Brickhill Capital (NZ) Limited v Defone Global Investments Limited

[2017] NZHC 383

IN THE HIGH COURT OF NEW ZEALAND

AUCKLAND REGISTRY

CIV-2016-404-003300

[2017] NZHC 383

BETWEEN

BRICKHILL CAPITAL (NZ) LIMITED

Plaintiff

AND

DEFONE GLOBAL INVESTMENTS LIMITED

Defendant

Hearing:	7 March 2017
Counsel:	P W David QC and O E Jaques for the Plaintiff No Appearance of, or for the Defendant
Judgment:	9 March 2017

JUDGMENT OF EDWARDS J

This judgment was delivered by Justice Edwards on 9 March 2017 at 12.00 pm, pursuant to

r 11.5 of the High Court Rules

Registrar/Deputy Registrar Date:

Counsel:     P W David QC, Auckland

BRICKHILL CAPITAL (NZ) LTD v DEFONE GLOBAL INVESTMENTS LTD [2017] NZHC 383 [9 March 2017]

Solicitors:    Russell McVeagh, Wellington

Introduction

[1]                 The plaintiff applies for summary judgment against the defendant for the following amounts:

(a)       US $6,866,709;

(b)Contractual interest of US $36,498.50;

(c)Costs of NZD $124,235.65; and

(d)Disbursements of NZD $14,729.73.

[2]                 The defendant is an offshore company with its registered office in the Seychelles. It has not taken any steps in the proceeding.

The claim

[3]                 The plaintiff operates a leveraged derivative foreign currency trading platform. The defendant had a foreign currency trading account with the plaintiff.

[4]                 The Trades are governed by the plaintiff’s Terms of Business and the Client Service Agreement. Clause 22.8 of the Terms of Business provides that the client “shall indemnify the [plaintiff] against any loss, liability and cost the [plaintiff] may suffer or incur … as a result of [defendant’s] breach of any material provision of this Agreement”. Clause 13 of the Client Service Agreement includes a further indemnity clause whereby the defendant “agrees to indemnify [the plaintiff] … against any and all claims, damages, costs (including those stemming from regulators) involving the [defendant’s] activities including account deficits, losses and expenses (including attorney’s fees) …”.

[5]                 Clause 5.5 of the Client Service Agreement provides for interest on overdue accounts and any other fees and expenses not paid “at the rate of TWO percentage

points (2%) per month above the base rate provided by Barclays London or the maximum amount allowed by law, calculated from the due date to the date of receipt of the overdue amount by [the plaintiff] (after as well as before judgment) compounded and payable at intervals selected by [the plaintiff] at its discretion”.

[6]                 Between 29 September and 6 October 2016, the defendant placed a number of GBP:USD buy positions (Trades) through its account with the plaintiff. As a result of significant downward movement of the GBP:USD cross-rate on 7 October 2016 (reported by media agencies as the pound sterling “flash crash”), the Trades were closed out leaving the defendant indebted to the plaintiff in the sum of US $6,866,709. That sum comprises an outstanding debt of US $6,404,238, and an indemnity claim of US $462,471.

[7]                 The plaintiff made formal demand for payment on 6 December 2016. The defendant has not responded to the demand, or raised any other reason for non- payment.

[8]                 On 12 January 2017, copies of the notice of proceeding, statement of claim, initial disclosure, and application for summary judgment, were served on the defendant. On 25 January 2017, a copy of the affidavit of Mr Guoxian in support of the application for summary judgment was also served on the defendant. Affidavits of service have been filed. There was no appearance for the defendant when the application was called in the summary judgment list on 7 March 2017.

Decision

[9]                 I am satisfied that judgment should be entered against the defendant for the sum of US $6,866,709 (comprising the outstanding debt and indemnity sum as referred to  above)  plus  contractual  interest  calculated   to   the   date   of   judgment   of US $36,498.50. Judgment for those sums is entered below in accordance with the draft form of order filed by the plaintiff’s counsel.

[10]              There remains an issue as to costs. Costs in the sum of NZD $124,235.65, and disbursements in the sum of NZD $14,729.73 are sought on an indemnity basis pursuant to the clauses in the Terms of Business and Client Service Agreement.

[11]              Where there is a contractual right to indemnity costs the question for the Court is: “for the necessary steps, are the costs claimed reasonable in amount?”1 The Court must make an objective assessment of the following matters:2

(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]              Applying those principles to the present case, I am satisfied that the indemnity clauses of the contractual documents which govern the Trades are expressed in the widest of terms. The tasks involved in preparing proceedings, including the legal fees and disbursements incurred, fall within the ambit of those indemnity clauses.

[13]              The steps taken to prepare proceedings were also reasonably necessary in the circumstances. I accept that the subject matter of the claim was complex. The assessment of loss was not a straightforward exercise. The fact that the defendant entity was resident overseas, and the director of the plaintiff company also resided overseas added to the complexity. As a result, significantly more time was required in relation to each step in the proceeding than would otherwise be required in a straightforward claim.

1      Black v ASB Bank Ltd [2012] NZCA 384 at [77].

2 At [80].

[14]              However, on the basis of the affidavit evidence filed by both the New Zealand and Australian solicitors, there would appear to be an overlap in the steps taken by each of those firms. That overlap is evident in the giving and taking of initial instructions, the preparation of pleadings, and the preparation of the affidavit in support of the application.

[15]              Despite its international flavour, I do not consider the claim required the involvement of two sets of solicitors located in both Australia and New Zealand. Although the steps taken by each individual set of solicitors would appear reasonable on their own, I am not persuaded that the duplication of certain steps was reasonably necessary in the circumstances.

[16]              The affidavit provided by the Australian solicitors provides a breakdown of the costs incurred. Making an allowance for costs incurred in briefing lawyers in the Seychelles and Singapore (which is appropriate), there is approximately AUD $35,000 incurred in relation to steps which appear to have been duplicated between the two firms. I do not consider that cost to have been reasonably incurred in the circumstances. Taking a robust approach to the assessment of reasonableness,3 and having regard to prevailing exchange rates, I consider that only costs in the sum of NZD $85,000 can be considered reasonably incurred and accordingly may be claimed by way of indemnity.

[17]              On its face, the sum of NZD $85,000 would still appear high for an undefended summary judgment application. However, counsel inform me that the scale costs calculated on a 3C basis for an undefended summary judgment application would amount to NZD $51,000. That suggests that actual costs in the sum of NZD $85,000 is not completely out of range. In any respect, there is no evidence that costs in the sum of NZD $85,000 were not properly incurred. To exercise my judicial discretion to award a lesser sum would “erode the contractual protection the indemnity was intended to provide”.4

3 Above n 1 at [81].

4      Ibid.

[18]              I therefore award costs in the sum of NZD $85,000, and disbursements in the sum of NZD $14,729.73.

Result

[19]I accordingly enter Judgment for the plaintiff against the defendant as follows:

(a)Judgment on the plaintiff’s first claim against the defendant for the payment of the outstanding debt in the sum of US $6,404,238.

(b)Judgment on the plaintiff’s second claim against the defendant for payment of the indemnity sum of US $462,471.

(c)Interest on both sums being US $36,498.50.

(d)The defendant is to pay the plaintiff’s costs of and incidental to this application  of  NZD  $85,000  together  with  disbursements   of  NZD $14,729.73.

Edwards J