Transport Investments Limited v Petroleum Logistics Limited

[2013] NZHC 1769

IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY

CIV-2011-485-002427 [2013] NZHC 1769

BETWEEN

TRANSPORT INVESTMENTS LIMITED

Plaintiff

AND

PETROLEUM LOGISTICS LIMITED First Defendant

ROBERT JAMES McKAY BOLTON Second Defendant

Judgment:                12 July 2013

JUDGMENT OF COLLINS J

[1]      This proceeding was set down to be heard by me on 13 and 14 May 2013. On 9 May 2013 the parties filed memoranda in which they said that the proceeding had settled apart from two issues, namely:

(1)       What interest, if any, the first defendant (PLL) should pay the plaintiff

(TIL); and

(2)       What costs, if any, PLL should pay TIL.

[2]      The parties agreed that I should determine these issues on the basis of written submissions.  TIL filed its submissions on 24 May 2013.  PLL responded on 7 June

2013.  TIL filed further submissions on 14 June 2013.  Unfortunately the file was not referred back to me until 8 July 2013.  I apologise to the parties for the delay in this

matter being brought to my attention.

TRANSPORT INVESTMENTS LIMITED v PETROLEUM LOGISTICS LIMITED [2013] NZHC 1769 [12

July 2013]

Background

[3]      TIL owned 60 per cent and PLL 40 per cent of the shares in a company called

Petroleum Logistics Pacific Ltd (PLPL).

[4]      On 27 July 2011 TIL and PLL agreed that PLL would purchase TIL’s shares in PLPL (share purchase agreement).  PLL paid TIL $550,000 of which $311,516 was attributed to TIL’s shares in PLPL.

[5]      Subsequently, a dispute arose between TIL and PLL about whether PLL had disclosed to TIL all information in its possession relating to the value of the shares as required by a warranty provision in the share purchase agreement.

[6]      TIL  commenced  its  proceeding  in  late  2011  when  it  claimed  that  the estimated fair market value of the shares in PLPL was $900,000.   TIL sought damages of $558,484 and a further $50,000 punitive damages.

[7]      PLL and the second defendant denied liability and challenged quantum.  The issue of quantum was ultimately resolved through the parties appointing an umpire who, on 6 May 2013 determined that the fair market value of TIL’s shares in PLPL was $600,000. TIL’s true loss was calculated to be $248,400.

[8]      PLL conceded quantum on the basis of the umpire’s determination.   TIL accepted $248,400 from PLL and abandoned its claim for punitive damages.   No agreement was reached in relation to the second defendant.

Interest

[9]      TIL claims interest at 10 per cent.  It does so pursuant to cl 11 of the share purchase agreement which provides:

The Vendor and Purchaser will each pay interest at the default rate on any payments due to the other under this Agreement, which are in arrears, calculated from the due date for payment to the date of actual payment.

[10]     I  do  not  believe  cl  11  of  the  share  purchase  agreement  covers  the circumstances before me.

[11]     TIL’s claim was based upon PLL’s failure to disclose all information relating to the value of the shares.  At it transpired, damages followed from PLL’s breach of the warranty clause, but the warranty clause did not create a “payment due” (debt).

[12]     A debt is a sum of money due from one person to another. To be due, it must be payable.   To be payable it must be a sum that is ascertained or readily ascertainable.1    For this reason, the amount recovered by TIL was not a “payment due” as that term was used in cl 11 of the share purchase agreement.  Accordingly, TIL is not entitled to interest at 10 per cent.

[13]     Mr Johnston, counsel for PLL, has quite properly acknowledged that interest is payable to TIL pursuant to s 87 of the Judicature Act 1908 from 27 July 2011.  I accordingly order that PLL pay TIL interest pursuant to s 87 of the Judicature Act

1908 from 27 July 2011 to the date of this judgment.

Costs

[14]   I start from the basic principle that costs follow the event unless the circumstances of the case must necessitate an alternative approach. 2

[15]     In this case TIL has filed extensive submissions in which it seeks increased indemnity  costs  because  of  what  TIL  submits  was  an  unnecessary  proceeding because “the defendants’ defence was a classic ‘hopeless case’ from day one”.3

[16]     On the other hand, PLL submits that the parties’ costs should lie where they fall because TIL grossly over inflated its claim and once quantum was resolved by the umpire the case settled almost immediately for a sum that was significantly less than TIL claimed.   PLL says this is a case in which each party has had similar success and if TIL had not over inflated its claim then agreement would have been

achieved much sooner.

1      New Zealand Venue and Event Management v Worldwide NZ LLC [2012] NZCA 130 at [23].

2      High Court Rules, r 14.2(a).

3 Submissions of TIL 23 May 2013 at [41].

[17]     I am satisfied that TIL has succeeded in its proceeding, albeit it has settled the proceeding for a sum that was substantially less than it claimed.  I am therefore satisfied TIL is entitled to costs.

[18]    I am also satisfied this is a scale 2 case because the issues raised by the pleadings appear to be of average complexity requiring counsel of regular skill and expertise in the High Court.  I am also satisfied that the proceeding is a band B case because a normal amount of time would reasonably be required to prepare for and present the case on the part of both parties.

[19]     Mr Matheson, counsel for TIL has explained that scale costs on a 2B basis would result in a costs award of $51,939.  Mr Matheson has explained the time spent in preparing for the hearing.  I do not think any serious issue can be taken with his explanation.

[20]    I do, however, reject Mr Matheson’s submission that indemnity costs are justified.  I can see nothing in the circumstances of this case which would warrant me departing from the standard approach to costs orders.  In particular, I am sure that this case was a typical dispute in which each side genuinely saw the merits of their own positions and conversely, saw little merit in the opposing parties’ case.

[21]     I am also satisfied that TIL is entitled to be paid the disbursements listed in

paragraph [31] of TIL’s memorandum of 24 May 2013.   Those disbursements are

$6,665.81.      I   am,   however,   not   convinced   about   the   reasonableness   of Grant Thornton’s claim for costs in relation to the valuation it carried out.   Grant Thornton’s fees apparently came to $94,296.82 which was more than twice the costs charged by PLL and Mr Bolton’s valuers.

[22]     Unless TIL can provide a compelling reason why I should do so, I am not

prepared to order that PLL pay for TIL’s valuation costs.

Orders

[23]     TIL is entitled to interest at the rate specified in s 87 of the Judicature Act

1908 from 27 July 2011 to the date of this judgment.

[24]     TIL is entitled to costs on a scale 2B basis in the sum of $51,939.

[25]     TIL is entitled to disbursements in the sum of $5,665.81.

D B Collins J

Solicitors:

Reeves Middleton Young, New Plymouth for Plaintiff

Crengle Shreves & Ratner, Wellington for First and Second Defendants