IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY

I TE KŌTI MATUA O AOTEAROA TE WHANGANUI-A-TARA ROHE	
CIV-2018-454-065
[2019] NZHC 1889	

BETWEEN	RAY CHARLES BOOTH
First Plaintiff

RAY CHARLES BOOTH AND ANNE BOOTH
Second Plaintiffs	
AND	POPLAR ROAD FARMS LIMITED
First Defendant

JASON BOOTH
Second Defendant

TANIA BOOTH
Third Defendant	

Hearing:	On the papers	
Counsel:	A N Isac QC and G M Richards for First Plaintiff J J Delany for Third Defendant	
Judgment:	5 August 2019	

JUDGMENT OF CLARK J (COSTS)

Introduction

[1]	On 12 April 2019 I granted the first plaintiff’s application for rectification of a deed of debt. 1 The effect of rectification was to increase by approximately $428,000 the amount which the first defendant, Poplar Road Farms Ltd, owes to Ray Booth. I concluded that, having succeeded, the first plaintiff was entitled to costs. I reserved

1	Booth v Poplar Road Farms Ltd [2019] NZHC 807.

BOOTH v POPLAR ROAD FARMS LIMITED [2019] NZHC 1889 [5 August 2019]

costs in respect of an abandoned interlocutory application pending receipt of an application and memoranda.2

[2]	The plaintiffs now seek costs:

(a)	against the first defendant in respect of the successful rectification application;

(b)	against the third defendant in respect of an abandoned application for leave to bring a derivative action;

(c)	on the costs application.

Discussion

Costs on the rectification application

[3]	The plaintiffs seek the following costs against the first defendant calculated on a 2B basis except in respect of the preparation of evidence. Those costs are sought under band A as the first plaintiff filed only three affidavits and otherwise relied on affidavits filed in related proceedings.

Step	Description	Days	Sum	
1	Commence proceeding	3	6690	
3	File reply	0.8	1782	
10	Prepare for case management conference	0.4	892	
11	File memo for CMC 31 October 2018	0.4	892	
13	Attend CMC 31 October 2018	0.3	669	
11	File memo for call 4 December 2018	0.2	$446	
30	Prepare evidence	1.5(A)	3345	
33	Preparation for hearing	3	6690	
34	Appearance at hearing	0.25	557.5	
22	Filing interlocutory application	0.6	1338	
29	Sealing order	0.2	446	
Total costs claim	$23,749.50	
Disbursements	
Filing fee: statement of claim	1350	
Scheduling fee	1600	
Interlocutory application	500	
Sealing judgment	50	
Total costs and disbursements	$27,249.50	

2	At [48].

[4]	For the third defendant Mr Delany submitted costs should be calculated on a 2A basis given the matter proceeded by way of formal proof and most stages were “relatively straightforward”. Mr Delany submitted the time allocations for category A “obviously relate to a normal defended hearing and are not analogous to a formal proof hearing”. Mr Delany offered no authority in support of his position with which I disagree.

[5]	Costs are set by reference to the skill and experience requirement of the proceeding and by determining what amount of time is reasonable for particular steps in the proceeding. I am aware of no principle suggesting that where a matter proceeds by way of formal proof it is by that account alone, susceptible to a different costs analysis. In my view the orthodox yardsticks of complexity and reasonableness of time taken for discrete steps must apply as much to matters that proceed by way of formal proof as to matters that proceed to a contested hearing.

[6]	In terms of this hearing, in the course of my judgment I made the following broad observation which is relevant to the immediate dispute about costs:

[36] Although this claim proceeded by way of an undefended formal proof hearing “the level at which a Judge is required to satisfy herself regarding the plaintiff’s evidence is much the same as it would be if the proceeding had gone to trial”.3 In this case the plaintiff is required to prove his cause of action so far as the burden of proof lies on him. He is not required to engage with any matters of affirmative defence, set-off or counterclaims.4

[7]	I consider the time required for preparation in this case is unaffected by the fact it ultimately proceeded undefended. Case management memoranda and judicial minutes document the rectification proceeding’s complex genesis and the link between it and Jason and Tania Booth’s application for the division of relationship property under the Property Relationship Act 1976. As at 1 November 2018 there was general agreement between counsel that the issue in the rectification proceeding needed to be prioritised  and  resolved  quickly.5  Only  at  the  case  management  conference  on 4 December 2018 was it apparent “Tania Booth [had] made a conscious decision – for

3	Ferreira v Stockinger [2015] NZHC 2916 at [35].
4	At [36], citing BBC Technologies Ltd v Sociedad Agricola Topagri Ltd [2014] NZHC 2386 at [5].
5	Booth v Poplar  Road  Farms  Limited  HC  Wellington  CIV-2018-454-59,  CIV-2018-454-65, 1 November 2018.

whatever reason – not to take active steps to ensure that the rectification proceeding is defended.”6 It seemed illogical to the Associate Judge that, having elected that course, she should be in a position effectively to raise a defence in the context of a different proceeding. The Associate Judge therefore directed the Registrar to set down the rectification proceeding for a formal proof hearing. Until that point it was contested.

[8]	The rectification proceeding involved difficult accounting issues and necessitated extensive expert accounting evidence. To succeed the first plaintiff had to establish the nature of the debt which, according to the common intention of the parties, was to be recorded in a deed of debt, and the nature of the accounting errors made in 2012 which resulted in a debt sum of approximately $430,000 less than the actual sum owed, being recorded in the deed of debt. Painstaking and elaborate evidence was required and indeed adduced.

[9]	I have no difficulty in concluding that, with the exception of the preparation of evidence, (see [3] above) scale costs calculated on a 2B basis are appropriate.

Costs on the third defendant’s abandoned application for leave to bring a derivative action

[10]	The background to this application was set out in the 12 December 2018 Minute of Associate Judge Johnston:7

[10]	During the course of a case management conference on 31 October 2018, counsel for Ray and Anne Booth, Mr Richards, and  counsel  for  Jason Booth, Mr Maassen, both contended forcefully that the only course open to Tania Booth if she wished the company to defend the rectification proceeding, was to apply for an order under s 165 of the Companies Act 1993. Such an order would entitle her to defend the rectification proceeding in the company’s name. On 14 November 2018 Tania Booth filed such an application in the rectification proceeding. It was met with notices of opposition by both Ray and Anne Booth and Jason Booth. Immediately prior to this case management conference, counsel for Tania Booth, Mr Delany, filed a memorandum saying that she was withdrawing that application in the face of the opposition and because she could not afford to fund a defence of the rectification proceeding (which she anticipated – correctly I think – that she would have to do).

6	Booth v Poplar Road Farms  Limited  HC  Wellington  CIV-2018-454-59,  CIV-2018-454-65, 12 December 2018 at [16](b) and [19].
7	Booth v Poplar Road Farms Limited above n 6.

[11]	The plaintiffs seek 2B costs, with an uplift of 50 per cent to reflect the lack of merit in the application and the wasted costs incurred in responding to the application. They also seek a disbursement for the filing fee of $110.

[12]	The plaintiffs seek the following costs:

Step	Description	Days	Sum at Category 2
rate	
23	Filing opposition to interlocutory application	0.6	1338	
24	Preparation of written submissions	1.5	3345	
12	Appearance at mentions hearing 4 December 2018	0.2	446	
Subtotal	5129	
Uplift 50%	2564.50	
Total	$7693.50	
Disbursement/Filing Fee – Notice of Opposition	
$110.00	
Total Costs and Disbursements	$7,803.50	

[13]	Rule 15.23 creates a presumption that a plaintiff who discontinues a proceeding against a defendant must pay costs up to the point of discontinuance. The defendant does not have to demonstrate the application was unreasonable, but the presumption may be displaced if the court finds there are circumstances which make it just and equitable that the plaintiff should not have to pay costs.8 The rule applies to abandoned interlocutory applications.9

[14]	Mr Delany argued it would be an injustice to require the third defendant to pay a significant amount of costs in circumstances where she abandoned her application due to lack of financial ability.

[15]	I do not consider the third defendant’s financial circumstances justifiably displace the presumption.   The application was filed on 14 November 2018.   On   30 November the plaintiffs filed their notice of opposition and affidavit in support. Counsel had been aware since 1 November of a hearing date on 3 December,

8	McGechan on Procedure at HR15.23.01.
9	At HR15.23.07; and Rocket Surgery Ltd v Goodwin [2013] NZHC 2667 at [4]; MV Celebre Ltd v Airwork Flight Operations Ltd [2015] NZHC 1400 at [9]; referred to in Kaur v Ministry of Business, Innovation and Employment [2016] NZHC 1862 at [3].

subsequently corrected to 4 December. After 6 pm on 3 December, the evening before the hearing, the third defendant’s counsel filed and served a memorandum advising the third defendant was “forced to abandon” her application in view of the strong opposition. There is nothing to suggest the decision to abandon was due to a sudden unforeseen change in her financial circumstances. The third defendant is presumed to have been aware of her financial position at the time of filing. Costs are therefore payable on a 2B basis.

[16]	Turning to the claim for uplifted costs, the court may make an order increasing costs where the party opposing costs has taken an unnecessary step that lacks merit, or fails to accept a legal argument without reasonable justification.10 Abandonment of a cause of action alone is insufficient to justify increased costs.11 If the claim has been abandoned pre-judgment, the Court will only award increased costs where the lack of merit is “both obvious and incontrovertible”.12 As Kós J explained in N-Tech Ltd v Abooth Ltd:13

The normal and entirely sensible approach of the Court is that it will not speculate on the merits of a case that has been discontinued before evidence has concluded and closing submissions have been exchanged, unless the merits are utterly clear.

[17]	Mr Isac submitted the abandoned interlocutory application contributed unnecessarily to the cost of the proceeding, lacked any merit and delayed the first plaintiff in pursuing his application by way of formal proof. Mr Isac described the third defendant’s evidence as “perfunctory and deficient”.

[18]	I do not share the plaintiffs’ certainty that the abandoned application was so lacking in merit as to justify a 50 per cent uplift. Section 165 provides that on the application of a shareholder or director of a company, a court may grant leave for that

10 High Court Rules, r 14.6(3)(ii) and (iii).
11 Bradbury v Westpac Banking Corporation [2009] NZCA 234, [2009] NZLR 400 at [27].
12 N-Tech  Ltd  v  Abooth  Ltd  [2012]  NZHC  1167  at  [108],  see  also  cases  discussed  therein:  New Pastures  Limited  v  FM  Custodians  Limited   HC  Christchurch  CIV-2009-409-000231, 2 November 2009; and Lesa Systems Limited v Canzac Limited HC Christchurch CIV-2006-409- 624, 4 October 2006.
13 N-Tech Ltd v Abooth Ltd, above n 12, at [99].

shareholder or director to bring proceedings in the name and on behalf of the company.
In determining whether to grant leave the court must have regard to:14

(a)	the likelihood of the proceedings succeeding:

(b)	the costs of the proceedings in relation to the relief likely to be obtained:

(c)	any action already taken by the company or related company to obtain relief:

(d)	the interests of the company or related company in the proceedings being commenced, continued, defended, or discontinued, as the case may be.

[19]	Leave may be granted only if the court is satisfied that either the company does not intend to defend the proceedings, or if it is in the interests of the company that the conduct of the proceedings should not be left to the directors or shareholders.15

[20]	The third defendant was a company director and the company manifestly did not intend to defend the proceedings. The point about rectification was not so straightforward that there was no possibility of the company succeeding in defending the claim. And, arguably, it was in the interests of the company that the conduct of the proceedings should not be left to the directors. The other director, Jason Booth, had conflicting interests. Should the rectification succeed, the company would have owed the plaintiffs a greater debt. But it was in Jason’s personal interests that the rectification proceeding against the defendant should succeed in order to decrease the relationship property pool.

[21]	As Mr Isac submitted, the application and accompanying affidavit are sparse, but they state how each of the requirements under s 165(3) might be met, even if the third defendant’s position was not amplified. That might have been expected at the hearing. As Mr Delany submitted a large volume of evidence was already before the court in the related relationship property proceeding some of which was accepted as relevant in the rectification proceeding. I am unable to conclude the lack of merit was “utterly clear”.

14	Companies Act 1993, s 165(2).
15	Section 165(3).

[22]	Accordingly, while I accept that costs should be awarded against the third defendant on a 2B basis, I do not propose to order a 50 per cent uplift.

Costs on costs

[23]	The plaintiffs also seek an award of costs against the third defendant on this application for costs. Mr Isac submits 2B costs for 0.6 days of $1338 is appropriate. He also notes the plaintiffs wrote to the third defendant’s counsel on 18 December 2018 with an offer to settle costs of the interlocutory on a 2B basis, but received no reply.

[24]	Mr Delany submitted this application does not  come within the ambit of        r 14.6(3)(b). The application is not, however, for increased costs pursuant to r 14.6, but scale costs in respect of preparing the costs application. Costs on costs are awarded on occasion. As such, an application “is to be treated no differently for costs purposes from an ordinary interlocutory application, so costs may be awarded according to scale or on an increased or indemnity basis as appropriate”.16 Costs on costs are, however, subject to the general costs principles under r 14.2. Particularly relevant is the consideration under 14.2(1)(g) that “so far as possible the determination of costs should be predictable and expeditious”. Davison J’s comments in Barry Park Investments Limited are relevant in that regard:17
[25]	I decline to award costs on costs. In the chain of exchanged memoranda, both parties fell into the tempting error of raising and repeating issues of dispute which led to an extended sequence of memoranda and an expansion of the dispute as to responsibility and, consequently, as to costs. Despite the Court’s general reluctance to award costs on costs applications, it would be rare for this Court to award costs on costs where doing so would conflict with the general principle and objective that the determination of costs should be expeditious.

[25]	The issue is finally balanced. On the one hand, encouraging disputation about costs on costs is unlikely to lead to an expeditious determination of a costs award. On the other hand, the plaintiffs attempted to settle costs with the third defendant and have now expended time and money preparing argument and reply. The plaintiffs have

16 Body Corporate Administration Ltd v Mehta (No 4) [2013] NZHC 213 at [85], cited in General Finance Ltd v Serepisos [2017] NZHC 2823 at [21]; and Haricot Investments Ltd v Maerewhenua District Water Resource Company Ltd [2015] NZHC 518 at [26].
17 Barry Park Investments Ltd v Body Corporate Number 95388 [2016] NZHC 1527.

been wholly successful in their costs claim in respect of the rectification application. They have succeeded in their claim for costs following discontinuance of the interlocutory application although not wholly, as I have declined to award uplifted costs. Nevertheless, this costs claim, and the attendances associated with it may have been avoided had the third defendant agreed to pay the very costs which I have awarded, when they were sought. Counsel for the plaintiffs wrote to the third defendant on 18 December 2018 seeking payment of the very amounts set out in the table above at [12]. There was no reply. In the circumstances the plaintiffs are entitled to the modest costs sought in the sum of $1,338.

Result

[26]	The first defendant must pay costs to the plaintiffs in the sum of $23,749.50 together with disbursements of $3,500.

[27]	The third defendant must pay costs to the plaintiffs in the following amounts:

(a)	on the discontinued interlocutory application, $5,129 together with disbursements of $110

(b)	on the plaintiffs’ costs application, $1,338.

Karen Clark J

Solicitors:
Louise Foley Le Pine & Co, Taupo for First Plaintiff Chapman Tong Law, Wellington for Third Respondent