Body Corporate 68792 v Memelink
[2017] NZHC 2446
•6 October 2017
IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY
I TE KŌTI MATUA O AOTEAROA
TE WHANGANUI-Ā-TARA ROHE
CIV-2013-485-5775 [2017] NZHC 2446
BETWEEN BODY CORPORATE 68792
Substituted Creditor
AND
BODY CORPORATE 378945
Substituted CreditorAND
HARRY MEMELINK Debtor
Hearing: on the papers Counsel:
D G Dewar for Body Corporate 68792
P J Muir for Body Corporate 378945Judgment:
6 October 2017
JUDGMENT OF ASSOCIATE JUDGE SMITH - COSTS
[1] On 8 May 2017 I gave a reserved judgment1 in which I dismissed an application by the substituted creditors for an order adjudicating Mr Memelink bankrupt. The decision to refuse the application was based in substantial part on the fact that Mr Memelink had either paid the creditors in full by the date of the hearing, or had made arrangements for them to be promptly paid.
[2] In refusing the creditors’ application, however, I noted Mr Memelink’s failure to comply with Court orders made in the course of the lengthy bankruptcy proceeding, including conditions on a halt order I had made on 7 November 2016.2 In my
judgment of 8 May 2017, I noted that failing to comply with Court orders, including
Body Corporate 68792 & Anor v Memelink [2017] NZHC 905.
Body Corporate 68792 & Anor v Memelink [2016] NZHC 2658.
BODY CORPORATE 68792 v MEMELINK [2017] NZHC 2446 [6 October 2017]
the conditions made on the halt order, was serious, but it was a matter that could be adequately addressed by an appropriate award of costs against Mr Memelink. I held that the substituted creditors were entitled to costs, and invited them to submit costs memoranda. I made provision for Mr Memelink to submit a memorandum in reply.
[3] Body Corporate 378945 submitted its costs memorandum on 25 May 2017. But there was delay by Body Corporate 68792 in submitting its memorandum. The memorandum from Body Corporate 68792 was eventually filed on 29 June 2017.
[4] On 21 July 2017 I extended the time for Mr Memelink to file and serve any submissions in reply, to 10 August 2017.
[5] No costs submissions have been received from Mr Memelink. I now give judgment on the costs applications made by the substituted creditors.
The history of the proceeding
[6] The adjudication proceeding was initially commenced in 2013 by the Commissioner of Inland Revenue. The Commissioner’s claims were eventually settled, and another creditor, Body Corporate 81012, was substituted as creditor under s 44 of the Insolvency Act by order made on 24 June 2014.
[7] The claim by Body Corporate 81012 was also the subject of an eventual settlement, and its application for adjudication was also withdrawn.
[8] Body Corporate 68792 and Body Corporate 378945 applied jointly to be substituted as creditors, and that application was granted on 28 June 2016.
The creditors’ costs claims
Body Corporate 378945
[9] Body Corporate 378945 claims costs on a 2B basis, together with a 33 percent uplift. Its claim on a 2B basis is as follows:
| Schedule 3 in High Court Rules Item | Detail | Time | No. | 2B Amount |
| 45 | Filing application for adjudication by creditor – 7/06/16 | 0.6 | 1 | $1,338.00 |
| 46 | Appearances 1. 13/05/16; 2. 31/05/16; 3. 14/06/16; 5. 15/03/17. | 0.4 | 5 | $4,460.00 |
| 47 | Supporting party on bankruptcy – 17/02/15 | 0.4 | 1 | $892.00 |
| TOTAL | $6,690.00 |
[10] I am satisfied that the claim is correctly calculated on a category 2, band B, basis under the High Court Rules 2016.
[11] In support of its claim for a 33 percent uplift, counsel for Body Corporate
378945 referred to an earlier judgment I gave in this proceeding on 17 May 2016,3 in which I accepted a submission for the creditor (then Body Corporate 81012) that an increase above normal scale costs was appropriate. I referred in that judgment to Mr Memelink’s repeated late filing of documents, often on the morning of a hearing, and I noted that that practice had contributed to costs and delays which should have been avoided. Counsel for Body Corporate 378945 submits that Mr Memelink has continued the same practices throughout the proceeding since then, complying only belatedly with the Court’s requirement that he pay all body corporate levies as they fell due.
[12] With a 33 percent uplift, Body Corporate 378945 calculates its costs claim at
$8922.72.
Body Corporate 81012 v Memelink [2016] NZHC 1008 at [49] and [50].
Body Corporate 68792
[13] Body Corporate 68792 had a longer and more substantial involvement in the proceeding than Body Corporate 378945. Its assessment of what costs would be on a
2B basis is $26,537, made up as follows:
| Bankruptcy Notice (x2) | 0.4 days | |
| Filing notice as Supporting Creditor | 0.4 days | |
| Application for Adjudication | 0.6 days | |
| Appearances (13 x 0.4 days) | 5.2 days | |
| Creditor’s Memoranda for Body Corporate 68792 (7 x 0.4 days) | 2.8 days | |
| Preparation of Affidavits, Exhibits, etc as evidence for the various hearings (one allowance) | 2.5 days | |
| Totaltimeallowance: | 11.9 days | $26,537.00 |
[14] Body Corporate 68792 also seeks a 33 percent uplift on the scale figure calculated on a 2B basis.
[15] In his costs memorandum, Mr Dewar referred to attendances relating to disputes between Body Corporate 68792 and Mr Memelink in certain other proceedings, and to certain other difficulties the Body Corporate has encountered with Mr Memelink (including failure by him to pay Body Corporate levies since the adjudication application was refused).
[16] Mr Dewar noted that paragraphs 44, 45, 46 and 47 are the only provisions in schedule 3 of the High Court Rules which expressly fix time allocations for costs applications in bankruptcy proceedings. He submits that those categories make no allowance for such matters as preparing extensive memoranda and affidavits, and that the Court should have regard to paragraphs 11 and 30 of schedule 3, which do make provision for those steps in the context of time allocations for costs claims in general civil proceedings. Mr Dewar submits that 0.4 days should be allowed for each memorandum, and 2.5 days should be allowed for the preparation of affidavits, exhibits et cetera, as evidence for the various hearings.
[17] With the 33 percent uplift, Body Corporate 68792’s costs claim is $35,294.21. It also seeks an order for disbursements as approved by the Registrar.
Discussion and conclusions
[18] As a preliminary matter, I note that the fact that in the end no adjudication order was made does not affect the costs claims. The adjudication application was refused only because the claims of both substituted creditors had been paid, and the refusal decision was made expressly on the basis that Mr Memelink would be liable for costs.
[19] Turning to the creditors’ separate claims, I am satisfied that Body Corporate
378945’s assessment of costs on a 2B basis is appropriate. However, I do not consider that its claim for an award of 33 percent above scale costs on a 2B basis is fully justified. Throughout their involvement the burden of argument for the substituted creditors was largely carried by Body Corporate 68792,4 and although some increase above what would otherwise have been awarded on a 2B basis is justified (for the reasons set out below in respect of Body Corporate 68792), I do not
think an uplift of 33 percent is justified. In my view the justice of the case will be met by a 20 percent uplift on the 2B figure. There will be an order accordingly.
[20] In respect of the claim by Body Corporate 68792, I note that I have already awarded costs to the Body Corporate in respect of the hearings on 18 October, 1
November, and 7 November 2016.5 The costs orders I now make take into account
that orders have already been made in respect of those hearings. By my reckoning that reduces the number of appearance in row four of the table at [13] from 13 appearances to 10 appearances.
[21] I accept that in a lengthy defended adjudication proceeding such as this, with a number of defended hearings, it is appropriate to refer to the costs provisions at schedule 3 to the High Court Rules which apply to general proceedings conducted in the Court, and that allowance can be made for the filing of memoranda (item 11 of
schedule 3) and the preparation of affidavits and written submissions for the hearing
For example, the written submissions for the hearings in August 2016, when the substituted creditors’ adjudication application was heard on a defended basis for the first time, were made by Mr Dewar on behalf of both creditors, and Mr Dewar appeared for both creditors at the hearing on
16 August.
Body Corporate 68792 & Anor v Memelink, above n 2, at [25](b)(iv).
(items 30 and 33).6 In this case, Body Corporate 68792 has claimed an allowance of
2.5 days for the preparation of affidavits and exhibits for the hearing on 15 March
2017, without any separate claim for written submissions or hearing preparation. I think the 2.5 days claimed in respect of the March 2017 hearing is entirely reasonable, given that the hearing was not interlocutory in nature but was the hearing of a substantive application for an adjudication order.
[22] Turning to Body Corporate 68792’s claim for a 33 percent uplift above scale, I
consider that the claim is justified.
[23] Claims for increased costs are governed by rule 14.6 of the High Court Rules. Rule 14.6(3) provides:
14.6 Increased costs and indemnity costs
…
(3) The court may order a party to pay increased costs if –
(a) the nature of the proceeding or the step in it is such that the time required by the party claiming costs would substantially exceed the time allocated under band C; or
(b) the party opposing costs has contributed unnecessarily to the time or expense of the proceeding or step in it by –
(i) failing to comply with these rules or with a direction of the court; or
(ii) taking or pursuing an unnecessary step or an argument that lacks merit; or
(iii) failing, without reasonable justification, to admit facts, evidence, documents, or accept a legal argument; or
(iv) failing, without reasonable justification, to comply with an order for discovery, a notice for further particulars, a notice for interrogatories, or other similar requirement under these rules; or
(v) failing, without reasonable justification, to accept an offer of settlement whether in the form of an offer under rule 14.10 or some other offer to settle or dispose of the proceeding; or
Dudfield ex parte Krogh HC Wellington CIV-2010-484-2173, 23 June 2011 at [18].
(c) the proceeding is of general importance to persons other than just the parties and it was reasonably necessary for the party claiming costs to bring it or participate in it in the interests of those affected; or
(d) some other reason exists which justifies the court making an order for increased costs despite the principle that the determination of costs should be predictable and expeditious.
…
[24] I put to one side entirely Body Corporate 68792’s submissions relating to Mr Memelink’s failure to pay ongoing levies after the bankruptcy adjudication application was dismissed. I am concerned here only with costs in respect of the proceeding itself, and any further alleged defaults by Mr Memelink subsequent to the conclusion of the proceeding are not properly matters I can take into account. I also disregard any costs or difficulties the Body Corporate 68792 says that it has suffered in other litigation with Mr Memelink, or outside of the Court processes altogether.
[25] That said, I am satisfied in this case that Mr Memelink has contributed unnecessarily to the time or expense of the proceeding by failing to comply with directions of the Court, most notably in failing to comply with the conditions of the halt order made on 7 November 2016 (in the respects identified at paragraphs [68] to [70] of my judgment given on 8 May 2017). The failure to promptly pay ongoing levies, in particular, was a failure for which Mr Memelink offered no satisfactory explanation, and I think can only be put down to a deliberate decision on his part not to pay levies he did not want to pay.
[26] Mr Memelink also effectively wasted the substituted creditors’ time, and the Court’s time, by submitting an affidavit as to his assets, liabilities, income and outgoings that was obviously insufficiently informative, and (whether or not it may have strictly complied with the relevant order made on 7 November 2016) could never have provided a useful basis for forming a clear view on whether he was or was not solvent.
[27] In considering Body Corporate’s 68792’s claim for increased costs, I think it is also appropriate to take into account the fact Mr Memelink always had available to him the option of paying the levies on a without prejudice basis, while his disputes
with the substituted creditors were litigated in the appropriate tribunal or Court. In the event, it was only when the prospect of an adjudication order was looming (after Mr Memelink had failed to comply with the conditions on the halt order, and the substituted creditors had applied to have the halt order lifted) that Mr Memelink belatedly came to a position he could have come to months or years earlier.
[28] I take into account also that Mr Memelink’s more recent defaults are not something new: earlier defaults by Mr Memelink in this same proceeding resulted in the making of an order for increased costs against him on 17 May 2016.
[29] I am satisfied that Body Corporate 68792’s claim for the 33 percent uplift over
2B costs is justified. There will be an order accordingly.
Result
[30] I make an order for costs in favour of Body Corporate 378945 in the sum of
$8,028.00, together with disbursements to be fixed by the Registrar.
[31] I make an order for costs in favour of Body Corporate 68792 in the sum of
$31,735.13, together with disbursements to be fixed by the Registrar.
Associate Judge Smith
Solicitors:
Thomas Dewar Sziranyi Letts for Body Corporate 68792
Price Baker Berridge for Body Corporate 378945
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