GLW Group Limited v Lepionka & Company Investments Limited [2018] NZHC 2445 (18 September 2018)

Last Updated: 29 October 2018

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2015-404-2168 [2018] NZHC 2445

BETWEEN	GLW GROUP LIMITED Plaintiff
AND	LEPIONKA & COMPANY INVESTMENTS LIMITED First Defendant LEPIONKA & COMPANY LIMITED Second Defendant STEFAN JOZEF LEPIONKA and NIGEL WARREN HUGHES as trustees of the SJ Lepionka Family Trust Third Defendants STEFAN JOZEF LEPIONKA Fourth Defendant ................................./continued

Hearing:	On the papers
Counsel: Appearance:	MD O'Brien QC and MG Colson for defendants/applicant DW Grove for plaintiff/second respondent GB Paterson, first and third respondent in person No appearance for fourth and fifth respondents
Judgment:	18 September 2018

JUDGMENT OF FITZGERALD J

_{[As to costs on caveat and stay applications]}

This judgment was delivered by me on 18 September 2018 at 12:30 pm, pursuant to Rule 11.5 of the High Court Rules.

_{Registrar/Deputy Registrar ........................................ Date..................................}

GLW Group Limited v Lepionka & Company Investments Limited [2018] NZHC 2445 [18 September 2018]

CIV-2018-404-690

UNDER BETWEEN	the Land Transfer Act 1952 and Part 19 of the High Court Rules 2016 LEPIONKA & COMPANY INVESTMENTS LIMITED Applicant
AND	GARTH BOWKETT PATERSON First Respondent GLW GROUP LIMITED Second Respondent GARTH BOWKETT PATERSON Third Respondent ELIZABETH ANNE O'NEILL Fourth Respondent NADIA DAPAS Fifth Respondent ed

Introduction

[1] Lepionka & Co Investments Ltd (LCIL) applies for costs against

Mr Garth Paterson and GLW Group Ltd (GLW). In a judgment issued 6 July 2018, I

resolved:¹

(a) An application by LCIL to remove a caveat lodged by Mr Paterson and for orders restraining further caveats without leave. LCIL was successful in removing the caveat and obtaining associated orders.

(b) An application by GLW to stay enforcement of my judgment of

14 December 2017,² pending determination of GLW’s appeal of the judgment. LCIL successfully defended that application, though against the backdrop of its provision of a comprehensive undertaking preserving GWL’s position.

[2] Against Mr Paterson (who is the former, now bankrupt, director of GLW), LCIL seeks scale costs increased by 50 per cent. Against GLW, it seeks scale costs.

[3] Mr Paterson has filed a memorandum in response to the costs application against him, seeking that costs lie where they fall or their deferral until GLW’s above- mentioned appeal is resolved.

[4] On 27 July 2018, three weeks after my judgment, GLW was placed into voluntary liquidation by shareholder resolution. The liquidators have not filed a memorandum on costs. LCIL submits that costs may be assessed against GLW, notwithstanding its intervening liquidation.

Costs against Mr Paterson

[5] LCIL submits that this is a good case in which to order indemnity costs against Mr Paterson, but “in the interest of economical resolution” it is “content to accept” scale costs uplifted by 50 per cent.

[6] Under r 14.6 of the High Court Rules 2016, the Court may order a party to pay increased costs if the party “has contributed unnecessarily to the time or expense of the proceeding” by, for example, “taking or pursuing an unnecessary step or an argument that lacks merit”.³ Generally, increased costs may apply “where there is failure by the paying party to act reasonably”.⁴

[7] LCIL says Mr Paterson acted unreasonably in lodging the caveat and then defending LCIL’s application because, in overview:

(a) He is an undischarged bankrupt;

(b) His explanations for his standing to lodge the caveat were unsupported and conflicting;

(c) He provided no written submissions in advance of the hearing;

(d) No evidence was advanced supporting the nature of the caveatable interest claimed;

(e) He has previously lodged caveats (on behalf of a company) without legal basis;⁵

(f) I found that Mr Paterson’s actions had caused loss to LCIL and ordered that he was not to lodge further caveats without leave;

(g) Mr Paterson, “for all intents and purposes” controlled GLW and caused it to take a position before proceedings that wasted time; and

³ Rule 14.6(3)(b)(iii).

⁴ Bradbury v Westpac Banking Corp [2009] NZCA 234, [2009] 3 NZLR 400 at [27].

⁵ See Lepionka & Co Investments Ltd v Horseshoe Bend Hawkes Bay Ltd [2016] NZHC 2318.

(h) The overall unjustifiable and unorthodox approach to the proceedings added to the difficulty and cost in dealing with this matter.

[8] Mr Paterson’s memorandum in response does not raise grounds that support costs laying where they fall or being deferred. The overall tenor of his argument is summarised by the following paragraphs:

2. Although I believe I am unable to contest that Her Honour has reached the conclusion that my caveat should be removed, there are certain matters that form part of that conclusion that are incorrect and upon review should weigh in my favour regarding costs.

...

6. I accept that the hearing was somewhat of a "messy" situation, but that is not surprising given that I myself was confused about what role I was able to undertake in the caveat proceeding. Unfortunately due to my lack of experience and distinct lack of knowledge as to how the procedure works, I made errors and the Court was not as well informed as it may have been, (I was not sure how to present evidence properly), had I understood the workings. etc. Her Honour allowed me at the conclusion of the hearing, (under very restrictive guidelines, stating no more than 3 pages), to lodge a supplementary affidavit. Unfortunately due to there being 4 pages of attachments I was unable to keep it below the prescribed 3 pages, but being mindful not to upset Her Honour, I kept my writing to just one page. Unfortunately due to this restriction, some very critical and important evidence was not able to be put to the Court.

[9] I do not accept Mr Paterson’s explanations that he could not provide evidence to further his application due to his lack of experience with legal matters, or because a subsequent allowance from the Court to file a supplementary affidavit was unduly restrictive. Elsewhere in his memorandum Mr Paterson shows understanding of legal concepts and processes that contradict that explanation.

[10] In short, I agree with the submissions made by LCIL that this is an appropriate case in which to order increased costs. Removal of the caveat was a “clear conclusion”.⁶ The caveat was defective in several respects and Mr Paterson’s basis for lodging it did not give rise to a reasonably arguable case in any event.⁷ As noted by LCIL, Mr Paterson filed no submissions until the morning of the hearing and did not provide evidence that demonstrated the nature of the caveatable interest alleged.

⁶ GLW Group Ltd v Lepionka & Co Investments Ltd [2018] NZHC 1658 at [40].

Counsel for LCIL, and the Court, were left in the dark until the morning of the hearing. I am also not persuaded Mr Paterson is so inexperienced with court procedure that such conduct was excusable. And as I noted in the judgment, Mr Paterson’s actions were concerning — sufficiently so to make orders restraining him from lodging further caveats.⁸ In all of these circumstances, I consider an increased costs award is justified.

[11] I am not persuaded, however, that scale costs increased by 50 per cent are warranted in this case. While the points taken by Mr Paterson lacked merit and, as he acknowledges, the hearing was somewhat “messy”, I do not consider these factors led to such an increase in time on LCIL’s part to warrant a 50 per cent increase. I award scale costs with a 20 per cent uplift.

[12] LCIL has sought costs on a 2B basis, except for the preparation of written submissions, which it says should be awarded on the basis of band 2C. I do not agree. The issues were not particularly complex or time-consuming such that would warrant band C applying for that step. For the same reasons, I also do not consider the matter warrants certification for second counsel.

[13] Accordingly, on the caveat application, there is a costs award in favour of LCIL

on a 2B scale basis, increased by 20 per cent. Costs for second counsel are excluded.

Costs against GLW

[14] GLW is now in liquidation. LCIL notes that under s 248(1)(c) of the

Companies Act 1993:

unless the liquidator agrees or the court orders otherwise, a person must not—

(i) commence or continue legal proceedings against the company or in relation to its property; or

(ii) exercise or enforce, or continue to exercise or enforce, a right or remedy over or against property of the company:

[15] LCIL nonetheless submits, relying on Employment Court authority,⁹ that the Court may order costs against GLW despite its liquidation; or in any event the Court could “order otherwise” under s 248(1)(c).

[16] It was prudent of counsel for LCIL to raise this potential issue. But I am satisfied costs may be ordered notwithstanding the appointment of the liquidator. First, the approach has been adopted in other cases.¹⁰ Second, LCIL’s costs application was served on 30 July 2018 and Mr Grove, counsel for GLW, notified the Registrar on

9 August 2018 that he was informing the liquidator of all correspondence. It follows that the liquidator has now had ample time to make any additional submissions on costs. I am therefore content to proceed.

[17] LCIL seeks costs on a 2B basis against GLW for its stay application. Though it acknowledges “the outcome was to some extent agreed” by GLW, it argues an award is warranted because prior to the hearing undertakings were given that made the application unnecessary and the part of GLW’s application that was continued to the hearing (concerning Lot 7) was unsuccessful.

[18] I have reached the view that costs ought to lie where they fall on GLW’s application. GLW was successful in its application, insofar as it led to LCIL giving a comprehensive undertaking which preserves GLW’s position should GLW be successful in its appeal. On the other hand, that (minor) aspect of GLW’s application which continued to the hearing (concerning Lot 7) was resolved against GLW.

[19] In those circumstances, with GLW having a mix of success and failure on the application, costs lying where they fall is, in my view, an appropriate outcome.

⁹ Orakei Group (2007) Ltd v Doherty [2008] ERNZ 505 (EC). See also Oceanic Seafoods Ltd v

Silla Co Ltd [2014] NZHC 78.

10. See, for example, the Mana Property Trustee Ltd v James Developments Ltd litigation: subsequent to the High Court judgment, a liquidator was appointed, but the Court of Appeal nonetheless

ordered costs could be determined in the High Court: James Developments Ltd v Mana Property

Trustee Ltd [2009] NZCA 604; and Mana Property Trust Ltd v James Developments Ltd (No 2)

[2010] NZSC 124, [2011] 2 NZLR 25.

Result and orders

[20] I accordingly make the following orders:

(a) Mr Paterson is to pay 2B scale costs, uplifted by 20 per cent, on each item claimed by LCIL in Schedule 1 of its memorandum, excluding step 43 (second counsel).

(b) Costs are to lie where they fall on GLW’s application.

[21] Mr Grove is requested to ensure a copy of this judgment is passed to GLW’s liquidators.

_{Fitzgerald J}

Solicitors: Bell Gully, Auckland (M Ollivier) Foy & Halse, Auckland

To: GB Paterson, Napier