Moonlight Farms Trust Limited v Powell Land Holding Limited

[2019] NZHC 1151

IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY

I TE KŌTI MATUA O AOTEAROA ŌTAUTAHI ROHE

CIV-2017-409-927

[2019] NZHC 1151

UNDER

the Companies Act 1993

IN THE MATTER OF

an application to set aside statutory demand

BETWEEN

MOONLIGHT FARMS TRUST LIMITED

Applicant

AND

POWELL LAND HOLDING LIMITED

Respondent

Hearing:	(Determined on the Papers)
Counsel:	C L Houghton and R A Woods for the Applicant A S P Tobeck for the Respondent
Judgment:	24 May 2019

JUDGMENT OF ASSOCIATE JUDGE LESTER

(Costs)

[1]                 In my judgment of 17 April 2019,1 I concluded that the application to set aside a statutory demand was a nullity as it had not been served within the 10 working day period.

[2]                 Notwithstanding that, I concluded that had the application been properly served, the statutory demand would have been set aside on the grounds that the costs claimed to be payable under the lease were not due and presently payable as at the date of the statutory demand.

1      Moonlight Farms Trust Ltd v Powell Land Holding Ltd [2019] NZHC 861.

MOONLIGHT FARMS TRUST LTD v POWELL LAND HOLDING LTD [2019] NZHC 1151 [24 May 2019].

[3]                 I invited submissions as to costs and the respondent has now sought costs firstly on an indemnity basis. That submission is made on the basis that the relationship between the parties at the relevant time was that of lessor and lessee and the lease contains a “solicitor/client cost clause”.

1. Mr Tobeck for the respondent says:

It is submitted that the Respondent as Lessor was attempting to enforce its rights under the Lease and that the costs it incurred arose from the Lease. (emphasis added)

[5]                 While putting the costs submissions on that basis, counsel for the respondent also says that assuming costs on a 2B basis as a starting point, an increase is sought being a 50 per cent uplift with it being noted that if there is a 50 per cent uplift, the total that would be payable is slightly less than the actual fee charged.

[6]                 Counsel for the unsuccessful applicant says that as I concluded that the statutory demand should in effect not have been issued in the first place, that the step of issuing the statutory demand cannot be considered to be a step related to the lease or the attempted enforcement of the respondent’s rights under the lease. The submission is:

It would be disproportionate to allow the Respondent to rely on the Lease’s indemnity clause when the Court has indicated that the basis on which the statutory demand was issued, the alleged debt under the Lease, did not exist.

[7]                 I agree. There was no debt due and owing at the time the statutory demand was issued and so I do not consider that as a matter of interpretation the issue of       a statutory demand for a debt that did not exist is within cl 12.1 of the lease which provides:

12.1     Lessee to Pay Lessor’s Costs

In addition to the rental and other moneys reserved by this lease the Lessee shall pay:

…

(b)  all costs, charges and expenses for which the Lessor shall become   liable in consequence of or in connection with any breach or default by the lessee in the performance of any of the covenants in this lease or by enforcing

or attempting to enforce any of the Lessee’s covenants or any of the Lessor’s rights under or arising from this lease.

[8]                 At the time of the statutory demand the applicant was not in breach of its obligations as the respondent had not taken steps to properly demand the amount it claimed was due.  I do not consider that the respondent was taking steps to enforce   a right it had under the lease because at the time the right, that is to recover costs under cl 12.1, had not crystallised.

[9]                 In other words, the costs of defending a statutory demand for a debt that did not exist when the statutory demand was issued are in my opinion not claimable under cl 12.1.

Scale Costs

[10]             However, the point made by Mr Tobeck that he had raised the defective service from the outset is a valid one. I agree costs should follow the event. While the point taken by the respondent about service could be described as a technical one, nonetheless it was a point the respondent was entitled to take and on which it was successful.

[11]Counsel are agreed as to the calculation of scale costs totalling $9,812.

[12]             The respondent seeks an uplift. Essentially, that is sought on the basis that the respondent from the outset raised the point that the applicant had not served its application within the prescribed time period and that was the point on which it succeeded.

[13]             I am not persuaded that this is a case that warrants an uplift in costs. The issue was subject to full and detailed submissions. There is also some merit in the applicant’s point  that  it  did  establish  that  the  debt  was  not  owing,  so  while  the respondent won the battle, it lost the war as it could not issue winding up proceedings asserting it is owed money by the applicant.

Disbursements

[14]             I do not see why travelling costs are not payable. The airfares do not appear to be excessive. The costs of travel to Christchurch for the hearing would be substantially less than instructing an agent who would have to get up to speed. However, it appears there is an airfare claimed for the first call. This could have been dealt with by an agent and this airfare is not allowed. I am not sure why there is a claim for an airfare from Christchurch to Palmerston North on 6 December 2018.

[15]             Given Mr Tobeck had been seized of the matter from the outset, I do not consider it unreasonable for him to have travelled to Christchurch to conduct the hearing.

[16]             In the absence of an explanation as to the Palmerston North airfare, that is not allowed, but  I would expect counsel to be able to sort  that out directly if there is     a proper reason as to why it was required.  It is also not clear why accommodation   is claimed for 21 March 2018 when the hearing was on 8 April 2019. If this is only an error in recording the date, then counsel should be able to resolve this, as a night’s accommodation to attend the hearing is a reasonable claim.

[17]             Accordingly, disbursements in terms of the Schedule annexed to Mr Tobeck’s memorandum of 29 April 2019 are approved, save for the airfare on 5 December 2018, the Palmerston North airfare on  6  December  2018,  and  the  accommodation  on 21 March 2018, which for the moment stand unexplained.

Associate Judge Lester

Solicitors:

Anderson Lloyd, Christchurch Menzies Marshall Law, Winton

Copy to counsel: A S P Tobeck, Barrister, Otautau