Beatson v Property Brokers Limited
[2024] NZHC 2057
•26 July 2024
IN THE HIGH COURT OF NEW ZEALAND PALMERSTON NORTH REGISTRY
I TE KŌTI MATUA O AOTEAROA TE PAPAIOEA ROHE
CIV-2024-454-013
[2024] NZHC 2057
BETWEEN BARRY BUSTER BEATSON, MAURICE GEORGE BEATSON and PETER JOHN ROEBUCK
Appellant
AND
PROPERTY BROKERS LIMITED
Respondent
Hearing: On the papers Appearances:
M B Lawson for Appellants D I Sheppard for Respondent
Judgment:
26 July 2024
JUDGMENT OF CHURCHMAN J [COSTS]
Introduction
[1] On 16 May 2024 I dismissed an appeal against the District Court’s decision that the appellants were in breach of a real estate agency agreement between themselves and the respondent (the Agency Agreement) in failing to pay a commission to the respondent following the sale of Waiaruhe Station.1
[2] I invited the parties to settle costs between themselves and, in the absence of an agreement within 14 days, I directed the parties to file memoranda. The parties have been unable to agree as to costs and have filed memoranda.
1 Beatson v Property Brokers Ltd [2024] NZHC 1583.
BEATSON, BEATSON and ROEBUCK v PROPERTY BROKERS LIMITED [2024] NZHC 2057 [26 July 2024]
Submissions
Appellants’ submissions
[3]Mr Lawson for the appellants submits that:
(a)the entitlement to indemnity costs under cl 5.3.2 of the Agency Agreement only arises from failure to pay fees and expenses and does not relate to the commission;
(b)if the Court does find that cl 5.3.2 does apply, solicitor/client costs do not necessarily follow as the Court retains a discretion to deny recovery of indemnity costs where they are not objectively reasonable; and
(c)a general right to be indemnified for costs or even legal costs does not necessarily extend to an indemnity for solicitor/client costs, with the clause relied upon not “plainly and unambiguously expressed”.
[4] Mr Lawson argues that costs in the sum of $10,755, calculated on a category 2B basis, should be awarded.
Respondent’s submissions
[5] Mr Sheppard for the respondent submits that costs in the sum of $42,025.01 should be awarded against the appellants. He argues that:
(a)the costs sought do not exceed the actual costs incurred, with tax invoices provided to support the sum claimed;
(b)the Agency Agreement does entitle the respondent to recover solicitor/client costs for non-payment of the commission, as the clause regarding non-payment applies generally, whether calculated based on the standard percentage arrangement in the first part of cl 5.3, or the bespoke “fees and expenses” arrangement;
(c)an interpretation of cl 5.3 that indemnity costs only apply to the bespoke arrangement would largely thwart the purpose of the clause to enforce the client’s obligation to pay for the agent’s services;
(d)the consequences of non-payment of commission are also imported at cl 7 of the Agreement, so regardless of how the commission is calculated, the consequences of non-payment are the same; and
(e)the respondent’s claim is being sought under a specific clause for all expenses and legal costs, not in reliance of a general indemnity cause.
Does the Agency Agreement provide for indemnity costs?
[6] Under r 14.6(4)(e) of the High Court Rules 2016 (HCR), 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. However, as referred to by Mr Lawson in his submissions, the entitlement must be plainly and unambiguously expressed.2
[7]Clause 5.3 of the Agency Agreement is set out as follows:
5.3How Commission is calculated:
The purchase price (including the price of any chattels included in the sale) on 1.75% on the balance of the purchase price plus GST for
$7,500,000 or if property reaches a higher level then at 1.95%
OR
I hereby authorise you to retain your fees and expenses (if any) plus GST from the deposit, if received by you. If a deposit is not received by you, I hereby agree to pay your fees and expenses (if any) plus GST herein referred to.
If payment is not so made:
5.3.1The Client will pay the agent penalty interest at 2% per month on the unpaid balance; and
5.3.2The Client is liable to pay the Agent all the Agent’s expenses and legal costs incurred as a result of the Client’s default;
5.3.3If the Agent obtains judgement against the Client, the Client will continue to be liable to pay 2% per month on the unpaid judgement.
2 Synlait Milk Ltd v New Zealand Industrial Park Ltd [2020] NZSC 157 at [190].
[8] Mr Lawson seeks to draw a comparison to Newfoundworld Site 2 (Hotel) Ltd v Air New Zealand Ltd, where a clause that granted a general right to be indemnified for “costs” was found to not grant a right to be indemnified for solicitor/client costs.3 He argues cl 5.3 similarly does not grant a right to indemnity costs. However, cl 5.3.2 of the Agency Agreement clearly provided for payment of all “legal costs”. As was the case in Waimauri Ltd v Mahon, the clause goes substantially further than that in Newfoundworld.4 I accept the submission of Mr Sheppard that the clause relied on specifically provides for indemnity costs and is indeed plainly and unambiguously expressed.
[9] Additionally, I do not accept the contention of Mr Lawson that the wording of cl 5.3 provides that only where the commission is calculated from fees and expenses will the respondent be entitled to indemnity costs. As submitted by Mr Sheppard, such an interpretation would run counter to the express purpose of imposing such consequences for non-payment under the Agreement, namely to deter a client from failing to pay the agent.
[10] Clause 5.3.2 therefore does apply here. The Agency Agreement clearly provides for indemnity costs for the respondent following non-payment of the commission.
Are the costs claimed reasonable?
[11] Rule 14.6(1)(b) of the High Court Rules provides that the Court may only order actual costs, disbursements and witness expenses that were reasonably incurred by a party. A different analysis is undertaken in respect of indemnity costs claimed under a contractual provision, with the analysis favouring the party claiming indemnity costs.5 However, the Court still has an overriding discretion to award what is reasonable in the circumstances.6 In the leading case of Black v ASB Bank Ltd, the Court of Appeal set out the matters to consider when determining the reasonableness of contractual indemnity costs as being:7
3 Newfoundworld Site 2 (Hotel) Ltd v Air New Zealand Ltd [2018] NZCA 261.
4 Waimauri Ltd v Mahon [2020] NZHC 2310.
5 Herron v Wallace & Ors [2018] NZHC 2638 at [25].
6 Synlait Milk Ltd, above n 2, at [200].
7 Black v ASB Bank Ltd [2012] NZCA 384 at [80].
(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.
[12]These factors have been usefully distilled into a two-step approach set out in
Regan v Brougham, namely:8
(a)whether the tasks undertaken were reasonably necessary, and thus within the contractual indemnity; and
(b)whether the costs claimed for undertaking those tasks were reasonable, both in terms of the hours expended and the hourly charge rates.
Do the claimed tasks fall within the indemnity?
[13] In respect of whether the tasks undertaken fall within the indemnity, the entitlement to indemnity costs set out in the Agency Agreement relates to costs incurred “as a result of the appellants’ default”. This determination of costs concerns only the costs incurred for the appeal proceedings before this Court, and I note that those costs incurred in relation to the District Court proceedings have been removed from the sum claimed.
8 Regan v Brougham [2020] NZCA 173 at [12].
[14] Although the activities claimed for in the respondent’s schedule of costs are almost all standard activities reasonably necessary for the proceedings, the respondent also claims a five per cent expenses fee which is added to the pre-GST totals of each of the three invoices issued in relation to these proceedings. Expenses are to be provided for in disbursements.9 Unparticularised expenses fixed as a percentage of fees payable for professional services are not recoverable as they are not identifiable as an expense payable and incurred for the purposes of the proceeding, and do not allow the reasonableness of the charge to be assessed.10 Therefore this additional five per cent fee is not claimable by the respondent.
[15] The original costs claim submitted by the respondent failed to particularise costs in the sum of $3,414.35 incurred by the respondent from Mr Sheppard’s instructing solicitors, Freebairn & Hehir. After a direction was made for the respondent to provide details of what this amount covered, a further memorandum was filed setting out a breakdown of those costs. The sum claimed was reduced to
$2,639.25 as the original sum included legal costs related to the District Court proceedings. Parts of the costs claimed in respect of Freebairn & Hehir are duplications of costs set out in the main schedule of costs filed by the respondents, such as those in respect of meetings with clients regarding the appeal, receiving and considering written submissions, and receiving and considering the appeal decision. Such duplicated costs are not recoverable. Consequently, the costs claimed in respect of Freebairn & Hehir are further reduced to $1,334.25.
[16] Apart from the expenses fee and parts of the Freebairn & Hehir claimed costs, the other activities claimed for fell within the contractual indemnity. This results in an adjusted costs claim of $38,680.50 plus disbursements of $172.20.
Are the claimed costs reasonable?
[17] In regard to whether the costs claimed are reasonable, the charge rates set out in the respondent’s schedule of costs are in line with industry standards, with Isac J
9 High Court Rules 2016, r 14.12(1).
10 Sax v Dempsey Wood Civil Ltd [2013] NZHC 1126 at [46]; Sanson v Energy Products Ltd (2010) 20 PRNZ 16 at [9]; and David Bullock and Tim Mullins The Law of Costs in New Zealand (LexisNexis, Wellington, 2022) at [6.30].
finding similar rates in Beattie v Mason to be “not unreasonable”.11 The charge rates are recorded as:
(a)Senior counsel: $430.
(b)Solicitor: $280.
(c)Law graduate one: $225.
(d)Law graduate two: $120.
[18] The appeal proceedings were not complex, but also not straightforward. The appellant raised seven grounds of appeal, four of which concerned matters not canvassed in the District Court. However, the hearing only took around three quarters of a day.
[19] In light of this context, the claimed time expenditure of around 79.7 hours (approximately 10 days) appears excessive. The hours recorded, and consequently the total sum claimed, are significantly higher than what would be claimable under the HCR on a 2B basis, as set out in the table below:12
Step Description Time
allowance
Amount 53 Commencement of response to
appeal
0.5 $1,195 10 Preparation for first case management
conference
0.4 $956 11 Filing memorandum for first case
management conference
0.4 $956 21 Inspection of documents 1.5 $3,585 55 Preparation of case on appeal 1 $2,390 56 Preparation of written submissions 3 $7,170
11 Beattie v Mason [2024] NZHC 1099 at [11]–[12].
12 High Court Rules, schs 2 and 3.
57 Appearance at hearing for sole or
principal counsel
0.75 $1,792.50 Total 7.55 days $18,044.50
[20] HCR r 14.2(d) provides that an appropriate daily recovery rate should normally be two-thirds of the daily rate considered reasonable in relation to the proceeding, meaning actual costs should be around 1.5 times as much as scale costs. Reasonable indemnity costs based on this calculus would amount to $27,066.75. In contrast, the claimed indemnity costs sum is 2.3 times as much as scale costs.
[21] Having considered these various matters, I conclude that an award of reasonable actual costs requires a reduction of 20 per cent to the adjusted claimed sum of $38,680.50, resulting in a costs award of $30,944.40 plus disbursements of $172.20. This recognises the fact that although the sum claimed is excessive, a full reduction down to the sum deemed reasonable under the HCR would fail to give account for the fact this was not a straightforward appeal.
Results
[22] I make an order of indemnity costs in the sum of $30,944.40 plus disbursements of $172.20 against the appellants.
Churchman J
Solicitors:
Lawson Robinson, Napier for Appellant
Cooper Rapley Lawyers, Palmerston North for Respondent
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