Andrews v Lomax

[2023] NZHC 1777

IN THE HIGH COURT OF NEW ZEALAND INVERCARGILL REGISTRY

I TE KŌTI MATUA O AOTEAROA WAIHŌPAI ROHE

CIV-2021-425-72

[2023] NZHC 1777

UNDER

section 174 of the Companies Act 1993

BETWEEN

ROBERT ANTHONY ANDREWS

First Plaintiff

KERRY ANDREWS
Second Plaintiff

ROBERT ANTHONY ANDREWS, KERRY ANDREWS and BERYL ANDREWS as

trustees of the RUBY TRUST Third Plaintiffs

AND

PAUL JOHN LOMAX

First Defendant

CHESTER HOSPITALITY LIMITED
Second Defendant

NH TRUSTEES NO. 9 LIMITED as trustee of the LOMAX FAMILY TRUST

Third Defendant

ARROW HOSPITALITY LIMITED

Fourth Defendant

Hearing:	(On the papers)
Counsel:	S D Williams and B B Gresson for Andrews parties P C Murray and K M Paterson for Lomax parties M J Hammer for non-party
Judgment:	7 July 2023

JUDGMENT OF ASSOCIATE JUDGE LESTER

(costs of non-party in providing discovery)

ANDREWS v LOMAX [2023] NZHC 1777 [7 July 2023]

[1]    On 7 December 2022 at a hearing of various applications between the parties Mr Murray, counsel for the Lomax parties, at my suggestion made an oral application for non-party discovery against Mr Townsend. Ms Williams, counsel for the Andrews parties, did not oppose the application being made orally or its substance. The discovery to be given by Mr Townsend (assuming he agreed to give discovery) was described in specified paragraphs  in  Mr Murray’s  submissions.  I requested that  Ms Williams make those paragraphs available to Mr Townsend.

[2]I said at [23]:

In the first instance, the costs of Mr Townsend in complying with the order (assuming he does not object) are to be borne by the Lomax Parties. …

[3]    What would have been a conventional non-party discovery application (assuming Mr Townsend consented) became complicated by what Judge Paulsen described in a minute issued 15 June 2023 as being “a futile attempt to save costs” through the parties attempting to redefine the scope of the non-party discovery order.

[4]In a minute issued 9 May 2023 Osborne J ordered:

Mr Townsend’s reasonable costs and disbursements (including reasonable solicitor/client costs) incurred from 3 February 2023 in co-operating in relation to and providing discovery are to be paid in the first instance by the first, second and third defendants …

He also directed the first, second and third defendants were to pay $10,000 into their solicitors’ trust account on account of Mr Townsend’s costs.

[5]    As to the quantum of Mr Townsend’s costs from 3 February 2023, Osborne J, in his minute of 9  May  2023,  directed  that  counsel  were  to  attempt  to  agree  Mr Townsend’s reasonable costs and failing agreement those costs were to be set by an Associate Judge.

[6]    Accordingly, two things are clear — Mr Townsend has the benefit of an order that his reasonable solicitor/client costs are to be met by the first, second and third defendants  in  the  first   instance  and,  secondly,  that  the  order  applies  from      3 February 2023.

Mr Townsend’s claim for costs

[7]    Mr Townsend, through  his  solicitors,  has  tabled  the  following  invoices: 31 January 2023 - $3,355.17 including GST; 17 February 2023 - $3,593.75 including GST; and 22 May 2023 - $2,403.50 including GST.

[8]    Given what I have said is  a  clear  position,  the  first  invoice  claimed  by Mr Townsend is not payable pursuant to the order made by Osborne J. It seems clear from Mr Townsend’s solicitors’ letter of 2 February 2023 that at least some of the costs represented by the first invoice relate to the concerns of Mr Townsend and his counsel as to the scope of the discovery sought.

[9]    Practically it was for Mr Townsend to agree or not that he would provide the discovery directed in my judgment of 16 December 2022. It was not for the Andrews parties to enter into debate as to what Mr Townsend should or should not provide given the purpose of the non-party discovery was expressly to test the Lomax parties’ proposition that the Andrews parties had not provided full discovery. Nor was it for Mr Townsend or his counsel to seek to enter the debate to any real degree as to what was relevant material to be discovered, such was determined by the orders made.

[10]   What then of the costs after 3 February 2023 incurred by Mr Townsend in seeking to address the categories of discovery? The fact is the Lomax parties engaged in what turned out to be a futile exercise in seeking to minimise costs.   It is clear   Mr Townsend’s solicitors incurred time in dealing with counsel for both parties in relation to the scope of discovery.

[11]   Counsel for the Lomax parties, having engaged in the exercise of attempting to refine the scope of discovery, cannot complain about Mr Townsend’s solicitors incurring costs in that regard.

[12]   The starting position is, as I have said, that Mr Townsend has the benefit of an indemnity costs order. He is a stranger to the litigation, notwithstanding the Lomax parties’ view that he is sympathetic to the Andrews parties. Assessing whether the indemnity costs claimed are reasonable involves the Court assessing whether the tasks undertaken were reasonably necessary and whether the charged rates were reasonable.

[13]   Once the parties engaged in debate with Mr Townsend as to the scope of the discovery costs were inevitable. That in turn has led to a debate about costs and that exercise creating further costs.

[14]   The short point is Mr Townsend has the benefit of the doubt in respect of the costs covered by Osborne J’s order. Having reviewed the time records produced by Mr Townsend’s solicitors, I am unable to conclude that any of the steps taken were unreasonable, nor do the charge-out rates recorded appear excessive.

[15]   I am satisfied that the first, second and third defendants are obliged to pay to Mr Townsend the amounts recorded in the second and third invoices. Mr Townsend is registered for GST and so the amount he may claim is net of GST: see McGechan HR 14.6.03(2)(b). Accordingly, there is judgment in favour of Mr Townsend against the first, second and third defendants in the sum of $2,125.00 in respect of the invoice 17 February 2023 and $2,090.00 in respect of the invoice 22 May 2023.

[16]   Finally, I note Mr Murray sought to compare Mr Townsend’s costs against scale costs. The difficulty with that exercise is that Mr Townsend’s costs have not been incurred in relation to matters covered by the scale. Again, once the parties engaged in debate about the scope of the discovery, albeit in an attempt to mitigate costs, neither party can argue that those costs are unreasonable. Equally, should it prove the case that the Lomax parties are able to seek that these costs be met by the Andrews parties, the Andrews parties will not be able to argue Mr Townsend’s costs were unreasonable.

Associate Judge Lester

Solicitors:

Todd & Walker, Queenstown Fortune Manning, Auckland Anderson Lloyd, Queenstown Counsel:

S Williams, Auckland P Murray, Auckland