Kingsbeer v Okey [2018] NZHC 2384 (13 September 2018)

Last Updated: 12 March 2019

IN THE HIGH COURT OF NEW ZEALAND PALMERSTON NORTH REGISTRY I TE KŌTI MATUA O AOTEAROA TE PAPAIOEA ROHE

CIV-2018-454-15 [2018] NZHC 2384

IN THE MATTER	of the bankruptcy of Ronald Gordon Okey
BETWEEN	PAULINE ANNE KINGSBEER and BERNADETTE PLEW Judgment creditors
AND	RONALD GORDON OKEY Judgment debtor

	CIV-2018-454-18
IN THE MATTER	of s 290 of the Companies Act 1993
BETWEEN	MCKENZIE MCPHAIL CORPORATE TRUSTEES LIMITED Applicant
AND	PAULINE ANNE KINGSBEER and BERNADETTE PLEW as trustees of the PAK Trust Respondents

Counsel:	Mr C Robertson for judgment debtor in CIV-2018-454-15 and applicants in CIV-2018-454-18 Mr R Fowler QC for judgment creditors in CIV-2018-454-15 and respondents in CIV-2018-454-18
Minute:	13 September 2018

COSTS JUDGMENT OF ASSOCIATE JUDGE JOHNSTON

[On the papers]

[1] Before the Court are applications for costs by Mr Ronald Okey in CIV^-2018-454-15 and McKenzie McPhail Corporate Trustees Limited in

KINGSBEER and PLEW v OKEY [2018] NZHC 2384 [13 September 2018]

CIV-2018-454-18 in relation to enforcement proceedings commenced by Ms Pauline Kingsbeere and Ms Bernadette Plew in their capacities as the trustees of the PAK Trust.

[2] The background is not without its complications but for present purposes can be outlined relatively briefly.

[3] The PAK trustees commenced proceedings in this Court seeking the extinguishment of an easement in the form of a right of way which all parties apparently understood to exist in favour of Mr Okey and MMC over land owned by the trustees in Palmerston North. In a judgment dated 1 February 2017 Cull J concluded that there was no lawful easement. Her Honour made a costs award in favour of the PAK trustees in the sum of $60,675. Mr Okey and MMC appealed. In a judgment dated 21 December 2017 the Court of Appeal allowed their appeal. The Court of Appeal made a costs award in favour of Mr Okey and MMC against the PAK trustees in the sum of $19,469 in respect of the costs of the appeal.

[4] The PAK trustees then demanded payment from Mr Okey and MMC of the difference between the High Court and Court of Appeal costs awards.

[5] When their demand was not met they commenced enforcement proceedings — bankruptcy proceedings under the Insolvency Act 2006 against Mr Okey and liquidation proceedings under the Companies Act 1993 against MMC.

[6] After the commencement of these enforcement proceedings, the parties identified as an issue the effect on the High Court costs award of the Court of Appeal’s judgment allowing the appeal — in other words, whether the High Court costs award had been overturned. In relation to this the parties’ then counsel filed memoranda in the Court of Appeal seeking clarification. In due course Kós P issued a minute in these terms:

[1] Counsel’s memoranda concerning the question of costs in the High Court has been referred to the Court.

[2] In the High Court the respondent prevailed and the equitable easement was extinguished, (or, alternatively, invalidated). In this Court the equitable easement was sustained, in the appellants’ interests, albeit

the appellants were required to pay the greater proportion of upgrading costs.

[3] The appellants must be taken to have prevailed and received costs in this Court on a standard basis, without rebate.

[4] The practice of this court in relation to High Court costs is to reserve those for redetermination in that court. Although not expressed, it may be taken however that was the intended disposition of this Court in this appeal. If need be the judgment may be recalled to state that further conclusion. But we imagine this matter can be dealt with administratively by the parties and the High Court.

[7] Kós P’s minute made it clear that costs in the High Court needed to be revisited, though, as I understand it, that is yet to be done.

[8] In due course, the PAK trustees withdrew their enforcement proceedings.

[9] The issue which I must resolve is costs in relation to the enforcement proceedings down to the date of their withdrawal. Mr Okey and MMC say that the enforcement proceedings pursuant to the Insolvency Act and the Companies Act ought never to have been commenced because, prior to their commencement, the High Court’s costs award on which they were based had been overturned. Having regard to the terms of Kós P’s minute of 27 March 2018, it is not open to the PAK trustees to argue that the High Court costs award survived the Court of Appeal’s judgment, but they say that it was reasonable for them to have concluded that it had so survived and therefore for them to have commenced and prosecuted enforcement proceedings.

[10] For the PAK trustees Mr Fowler QC, who has only recently been instructed, makes a series of submissions in support of their resistance to any costs order against them.

[11] First he submits that after the Court of Appeal delivered its judgment the PAK trustees were “perfectly entitled to take enforcement steps” because the Court of Appeal “gave no indication that the High Court costs order was to change”. It seems to me that the fact that the Court of Appeal expressly overturned the High Court’s judgment might have been such an indication.
[12] Second, in reliance on rr 48(4) and 53J of the Court of Appeal (Civil) Rules 2005, Mr Fowler submits that “unless an order is specifically set aside on appeal, orders made in the lower court stand”. In support of this contention, he refers to McGechan on Procedure at para CR53J.03 where the following passage appears:

If the High Court’s judgment is merely adjusted (for example, its findings on liability are upheld, but its award of damages are reduced), the costs order made by the High Court is likely either to be left unaltered, or at most be somewhat reduced.

[13] The difficulty with this contention, I think, is that this is not a case in which the High Court’s order was “merely adjusted”. The High Court concluded that there was no lawful easement. The Court of Appeal concluded that there was. To that extent, the outcome of the appeal was a reversal of the High Court’s judgment.

[14] Finally, Mr Fowler submits that Kós P’s minute established two things. First, that reference back in relation to costs is a matter of practice, not a rule of law. Second that, here, the reference back was not expressed but was the intended disposition. So far as it goes, that submission is no doubt correct. But it seems to me that a fair interpretation of Kós P’s minute is that the Court of Appeal’s intention was always to overturn the High Court’s judgment in its entirety, including the award of costs, albeit coupled with an acknowledgment that the Court did not say so in express terms. On those bases, I cannot accept Mr Fowler’s consequential submission that Mr Okey and MMC’s “argument that the enforcement step was unlawful ab initio cannot succeed.”

[15] I do accept the unstated contention that the PAK trustees and their advisers at the time might be forgiven for misunderstanding the position given that the Court of Appeal did not deal with the High Court costs order expressly. However, as a rule, costs are not a reflection of the reasonableness or otherwise of the parties’ positions. The general rule is that costs follow to event. Here, in the event, the position taken by the PAK trustees in the enforcement proceeding was wrong.

[16] Given my conclusion that the enforcement proceedings commenced by the trustees of the PAK Trust after the delivery by the Court of Appeal of its judgment were not justified, it is not necessary to dwell on whether Kós P’s minute further exacerbated the position.
[17] Insofar as the appropriate costs order in relation to these enforcement proceedings is concerned, it is important to acknowledge that whilst the High Court’s decision may have been overturned by the Court of Appeal, nevertheless, the reality is that both parties enjoyed a measure of success in the ultimate outcome. Although the Court of Appeal concluded that Mr Okey and MMC continued to enjoy a right of way it also ordered that they should bear 75 per cent of the maintenance costs of the roadway.

[18] I therefore reject the submission made by Mr Robertson on behalf of Mr Okey and MMC that there ought to be an uplift in costs in this case.

[19] The view I take is that substantial justice as between the parties will be done if I make an order awarding costs on a 2B basis to Mr Okey and MMC in respect of the abandoned enforcement proceedings plus disbursements which may be fixed by the Registrar.

Associate Judge Johnston

Solicitors:

Brittens, Palmerston North Strachan O’Connor, Upper Hutt