A v D and E Limited

[2023] NZHC 1111

ORDER PROHIBITING PUBLICATION OF NAMES, ADDRESSES OR IDENTIFYING PARTICULARS OF PLAINTIFFS AND DEFENDANTS.

IN THE HIGH COURT OF NEW ZEALAND NAPIER REGISTRY

I TE KŌTI MATUA O AOTEAROA AHURIRI ROHE

CIV-2018-441-000060

[2023] NZHC 1111

BETWEEN

A

First Plaintiff

B
Second Plaintiff

C
Third Plaintiff

AND

D AND E LIMITED AS TRUSTEES OF THE Z TRUST

Defendants

On the Papers
Counsel:	M Phillipps and N Dennison for the Plaintiffs M Wenley and B Ronberg for the Defendants
Judgment:	10 May 2023

COSTS JUDGMENT (No. 2) OF GWYN J

Solicitors:

Vicki Ammundsen Trust Law, Auckland for Plaintiffs Willis Legal, Napier for Defendants

A v D AND E LIMITED AS TRUSTEES OF THE Z TRUST [2023] NZHC 1111 [10 May 2023]

Introduction

[1]        On 5 November 2021 I gave judgment for the plaintiffs in this matter (substantive judgment).1 I issued a costs judgment, granting costs to the plaintiffs, on 14 February 2022 (costs judgment).2

[2]        Subsequently the Court of Appeal allowed the defendants’ appeal against the substantive judgment and directed that:3

The costs order made in the High Court is quashed. If the parties are unable to agree upon costs in the High Court, then that issue should be remitted to the High Court for determination.

Defendants’ application

[3]        The parties have been unable to agree on High Court costs and accordingly the defendants have made an application to this Court to determine those costs. The defendants seek costs on the same basis that I awarded costs to the plaintiffs in the costs judgment. In the costs judgment I determined that the defendants should pay to the plaintiffs costs calculated on a category 2 basis as follows:4

(a)All pre-trial steps other than commencement of proceedings to be calculated on a Band B basis;

(b)Commencement of proceedings to be calculated on a Band C basis, but with a deduction of one day from the 10 day allowance, that is, nine days;

(c)The allowance for Steps 33 and 33B to be assessed as if the trial had taken three days;

(d)Second counsel not certified for;

(e)CMC memoranda – allowance for one only;

1      A v D and E Ltd as Trustees of the Z Trust [2021] NZHC 2997.

2      A v D and E Ltd as Trustees of the Z Trust [2022] NZHC 173.

3      D and E Ltd as Trustees of the Z Trust v A, B and C [2022] NZCA 430 at [171] per Kós P.

4      Costs judgment, above n 2, at [38].

(f)Memoranda of 12 February and 28 February 2021 – no allowance;

(g)Allowance as claimed for two memoranda in response to the defendants’ Beddoe application.

[4]        On that basis, the defendants seek costs of $46,844, together with disbursements of $220.

Commencement of defence

[5]        Under sch 3, Step 2 (Commencement of defence),5 the defendants seek five days with a deduction of one day, to be calculated on a Band C basis. The defendants say that the uplift in costs (adopting Band C for Step 2, as at [3(b)] above) is justified for the defendants, in the same way that it was justified for the plaintiffs, in that the defendants faced the same complexity in dealing with the relevant issues of orthodox principles of equity, unsettled areas of law, combined with a relatively unique set of facts. The defendants should now be entitled to costs on the same basis.

Post-judgment memoranda

[6]        In the costs judgment,6 I concluded that the plaintiffs were entitled to costs in relation to the two memoranda they filed in response to the defendants’ Beddoe application, after the substantive judgment.7

[7]        The defendants say that, as a consequence of the Court of Appeal judgment, they are entitled to be indemnified for costs from the Trust property and costs in relation to the Beddoe application are therefore appropriate.

[8]        Counsel for the defendants now seeks costs in a total of 0.8 days in relation to their two post-judgment memoranda.

5      High Court Rules 2016.

6      Costs judgment, above n 2, at [37].

7 At [37].

Plaintiffs’ response

[9]        The plaintiffs dispute the defendants’ claim for additional costs at Step 2 and for the two post-judgment memoranda.

Commencement of defence

[10]      Counsel for the plaintiffs resist this aspect of the costs claim, submitting that costs should be allowed for two days, at Band B. Counsel note, first, that the plaintiffs’ claim was initially made against both the defendants as trustees of the Trust and Willis and Davies as solicitors and second defendants. The first and second defendants filed a combined statement of defence dated 10 August 2018, together with a summary judgment application. The statement of defence dated 10 August 2018 was three pages long. The second defendants succeeded on their summary judgment application and the parties agreed on costs, including two days for preparing a defence (Step 2).

[11]      The plaintiffs say it is not appropriate for the first defendants to now claim a further five days for commencement of their defence (totalling seven days for both defendants) because the relevant factual allegations were largely uncontested and the commencement of the defence did not involve any affirmative defences. Counsel says that the only legal point raised by the defendants in their defence, other than denials, was the proposition that the plaintiffs should have earlier claimed exemplary damages. Preparation of the statement of defence did not involve any particular factual complexity. In relation to the legal framework, the defendants denied the plaintiffs’ pleading and the novel and complex aspects of the law involved in this matter were addressed in submissions, not in the pleading.

[12]      Counsel for the defendants in response on this point submits that “commencement of defence by defendant” in sch 3 goes beyond the drafting of a statement of defence. Counsel refers to the defendants’ amended statement of defence dated 12 November 2020. Counsel for the defendants also notes that the original second defendants faced a completely different claim, dishonest assistance, and there is no proper basis for discounting that defence.

Post-judgment memoranda

[13]      Counsel for the plaintiffs says that the post-judgment Beddoe application was a separate and distinct matter and the defendants should not be entitled to costs on their failed application.

Discussion

[14]      I agree with the defendants that the original second defendants faced a different claim and there is no proper basis to discount the time awarded in respect of the original statement of defence.

[15]      I accept that, as counsel submits, the defendants’ amended statement of defence did include a fuller response to the legal allegations made by the plaintiffs in respect of the remaining defendants. In particular:8

(a)[Mr Z] was not under a fiduciary duty nor in breach of a fiduciary duty;

(b)The defendant trustees have an indefeasible title to the property pursuant to the Land Transfer Act 2017 and to hold the property in shares solely for the beneficiaries of the [Z Trust] and not on any constructive trust; and

(c)The deeds of gift for the property and shares were lawful, effective and irrevocable in transferring absolute ownership to the defendants.

[16]      Counsel for the defendants submit that “commencement of defence” goes well beyond the drafting of a statement of defence. There is a deficiency of authority on that point, but I accept that it may properly include receiving instructions, researching facts and law, as well as preparing, filing and serving a statement of defence or notice of opposition.

[17]      However, this was not a case where that preparation involved considerable research of the facts: the principal allegations factual allegations made by the plaintiffs

8      Amended Statement of Defence of Defendants dated 12 November 2020 at [50]–[54].

were met with a “no knowledge therefore denied” plea. While the amended statement of defence filed on 12 November 2020 was necessarily different from the first statement of defence, and did include a more substantive response to the legal issues raised, it is fair to say it does not appear to have required the same degree of factual inquiry and legal research as the plaintiffs’ statement of claim.

[18]      In one previous case, Farmdirect Ltd v Southfuels Ltd, where the Court dealt with this question (albeit in the very different context of an application for an interim injunction), Fogarty J said:9

In this case the application for the interim injunction was opposed by the defendants disclosing in detail the initiative of Shell to reorganise its rural distribution, leading to the incorporation of the first defendant, and the subsequent events which led the fourth to eighth defendants to become employees of the first defendant. This defence required considerable research of the facts, and then the incorporation of that research into affidavits. I am satisfied that the amount of work undertaken easily fits within the concept of commencement of defence required in step 2. …

[19]      That authority supports the defendants’ submission that costs for commencement of defence go beyond preparing a statement of defence. Beyond that, the case is not of much assistance, given the very different context and the obviously greater factual research, analysis and synthesis into evidence involved in that case.

[20]      Nevertheless, the statement of claim filed by the plaintiffs involved detailed factual allegations and a more detailed pleading of five causes of action, being breach of fiduciary duty; fraud on a power; knowing receipt; unconscionable conduct and unjust enrichment; and knowing assistance of breach of fiduciary obligations. Preparation of that pleading, it seems to me, was necessarily a more complex exercise requiring more time than the preparation of the defendants’ statement of defence.

[21]      While the defendants are entitled to a costs award that reflects more than preparation of the statement of defence, it is not apparent that the broader preparation was extensive. I do not think the defendants are entitled to precisely the same calculation as was made in favour of the plaintiffs in the costs judgment.

9      Farmdirect Ltd v Southfuels Ltd HC Christchurch CIV-2006-409-002858, 13 March 2007 at [23].

[22]I conclude that the defendants are entitled to four days at Band B.

[23]      While it is not clear from the memoranda filed for the defendants in support of this costs application, I have assumed that the two post-judgment memoranda for which costs are sought are the memoranda dated 10 November 2021 and 13 December 2021.

[24]      The first of these sought a retrospective Beddoe order. I accept the plaintiffs’ submission that no costs are appropriately awarded to the defendants in relation to the Beddoe application. The application was rejected as being improperly brought (after the substantive proceeding) and procedurally flawed.10 That conclusion is not changed by the fact that the appeal judgment means the trustees are entitled to costs from the Trust property.

[25]      The second post-judgment memorandum for which the defendants seek costs supported an application for indemnity costs for the defendant trustees, sought clarification of the status of interim distributions made to the beneficiaries of the Trust before the substantive judgment and also sought clarification whether the judgment had found that there was an institutional constructive trust. These questions were addressed in my supplementary judgment of 14 February 2022.11

[26]      First, I accept that it was necessary and appropriate to seek clarification of the status of the interim distributions and the institutional constructive trust. Second, the consequence of the Court of Appeal judgment is that the defendants are entitled to be indemnified for costs from the Trust property. I therefore conclude that the defendants are entitled to costs for this second post-judgment memorandum.

Outcome

[27]      Accordingly, I award costs to the defendants in terms of the schedule appended to counsel’s memorandum of 11 October 2022, save for the following amendments:

10     A v D and E Ltd as Trustees of the Z Trust HC Wellington CIV-2018-441-60, 1 December 2021 at

[22](Minute of Gwyn J).

11     A v D and E Ltd as Trustees of the Z Trust [2022] NZHC 172.

(a)Step 2 — commencement of defence — Band B, four days; and

(b)One post-judgment memorandum — 0.4 days.

Gwyn J