BGT Developments Limited v Hewson

[2020] NZHC 3291

IN THE HIGH COURT OF NEW ZEALAND TAURANGA REGISTRY

I TE KŌTI MATUA O AOTEAROA TAURANGA MOANA ROHE

CIV-2020-470-97

[2020] NZHC 3291

BETWEEN

BGT DEVELOPMENTS LIMITED

Applicant

AND

STEVEN PAUL HEWSON, VICTORIA HEWSON AND FL TRUSTEES 2013

LIMITED AS TRUSTEES OF THE HEWSON FAMILY TRUST
First Respondent

FENTON McFADDEN

Second Respondent

Hearing:	On the papers
Counsel:	D Fraundorfer and R Steens for Applicant N Smith for Second Respondent
Judgment:	14 December 2020

COSTS JUDGMENT OF WHATA J

This judgment was delivered by me on 14 December 2020 at 3.00 pm, pursuant to Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar Date: ………………………….

Solicitors:           Holland Beckett Law, Tauranga

BGT DEVELOPMENTS LIMITED v HEWSON [2020] NZHC 3291 [14 December 2020]

Introduction

[1]    The second respondent (Fenton McFadden) responded to a judgment of this Court in respect of freezing orders over proceeds of sale in the hands of the first respondent. In particular, they:

(a)Provided a memorandum to the Court setting out its position in respect of the proceeds of sale, noting that they do not hold them, or have control of them, that it was not aware of the transaction underpinning the freezing orders, that the first and second named first respondents no longer resided in New Zealand and that they are authorised to accept service for the first respondents.

(b)Attended a telephone conference under urgency, at which they confirmed they did not have instructions to disclose the relevant bank account details.

[2]    Fenton  McFadden  now  seeks   an  award  of  non-party  costs  pursuant   to r 14.6(4)(d) of the High Court Rules 2016. It submits r 14.6(4)(d) applies because they are not a party to the primary proceeding and have acted reasonably.

Fenton McFadden’s submission

[3]    Citing various authority, Fenton McFadden submits that, as a “non-party”, it is entitled to its costs for the above attendances.1 It says that their role is akin to that of a non-party subject to a discovery order.

[4]    Counsel’s actual costs were $2,774, plus GST in relation to the urgent attendances and appearances are reasonable. Fenton McFadden submits this was modest, because the standard scale 2B award on equivalent items totals $2,390 (more than two-thirds of actual costs). They further note the second respondent partnership has not sought reimbursement for incurred time and costs in responding to and complying with the plaintiff’s application and orders.

1      Jindal v OM Financial Ltd [2020] NZHC 2444; Hemmingson v Rod [2015] NZHC 2021.

[5]    Costs on this application for costs are also sought on the basis that the plaintiff has failed to provide a substantive response to the second respondent’s numerous efforts to resolve costs on a discounted basis.2

[6]    Counsel’s actual costs of $1,738, plus GST in relation to the various attendances and subsequent preparation of this costs application, are said to be reasonable because a standard scale 2B award on the equivalent item totals $956 – 55 per cent of the actual costs.

Applicant’s submission

[7]    The applicant, BGT, accepts there is authority for “true” non or third parties being compensated for costs, but contends there is good reason3 to depart from that approach because Fenton McFadden:

(a)is not a true “third party” or non-party with no involvement, save for the interlocutory application for freezing orders, because their participation would have been and is required in the proceedings and/or application in any event, including in their capacity as a trustee company;

(b)has taken minimal steps4; and

(c)has not acted reasonably and/or their costs are unreasonable, particularly where they are unlikely to be out of pocket for those costs regardless of the orders made.

[8]BGT further submits:

(a)it is not yet clear whether Fenton McFadden played a role in the wrongdoing alleged by BGT. That is, Fenton McFadden could have a

2      Citing Body Corporate Administration Ltd v Mehta [2013] NZHC 213 at [85].

3      The applicant also relies Jindal v OM Financial Ltd [2020] NZHC 2444, which cited Clear Communications Ltd v Telecom Corporation of NZ Ltd (1994) 8 PRNZ 200 (HC) as authority.

4      Citing Goodler v The Earthquake Commission [2020] NZHC 63.

personal interest in the matter, and a personal interest was relevant to costs in Jerad v Auckland Council.5

(b)BGT challenges Fenton McFadden’s characterisation of its own role as akin to that of a non-party to discovery. BGT emphasises that here, Fenton McFadden was not required to provide any documents other than confirmation of the transfer of funds. No evidence was prepared or filed. The role was more like that of an agent or representative of the Trust (who is a party), rather than a non-party.

(c)Fenton McFadden would have been served on a Pickwick basis (and their participation required) because of their role as the Trust’s lawyers

– irrespective of being named as party to the application.

(d)The “agent” relationship (where Fenton McFadden are involved because of their role as the Trust’s lawyers) was relevant to this Court on costs in FM Custodians Ltd v Hannan, where a non-party (a receiver) was not entitled to costs because its involvement was those of an agent of a true party (FM Custodians).6

Costs unreasonable

[9]    BGT submits that if the Court is minded to award costs, scale costs are appropriate because opposing counsel has not provided enough of a breakdown of any real assessment of reasonableness of indemnity costs (such as details of hours undertaken).7

[10]   The applicant also submits Fenton McFadden did not act reasonably in all aspects. In particular, the applicant submits BGT should not be responsible for costs relating to the second teleconference. The applicant notes BGT was required to seek directions with respect to disclosure of the bank account number where funds were

5      Jerad v Auckland Council [2015] NZHC 3357 at [14]. The cited excerpt states, “However, I do not consider that indemnity costs are appropriate in this case. Mr McCartney was anxious to protect his reputation and had a personal interest in filing the affidavit.”

6      FM Custodians Ltd v Hannan [2017] NZHC 3286.

7      Citing Bei v Wang [2020] NZHC 897 at [78].

transferred to. BGT further submits Fenton McFadden “will not actually be out of pocket if costs orders are not made” because “It is likely that these costs will be passed on to its client, the Trust, or alternatively as a professional fee relating to FL Trustees”.

[11]Fenton McFadden in reply:

(a)provides an account with corresponding time records;

(b)replies to the BGT’s speculation the second respondent may be joined to the claim in the future with the submission the claim is “entirely unsupported” and that no weight should be placed on it;

(c)submits the applicant has sought to blur the lines between Fenton McFadden and the first respondents; and

(d)in relation to FL Trustees Limited, submits it also had no knowledge of the existence of the Heads of Agreement and may well require separate representation to Mr and Mrs Hewson, but that, either way, it should have no bearing on the second respondent’s position.

Assessment

[12]   Fenton McFadden responded to the urgent request of the Court as a non-party to the underlying dispute. They are therefore entitled to their costs on their attendances in this regard. Further, while the costs may be recoverable from the first respondent, Fenton McFadden should not be put at risk of not recovering their costs for these attendances. But given the multiple roles performed by them, including as advisor to the first respondent in respect of the proceedings, and as trustees, some care is needed to ascertain those costs that were incurred as a non-party. In this regard, I consider that the costs incurred in advising the Court of its position in respect of the proceeds (including in terms of the substance of the dispute) are clearly non-party costs. However, costs incurred in respect of communicating with and taking instructions from the first respondent are not costs incurred as a non-party. Those costs must be recovered from the first respondent.

[13]   As I am unable to ascertain the proper division of the costs incurred as noted above, and if the division cannot be agreed, I direct that Fenton McFadden file a memorandum clearly setting out that division. I will then make a final order as to costs.

[14]   I make no award for costs on the application for costs. The application suffers from evident overreach for the reasons just noted.