Taakoka Island Villas Ltd v Tupangaia [2010] CKHC 36; OA1.08 (7 May 2010)

IN THE HIGH COURT OF THE COOK ISLANDS
HELD AT RAROTONGA
(CIVIL DIVISION)

OA 1/08

IN THE MATTER of the Property Law Act 1952

AND

IN THE MATTER of AREMANGO SEC 7A1A2
Ngatangiia

BETWEEN:

TAAKOKA ISLAND VILLAS LIMITED
Applicant

AND

R T TUPANGAIA
Respondent

Counsel: Mr Morley for Applicant
Mr Vakalalabure for Respondent

Judgment: 7 May 2010

COSTS JUDGMENT OF WILLIAMS CJ

Introduction

[1] Paragraphs [81] and [82] of my Reserved Judgment dated 6 October 2009 on the substantive aspects this case provide as follows:

"[81] My provisional view as to costs is that the Applicant is entitled to an award as a successful party and indeed that there may be a case for indemnity costs.

[82] The Applicant must file any application it wishes to make for costs within 21 days from the date of this judgment. Thereafter the Respondent shall have 21 days to file any submissions in opposition and within seven days of the filing of those submissions the Applicant must file a brief reply. The Court will then deliver a separate judgment on costs."

[2] The following submissions have been filed in accordance with the above directions:

1. Applicant's Memorandum for Williams CJ in Relation to Costs on Relief Against Forfeiture Application dated 30 October 2009 ("Applicant's Submissions");
   
2. Cost Memorandum for Respondent dated 4 December 2009 ("Respondent's Submissions"); and,
   

100. Memorandum by Applicant for Williams CJ in Reply to Respondent's Costs Memorandum dated 4 December 2009, dated 16 December 2009 ("Applicant's Reply Submissions").
     

[3] Mr Parau Tupangaia sought leave to submit a Further Cost Memorandum for the Respondent dated 6 February 2010. The Respondent was granted an opportunity to make submissions on costs in accordance with the directions set out at paragraph [82] of my Reserved Judgment. That opportunity was exercised by Mr Vakalalabure on behalf of the Respondent. There is no special reason to depart from the Court's earlier directions and the Respondent's application for leave to make further submissions is therefore refused.

Applicant's Submissions

[4] In its Submissions, the Applicant submitted that this was an appropriate case for indemnity costs to be fixed at $70,000 being the Applicant's costs reasonably and actually incurred in relation to the application for relief against forfeiture. The Applicant further sought a direction that the 2009/2010 rental be offset against the costs ordered by the Court in relation to the present case. The Applicant reserved its position in relation to a potential future applications for:

1. A costs order against Mr Travis Moore personally in the event that any costs awarded by this Court in relation to the present application are not able to be recovered from Mrs Ruta Tupangaia;
   
2. Recovery of the losses arising out of the unlawful mining and removal of sand from the property during the period of forfeiture;
   

100. Associated costs of reinstatement, against Mrs Tupangaia, Mr Moore and Mr Tupangaia; and
     

4. A costs order in relation to the application for injunction.
   

[5] As to the legal framework for costs orders, the Applicant submitted that the Court has a wide discretion to make costs orders under s 92 of the Judicature Act 1980-81 and the Code of Civil Procedure 1981. The Applicant cited Morton v Douglas Holmes Limited (No 2) [1984] 2 NZLR 260 as the leading case with regard to costs in the Cook Islands and noted the Court's observation that, in determining the appropriate award of costs, the dominant consideration is always the nature and course of the proceeding. The Applicant contended that costs are typically awarded in the range of two-thirds of the costs reasonably and actually incurred.

[6] In relation to the earlier litigation between the present parties, the Applicant referred to the comments of Nicholson J in his costs judgment of 13 November 2006 and those of the Court of Appeal in its decision dated 27 April 2007 confirming that, although the applicant is normally required to pay the landlord's costs on a solicitor/client basis in relief against forfeiture applications, that principle is not mandatory and is not applied invariably by the Court.

[7] As to the principles relevant to an award of indemnity costs, the Applicant referred to various provisions of the High Court Rules in New Zealand, including Rule 14.6(4) which sets out particular circumstances in which an order for indemnity costs may be justified in New Zealand. Those circumstances include where a party has acted vexatiously, frivolously, improperly or unnecessarily in commencing, continuing or defending a proceeding or a step in the proceeding.

[8] Turning to the facts of the present case, the Applicant contended that its application for relief against forfeiture should have been unnecessary in view of this Court's finding that no rent was owing at the time the Notice was issued by the Respondent. The Applicant also criticised the conduct of the Respondent, arguing that it had the effect of "complicating and delaying the hearing and the disposition of the proceeding" and that the Respondent failed to deal responsibly with Court processes and the substance of the application itself.

[9] The Applicant referred to the protracted history of litigation between the present parties and, in particular, identified at paragraph 37 of its Submissions the following features of the Respondent's conduct in the present case, which, it is said, justify an award of costs to be assessed on an indemnity basis:

"The basis upon which the Notice to Quit was issued wholly differs from the circumstances subsequently alleged for Mrs Tupangaia as amounting to a reason to refuse relief against forfeiture (para 67);

That may indicate Mrs Tupangaia's aim was not merely to achieve security for rent (for which the right to re-enter and forfeit exists), but some further collateral advantage and if so involves a misuse of the remedy of forfeiture (para 68);

It lies ill in the mouth of Mrs Tupangaia to claim that the company is not entitled to equitable relief when she was herself a director of the company at the time of its (alleged) breaches (para 69);

The argument that the company had carried on business in the Cook Islands within the meaning of section 2 of the [Development Investment Act 1995-96], despite not being registered as foreign enterprises, was 'in essence argued before and dismissed by Nicholson J in 2006' (para 71 and 72);

The argument that there had been a breach of the DIA by increasing foreign investment had also already been argued and determined by Nicholson J in 2006 and upheld on appeal in 2007 (para 73);

The last two arguments are precluded by res judicata and are quite possible vexatious (para 74);

The Court's ongoing recognition in the present (as in the earlier) proceeding(s), that the conduct of Mrs Tupangaia and her agents 'has left much to be desired' (para 76(b)); and

The divergence between the present submissions from the grounds upon which the notices were issued and the obdurate invocation of claims already heard and determined' resulted in a refusal to allow the forfeiture (para 76(b)." (Paragraph references in the above quotation are to this Court's Reserved Judgment of 6 October 2009)

[10] In addition, the Applicant made a further submission that it would be appropriate for this Court to mark its disapproval for the Respondent's continuing and wilful non-compliance with the numerous (at least nine) costs awards which have already been made against her in relation to the history of litigation associated with the present case.

[11] In relation to quantum, the Applicant submitted that, making account for previous calculations of costs in relation to prior stages of these proceedings, at least $70,000 worth of legal costs had been incurred by the Applicant in relation to its application for relief against forfeiture.

Respondent's Submissions

[12] The Respondent submitted that the wide discretion in relation to costs which is made available to the Court by s 92 of the Judicature Act 1980-81 must be read subject to the provisions of Part XXXI of the Code of Civil Procedure of the High Court 1981 ("Code"). The Respondent also cited Regulation 8 of the High Court Fees, Costs and Allowance Regulations 2005 which provides that the Court "[m]ay fix such additional solicitor's costs [...] as is fair and reasonable in the circumstances of each case to do so."

[13] The Respondent sought to distinguish the cases cited by the Applicant on the basis that they were decided prior to the promulgation of Regulation 8. The Respondent cited Envirotech Australia Pty Ltd v Martin [1975] BCL for the proposition that a Court is not obliged to award full indemnity costs where a party has chosen to instruct the best available counsel and should look at the position as between the parties on a normal solicitor-client basis, requiring only "a reasonable contribution to the other party's costs".

[14] The Respondent made various submissions disputing this Court's earlier findings in the Reserved Judgment dated 6 October 2009 and contended that, "[t]he Respondent should not be made to pay for costs which relate to the Courts finding, which we submit are at the least, not based on the evidence before the Court."

[15] As to the appropriateness of an order for indemnity costs, the Respondent submitted that the grounds for her opposition to the application for relief against forfeiture were not "hopelessly untenable or unarguable" and that the case came to Court originally due to the Applicant failure to pay rent as required. Similarly, the Respondent submitted that the matter of the Applicant's registration only arose due to the Applicant's own failures. In summary, the Respondent argued that her conduct in this litigation could not be described as vexatious, needless or repetitive of previously litigated matters.

[16] In relation to the quantum of costs sought by the Applicant, the Respondent argued that the figure of $70,000 was "high, unreasonable and not fair." The Respondent complained that the figure was arrived at by way of an estimate and that no detailed breakdown had been provided by the Applicant.

[17] In support of her submissions on quantum, the Respondent noted that the proceedings were determined "on the papers" and submitted that the Respondent's legal objections were straightforward and did not require complex legal argument or expert evidence and that the Applicant should therefore only be able to claim for limited preparation. The Respondent further submitted that the Applicant had unnecessarily chosen to employ New Zealand counsel and that this had resulted in increased costs. As to her attitude in the proceedings, the Respondent contended that a responsible course had been adopted with regard to condensing the matters in dispute, which were based n legitimate questions of law. Finally, the Respondent submitted that the Applicant's claim for $70,000 in costs was disproportionate in the wider context of this litigation and that there was a risk of duplicating costs.

[18] In relation to the Respondent's status as a bankrupt, the Respondent contended that any order to offset the rental payable by the Applicant against any costs order made in the present case could only be made with the involvement of the Official Assignee.

Applicant's Reply Submissions

[19] In its Reply Submissions, the Applicant objected to the Respondent's characterisation of the Respondent's argument in these proceedings as raising new, undecided questions of law. The Applicant contended that the Respondent had misrepresented the procedural history and facts of the case in her Submissions and that the Respondent's comments relating to matters which had already been the subject of findings by this Court were inappropriate and did not need to be addressed.

[20] In relation to the Respondent's submissions on the appropriateness of a costs award on an indemnity basis, the Applicant reiterated its submission that it had been "forced to deal with a wholly intransigent litigant prepared to litigate, repeatedly and repetitively, over the same points."

[21] On the issue of quantum, the Applicant pointed out that it had been appropriate and, indeed, cost-effective to retain Mr Morley due to his participation in earlier stages of the present litigation and his thorough knowledge of the facts of the case. The Applicant reiterated its submissions at paragraphs 34 and 35 of the Applicant's Submissions as to the method for calculating costs for the present application and submitted that there had been no duplication in the calculation of its costs for present purposes. The Applicant further contended that the Respondent's characterisation of its conduct during these proceedings did not reflect the reality and invited the Court to make its own assessment of the nature and course of the proceedings. Finally, the Applicant denied that it had ever failed to pay rent as required except as a result of the Respondent's interference with the Applicant's occupation.

[22] Finally, the Applicant submitted that, under Cook Islands law, the Official Assignee has no interest in land in the Cook Islands owned or partially owned by a bankrupt in New Zealand and for this reason the Official Assignee had declined to participate in these proceedings. The Applicant also noted that it would be unlikely that it would be able to recover its costs from the Respondent in respect of the costs orders other than those of Nicholson J and the Court of Appeal relating to the earlier relief against forfeiture application. This was because the remaining costs awards post-dated the Respondent's bankruptcy.

Decision

[23] Having carefully considered the parties' respective submissions, the Court is of the view that this is an appropriate case for an award of costs on an indemnity basis. The Court accepts the Applicant's submissions as to the Respondent's conduct in these proceedings, including those matters set out at paragraph [9] above.

[24] The Respondent claims that the sum of $70,000 is inflated. The Court does not uphold this contention. The Court finds that the sum of $70,000 has been proved as the actual costs incurred by the Applicant in this case. Therefore, the Court awards indemnity costs of $70,000 to the Applicant and judgment may be entered for this amount.

[25] The Court further orders that the amount of $70,000 for costs may be offset against future land rental owing by the Applicant to the Respondent. Leave is reserved to apply in relation to any matter of implementation or otherwise arising out of this set-off order.

...................................................
David Williams CJ
Dated: 7 May 2010