Black v ASB Bank Ltd HC Auckland CIV-2010-404-3252
[2011] NZHC 1073
•30 September 2011
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV-2010-404-3252
BETWEEN RICHARD JOHN CARSON BLACK Plaintiff
ANDASB BANK LIMITED First Defendant
ANDRSL TRUSTEE SERVICES LIMITED, COLLEEN MARGARET OSBORNE AND PETER JOHN OSBORNE Second Defendants
Hearing: On the papers. Appearances: M C Black for plaintiff
M V Robinson and E C Gellert for first defendant
No appearance for second defendants
Judgment: 30 September 2011 at 3:00 PM
COSTS JUDGMENT OF ASSOCIATE JUDGE R M BELL
This judgment was delivered by me on 30 September 2011 at 3:00pm
pursuant to Rule 11.5 of the High Court Rules.
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Registrar/Deputy Registrar
Solicitors:
Craig Griffin Lord, P O Box 9049 Newmarket, Auckland 1149 for plaintiff
Simpson Grierson, Private Bag 92518 Auckland 1141 for defendants
Email: [email protected]
Email: [email protected]
Copy for:
Michael C Black, P O Box 1984 Auckland 1140
Email: [email protected]
Case Officer: [email protected]
BLACK V ASB BANK LIMITED HC AK CIV-2010-404-3252 30 September 2011
[1] In my judgment of 8 July 2011, I dismissed the plaintiff’s application for summary judgment and granted the first defendant’s application for summary judgment. I also reserved costs. The parties have now filed costs memoranda.
[2] The bank seeks indemnity costs under r 14.6(4)(e) on the basis that the facility agreements signed by Deli Ca Sea and the Black Family Trustees, the mortgage given by the Black Family Trustees and the guarantees signed by the trustees all contained provisions for the payment of all costs and expenses associated with the enforcement of rights under any of these documents. The amount the bank claims is $91,413.50 plus disbursements of $1,855.40, a total of $93,268.90. The bank seeks orders for costs not only against Mr Black but also against his co- trustees.
[3] Rule 14.6(4)(e) provides:
The court may order a party to pay indemnity costs if ...
(e) the party claiming costs is entitled to indemnity costs under the contract or deed.
[4] The rule reflects earlier case law under which the courts allow a creditor to recover solicitor-client costs if there is a contractual provision allowing it to do so – ANZ Bank v Gibson.[1] Once it is found that a party is contractually entitled to solicitor-client costs, the court determines what is the reasonable amount of costs to be awarded for proper and necessary steps to resolve the issue.
[1] ANZ Bank v Gibson [1986] 1 NZLR 556 (CA); Frater Williams & Co Ltd v Australian
Guarantee Corporation (NZ) Ltd [1994] 2 NZConvC 191,873.
[5] The bank has a contractual entitlement to its solicitor-client costs in relation to this proceeding. Mr Black’s proceeding was directed at limiting his liability under the guarantee he gave in support of the indebtedness of the Black family trustees to the bank. Establishing the extent of his liability under that guarantee required an examination of the bank’s lending arrangements with the Osbornes and Deli Ca Sea to establish the original indebtedness of the Black Family Trustees. The guarantee
given by Mr Black provided for payment of solicitor-client costs in enforcement
proceedings. The mortgage given over the Papamoa property also provides for payment of solicitor-client costs and the bank can enforce the provisions in both the guarantee and the mortgage.
[6] As to the reasonableness of the fees, the bank refers to the criteria under r 9.1 of the Rules of Conduct and Client Care for Lawyers:
(a) the time and labour expended:
(b) the skill, specialised knowledge, and responsibility required to perform the services properly:
(c) the importance of the matter to the client and the results achieved:
(d) the urgency and circumstances in which the matter is undertaken and any time limitations imposed, including those imposed by the client:
(e) the degree of risk assumed by the lawyer in undertaking the services, including the amount or value of any property involved:
(f) the complexity of the matter and the difficulty or novelty of the questions involved:
(g) the experience, reputation, and ability of the lawyer:
(h) the possibility that the acceptance of the particular retainer will preclude engagement of the lawyer by other clients:
(i) whether the fee is fixed or conditional (whether in litigation or otherwise): (j) any quote or estimate of fees given by the lawyer:
(k) any fee agreement (including a conditional fee agreement) entered into between the lawyer and client:
(l) the reasonable costs of running a practice ...
(m) the fee customarily charged in the market and locality for similar legal services.
[7] To show that costs of the level sought in this case may be the subject of awards of solicitor-client costs, the bank refers to comparable cases:
(a) Agape-HolisticRetreat Corporation Ltd (In Liq) v Agape-High Q- Holistic Horsemanship Corporation Ltd[2] - $95,000.
[2] Agape-HolisticRetreat Corporation Ltd (In Liq) v Agape-High Q-Holistic Horsemanship
Corporation Ltd HC Auckland CIV-2007-404-6917, 16 September 2010, Lang J.
(b) Agape-HolisticRetreat Corporation Ltd (In Liq) v Agape-High Q- Holistic Horsemanship Corporation Ltd[3] - $78,000.
(c) Fotheringham v Singh - $66,000. (d) Stock Co v Denize [4]- $45,000.
[3] Agape-HolisticRetreat Corporation Ltd (In Liq) v Agape-High Q-Holistic Horsemanship
Corporation Ltd HC Auckland CIV-2007-404-6917, 7 August 2008, Associate Judge Hole.
[4] Stock Co v Denize HC Auckland CIV-2010-404-5668, 11 July 2011, Associate Judge Doogue.
[8] The bank has provided copies of its invoices covering the work by the bank’s lawyers from the start of the proceeding in June 2010 to the completion of the hearing in February 2011. The bank’s lawyers say that on a pure time and attendance basis their fees would come to $131,765.25 but there were write-offs so that the amount actually charged to the bank was $91,430.50.
[9] I accept that the hourly charge-out rates were appropriate for a large Auckland firm. I also accept that the bank was entitled to choose which law firm to retain.
[10] As to the extent of the work, the bank was faced with a wide-ranging and serious attack on the steps it had taken under term loan agreements, facility agreements, guarantees and mortgages. The bank says that Mr Black’s claims were
―entirely unfounded‖. I do not need to endorse that characterisation. As a result of the way that the bank had exercised its powers under its securities, the Blacks found themselves in an unenviable position. Their response, to test the bank’s exercise of its powers by taking proceedings in this court, was made in good faith and seriously. The attack was wide-ranging, as is reflected in the length of my judgment. It was
necessary to consider a considerable number of separate issues. Unfortunately,
Mr Black’s pleadings and submissions were somewhat diffuse and added to the complexity of the proceeding. Given the wide-ranging challenge made by Mr Black, I accept that the bank’s lawyers were put to significant work to respond to the challenge. Their work had to be thorough.
[11] In opposition, Mr Black says that costs for this proceeding were fixed at
Category 2 Band B under r 14.3(2) in a case management conference on 29 July
2010. Although there were later conferences and appearances, the bank did not claim indemnity costs until the hearing on 10 and 11 February 2010. Mr Black says that the bank is bound by the costs categorisation made on 29 July 2010 and in the absence of any later recategorisation, the Court must apply Category 2 under r
14.3(2), unless there are special reasons to the contrary. Mr Black cites Tindall v Far North District Council[5] as authority against recategorising costs. R 14.3 provides for categories for proceedings according to the skill and experience required of lawyers for the case. Indemnity costs under r 14.6 are not one of those categories. Instead a claim for indemnity costs under r 14.6 stands outside the costs categories in r 14.3. This is made clear by r 14.6:
[5] Tindall v Far North District Council HC Auckland CIV.2003-404-135, 25 May 2007, Winkelmann J.
(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).
The result is that the bank is entitled to claim indemnity costs, even though the case had been put in Category 2 for costs.
[12] Mr Black also says that the bank cannot claim solicitor-client costs because there is no pleading asking for costs on that basis. The bank’s notice of application for summary judgment sought an order for costs, but did not specify that it would apply for solicitor-client costs. While it is good practice to plead a claim for solicitor-client costs, a plea for costs without specifying that solicitor-client costs will be claimed is not necessarily fatal. In general, the court has a discretion to give
relief, although not specifically claimed.[6] Further, a claim for costs is a plea for the
court to award costs under Part 14 of the High Court Rules, which includes the power to award indemnity costs under r 14.6. In Damesh Holdings Ltd v Apple Fields Ltd[7] partial indemnity costs had been awarded although they had not been specifically claimed, except in a memorandum at the end of the hearing, as in this case. I follow the same course in this case.
[6] High Court Rules r 5.27.
[7] Damesh Holdings Ltd v Apple Fields Ltd HC Christchurch CP 55/02, 30 August 2002, Master Venning.
[13] Mr Black does not dispute that the guarantee, mortgage and other documents contain provisions for him to pay the bank’s costs and that, but for these procedural points, the bank is entitled to its reasonable solicitor-client costs. He does dispute the reasonableness of the charges. He cites Glaister v Amalgamated Dairies Ltd.[8]
That case is not on point. It is about fixing costs in the ordinary case, not costs on an
indemnity basis. He expresses concern at the bank’s lawyers putting too much effort into the case, for what was really in issue. He invites comparison with costs according to the scales under the High Court Rules. He refers to cases such as Bradbury v Westpac Banking Corporation[9] where adjustments were made to claimed indemnity costs.
[8] Glaister v Amalgamated Dairies Ltd [2004] 2 NZLR 606 (CA).
[9] Bradbury v Westpac Banking Corporation [2008] NZHC 751.
[14] The concern that the bank’s lawyers spent more time on the case than it required is addressed by the lawyers’ write off of time. Substantial adjustments have been made on that account. I am entitled to take into account that the bank is not assured of full recovery from the Blacks. The bank carries the legal charges in the first instance, without the certainty of recovery from the Blacks. The bank will be alive to the reasonableness of its lawyers’ charges. In these circumstances I am entitled to assume that if the charges are reasonable as between the bank and its lawyers, I do not have to scrutinise the charges further. The matter may be otherwise if the bank could be assured that it would recover in full for any legal costs, but that is not this case. In these circumstances I see no reason to hold that the costs claimed are not reasonable.
[15] The bank had also deducted $30,104.50 plus GST and disbursements for legal costs from the proceeds of sale of the Papamoa property in August 2010. As
those costs have been recovered they are not in issue in this proceeding, but in considering the totality of the legal charges, I apply the assumption made in the last paragraph.
[16] Mr Black refers to clause 9.1 of the mortgage, which provides for the proceeds of enforcement to be applied in a certain order, with the costs of enforcement ranking first. Mr Black says that because of clause 9.1 the bank is precluded from seeking further costs after the security has been realised because that would be contrary to the priority regime. I accept the bank’s submissions on the point. In particular, much of the costs claimed in this proceeding were incurred after the receipt of the sale proceeds of the Papamoa property. Clause 9.1 does not exhaust the bank’s rights to recover its costs of enforcement.
[17] I cannot deal with the bank’s claim for costs against the other Black trustees. They are not parties to the proceeding. Even though he was a trustee, Mr Black brought the proceeding in his own name to obtain a determination of his personal liability under the guarantee he had given in support of the trustees’ indebtedness.10
Before I could consider making any costs order against non-parties, they need to be
served with a costs application and given the right to respond. So far they have not been given that opportunity.
[18] I find that the bank is entitled to the costs it seeks against Mr Black. I make an order that he is to pay the bank costs of $93,268.90 (including disbursements). I do not make any order for costs against any non-parties.
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Associate Judge R M Bell
10 See [2] of the decision of 8 July 2010: ―He is entitled to the Court’s determination of his personal
liability without them as parties.‖
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