AMFL Limited v Savill

[2020] NZHC 3058

IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY

I TE KŌTI MATUA O AOTEAROA ŌTAUTAHI ROHE

CIV-2020-409-000143

[2020] NZHC 3058

BETWEEN

AMFL LIMITED

Applicant

AND

SIMON LYDALL SAVILL

Respondent

Hearing:	On the papers
Appearances:	M J Hammer and C M O’Brien for Applicant D J Ballantyne for Respondent
Judgment:	19 November 2020

JUDGMENT OF DUNNINGHAM J RE: COSTS DECISION

This judgment was delivered by me on 19 November 2020 at 2.30 pm, pursuant to r 11.5 of the High Court Rules

Registrar/Deputy Registrar Date: 19 November 2020

Introduction

[1]    On 25 March 2020 the respondent (Mr Savill) sought an interim injunction preventing the applicant (AMFL) from exercising its mortgagee rights and restricting the mortgagee sale of the Mr Savill’s property at Kumutoto Bay, Marlborough (the property). I granted the injunction, on a without notice basis, on the same day.1 I did so on the basis that Mr Savill asserted that AMFL proposed proceeding with a

1      Savill v AMFL Ltd [2020] NZHC 655.

AMFL LIMITED v SIMON LYDALL SAVILL [2020] NZHC 3058 [19 November 2020]

mortgagee sale during COVID-19 level 4 lockdown restrictions, and considered it not possible to obtain the best price reasonably obtainable in the circumstances where prospective purchasers could neither view the property nor attend the auction.2

[2]    After the lockdown restrictions were lifted, AMFL sought to rescind the interim injunction. At a hearing on 13 August 2020, I granted that application.3 In my subsequent reasons judgment, I found that Mr Savill had some arguable, but distinctively unpromising, claims.4 I also concluded that the balance of convenience clearly favoured AMFL for a number of reasons, so AMFL should be able to sell the property in its entirety, including with associated structures such as moorings and a jetty which were authorised by coastal permits. I reserved the issue of costs.

[3]    AMFL has now made an application for costs in relation to the interim injunction proceedings.

Costs on the interim injunction

Applicant’s submissions

[4]    AMFL’s position is that Mr Savill is not entitled to costs on the interim injunction. AMFL’s successful application to rescind the injunction demonstrates that it was not justified.

[5]    AMFL seeks costs on an indemnity basis in the sum of $81,033.02 (inclusive of GST) and disbursements in the sum of $500.5 Furthermore, AMFL seeks indemnity costs on the current application, citing the lack of engagement by Mr Savill on the issue of costs.

[6]    Counsel for AMFL refers to r 14.6(4)(e) of the High Court Rules 2016 which states the court may order a party to pay indemnity costs if “the party claiming costs is entitled to indemnity costs under a contract or deed”.

2 At [3].

3      AMFL Ltd v Savill [2020] NZHC 2053.

4      AMFL Ltd v Savill [2020] NZHC 2112.

5      Being the filing fee for the application to rescind the interim injunction.

[7]    AMFL’s position is that under the terms of the Facility Agreement (the Agreement) it is entitled to recover all costs and expenses incurred in connection with the enforcement of its rights under the Agreement (including legal costs on a full indemnity basis).

[8]The Agreement contains the following clause:

16.1.1Costs and expenses: The Borrower shall pay to the Lender upon demand an amount equal to all costs, losses, expenses and other liabilities on a full indemnity basis (including legal expenses on a full indemnity basis and goods and services and similar taxes thereon) incurred or sustained by the Lender in connection with:

(a)the negotiation, preparation, execution, and ongoing administration of this Agreement and any amendments, variations, waivers or supplements to or of the same;

(b)the exercise, enforcement or preservation, or the attempted exercise, enforcement or preservation, of any right under any Finance Document, or in suing for or recovering any sum due under any Finance Document; and

(c)the granting of any waiver or consent under, or the giving of any variation or release of any Finance Document.

[9]    AMFL seeks that the Court only include in the award costs incurred from the date the interim injunction was filed, but excluding matters not directly related to the interim injunction and the application to rescind. The quantum of costs incurred with AMFL’s lawyers, Anderson Lloyd, is $65,553.02 (including GST) plus disbursements of $500. AMFL also seeks costs incurred with David Maclaurin, a barrister who assisted on legal matters relating to the interim injunction applications, totalling

$15,000. Counsel submits these costs can also be claimed, relying on cl 16.1 of the Agreement.

[10]   Counsel explains that items that do not directly relate to the applications have been excluded from the Anderson Lloyd invoices where it is reasonably possible to do so. However, this exercise cannot be completed to an exacting standard.6 The invoices

6      For example, phone calls and correspondence could have included discussion of various matters relating to the enforcement of the Agreement.

also contain a pro-rata write off, which cannot be retrospectively examined to ascertain the precise nature of the individual’s time entry. The invoices have had an approximate discount of time applied in respect of this aspect.

[11]   Counsel for AMFL submit the costs incurred to date are reasonable. The work undertaken was reasonably necessary and covered by the Agreement, the charge out rates are reasonable and there are no other factors on which this Court should deny judgment. In written submissions counsel provide a detailed description of the work, charge out rates, details of disbursements and office expenses.

[12]   The claim proceeds on a GST inclusive basis as AMFL is advised Mr Savill is not a GST-registered entity.

Respondent’s submissions

[13]   Mr Ballantyne, on behalf of Mr Savill, submits that costs must be determined on two distinct applications:

(a)Mr Savill’s successful application for the interim injunction in late March; and

(b)AMFL’s successful application to rescind the interim injunction.

[14]   He submits Mr Savill was successful on his initial application for an interim injunction and costs should follow the event. He accepts that the same principles apply to the unsuccessful opposition to AMFL’s application to rescind the interim injunction. However, he objects to costs being granted on an indemnity basis.

[15]   Mr Savill’s position is that the interim injunction was necessary for him to protect his position, and that he was wholly successful on his application. Accordingly, costs should follow the event on a 2B basis. Mr Savill seeks costs in the sum of $3,107, plus disbursements of $476.

[16]   Mr Savill’s position is, while AMFL was successful in its application to rescind, costs on an indemnity basis are not appropriate as the interim injunction was a necessary step to allow him to protect his position.

[17]   Mr Ballantyne appears to interpret AMFL’s submissions on costs as relying in some way on the undertaking as to damages given by Mr Savill and he submits if AMFL wishes to enforce the undertaking as to damages, it should bring a claim on that basis and fully argue the issue of costs as damages.

[18]   Counsel also takes issue with the reasonableness of the costs sought by AMFL. Scale costs on a 2B basis would be $9,321. Mr Ballantyne points to the general principle of that an appropriate daily recovery rate should normally be two-thirds of actual costs.7 On that basis, it follows that AMFL’s actual costs would appropriately be around $12,396.93. Mr Ballantyne submits this matter only related to one interlocutory application, and nothing outside of the ordinary in their proceedings would suggest that costs should go beyond normal daily recovery rates.

[19]   Mr Ballantyne points to a policy argument, that allowing indemnity costs would create an incentive for mortgagees to incur excessive costs on the basis they would be immediately recoverable under indemnity.

[20]   Mr Savill objects to the  $15,000  sought  by  AMFL  for  the  services  of  Mr Maclaurin. It is submitted it is not reasonable for AMFL to recover costs for a barrister that was not engaged to act for AMFL on the proceeding. This appears to be double dipping, as the work done by Mr Maclaurin and by Anderson Lloyd almost entirely overlaps.

[21]   Mr Ballantyne submits AMFL has not provided a sufficient breakdown of its costs associated with its interlocutory application to rescind. Without a sufficient breakdown of these costs, it is submitted the court should proceed on the basis that costs are approximately two-thirds of the daily rate considered reasonable, being

$12,396.

7      High Court Rules 2016, r 14.2(1)(d).

[22]   Mr Ballantyne submits any costs award against AMFL should be set-off against any adverse costs award against Mr Savill, particularly in light of AMFL refusing to defer the proposed mortgagee sale in the context of the COVID-19 lockdown.

[23]   Finally, I record that AMFL filed brief submissions in reply which counsel for Mr Savill objected to. He also sought, if the reply submissions were taken into account, to file a further reply for Mr Savill. I am satisfied that the applicant’s reply submissions should be accepted. They were brief and restricted to matters in reply. They did not require further response and which is why I did not permit that.

Discussion

The law

[24]Rule 14.6 of the High Court Rules 2016 provides:

14.6     Increased costs and indemnity costs

(1)       Despite rules 14.2 to 14.5, the court may make an order—

…

(b) that the costs payable are the actual costs, disbursements, and witness expenses reasonably incurred by a party (indemnity costs).

…

(4)       The court may order a party to pay indemnity costs if—

…

(e)the party claiming costs is entitled to indemnity costs under a contract or deed; or

(f)some other reason exists which justifies the court making an order for indemnity costs despite the principle that the determination of costs should be predictable and expeditious.

(emphasis added)

Is the indemnity clause in the Agreement engaged?

[25]The Agreement contains the following clause:

16.1.2Costs and expenses: The Borrower shall pay to the Lender upon demand an amount equal to all costs, losses, expenses and other liabilities on a full indemnity basis (including legal expenses on a full indemnity basis and goods and services and similar taxes thereon) incurred or sustained by the Lender in connection with:

…

(b) the exercise, enforcement or preservation, or the attempted exercise, enforcement or preservation, of any right under any Finance Document, or in suing for or recovering any sum due under any Finance Document;

…

[26]   Where indemnity costs are claimed, the clause must “be plainly and unambiguously expressed”.8

[27]   Clause 16.1.2(b) is clearly relevant. Here, AMFL was attempting to exercise its power of sale to recover the sum due under the Agreement, after Mr Savill defaulted on his mortgage payments. I consider the clause is plainly expressed, and covers the need to oppose attempts to prevent AMFL from exercising its powers of mortgagee sale, as occurred here.

Are the indemnity costs claimed reasonable?

[28]   Whether the costs are reasonable is not calculated from the costs scale contained in the rules, but rather from a “reasonable allocation of actual costs”.9 The appropriate time taken, significance and complexity of the work, and median hourly rate are relevant considerations.10 Where a dispute arises regarding the reasonableness of indemnity costs, “the trial court should make a decision on the reasonableness of the costs claimed.”11

8      Re Adelphi Hotel (Brighton) Ltd [1953] 2 WLR 955 (Ch) at 956.

9      Bradbury v Westpac Banking Corp (2009) 18 PRNZ 859 (HC) at [204] and [209].

10 At [209].

11     Edel Metals Group Ltd v Geier Ltd [2018] NZCA 494 at [64].

[29]   The principles for assessing whether indemnity costs claimed are reasonable was outlined by the Court of Appeal in Black v ASB Bank Ltd.12 The Court is to make an objective assessment of:13

(a)what tasks attract a costs indemnity on a proper construction of the contract;

(b)whether the tasks undertaken were those contemplated in the contract;

(c)whether the steps undertaken were reasonably necessary in pursuance of those tasks;

(d)whether the rate at which the steps were charged was reasonable having regard to the principles normally applicable to solicitor/client costs; and

(e)whether any other principles drawn from the general law of contract would in whole or in part deny the claimant its prima facie right to judgment.

[30]   Mr Ballantyne says it is well established that costs on an indemnity basis under a contract are at the discretion of the court.14 Further, that the Court has broad discretion to reduce the costs payable.15

[31]   In this case, I accept that significant attendances were necessary. Mr Savill raised a number of legal and factual disputes. Each needed to be analysed and responded to, whether with legal argument or with affidavit evidence as to the factual narrative. While AMFL responded thoroughly to all of these, that was a necessary consequence of Mr Savill raising multiple impediments to AMFL’s right to proceed with a mortgagee sale.

[32]I do not consider Anderson Lloyd’s costs were unreasonable.

[33]   While I accept that Mr Maclaurin’s attendances appear to overlap with those of Anderson Lloyd, that is normal in circumstances where counsel’s advice is sought. The narration makes it clear the attendances were related to the injunction proceedings. His account then incorporates a modest discount on work done charged at a reasonable

12     Black v ASB Bank Ltd [2012] NZCA 384.

13 At [80].

14     Referring to High Court Rules, r 14.6(4)(e).

15     Rule 14.7(g).

hourly rate of $300. For these reasons, I cannot say that this additional cost is unreasonable and should be excluded from recovery under the Agreement. Accordingly, I am satisfied that the applicant is entitled to costs as sought, pursuant to the terms of the Agreement.

Mr Savill’s costs on the interim injunction

[34]   That leaves the issue of whether Mr Savill is entitled to costs on the successful application for an interim injunction made without notice. As already noted, I did not consider the merits of any of Mr Savill’s legal arguments on that occasion. I simply relied on the assertion that AMFL may proceed with a mortgagee sale notwithstanding the level 4 lockdown restrictions. That issue was no longer live when I dealt with the on notice application to rescind the interim injunction.

[35]   When I rescinded the interim injunction, I noted that important documents in the chain of correspondence between the parties had been omitted from the without notice application. I also said that:16

… Mr Savill overstated the situation when he said that AMFL intended to proceed with a mortgagee sale during the lockdown “at any cost”. While AMFL had not discounted that possibility, it had also said it was taking advice on that issue, and I do not consider it was accurate to suggest it was committed to that course of action.

However, I went on to say that:17

AMFL did not disavow the possibility that it would sell the property during lockdown and nothing in the material subsequently filed suggests it was inappropriate to restrain AMFL from doing that during that period.

[36]   Accordingly, while I consider the matter could have been better handled by Mr Savill, I do not consider the initial application for an injunction was unmeritorious. Had AMFL expressly and clearly disavowed the possibility that it would try to sell the property during lockdown, the application would not have been made.

16     AMFL Ltd v Savill, above n 4, at [20].

17 At [21].

Result

[37]   I am satisfied it is appropriate to award costs, in Mr Savill’s favour on a 2B basis amounting to $3,583 (being costs of $3,107 plus disbursements of $476). This amount is to be set-off against the amount of $81,533.02 I award AMFL, leaving a net balance for Mr Savill to pay to AMFL of $77,950.02.

Costs on this costs’ application

[38]   I am not satisfied that indemnity costs should be awarded in respect of making this application for costs. It included consideration of Mr Savill’s cross claim which was resisted by AMFL. I award $1,300 to AMFL which is just under 50 per cent of its actual costs.

Costs recovery

[39]   I further order that if Mr Savill is unable to meet any of the costs I have awarded, AMFL is entitled to recover them under the Agreement and the mortgage.

Solicitors:

Canterbury Legal, Christchurch Anderson Lloyd, Queenstown

Copy To:

D J Ballantyne, Barrister, Christchurch