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Fit Properties Limited v Zantra Health & Wellbeing Limited (in liquidation) [2014] NZHC 2866 (18 November 2014)

Last Updated: 5 December 2014


IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY



CIV-2014-404-001210 [2014] NZHC 2866

UNDER
The Property Law Act 2007
BETWEEN
FIT PROPERTIES LIMITED Applicant
AND
ZANTRA HEALTH & WELLBEING LIMITED (IN LIQUIDATION)
First Respondent
KEVYN ANDREW BOTES Second Respondent


Hearing:
(On the papers)
Judgment:
18 November 2014




COSTS JUDGMENT OF VENNING J



This judgment was delivered by me on 18 November 2014 at 3.30 pm, pursuant to Rule 11.5 of the

High Court Rules.

Registrar/Deputy Registrar

Date...............

















Solicitors: Macky Roberton Limited, Auckland

Jones Fee, Auckland

Copy to: B Gustafson, Auckland


FIT PROPERTIES LTD v ZANTRA HEALTH & WELLBEING LTD (IN LIQN) [2014] NZHC 2866 [18

November 2014]

Background to the costs issue

[1] Fit Properties Limited (Fit) sought orders pursuant to s 244 and 251 of the Property Law Act 2007 (the Act). Zantra Health & Wellbeing Limited (in liquidation) (Zantra) was a franchisee of Fit and also sub-lessee of premises in Milford. Zantra was placed into voluntary liquidation on 15 May 2014. Mr Botes was appointed liquidator.

[2] Issues arose between Fit and Mr Botes as to possession of the leased premises and the fixtures and fittings and chattels within the premises.

[3] In its application Fit sought orders: (a) for immediate possession;

(b) that Zantra and Mr Botes remove only gym equipment and other chattels owned by Zantra;

(c) Zantra and Mr Botes leave all fixtures and fittings in the property until further order of the Court within 24 hours; and

(d) compensation from both Zantra and Mr Botes; (e) costs against Mr Botes.

[4] Although filed ex parte the application was served on both respondents and a telephone conference hearing was convened by Andrews J on 21 May 2014. Following discussions with counsel Andrews J made the following orders:

a) The liquidators have until 12 noon on Saturday 24 May 2014 to remove chattels. The term “chattels” refers to gym equipment, televisions, fans, free-standing desks, chairs, and tables.

b) The liquidators undertake not to remove any fixtures and fittings, such as partitions and light fittings. There is some dispute as to whether heat pumps, fitted mirrors, and plumbing are “fixtures and fittings” but for present purposes the liquidators agree that they are to be treated as fixtures and not moved.

c) The liquidators further undertake not to take any steps in relation to the database of gym members.

d) The applicant may affix a sign on the building to advertise the re- opening of the gym.

e) The proceeding is to be listed for mention in the Duty Judge List on Monday 26 May 2014. I have suggested to counsel that a joint memorandum may be filed setting out further directions that may be made.

[5] Discussions between the parties followed. Mr Botes’ representation changed in the meantime. Mr Botes has not been required to file a substantive affidavit in response to the affidavits of the plaintiff. In the event these proceedings were ultimately discontinued by Fit. Fit considered that it had achieved its goal in the proceedings, accepted it could not obtain compensation from Mr Botes under the Act, and chose not to pursue them further. The only remaining issue was costs.

[6] The parties have now exchanged submissions in relation to costs in accordance with the timetable and directions of Moore J on 29 October 2014.

Fit’s application

[7] Fit seeks costs on a 3B basis for bringing and succeeding with its application. In the alternative it seeks costs on a 2B basis.

Mr Botes’ position

[8] Mr Botes opposes Fit’s application for costs. It is submitted on his behalf that, as Fit discontinued the proceedings, Mr Botes is entitled to costs. Costs are sought on a 2B basis.

Discussion

[9] Mr Botes relies on r 15.23. The rule provides that unless the Court otherwise orders a plaintiff who discontinues a proceeding must pay costs to the defendant of and incidental to the proceeding up to and including the discontinuance. However, I am satisfied the rule does not apply in this case or that the Court should in any event direct otherwise. The proceedings came before the Court as a matter of urgency because of the dispute between Fit and Mr Botes as liquidator of Zantra as to the

possession of the premises. Fit alleged it had re-taken possession under the lease. Mr Botes did not accept that. There was also a dispute between the parties as to their respective rights in relation to the fixtures and fittings and chattels in the premises.

[10] The first two substantive orders of Andrews J resolved the first three formal orders sought by Fit and largely resolved the issues between the parties. This is not a case where, having received a statement of defence, a plaintiff has discontinued. The Court engaged with the parties and made orders in favour of Fit on the basis of Fit’s application. The only remaining issues were compensation (which Mr Botes cannot be liable for and Zantra cannot pay) and costs.

[11] Prima facie I accept that Fit is entitled to costs. However, I do not accept its submission that costs on a category 3 basis are appropriate. The proceeding is not particularly significant or complex requiring counsel with special skill. The proceeding was brought by way of originating application effectively seeking injunctive relief. Such applications are of average complexity requiring counsel of average skill and experience in the High Court. Category 2 is appropriate.

[12] That is not an end of the matter however, Mr Botes opposes any order for costs on the grounds that:

(a) Fit has not provided any basis to support an order for costs against him personally;

(b) he acted reasonably in opposing the proceedings for possession; (c) Fit failed to achieve any orders against him;

(d) the proceedings for possession were unnecessary.

[13] The theme underlying Mr Botes’ submission is that the authorities confirm that a liquidator is not personally liable for costs unless he has failed to act bona fide in the sense that he has adopted a position which was not reasonably arguable.

[14] It is said that Mr Botes had a duty to protect the interests of the creditors of Zantra and that it was appropriate and reasonable for him to oppose the application for possession.

[15] While it may be strictly correct to say there are no orders made against Mr Botes personally, that is the practical effect of the orders. As from the date of the liquidation he was in control of Zantra and it was he who was in physical and legal control of the premises. The order requiring Zantra to deliver up possession effectively required Mr Botes to deliver up possession. The information before the Court, namely the affidavits filed in support of the application led ultimately to the orders made by Andrews J. On that basis the Court has accepted it was necessary for Fit to bring the proceedings for possession.

[16] Further, there could have been no issue or dispute that Mr Botes was required to deliver up possession to Fit once Zantra was placed in liquidation. Clause 11.2 of the sublease between Fit and Zantra confirmed the provisions of the head lease applied to and were deemed to be incorporated into the sublease as if the conditions were set out in full and references to the landlord and tenant under the head lease were to Fit and Zantra under the sublease. The head lease provided:

28.1 THE Landlord may (in addition to the Landlord’s right to apply to the Court for an order for possession) cancel this lease by re-entering the premises at the time or at any time thereafter:

...

(d) in the event of the insolvency bankruptcy or liquidation of

the Tenant; ...

[17] There could be no serious argument advanced by Mr Botes or Zantra that Fit was not entitled to possession notwithstanding that the rental under the lease may have been up to date.

[18] Equally in terms of the lease it was apparent that Fit was entitled to the benefit of the fixtures and fittings. The correspondence between the parties, particularly the correspondence from Mr Botes’ previous solicitors, suggested that the fixtures and fittings attaching to the premises belonged to the liquidator and he

was entitled to remove them. That is simply wrong as a matter of law, which again entitled Fit to take the action it did.

[19] In terms of cl 1.2 of the sub-lease Fit granted to Zantra the right to use Fit’s fixtures and fittings in the premises and the common area. There is no basis for Mr Botes to argue that the fixtures and fittings belonged to Zantra.

[20] For the above reasons the position initially taken by Mr Botes in relation to both possession and the suggestion Zantra had rights to the fixtures and fittings was unreasonable in circumstances. An order for costs against him is justified.

Result

[21] Fit is to have costs against Mr Botes calculated on a 2B basis for filing the application and supporting affidavits, preparation of written submissions and appearance at the telephone conference hearing, in total $7,462.50 plus

disbursements.







Venning J


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