IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY

I TE KŌTI MATUA O AOTEAROA ŌTAUTAHI ROHE	
CIV-2020-409-243
[2020] NZHC 2967	

UNDER	the Companies Act 1993	
IN THE MATTER	of SOMA GROUP LIMITED	
BETWEEN	MILLINIUM CAPITAL MANAGERS LIMITED (ACN 111 283 357) as
responsible entity for MILLINIUM’S ALTERNATIVES FUND
(ARSN 121 722 521)
Plaintiff	
AND	SOMA GROUP LIMITED
First Defendant	
AND	GREGORY PHILIPPE MARSHALL
Second Defendant	
AND	PAUL JOHN CHAMBERLAIN
Third Defendant	

Hearing:	(Determined on the papers)	
Counsel:	D L Bennington for the Plaintiff
E B Moran and K E Nordmeyer for the Defendants	
Judgment:	11 November 2020	

JUDGMENT OF ASSOCIATE JUDGE LESTER

This judgment was delivered by me on 11 November 2020 at 11.00 am pursuant to Rule 11.5 of the High Court Rules

Registrar/Deputy Registrar 11 November 2020

MILLINIUM CAPITAL MANAGERS LIMITED v SOMA GROUP LIMITED [2020] NZHC 2967
[11 November 2020]

[1]	This proceeding was filed on 2 June 2020 by way of a statement of claim under pt 18 of the High Court Rules 2016. The plaintiff seeks orders under s 178 of the Companies Act 1993 and specific performance of a shareholders agreement, both causes of action aimed at securing information from the defendants.

[2]	On 27 August 2020, the defendants sought an order that the plaintiff pay security for costs. As I will refer to below, the application was made without the defendants’ first calling upon the plaintiff to agree security. On the application being made, the plaintiff offered to pay $10,000 by way of security for costs to the plaintiff’s solicitors. The plaintiff says there was no counter-offer in respect of that proposal and that the defendants sought to pursue this application.

[3]	Prior to the first call of the application scheduled for 17 September 2020, counsel filed a joint memorandum recording the plaintiff’s offer to give security in the sum of $10,000, (which was not accepted by the defendants), and identifying the issues in the application as:

(a)	the quantum of security;

(b)	whether it should be held by the plaintiff’s solicitors or paid into Court; and

(c)	costs on the application.

[4]	Counsel were content that those issues be determined on the papers and filed written submissions. This Judgment addresses those issues.

Quantum

[5]	Security of approximately $27,000 is sought.

[6]	In a schedule attached to the defendants’ submissions, costs through to trial on a 2B basis were calculated at $33,221 plus disbursements. That figure included the sum of $6,214 relating to this application – bringing the 2B calculation down to just over $27,000.

[7]	The plaintiff’s calculation of costs on a 2B basis arrive at scale costs of just under $14,000. The main difference is the deletion of an item for an appearance at the first case management conference, as such was dealt with by way of a consent memorandum. The plaintiff calculates scale costs on the basis of a half-day hearing, not two days adopted by the defendants.

[8]	The plaintiff also points to an error in the disbursements claimed by the defendants, being an incorrect claim for a filing fee for the statement of defence.

[9]	In respect of quantum, the plaintiff says that while it is based in Australia, it says Australia’s Trans-Tasman Proceedings Act 2010 (Cth) is relevant to the Court’s assessment as to the ability, ease, convenience and costs of enforcing any costs award that may be made against the plaintiff.

[10]	A further point made by the plaintiff, with reference to Ambrose v Pickard, is that security is future looking, it being generally inappropriate to make an order for security for costs that have already been incurred.1 Here, the plaintiff says that the cost of the statement of defence is a sunk cost, as is the cost claimed for the first case management conference. When those matters are removed, the actual anticipated 2B costs for the hearing, again on a half-day estimate, is just over $7,000. I can see no basis to depart from this general rule.

[11]	As to the plaintiff’s estimate that only one-half day is required, I expect that is optimistic and it is more likely a full day would be allocated. Even then, the offer of
$10,000 as security is more or less what a 2B costs award would be, removing sunk costs.

[12]	In all the circumstances, I am satisfied that the plaintiff’s offer of $10,000 for security for costs was an appropriate one, and I fix security in that sum.

[13]	As to where security can be paid, it is not clear to me why the defendants would not accept an undertaking from the plaintiff’s solicitors to hold the security on the usual undertakings.

1	Ambrose v Pickard [2009] NZCA 502 at [42].

[14]	I direct the security is to be paid to the plaintiff’s solicitors to be held on their written undertaking to hold those funds until the agreement of the parties or order of the Court. The security is to be paid within 10 working days of the date of this Judgment. If not paid, this proceeding shall be stayed.

Costs of these proceedings

[15]	That leaves the costs of these proceedings. As I said at the outset of this Judgment, I would return to the fact that the application was made without a call for security to be agreed.

[16]	I have found that the offer made by the plaintiff, when the application for security was received, was a reasonable one. Again, the defendants did not seek to agree costs but pursued this application.

[17]	While, at one level, the defendants have succeeded in their application because security has been fixed, the fact is the plaintiff’s early offer of security, once the application was received, is indicative of how they would have responded to a request for security. I do not find convincing the defendants’ argument that the plaintiff has not filed evidence saying had security been requested, it would have been offered. Why the application was made without notice is unexplained. I do not consider it fair and reasonable for the defendants to receive costs on an application that it should not have brought until it sought to have security agreed, or where it failed to negotiate security after this application was filed and the plaintiff made an offer of security.

[18]	As to whether the defendants should pay the plaintiff’s costs, I am satisfied that, in substance, the plaintiff was the successful party here. Its offer made, when the issue of security was first brought to its attention, proved to be an accurate one. The defendants have failed to obtain a greater award of security. They failed to engage with the plaintiff in respect of the level of security or, indeed, in respect of security at all prior to issuing the application. Nor did the defendants take into account the appropriate approach to sunk costs.

[19]	While I do not agree that an increase in scale costs as sought by the plaintiff is appropriate, in my view, an award of costs in favour of the plaintiff on a 2B basis is justified.

[20]	Associate Judge Osborne (as he then was) declined costs to a successful applicant for security on the basis they had not raised the issue of security with the respondent prior to filing of the application, saying:2
[22] Except sometimes in situations of clear urgency, the Court expects plaintiffs and applicants, before issuing proceedings or making applications, to explore resolution informally. In relation to general proceedings, this is frequently done through a “letter before action”. A failure to pursue resolution through either a non-litigious approach or through a less expensive course of proceeding may attract the Court’s invocation of r 14.7. The Australian commentary in Professor Dal Pont’s Law of Costs, in relation to the disallowance of costs in certain cases, includes the following:3

8.18	The court’s general costs discretion dictates that, where in accordance with its proper exercise, a court deems that costs should be disallowed to a litigant, even if he or she is ultimately successful, it may make an order to this effect. What costs should be disallowed depend on the circumstances of each case. For instance, Courts have disallowed costs incurred:

…

•	that might fairly have been rendered unnecessary by a little forethought (see, for example, Re Commissioners for Railways (1902) 18 WN (NSW) 296 at 297 per A H Simpson CJ);

•	as a result of an unnecessary application (see, for example, Re Ewer (1903) 4 SR (NSW) 240);

•	where a less expensive course of effecting the same outcome was readily available (see, for example, Dore v Gormley (1962) 9 LGRA 187 at 190 per Gibbs J (SC(Qld)); Commissioner of Stamp Duties v Edmunds [1989] 1 QdR 271 at 273 per Matthews J (FC));

…

[21]	I applied the above passage in Spackman v Martin, in not dissimilar circumstances to the present case.4

2	Morrell v World Solar Ltd [2018] NZHC 518.
3	G E Dal Pont Law of Costs (3rd ed, LexisNexis, Butterworths Australia, 2013) at [8.18].
4	Spackman v Martin [2020] NZHC 2148.

[22]	Accordingly, the defendants are to pay to the plaintiff costs on a 2B basis in respect of this proceeding as per the schedule of costs at page 12 of the plaintiff’s amended submissions dated 16 October 2020 along, with the sealing fee of $50.

Associate Judge Lester

Solicitors:
Duncan Cotterill, Auckland DLA Piper, Wellington