A v D and E Limited
[2022] NZHC 173
•14 February 2022
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
[2022] NZHC 173
BETWEEN A
First Plaintiff
B
Second PlaintiffC
Third PlaintiffAND
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:
14 February 2022
COSTS JUDGMENT OF GWYN J
Solicitors:
Vicki Ammundsen Trust Law, Auckland for Plaintiffs Willis Legal, Napier for Defendants
A, B and C v D and E LIMITED AS TRUSTEES OF THE Z TRUST [2022] NZHC 173 [14 February 2022]
[1] The plaintiffs in this case, Ms A, Mr B and Mr C, are the three living adult children of Mr Z. The plaintiffs alleged that Z had physically and sexually (in relation to plaintiff A), abused them during their childhood.
[2] In my judgment of 5 November 2021 I found that abuse was proved and amounted to a breach of the fiduciary duty Mr Z owed to his children at that time.1 The plaintiffs pleaded that the proved abuse created a vulnerability which meant that, in their adulthood, Mr Z owed them a fiduciary duty to provide economically for them from his wealth.2 The plaintiffs alleged a breach of fiduciary duty by Mr Z, in gifting property to the Z Trust, before his death. The defendants to the proceedings were the trustees of the Z Trust.
[3] I found that Mr Z did owe a fiduciary duty to the children as adults and had gifted his property to the Z Trust in breach of that duty. I concluded that the Z Trust held the property on constructive trust for the plaintiffs.
[4] I invited the parties to agree on costs, however there remains a measure of disagreement between them as to the appropriate level of costs.
[5]The plaintiffs claim costs as follow:
(a)Category 2 costs.
(b)Band C for Step 1 (commencement of proceedings) (Band B for all of the remaining Steps).
(c)Increased costs under each of Steps 33 (Preparation of briefs, list of issues, authorities, and agreeing common bundle) and 33B (Preparation for hearing) to four days for each step, instead of two days.
(d)Certification for a second (junior) counsel to attend the hearing, under Step 35.
1 A, B and C v D and E Limited as Trustees of the Z Trust [2021] NZHC 2997 at [113].
2 At [119].
[6] The costs sought at (b), (c) and (d) above are not agreed and the defendants also dispute costs sought for certain memoranda filed by the plaintiffs. In addition, in a separate memorandum, Mr Wenley, counsel for the defendants, has sought payment of the trustees’ costs in this proceeding from the Trust fund. This is considered in my Supplementary Judgment of 14 February 2022.3
[7]I discuss each of the disputed costs claims in turn.
Band C for Step 1
[8] The plaintiffs say that a Band C allocation of 10 days is appropriate for Step 1, rather than the Band B allocation of three days, because of the complexity and novelty of the claim. The plaintiffs say that although the case involved the application of orthodox principles of equity, it also involved unsettled areas of law, combined with a relatively unique set of facts. Plaintiffs’ counsel, Mr Phillipps, emphasises the care taken in the drafting of the pleading which settled the factual allegations and defined a series of legal steps leading to the relief sought. He notes that no amendments to the pleadings were required, despite the defendants’ failed summary judgment application which the Court of Appeal equated to a strike-out application.4 This led to a more efficient disposition of the claim by minimising the steps in the proceedings and the hearing time, as a consequence of expending a significant amount of time at the commencement. In those circumstances, an allowance of three days would be insufficient and 10 days is reasonable.
[9] Mr Wenley, counsel for the defendants, says in response that the factual basis of the claim was straightforward; the legal position that sexual abuse of infants in care was a breach of fiduciary duty was already well-established, and the claim for a breach of fiduciary duty to adult children was based on the application of conventional equitable principles, albeit that the application to adults was novel. Mr Wenley also notes that it would be inappropriate for an award of costs to the plaintiffs to include
3 A, B and C v D and E Limited as Trustees of the Z Trust [2022] NZHC 172.
4 In A, B and C v D and E Limited [2019] NZHC 992, Associate Judge Johnston dismissed an application by the first defendants for summary judgment but entered summary judgment in favour of the second defendants. In D and E Limited v A, B and C [2019] NZCA 585, the Court of Appeal declined an application for leave to appeal the Associate Judge’s judgment declining the application for summary judgment.
their preparation on their unsuccessful claim against the former second defendants for dishonest assistance.
[10]Rule 14.2 of the High Court Rules 2016 (the Rules) provides:
14.2 Principles applying to determination of costs
(1)The following general principles apply to the determination of costs:
(a)the party who fails with respect to a proceeding or an interlocutory application should pay costs to the party who succeeds:
(b)an award of costs should reflect the complexity and significance of the proceeding:
(c)costs should be assessed by applying the appropriate daily recovery rate to the time considered reasonable for each step reasonably required in relation to the proceeding or interlocutory application:
(d)an appropriate daily recovery rate should normally be two- thirds of the daily rate considered reasonable in relation to the proceeding or interlocutory application:
(e)what is an appropriate daily recovery rate and what is a reasonable time should not depend on the skill or experience of the solicitor or counsel involved or on the time actually spent by the solicitor or counsel involved or on the costs actually incurred by the party claiming costs:
(f)an award of costs should not exceed the costs incurred by the party claiming costs:
(g)so far as possible the determination of costs should be predictable and expeditious.
…
[11]Rule 14.5 relevantly provides:
(2)A determination of what is a reasonable time for a step under subclause (1) must be made by reference—
(a)to band A, if a comparatively small amount of time is considered reasonable; or
(b)to band B, if a normal amount of time is considered reasonable; or
(c)to band C, if a comparatively large amount of time for the particular step is considered reasonable.
[12] The time allocations for each step in the proceeding are set out at Schedule 3 of the Rules. Step 1 is commencement of proceeding by plaintiff. Under Band B three days are allocated, under Band C 10 days are allocated.
[13] It is for the party contending for a band other than Band B to demonstrate why a normal amount of time does not apply.5 However, as McGechan on Procedure notes, the bands applied may differ at each step.6
[14] The appropriate daily recovery rate relates to the complexity of the proceeding.7 In this case, both parties are agreed that Category 2 is appropriate. Whether a case falls into Band B or C turns on the time the step in the proceeding takes to complete. As Mander J noted in Mary Moodie Family Trust Board v Attorney- General, that may include consideration of the complexity of the matter as well as the amount or “volume” of the material or evidence that may need to be prepared.8
[15] I am satisfied that in this case, the time allocation for Step One should have a Band C classification. As the plaintiffs assert, the claim was novel. Although relatively straightforward factually, the interplay between those facts, orthodox principles of equity and new and unsettled areas of the law, was inevitably complex and reflected in the time required to prepare the pleadings.
[16] However, I agree with Mr Wenley that it is appropriate to make a deduction from the time allowance to take account of the fact that the plaintiffs’ preparation time would have included their unsuccessful claim against the solicitors (formerly the second defendants) for dishonest assistance. Accordingly, Step One is to be calculated on a Band C basis, but with a deduction of one day, that is, an allowance of nine days.
Increased costs under Steps 33 and 33B
[17] Under Steps 33 and 33B the time allowance, for all bands, is one day per day for the first to fifth hearing days. The plaintiffs seek an increase to four days for each step.
5 Paper Reclaim Limited v Aotearoa International Limited [2007] NZCA 544, (2007) 18 PRNZ 743, at [35]. See also Beach Road Preservation Society v Whangarei District Council (2001) 16 PRNZ 13 (HC) at [9].
6 Andrew Beck and others McGechan on Procedure (looseleaf ed, Thomson Reuters) at [HR14.5.01].
7 Mary Moodie Family Trust Board v Attorney-General [2016] NZHC 755 at [6].
8 At [6].
[18] The trial was initially set down for five hearing days which was subsequently reduced to four hearing days. It was due to commence on Monday 1 March 2021, but on Sunday 28 February 2021 Auckland was moved to Alert Level 3 under the COVID- 19 rules and at a telephone conference that day Moore J adjourned the fixture. Mr Phillip says the effect of the adjournment was that counsel had to repeat some preparation for the hearing in May.
[19] In fact, the hearing took two days. Mr Phillipps submits that, although the matter was disposed of in two days, that was largely because of very limited cross- examination of the plaintiffs by the defendants’ counsel and the relatively limited time spent on closing submissions. In counsel’s submission, that was the result of the efficient and focussed approach the plaintiffs brought to the evidence and the areas of dispute, including a series of annexures to the closing submissions provided for the plaintiffs that included a schedule of relevant persons, a thorough, detailed and comprehensive chronology of events, personal chronologies for each of the plaintiffs, a schedule of all the relevant file notes and a comprehensive analysis of Mr Z’s will. Considerable time was taken in preparation of these documents which substantially reduced the need to orally address that detail.
[20] Mr Phillipps also notes that the common bundle ran to 1156 pages, including numerous affidavits, medical records and legal files and other legal and transactional documents. He also notes the comprehensive legal research that was necessary given the novel aspect of some of the claims.
[21] In response, Mr Wenley says the time allocation of only two days for each of these steps is appropriate. He submits that the number of documents included in the bundle was excessive and only a small proportion were ever referred to in evidence. It was counsel for the plaintiffs who nominated five days for the hearing and the actual time taken of two days was adequate, given the straightforward factual position, the limited scope of the evidence and the scope for cross-examination, and, the fact that the evidence and legal arguments had been traversed in the earlier summary judgment proceeding.
[22]Rule 14.6(3)(a) of the Rules provides:
(3)The court may order a party to pay increased costs if—
(a)the nature of the proceeding or the step in it is such that the time required by the party claiming costs would substantially exceed the time allocated under band C; or
…
[23] In Auckland Waterfront Development Agency Limited v Mobil Oil New Zealand Limited,9 the parties prepared for a four week trial although the actual length of the trial was only six days. Justice Katz was prepared to grant an uplift under r 14.6(3)(a), finding that a reasonable time allocation for trial preparation was 15 days and a reasonable time allocation for preparation of briefs was also 15 days.
[24] I do not think it is appropriate to take account of any duplication in preparation arising from the deferral of the hearing because of COVID 19. That was outside the control of the Court and the defendants.
[25] I also think there is merit in Mr Wenley’s submission that the evidence and submissions had been previously rehearsed in the summary judgment proceeding.
[26] I accept however that, although the matter was disposed of very expeditiously, that was in part as a result of what was no doubt comprehensive preparation by the plaintiffs. In particular, I note that the series of annexures provided to the closing submissions was substantially helpful during the course of the hearing and in preparation of my judgment. I conclude that it is reasonable for the allowance for each of Steps 33 and 33B to be assessed as if the hearing had taken three days.
Second counsel
[27] The plaintiffs seek certification of second counsel for one day under Step 35. In this case, both the plaintiffs and the defendants had second counsel attending for the course of the hearing. Mr Phillipps submits that second counsel substantially assisted in the preparation of the common bundle, the briefs of evidence and in the arrangements regarding the evidence taken from the witness in England by VCR, as well as organising the other witnesses. Counsel’s submission is that the complexity of
9 Auckland Waterfront Development Agency Limited v Mobil Oil New Zealand Limited [2015] NZHC 470 at [28].
the legal and factual issues and the practical exigencies of the hearing meant it was appropriate for second counsel to attend the hearing.
[28] The defendants object to the claim. Mr Wenley submits that second counsel for the plaintiffs did not play any role in the hearing that could not have been readily covered by lead counsel and that the role of second counsel in preparation for the hearing is not relevant to this question. His submissions also note that the factual issues were not complex and the legal issues had been well-rehearsed in the summary judgment and leave proceedings. Only three witnesses were called for the plaintiffs.
[29] The default position in Schedule 3 of the Rules is that provision is made for only one counsel in a proceeding, but the Court has a discretion to certify a second or third counsel, depending on the individual case. The general approach is that second counsel will be allowed in Category 3 cases, but that a Category 2 case must have some exceptional feature to justify a second counsel allowance.10
[30] The claim for second counsel is to be calculated on the basis of a 50 per cent allowance for the appearance of principal counsel. The claim therefore relates only to counsel’s appearance at the hearing.11 Here, the plaintiffs’ submissions emphasise the role of second counsel in preparation prior to the hearing. In the absence of sufficient detail regarding second counsel’s role at the hearing, I am not satisfied there is any exceptional feature to justify a second counsel allowance. I do not allow the claim for second counsel.
Other disputed steps
[31] The defendants object to the allowance claimed for three case management conference (CMC) memoranda filed by the plaintiffs on 21 February 2020, 10 March 2020 and 17 April 2020 and says the allowance claimed is excessive as all three memoranda were directed to one CMC.
10 Prattley Enterprises Limited v Vero Insurance New Zealand Limited [2017] NZHC 1599 at [44].
11 Mary Moodie Family Trust Board v Attorney-General, above n 7, at [9].
[32] The defendants also object to the allowance claimed for a memorandum for trial dated 12 February 2021, on the basis that it related to the plaintiffs’ own witness arrangements.
[33] The defendants object to an allowance claimed for a telephone conference on 28 February 2021 regarding adjournment of trial (because of COVID-19).
[34] The defendants also object to an allowance claimed for two memoranda filed by the plaintiffs regarding the defendants’ Beddoe application, dated 15 November and 17 November 2021, as being “premature”.
[35] In relation to the memoranda filed for the CMC, I agree that an allowance for one memorandum only is appropriate.
[36] I also agree with the defendants that the allowance sought for the memorandum for trial (12 February 2021) and for a telephone conference regarding adjournment of the trial is not appropriate.
[37] In relation to the two memoranda filed in relation to the defendants’ Beddoe application, I do not understand the submission for the defendants that the memoranda were premature. The question of a Beddoe order was raised by the defendants for the first time after judgment; the plaintiffs were required to respond in some detail. I do not agree that the costs sought are excessive, given the nature of the orders sought by the defendants and the relative complexity of the underlying case law. I will allow costs sought in relation to those memoranda.
Conclusion
[38] Accordingly, the defendants must pay to the plaintiffs costs calculated on a Category 2 basis as follows:
(a)All pre-trial steps other than commencement of proceedings are 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 is to be assessed as if the trial had taken three days;
(d)Second counsel is not certified for;
(e)CMC memoranda – allowance for one only;
(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.
Gwyn J
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