits such tactical conduct should be discouraged by the Court and r 14.6(3)(ii)–(iv) and (4)(a) of the High Court Rules 2016 is engaged.Defendants' submissions[39] Mr Smith submits the proceedings were always unfounded as there was nobasis for a shareholder oppression claim under s 174 of the Companies Act. He saysthere was never any refusal to register the shares, rather the defendants raisedreasonable requests for further information which delayed registration. He saysMiramar refused to engage constructively with those requests and instead issued thisproceeding.[40] Mr Smith says Miramar's allegations that the defendants had ulterior motivesfor not registering the share transfer document are unfounded. He says the defendantswere concerned with following a proper process and that as soon as the informationthey required was provided to them, they promptly approved the registration of theshare transfer. Mr Smith says there has been no reasonable explanation as to whyMiramar delayed in providing this information to the Bank.[41] Mr Smith submits that if the Court is not minded to award the defendants scalecosts, then costs should lie where they fall. Mr Smith says the defendants proposed apragmatic solution to avoid troubling the Court with a low value costs dispute, butMiramar has pressed on regardless.[42] Mr Smith argues that Miramar's claim for a 100 per cent uplift on scale costsis inconsistent with the rule in Holdfast NZ Ltd v Selleys Pty Ltd, limiting increasedcosts awards to a 50 per cent uplift over scale.10 He also says the fees incurred byMiramar are excessive.Analysis[43] Both counsel referred me to the evidence filed in support and opposition to thesummary judgment application and I have read that material. I have formed the clearview that this is a case where the interests of justice require that the presumption in10 Holdfast NZ Ltd v Selleys Pty Ltd (2005) 17 PRNZ 897 (CA) at [46]–[48].r 15.23 of the High Court Rules should be displaced and that Miramar is entitled tocosts.[44] The first matter of note is that Miramar has obtained the relief that it sought inthe proceeding and USC and the defendants agreed to the transfer of shares fromMiramar to Keith. The proceeding was discontinued because it had been renderedredundant once Miramar obtained the relief it was seeking.[45] Second, as noted above, one instance where the presumption in r 15.23 may bedisplaced is where the defendants' acts or omission have caused the litigation and thenrendered it unnecessary. The defendants say they did not cause the litigation, but theyacted reasonably throughout. Their contention that they should not pay costs, andindeed should be awarded costs, is founded on two assertions that:(a) Miramar failed to engage constructively with the defendants' requestsfor information pending which registration of the share transfer wasdelayed; and(b) the defendants' concerns were addressed when Miramar belatedlyengaged with and satisfied the Bank's AML/CFT requirements.These assertions do not withstand scrutiny.[46] The relevant clause under the USC constitution provides:4.4 Board's right to refuse or delay registration of transfer.(a) The board may, within 30 working days of the receipt of aform of transfer of shares, refuse or delay the registration ofthe transfer if:(i) the holder of the shares has failed to pay an amountdue to the company in respect of those shares;(ii) the provisions of clauses 4.6 to 4.13 and 4.16 dealingwith pre-emptive rights have not been fully compliedwith;(iii) the board considers that to effect the transfer wouldresult in a breach of the law;(iv) the board considers that it is not in the best interestsof the company to register the transfer; or(v) clause 6.3 (transfer to be accompanied by sharecertificate) has not been complied with or the form oftransfer has not been properly executed or does notcomply with clause 4.3.(b) A resolution of the board to refuse or delay a transfer of sharesmust set out in full the reason for doing so, and a copy of theresolution must be sent to the transferor and transferee within5 working days of the date of the resolution being passed.[47] The original concern of the defendants to the proposed share transfer raised intheir letter to USC of 17 December 2021 related specifically to the fact that the transfersum was $2,500,000 which was said to be over three times the anticipated reasonablevaluation. They expressed concern generally about the "context, valuations andregulatory compliance aspects of the proposed sale". Those "aspects" were notdefined further. They asked the Board to delay registration in order to obtain furtherinformation and obtain independent legal advice if necessary.[48] Miramar provided a response to that letter through their solicitors on28 December 2021 which explained that the transfer price was a result of negotiationbetween Miramar and Keith and the matters factored into the negotiation, includingthe amounts invested into the assets owned by USC and the intention to wind upMiramar.[49] There was no response to that letter for over two months until Mr Hughes wroteto the Board of USC on behalf of the defendants. He suggested three options toprogress the matter, one of which was that "Miramar/Mr Hagaman might choose toprovide further context and information by 31 March". While Mr Hughes refers toBuddle Findlay's letter of 28 January 2021, he does not discuss its contents. Hissuggestion that Buddle Findlay might provide due diligence or valuation informationrelevant to the sale seems to ignore the basis upon which Buddle Findlay had explainedthe share price had been determined, and he failed to say what further information notcontained in the 28 December 2021 letter should be provided.[50] Importantly, there was further correspondence from Buddle Findlay toCameron & Co, then acting for the Board of USC, dated 12 April 2022 in whichBuddle Findlay again explained the basis upon which the share transfer price wasdetermined. They wrote:In relation to the increase in the share price, your client appears to be missingthe point here. Miramar's two separate offers to transfer its shares in USC(one to the class A shareholder (the first offer) and one to Mr Hagaman (thesecond offer)) were commercially driven rather than being related to USC'smarket value. As we have previously advised, the price of the second offershould be of no concern to the class A shareholder, or indeed, the directors ofUSC , provided it is not less tha[n] the price of the first offer. There is norequirement that the price represent market value and in fact, there is likely noor a very limited market for the USC shares, particularly given the ownershipstructure of USC and the ownership of the landlord entity. From Miramar'sperspective, the first offer was generous to your client, but one whichMiramar's director was prepared to make in the hope that Miramar would beable to quit its shares in USC. When the first offer was rejected, Miramar'sdirector determined to make the second offer to [Keith], who he knew was awilling buyer, at a price he considered was fair as between [Keith] andMiramar, given it allows Miramar to settle all debts owed by Miramar to[Keith]. This is of no consequence to USC nor is it relevant to the first offer.[51] Lani says that this explanation raised more questions than answers and that itwas the final correspondence before Miramar issued proceedings, but the proceedingswere not issued until 13 July 2022, that is three months later, and in that time thedefendants did not raise these "questions".[52] Further, Lani says the evidence of Keith and Mr Gemmell did not provide anexplanation for why the share transfer needed to be at $2,500,000 and so her questionsremained unanswered. This is important for a reason I shall come to.[53] I therefore do not accept the first pillar of the defendants' argument thatMiramar failed to constructively engage with requests for information concerning thesale transfer price. The basis upon which Miramar and Keith arrived at that figure wasexplained. Importantly, the defendants did not respond to Buddle Findlay's letter of12 April 2022, despite Lani saying she continued to have questions.[54] At around the same time an issue arose concerning the Bank. In March 2022,the parties became aware of the Bank's "Ongoing Customer Due Diligence"AML/CFT requirements. The first relevant correspondence from the Bank was anemail to Lani dated 10 March 2022. The Bank asked for information concerning thedirectors and shareholders of Ora Fiduciary (Cook Islands) Ltd. In response, BuddleFindlay emailed the Bank on 22 April 2022 to advise that as Miramar had transferredits shares in USC to Keith, the Bank had no need for that information.[55] This then takes me to the second pillar of the defendants' argument, that thedefendants' concerns were addressed when Miramar belatedly engaged with andsatisfied the Bank's AML/CFT Act requirements following which it immediatelyagreed to transfer the shares. I do not accept that submission for several reasons.[56] First, the Bank advised Lani by email of 20 June 2022 that Keith had respondedpromptly to it and was providing the Bank with the necessary information it required.[57] Second, the Bank's request had nothing to do with the transfer of shares fromMiramar to Keith and the information that was requested simply related to the detailsof the shareholder of Miramar. The information the Bank required could not possiblyshed any light on any matters that the defendants say were concerning them.[58] Third, as Mr Peers correctly submits in my view, the Bank was indifferent asto whether the share transfer was registered or not. As the Bank's email of 13 June2022 demonstrates, if the transfer was registered with the Companies Office the Bankwould not require information concerning the shareholding of Miramar. The positionadopted by the Bank that the information it requested had to be provided could neverhave been a legitimate basis for the defendants to delay the transfer of the sharesbecause it was acknowledged the information would no longer be required if the shareswere transferred. It was the second defendant's failure to register the transfer that wasforcing the Bank's hand when it threatened to stop USC's account.[59] Fourth, it is acknowledged by the defendants that USC was not likely to be areporting entity under the AML/CFT Act but it was said there were reputationalconcerns arising for those associated with the company in professional capacities ifthey were caught up in "this type of compliance issue". However, given the verylimited nature of the Bank's information request, satisfying the Bank's requirementswould in no way resolve reputation concerns.[60] Fifth, as I noted earlier, Lani says that Buddle Findlay's letter of 12 April 2022raised more questions than answers and those questions remained despite the evidencethat Miramar filed in the proceeding. When the defendants finally agreed to thetransfer of the shares it was on the basis that the Bank's requirements had beensatisfied, yet the defendants had been provided with no further information to answerquestions that Lani said she had about the share transfer price and such questions couldnot have been answered by advice that the Bank's information request had beensatisfied.[61] Sixth, it is instructive that before the defendants were required to file anypapers in opposition to the application for summary judgment, Buddle Findlay soughtclarification as to what the defendants' specific residual concerns or informationrequirements were and what further information they required, and offered anextension of time for the filing papers in opposition. If all that was preventing USCfrom registering the transfer of the shares was compliance by Miramar with the Bank'sinformation request, that could have been easily stated. However, the defendants didnot respond to Buddle Findlay's proposal, except to say that they would be filingpapers with the Court.[62] Drawing these threads together, Miramar did respond to requests forinformation concerning the basis upon which the share transfer price was determinedwell before Miramar commenced this proceeding. Following Buddle Findlay's12 April 2022 letter, there was no further information sought by the defendants orUSC. While the defendants now say their concerns remained, they did not seek suchinformation, nor could the Bank's information request ever have been a proper basisto further delay the share transfer. Further, the defendants' case that their concernsremained is incongruous given the decision to agree to the transfer of the shareswithout further information being provided to address any concerns.[63] Another argument advanced for the defendants was that by Keith recusinghimself as a director of USC in matters involving the share transfer (due to his conflictof interest) he frustrated progress towards a resolution. I do not see how that canpossibly be the case when there was no suggestion that this was an impediment tosettlement and the shares have been transferred.[64] I therefore do not accept the arguments now advanced by the defendants as tothe reasons why they defended Miramar's application for summary judgment untilshortly before the hearing.[65] The next issue is whether Miramar should be awarded indemnity costs or anuplift on scale costs. As far as scale costs are concerned there does not appear to beany dispute that this proceeding is category 2 for costs purposes.[66] Rule 14.6(4)(a) provides that the Court may order a party to pay indemnitycosts if "the party acted vexatiously, frivolously, improperly, or unnecessarily in defending a proceeding or a step in a proceeding". Rule 16.6(3)(b)(ii) provides thatthe Court may order the payment of increased costs if a party opposing costs hascontributed unnecessarily to the time or expense of the proceeding by "taking orpursuing an unnecessary step or an argument that lacks merit".[67] Miramar argues that USC was motivated by Lani's antagonism toward Keitharising out of unrelated litigation and that Miramar's application was opposed fortactical reasons to delay and frustrate the transfer of the shares.[68] While in the present context the Court will not usually consider the merits ofthe parties' respective cases unless they are immediately apparent, this is such a case.Nowhere in the material advanced by the defendants have I seen a cogent argumentidentifying any of the grounds set out in cl 4.4(a) of the constitution of USC thatjustified the decision to delay the transfer of the shares, and certainly not beyond12 April 2022 when Buddle Findlay explained again the basis for the share transferprice.[69] I consider that the defendants' defence to the summary judgment applicationwas weak and it would not have been successful in opposing summary judgment. Forthe reasons given above, I consider the lack of merit in the defendants' position isreflected in their decision to agree to the transfer of the shares immediately before thehearing of the summary judgment application.[70] That said, while an inference might be drawn that the defendants' intention wasentirely tactical, designed to delay and frustrate Miramar, to my mind the evidencedoes not take me quite that far. There is antagonism between Keith and Lani thatinfluenced the manner in which both approached this dispute and which prevented anearlier resolution.[71] I do, however, consider the defendants' defence of the claim was unnecessaryand lacked merit and substantially added to Miramar's costs such that an award ofincreased scale costs should be made. Standing back and looking at the matter as awhole, I consider a just result is that Miramar be awarded costs of the proceeding ona scale 2B basis (in accordance with the schedule attached to Mr Peers' memorandum)with an uplift of 50 per cent. I note that this is significantly less than 50 per cent ofMiramar's actual costs.Result[72] The plaintiff is entitled to costs of the proceeding on a scale 2B basis with a50 per uplift in the total amount of $20,793 plus disbursements as fixed by theRegistrar._______________________O G PaulsenAssociate JudgeSolicitors:Buddle Findlay, ChristchurchGilbert Walker, Auckland