Affco New Zealand Limited v Anzco Foods Waitara Limited HC Wellington Civ-2004-485-499

[2005] NZHC 1701

IN THE HIGH COURT OF NEW ZEALAND                CIV 2004 485 499 WELLINGTON REGISTRY

BETWEEN              AFFCO NEW ZEALAND LIMITED

Plaintiff

ANDANZCO FOODS WAITARA LIMITED

First Defendant

AND  ITOHAM NEW ZEALAND LIMITED

Second Defendant

AND  RIVERLANDS LIMITED

Third Defendant

Hearing:        3 May 2005

Counsel:        R A Dobson QC and B K Murphy for Plaintiff C F Finlayson for Defendants

Judgment: In accordance with r 540(4) I direct the Registrar to endorse this judgment with the delivery time of 3.00 p.m. on Monday the 9^th day of May 2005.

JUDGMENT (2) AS TO COSTS OF RONALD YOUNG J

[1]This judgment as to costs should be read together with:

(a)My judgment on the substantive proceedings dated 23 August 2004, and

(b)My judgment as to costs dated 3 November 2004.

[2]        There remain several issues to be resolved by me. I have heard counsel’s submissions orally.

[3]The issues are:

(1)Whether I should make an order for interest on unpaid costs by the defendants to the plaintiff.

(2)The Bell Gully service charge.

(3)The Melsop fee account.

(4)The Foster fee account.

[4]I consider each in turn.

Interest

[5]        The agreed category 3C costs are $108,897.50. The plaintiff sought payment of these costs without disbursements on 22 December 2004 when it became evident that there was significant argument about the payment of disbursements. The plaintiff says that the defendants’ obligation to pay these costs must at least have been from that date. Given the failure to pay they say this Court should make an order for interest at a rate of 7.5% from 3 November 2004 the date of my judgment on costs until the date of payment.

[6]        The defendants’ reply is that there is no obligation to pay costs until costs and disbursements are identified and either agreed between the parties or ordered by the Court. The defendants say that part of the reason for the delay in resolving this issue was that the amount originally claimed by the plaintiff for costs has been significantly reduced as a result of changes and some disbursement items and other items that have been withdrawn. They say that the cause of delay is the plaintiff’s over claiming for some items.

[7]        I agree with the approach of the plaintiff here. I can see no reason why the costs that were agreed between the parties of $108,897.50 should and could not have been immediately paid after my judgment of 3 November 2004. Because there was an argument about disbursements did not mean that the obligation to pay costs accepted did not arise. As the plaintiff points out, Rule 48H(2) provides:

48H Disbursements

. . .

(2)A disbursement may be included in the costs awarded for a proceeding to the extent that the disbursement is— . . .

[8]        That Rule therefore clearly contemplates that a disbursement might be included in the costs award or may be later identified. Courts often make global awards of costs with disbursements to be identified and fixed by the Registrar. In such a situation the costs award will clearly be payable from the time the amount payable is identified. I see no reason to differentiate here. The question, therefore, that arises from this proposition, is whether or not this Court has power to and  should make an award of interest on the unpaid costs.

[9]        The House of Lords in Hunt v R M Douglas (Roofing) Ltd [1988] 3 WLR 975 (HL) supports the proposition that the Court does have jurisdiction to make an interest order on unpaid costs. In Hunt the headnote adequately summarises the conclusions of the Court:

A litigant who has been awarded costs is entitled to interest on those costs from the date of judgment rather than the date the taxation of costs is completed.

[10]      There is nothing to say that such  a  jurisdiction  does  not  also  exist  in  New Zealand. While such an order would clearly not be made in the run of the mill situation, the circumstances here are quite different.   A large order of costs, over

$100,000 has been agreed between counsel. A significant period of time has passed (six months) since my judgment of 3 November which gave rise to the identification of the amount outstanding. There is no reason why ANZCO should have had the use of what essentially is AFFCO’s money.  I therefore make an order that interest be

payable at the rate of 7.5% on the outstanding amount of costs of $108,897.50 from the date of demand which I take to be 22 December 2004 until the date of payment.

Bell Gully service charge

[11]The plaintiff seeks recovery of what is described as a service charge of

$4,855.66 being 2.5% of their costs account. The defendants say that a service charge is not contemplated by the Rules and is not payable. The service charge is said to be for such matters as photocopying expenses, facsimile charges, toll charges, courier charges, internet charges and the like. It seems that some of the larger law firms in New Zealand as between themselves and their clients are providing for a percentage recovery of what has been generally identified as “office disbursements” as described above. It seems that law firms have identified that it is economically sensible to charge these as a percentage, if their clients agree, rather than try and identify them individually in relation to each client matter. Out of pocket expenses such as Court charges, registration and filing costs, accommodation costs and the like are charge as incurred.

[12]      The plaintiff invites me, therefore, in this case to find that such a charge is authorised by the High Court Costs Rules and should be payable by the defendants. In support of this submission the plaintiff submits that Rule 48H(2) entitles such a payment to be authorised by the Court. Rule 48H(1) and 48H(2) provide as follows:

48H     Disbursements

(1)In this rule, disbursement, in relation to a proceeding,—

(a)means an expense paid or incurred for the purposes of the proceeding that would ordinarily be charged for separately from professional services in a solicitor's bill of costs; and

(b)includes—

(i)fees of Court for the proceeding:

(ii)expenses for serving documents for the purposes of the proceeding:

(iii)expenses for photocopying documents required by these rules or by a direction of the Court:

(iv)expenses of conducting a conference by telephone or video link; but

(c)does not include counsel’s fee.

(2)A disbursement may be included in the costs awarded for a proceeding to the extent that the disbursement is—

(a)of a class that is either—

(i)approved by the Court for the purposes of the proceeding; or

(ii)specified in subclause (1)(b); and

(b)specific to the conduct of the proceeding; and

(c)necessary for the conduct of the proceeding; and

(d)reasonable in amount.

(3)A Judge or Master may direct a Registrar to exercise the powers of the Court under this rule.

[13]      The only case where counsel have been able to identify the authorisation of a “lump sum” for disbursements is Aotearoa International Limited v Paper Reclaim Limited (Unreported, HC Auckland, CP 117/01, 30 August 2004, Nicholson J) and  in particular at paragraph [74] of that judgment where the Judge said:

Mr Judd challenged the claim of $2,251.51 for fax, tolls, courier and  internet. In response, Mr Grant advised that the internet charge was $4.00  for a company search and that the courier costs were $233.50 paid largely  for service and delivery of documents to Paper Reclaim’s solicitors and counsel. Particulars were not given of the fax and toll disbursements claimed. I allow $2,000 for the fax, tolls, courier and internet disbursement item as expenses paid for the purpose of the proceeding in terms of r48H(1)(a).

[14]      That case involved quite a different situation than the present. In Aotearoa International (supra) it was a case of a best estimate of actual expenses. In this case the plaintiff maintains that identifying particular disbursements is not necessary because they maintain that a 2.5% change bears some relationship generally to actual charges.

[15]      I am not prepared to make an order in terms of Rule 48H that a legitimate disbursement is Bell Gully’s 2.5% service charge is a legitimate basis for charging disbursements. Sub-rule (1) defines what disbursements are in relation to a

proceeding. They are “expense” payable and “incurred for the purposes of the proceeding”. A service charge as such is not an expense payable or incurred for the purpose of a proceeding in the sense that it is not adequately or appropriately identified as such. By its very nature, a percentage fee may or may not involve  actual expenses paid or incurred. Because the Rules authorise only reimbursement  of expenses paid or incurred for the purpose of the proceedings, a percentage charge cannot, in my view, be justified by Rule 48H.  Nor in my view does 48H(2) assist  the plaintiff. While the disbursements that may be included in the costs award are broadly described there, they must still in my view comply with the definition of disbursement in r48H(1)(a). The examples given in r48H(1)(b) reinforce my view. They are illustrations of actual expenses incurred.

[16]While I accept the submission of Bell Gully that the amount claimed here,

$4,855.66 may have been exceeded by actual disbursements incurred, I am not prepared to allow a percentage service charge as appropriate.

[17]However, the plaintiff in these submissions could identify courier fees of

$769.49 and photocopying of $2,219.70. In addition they thought that there could be case specific communications “expenses” of at least $600.

[18]      I would be prepared to authorise, for this purpose, the courier charges and photocopying. I would not, however, be prepared to authorise the $600  which cannot be said to be based on actual expenses incurred. I therefore allow the sum of

$2989.19.

Melsop’s fee for professional

[19]      The plaintiff sought $51,251.00 for professional services for  Mr  Melsop.  Mr Melsop was a significant expert witness in what was, as I have identified, a complex case. While the starting point in such a case is the Witnesses and Interpreters Fees Regulations 1974 they would, I accept, be hopelessly inadequate to properly reimburse the experts in this case. The defendants did not suggest otherwise. They submit, however, that the fees were excessive being, they claim, something in the region of six times the fees for their equivalent expert Mr Davison.

[20]      There is nothing that I have seen which makes me doubt the appropriateness of Mr Melsop’s fee. It was based on work done by him and others including a more junior in his organisation. Having a less senior person undertake part of the research necessary is appropriate and potentially advantages the defendant in any event. It is for experts to judge at what level the work needs to be done and obviously the lower the level the lower at least the hourly rate. I acknowledge of course the proposition that in such circumstances junior staff members may take longer than a senior staff member to undertake the same work. There is nothing in the defendant’s claim that Mr Melsop has spent excessive time on this matter that convinces me. I ultimately preferred his evidence in the case. This was a complex legal and factual case and while there was considerable agreement between Mr Davison the defendants’ expert, and Mr Melsop, ultimately they drew different hypotheses and therefore different conclusions from the material.

[21]      I  also  note  that  Mr  Davison’s  circumstances  are  quite  different  than   Mr Melsop’s.   Mr Melsop is a private individual running a private  consultancy.   Mr Davison is an employee of the Meat and Wool Economic Service which is an industry sponsored body and therefore is in quite a different position in terms of charge outlay. I approve Mr Melsop’s charge in full.

Mr Foster’s fee for professional services

[22]      Mr Foster’s fee for professional services was $9,075. He was an expert witness who gave evidence relating to both the encumbrance and Commerce Act issues. Essentially the complaint by the defendants comes down to an expression of concern that Mr Foster claimed that he was in Court for four days but only gave evidence on two days. Essentially the defendants say that it should not have to pay for the two days he was in Court merely observing rather than giving evidence. The plaintiff says that Mr Foster was required to be in Court because it was difficult to know when he would precisely be required. This was exacerbated by the fact that he had to give evidence twice on different issues.

[23]      I accept that there  may  be  some  modest  over  counting  with  regard  to  Mr Foster being part of the two days. I would be prepared to reduce his claim for a

fee of $9,075 to reflect that it is difficult to justify an additional two days. I therefore reduce the amount that may be claimed by the plaintiff to $8,000.

[24]In summary, I therefore make the following orders:

(1)That interest at the rate of 7.5% on  the  sum  of  $108,897.50  from 22 December 2004 until paid.

(2)Disbursements Bell Gully be entitled to claim for photocopying and courier fees $2,989.19.

(3)The defendants’ pay the plaintiff the full amount of Mr Melsop’s professional fee of $51,251.00.

(4)The defendants pay Mr Foster’s professional fee fixed at $8,000.

(5)I allow costs of this application in favour of the plaintiff who succeeded on most of the issues raised in a lump sum rather than based on a scale in the sum of $2,500.

……………………………

Ronald Young J

Solicitors:

Bell Gully, Auckland, for Plaintiff

Crengle Shreves & Ratner, Wellington, for Defendants