SOUTH CANTERBURY FINANCE LIMITED V WAYNE FRANCIS TYLER HC PMN CIV-2010-454-328

SOUTH CANTERBURY FINANCE LIMITED V WAYNE FRANCIS TYLER HC PMN CIV-2010-454-328 29 October 2010IN THE HIGH COURT OF NEW ZEALAND PALMERSTON NORTH REGISTRY CIV-2010-454-328BETWEEN SOUTH CANTERBURY FINANCE LIMITED Plaintiff AND WAYNE FRANCIS TYLER Defendant Judgment: 29 October 2010 at 12.00 pmJUDGMENT AS TO COSTS OF ASSOCIATE JUDGE D.I. GENDALLThis judgment was delivered by Associate Judge Gendall on 29 October 2010 at 12.00 pm under r 11.5 of the High Court Rules.Solicitors: Fitzherbert Rowe, Solicitors, Private Bag 11016, Palmerston North Brittens, Solicitors, PO Box 548, Palmerston North 4440Introduction[1] On 7 October 2010, the plaintiff obtained summary judgment against the defendant for a sum of $81,060.00. The claim was brought on the basis of the defendant's liability as guarantor with respect to certain indebtedness of his company, Central Autocourt (2000) Limited ("Central Autocourt"), with the plaintiff. The total amount that was originally sought in this proceeding was $112,890.65 together with contractual interest and costs. However, this amount was later revised by the plaintiff to $81,060.00 for summary judgment purposes. [2] At the hearing before me, the defendant accepted liability to the plaintiff with respect to this revised amount of guaranteed indebtedness and conceded that the sum of $81,060.00 was undisputed. An order for summary judgment was made accordingly, for the reasons set out in my judgment dated 11 October 2010. The defendant apparently has now been adjudicated bankrupt. [3] Costs on the summary judgment application were reserved and directions made for the filing of memoranda on the issue. The parties have now filed several memoranda as to costs. Essentially, the plaintiff seeks indemnity costs of $27,907.19, while the defendant submits that costs should lie where they fall.Counsel's Submissions and My Decision[4] The defendant submits that costs should lie where they fall because he says the plaintiff's application for summary judgment was only partially successful. The plaintiff's claim was reduced from $112,890.65 plus interest, as outlined in the statement of claim, to $81,060.00 on the date of the hearing. Summary judgment was granted for this lower amount, which was essentially undisputed. [5] In my view, the plaintiff's application must be regarded as generally successful here. The plaintiff obtained judgment against the defendant on liability, and was awarded damages in accordance with its concession that there was a dispute as to something over one-third of the amount claimed. In these circumstances, an order for costs in favour of the plaintiff is necessary to adequately reflect the overallsuccessful outcome of the application. The only issue in my view is the basis on which costs should be awarded. [6] The plaintiff purports to rely on two grounds in seeking an award of indemnity costs. The first is a contractual entitlement to indemnity costs as recognised by r 14.6(4)(e) High Court Rules. The second is an argument based on r 14.6(3)(b)(ii) High Court Rules that the defendant unnecessarily contributed to the time and expense of the proceeding. This latter rule, however, does not provide a basis for indemnity costs, but is concerned merely with increased costs. Accordingly, I will treat the plaintiff's present costs application as one for indemnity costs or, alternatively, increased costs. [7] For the purposes of its claimed contractual entitlement to indemnity costs, the plaintiff places reliance on three different clauses contained in three different documents that it entered into with Central Autocourt as debtor and the defendant as guarantor. The first is cl 29 of a General Terms of the General Security Agreement ("GSA") dated 29 April 2005, which provides as follows:(a) Costs payable by the party giving the security: The party granting the security must pay to the security holder upon demand, the security holder's legal costs (as between solicitor and client) for: ......................... (ii) costs on default: legal services arising from or relating to any default under this instrument or the enforcement or exercise or attempted enforcement or exercise of any of the security holder's rights, remedies and powers under this instrument ...[8] The second is cl 11.4 of a Credit Facility Agreement between the parties dated 30 June 2006:11.4 The Borrower shall pay to the Lender upon demand the Lender's solicitors costs for legal services arising from or relating to any default under this Agreement or the enforcement or exercise of any of the Lender's rights and remedies under this Agreement.[9] Finally, cl 6.6 of a Secured Facility Agreement between the parties dated 29 August 2006 is in the following terms:6.6 Costs of documentation, etc: All costs, charges and expenses, including on a solicitor/client basis relating to the preparation, of this Agreement, any PPSR searches or registrations, and any other documents or costs required in relation to this Agreement shall be paid by the Borrower.[10] Central Autocourt's claimed indebtedness to the plaintiff arose from advances made under both the Credit Facility Agreement and the Secured Facility Agreement. In addition, the GSA secured all past and future advances. [11] At this point I need to record that I have doubts whether cl 11.4 or cl 6.6 noted above can be construed as conferring a right to indemnity costs. Clause 11.4 merely refers to "the Lender's solicitors costs". There is nothing to suggest that the plaintiff should be entitled to recover costs on a solicitor/client basis. For example, the clause does not refer to an obligation to pay "all costs and expenses": see Suttie Bridgecorp Ltd HC Auckland CIV-2006-404-3667, 8 December 2006; Pangani Properties Ltd v Owens Transport Ltd HC Auckland CIV-2001-404-2036, 12 July 2004. Clause 6.6, on the other hand, is ambiguous insofar as it does not specifically refer to costs arising from default under, or enforcement of, the agreement. [12] As a matter of construction, therefore, I would have tended to the view that neither cl 11.4 nor cl 6.6 can be relied upon for the purposes of r 14.6(4)(e), because the right to indemnity costs is not "plainly and unambiguously expressed": Watson & Son Ltd v Active Manuka Honey Association [2009] NZCA 595, 15 December 2009 at [17]. [13] However, the real meaning of cl 11.4 and cl 6.6 as I see it is immaterial here, because the relevant provisions of the GSA are sufficiently broad to also cover any legal costs incurred as a result of the particular advances made under the Credit Facility Agreement and the Secured Facility Agreement. Clause 29 of the GSA refers specifically to costs arising from or relating to "any default under this instrument or the enforcement or exercise or attempted enforcement or exercise of any of the security holder's rights, remedies, and powers under this instrument...". One of the specified events of default is the failure by the party granting the security to pay any part of the "secured moneys" (cl 19). The term "secured moneys" includes "all moneys which are now or at any time in the future owing to the security holder" (cl 2). In my view, therefore, the right to indemnity costs in cl 29 extends to recovery of loan amounts advanced under subsequent agreements.[14] The defendant submits, however, that each of the clauses relied on by the plaintiff relate to the borrower, and that the plaintiff has not pointed to any clause in the documentation which makes the guarantor liable for the costs incurred between the plaintiff and the borrower. None of the clauses refer to a specific right to indemnity costs incurred in enforcing the guarantee, as against the guarantor. The clauses are directly applicable to the company as debtor, or as "the party giving the security". The documents do not refer to an independent obligation on the defendant to indemnify the plaintiff for any costs arising through default by, or from enforcement of its rights against, the defendant as guarantor. [15] However, I am satisfied here that the guarantor's liability in relation to Central Autocourt's obligations encompasses the right to indemnity costs, and that the right to indemnity costs would have to include costs arising from enforcement of the guarantee. For example, cl 31 of the GSA states that the defendant "will pay all the obligations hereby secured"; and the right to indemnity costs in cl 29 is phrased in general terms, including costs arising from "default" or relating to enforcement of the security holder's "rights, remedies, and powers" under the GSA. [16] The defendant's liability as guarantor for indemnity costs is premised on Central Autocourt's liability as debtor for these costs. Clause 29 therefore has to be interpreted as including liability for costs incurred in enforcing the guarantee. On the face of it, these enforcement costs would be a direct result of the debtor's "default", and would also fall under costs relating to enforcement of the creditor's "rights, remedies, and powers" under the GSA, as the GSA includes the defendant's obligations as guarantor. [17] And finally, my conclusion that cl 29 is applicable here is supported by the Court of Appeal's decision in Laverty v Para Franchising Ltd CA104/04, 19 September 2005, where a similar clause (that "[t]he Franchisee must pay and bear all legal cost and expenses ... incurred by [the franchisor]") was considered to be enforceable against the guarantors (see [25]).[18] In light of this conclusion that the plaintiff is entitled to indemnity costs here, I do not need to consider whether an order for increased costs pursuant to r 14.6(3)(b)(ii) would be warranted. [19] Turning to quantum of the plaintiff's indemnity costs, the plaintiff claims that it incurred actual costs of $27,907.19, and has attached four invoices in support of this claim. It is said that the amount of $27,907.19 does not include the sum of $2,892.24, which was already awarded to the plaintiff in respect of the liquidation proceedings regarding the defendant's company. Nevertheless, it is impossible to tell, at least with some of these invoices, whether all of the claimed costs were actually incurred in bringing the application for summary judgment. The plaintiff is not entitled, in the context of this application for costs pursuant to the High Court Rules, to any other costs incurred in related proceedings against the defendant or his company. [20] However, having studied the invoices provided in some detail, I conclude that the plaintiff has incurred costs of about $24,000.00 in bringing the present application for summary judgment, and that these actual costs were reasonably incurred. This conclusion is based principally on the last two invoices for $9,059.06 and $14,683.06, which do not include costs for proceedings other than the application for summary judgment; and the invoice dated 31 March 2010 for $3,213.17, which lists some work relevant to the present application such as drafting the application and affidavit for summary judgment.Conclusion[21] Costs in the sum of $24,000.00 are awarded to the plaintiff against the defendant on this summary judgment application proceeding together with disbursements as approved by the Registrar.'Associate Judge D.I. Gendall'