AFI Management Pty Ltd v Lepionka & Co Investments Ltd
[2018] NZHC 892
•1 May 2018
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2015-404-2836
[2018] NZHC 892
IN THE MATTER of the Property Law Act 2007 BETWEEN
AFI MANAGEMENT PTY LIMITED
Applicant
AND
LEPIONKA & COMPANY INVESTMENTS LIMITED
Respondent
……………………………/continued
Hearing: On the papers Counsel:
MG Colson and MM Ollivier for defendants
KA Muir for Warren James Ladbrook (non-party)
Judgment:
1 May 2018
JUDGMENT OF FITZGERALD J
[As to costs of non-party discovery application]
This judgment was delivered by me on 1 May 2018 at 4 pm, pursuant to Rule 11.5 of the High Court Rules.
Registrar/Deputy Registrar
Date…………
Solicitors: Bell Gully, Auckland
Morgan Coakle, Auckland
AFI Management Pty Limited v Lepionka & Company Investments Limited [2018] NZHC 892 [1 May 2018]
CIV-2015-404-2168
BETWEEN GLW GROUP LIMITED
First Plaintiff
GARTH BOWKETT PATERSON
Second Plaintiff
ANDLEPIONKA & COMPANY INVESTMENTS LIMITED
First Defendant
LEPIONKA & COMPANY LIMITED
Second Defendant
STEFAN JOZEF JOHN LEPIONKA and
NIGEL WARREN HUGHES as trustees of the SJ Lepionka Family Trust
Third Defendants
STEFAN JOZEF JOHN LEPIONKA
Fourth Defendant
Introduction
[1] In March 2017, the defendants in these proceedings (the “Lepionka parties”) sought non-party discovery against Warren James Ladbrook (and others). That application, together with several other interlocutory applications, was heard by me on 19 May 2017. By a judgment delivered on 31 May 2017, I declined the Lepionka parties’ application for non-party discovery against Mr Ladbrook.1
[2] Mr Ladbrook now seeks his costs of successfully opposing the application, namely indemnity costs of $14,370 (inclusive of disbursements). The Lepionka parties oppose such an order in Mr Ladbrook’s favour, and instead say that costs should either lie where they fall, be reduced or be paid by the plaintiff (“GLW”).
Legal principles
[3]High Court Rule 8.22(3) provides as follows:
8.22 Costs of discovery
…
(3)If an order is made under rule 8.20(2) or 8.21(2), the Judge may, if the Judge thinks it just, order the applicant to pay to the person from whom discovery is sought the whole or part of that person’s expenses (including solicitor and client costs) incurred in relation to the application and in complying with any order made on the application.
[4] While r 8.22(3) expressly refers to a non-party’s costs when an order is made under r 8.21(2) (i.e. an order for non-party discovery to be given), the same matters to be considered under r 8.22(3) are to be considered when an application for third party discovery is opposed and the application does not proceed.2 I can see no reason why a similar approach ought not to apply when the application is opposed, proceeds to a hearing and the respondent is successful in his or her opposition.
1 AFI Management Pty Ltd v Lepionka & Company Investments Ltd [2017] NZHC 1176 at [40].
2 Air New Zealand Ltd v E-Gatematrix New Zealand Ltd (2007) 18 PRNZ 501 (HC) at [19].
[5] It is also clear that r 8.22(3) covers two different stages of an application for non-party discovery: first, costs in relation to the application itself; and, secondly, the costs of complying with any order that the non-party give discovery.3
[6] When considering costs at the first stage, the court will assess whether the non- party’s response to the application was reasonable.4 Further, while costs are always at the discretion of the court, and assuming the non-party’s response to the application was reasonable, that party’s (reasonable) actual costs ought to be met by the party seeking non-party discovery. As observed by McGechan J in Clear Communications Ltd v Telecom Corp of New Zealand Ltd, “[t]hird parties brought in as by a sidewind should not be left meeting their own expenses”.5 While the Judge’s comment was made in relation to the costs of the second stage of a non-party discovery application (i.e. the costs of compliance), again, I can see no reason why it ought not to apply to the non-party’s costs of responding to the application itself. Rule 14.6(4)(d) also reflects such an approach, namely that the court may order indemnity costs where “the person in whose favour the order of costs is made was not a party to the proceeding and has acted reasonably in relation to it” (emphasis added).
[7] In terms of assessing the quantum of a non-party’s application for indemnity costs, the court remains concerned to ensure that the costs sought are reasonable. In this context, the equivalent scale costs and actual costs incurred by other parties in relation to the same or similar work may be useful references.6 However, as Rodney Hansen J observed in Commerce Commission v Cards NZ Ltd, when comparing the non-party applicant’s costs to costs incurred by another non-party faced with the same or a similar application, the exercise should not become purely mathematical; that is, a precise coincidence of costs is neither required nor expected. Rather “[t]he particular needs of clients and the different ways in which solicitor and client interact should be recognised”.7 I respectfully agree with his Honour’s observations.
3 Commerce Commission v Cards NZ Ltd HC Auckland CIV 2006-485-2535, 10 December 2009 at [5].
4 At [6], referring to Clear Communications Ltd v Telecom Corp of New Zealand Ltd (1994) 8 PRNZ 200 (HC) at 202.
5 Communications Ltd v Telecom Corp of New Zealand Ltd (1994) 8 PRNZ 200 (HC) at 202.
6 Davis v Independent Newspapers Ltd HC Auckland CP 67-SD02, 16 May 2003 at [35]; Commerce Commission v Cards NZ Ltd HC Auckland CIV 2006-485-2535, 10 December 2009 at [12].
7 At [23].
[8] Finally, in assessing reasonableness, a broad approach will often be appropriate, and the court should not strive to be “too exact”8 or “overly prescriptive”.9 Ultimately, the court must “view the matter overall in order to consider whether or not the costs are reasonable in all the circumstances.”10
Submissions
Mr Ladbrook
[9] Counsel for Mr Ladbrook, Mr Muir, submits that costs ought to follow the event in the ordinary way and, in accordance with the usual approach, Mr Ladbrook’s costs ought to be met in full. Mr Ladbrook was and remains a non-party to the proceedings and his response in opposing the application was reasonable, given the application ultimately failed. Mr Muir further submits that Mr Ladbrook’s actual costs are reasonable and in line with earlier assessments by this Court of a non-party’s costs on a non-party discovery application.11 Finally, and in response to several points raised on behalf of the Lepionka parties (see below), Mr Muir says there is nothing about Mr Ladbrook’s involvement in this matter which alters his status as a non-party, and Mr Ladbrook responsibly sought to agree some form of voluntary non-party disclosure with the Lepionka parties but was ultimately unsuccessful. Mr Ladbrook also objects to certain aspects of the material relied on by the Lepionka parties in opposing his application for costs, given it is not supported by affidavit evidence.
The Lepionka parties
[10] Mr Colson and Ms Ollivier, counsel for the Lepionka parties, acknowledge that in the ordinary course, costs ought to follow the event and that non-parties’ actual costs are often met in whole or in part. However, they submit Mr Ladbrook is not an ordinary “non-party”, because he has a close interest in these proceedings, given his various attempts to purchase the underlying property in question. The Lepionka
8 Clear Communications Ltd v Telecom Corp of New Zealand Ltd (1994) 8 PRNZ 200 (HC) at 202.
9 Commerce Commission v Cards NZ Ltd HC Auckland CIV 2006-485-2535, 10 December 2009 at [33].
10 Davis v Independent Newspapers Ltd HC Auckland CP 67-SD02, 16 May 2003 at [31].
11 Referring to Master Lang’s comments in Davis v Independent Newspapers Ltd at [37].
parties further submit that it appears Mr Ladbrook has been in some kind of “advisory” role to GLW from early 2015.
[11] Given these matters, the Lepionka parties submit that costs of the non-party discovery application ought to lie where they fall. Alternatively, and for largely the same reasons, the Lepionka parties submit that scale costs only should be awarded. Further, and by way of comparison with costs incurred by another non-party on the same application, the Lepionka parties submit that if indemnity costs are to be ordered, Mr Ladbrook’s costs should be reduced by 50 per cent. Finally, the Lepionka parties say that because the non-party discovery was sought because of GLW’s failings in its own discovery, any costs ordered ought to be paid by GLW in any event.
Discussion
[12] There is no doubt Mr Ladbrook had and, it seems, still has, an interest in purchasing the property which underlies these proceedings. In that sense, he has an interest in the outcome of the proceedings. I do not consider, however, that his interest in the underlying property somehow “converts” Mr Ladbrook into a party to these proceedings for costs purposes. There is no suggestion, for example, that Mr Ladbrook is driving or funding GLW’s pursuit of the proceedings.
[13] Further, while the Lepionka parties say that Mr Ladbrook’s role extends to an “advisory” role to GLW since early 2015, that submission is based solely on an email from GLW’s solicitor in 2017 explaining why litigation privilege ought to attach to GLW’s communications with Mr Ladbrook from early 2015. Counsel for Mr Ladbrook has indicated that the contents of that email are considered by Mr Ladbrook to be incorrect, and notes that the nature of Mr Ladbrook’s role vis-à-vis GLW has never been tested or determined by this Court. I do not consider GLW’s (untested) description of Mr Ladbrook’s role to be an appropriate basis on which to (effectively) treat Mr Ladbrook as a party for the purposes of his costs application.
[14] Moreover, even if Mr Ladbrook had been treated as a party (or at least a not wholly disinterested non-party) for cost purposes, the application for discovery against Mr Ladbrook failed. That was on the basis the documents sought were not relevant to
an issue arising on the pleadings.12 Accordingly, I do not consider an appropriate outcome would be to order costs on the application to lie where they fall.
[15] Largely for the same reasons as above, nor do I consider it appropriate to order scale costs only, rather than all or part of Mr Ladbrook’s actual costs. He is a non- party to these proceedings. The application against him failed. There is nothing in the materials before me which persuades me I should exercise my discretion to limit Mr Ladbrook’s recovery of costs to scale costs only.
[16] Accordingly, the sole remaining question is the reasonableness of the costs sought by Mr Ladbrook. The Lepionka parties compare Mr Ladbrook’s costs ($14,370) to the costs incurred by another non-party in opposing the same application ($8,050.62). The Lepionka parties say that Mr Ladbrook’s costs by comparison are unreasonably high, particularly given his involvement was limited to filing a notice of opposition, preparing submissions and making brief oral submissions at the hearing before me on 19 May 2017.
[17] First, I do not consider the mere fact that another party has incurred less costs means that Mr Ladbrook’s costs are unreasonable. Nevertheless, Mr Ladbrook’s costs are some 80 per cent higher than the other non-party’s costs on the same application. This does tend to suggest Mr Ladbrook’s costs are somewhat on the high side. Secondly, his costs are also approximately 2.5 times the equivalent scale costs allocation.13 While I accept there is debate in some quarters as to whether scale costs provide a reasonable rate of recovery for a successful party (at least in reasonably complex commercial litigation),14 the fact Mr Ladbrook’s costs are that much greater than scale again suggests they are slightly on the high side.
[18] Taking the above matters into account, and that the issues arising on the non- party discovery application were not particularly complex and were confined to a very narrow set of document requests, I consider a slightly lower figure than $14,370 to be
12 AFI Management Pty Ltd v Lepionka & Company Investments Ltd [2017] NZHC 1176 at [37] to [40].
13 Scale costs on a 2B basis for defending an interlocutory application such as this are $5686.50.
14 As observed in Davis v Independent Newspapers Ltd HC Auckland CP 67-SD02, 16 May 2003 at [35].
reasonable. Taking the broad approach outlined at [8] above, I consider an appropriate order for costs in Mr Ladbrook’s favour is one of $12,000.
[19] I do not consider it appropriate to order that these costs are payable by GLW rather than the Lepionka parties. GLW has not, it seems, been served with copies of the parties’ memoranda and therefore has not had an opportunity to make submissions on any such proposal. Further and in any event, I determined that the documents sought by way of discovery from Mr Ladbrook were not relevant to issues to be determined in these proceedings. Accordingly, in my 2017 judgment, I declined to order similar discovery against GLW.15 While GLW’s own discovery was clearly deficient, that fact alone does not provide a sound basis to order GLW to pay the costs of the Lepionka parties’ unsuccessful non-party discovery application.
[20] Given the outcome of Mr Ladbrook’s costs application, the Lepionka parties ought to pay Mr Ladbrook’s costs of applying for costs of the non-party discovery application. Mr Ladbrook seeks such costs on a scale basis. There is no step in sch 3 to the High Court Rules which covers Mr Ladbrook’s application for costs of his costs application. However, scale costs can be determined by analogy with Step 11, namely preparation of memoranda.16 Two (substantive) memoranda seeking costs were filed on Mr Ladbrook’s behalf. Taking into account that the second memorandum (dated 20 April 2018) addressed in part matters also addressed in the first memorandum (dated 13 June 2017), and that Mr Ladbrook has not been wholly successful on the quantum of costs sought, I consider it appropriate that the Lepionka parties pay Mr Ladbrook $1,000 towards the costs of his costs application.17
Orders
[21] There are accordingly orders that the Lepionka parties pay the following costs of Mr Ladbrook:
15 AFI Management Pty Ltd v Lepionka & Company Investments Ltd [2017] NZHC 1176 at [72].
16 High Court Rules 2016, r 14.5(1)(b).
17 Allowing for two memoranda, each of which would be allocated 0.4 days, the $1,000 is just over half the amount ordinarily claimable.
(a)$12,000, being Mr Ladbrook’s reasonable actual costs of the Lepionka parties’ application for non-party discovery; and
(b)$1,000 in respect of Mr Ladbrook’s costs of this costs application.
Fitzgerald J
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