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High Court of New Zealand Decisions |
Last Updated: 5 December 2014
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV-2014-404-001210 [2014] NZHC 2866
UNDER
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The Property Law Act 2007
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BETWEEN
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FIT PROPERTIES LIMITED Applicant
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AND
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ZANTRA HEALTH & WELLBEING LIMITED (IN LIQUIDATION)
First Respondent
KEVYN ANDREW BOTES Second Respondent
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Hearing:
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(On the papers)
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Judgment:
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18 November 2014
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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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