Commercial Factors Limited v Veda Advantage (NZ) Limited HC Auckland CIV-2010-404-6798

[2011] NZHC 2097

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2010-404-6798

BETWEEN  COMMERCIAL FACTORS LIMITED First Plaintiff

ANDSAFER TRADING LIMITED Second Plaintiff

ANDVEDA ADANTAGE (NZ) LIMITED Defendant

Hearing:         12 December 2011

Judgment:      15 December 2011 at 5:00 PM

COST JUDGMENT OF ASSOCIATE JUDGE SARGISSON

This judgment was delivered by me on 15 December 2011 at 5 pm pursuant to

Rule 11.5 of the High Court Rules

Registrar/Deputy Registrar

Date ..........................

Solicitors:

Russell McVeagh, PO Box 8, Auckland

Bruce Scott Stevens, PO Box 11683, Ellerslie, Auckland

COMMERCIAL FACTORS LIMITED V VEDA ADANTAGE (NZ) LIMITED HC AK CIV-2010-404-6798 15

December 2011

[1]      The defendant filed an interlocutory application on 29 July 2011 seeking orders that the plaintiffs file an amended statement of claim quantifying the damages claimed and costs on the application.

[2]      The application has been disposed of by an order made by consent requiring the plaintiffs to file and serve an amended statement claim quantifying the damages by 1 November 2011.   The defendant now seeks an award of indemnity costs of

$1,837.50 for the time and effort spent in preparing and filing the application. [3]    The application is opposed.

[4]      Counsel for both sides have filed costs memoranda.

Background

[5]      The defendant gave notice to the plaintiffs on 21 July 2011 that it:

a)        Required quantification of alleged loses by Friday 29 July 2011 (the timetabled date for filing any interlocutory applications);

b)        Intended to file the application if the requirement was not met.

[6]      The plaintiffs did not respond.   The defendant’s application was therefore filed on 29 July 2011.

[7]      The plaintiffs did not file a notice of opposition by the required date of 12

August 2011.  On 19 August 2011, counsel for the plaintiffs advised that they would not be opposing the application and would be filing an amended statement of claim. He indicated that the amended statement of claim had been drafted and would be filed shortly, but was awaiting the plaintiffs’ approval, whose managing director was to return to New Zealand in late October.

Defendant

[8]      Counsel for the defendant relies on those provisions in r 14.6(4) that states: The court may order a party to pay indemnity costs where:

a)        The   party   has   acted…unnecessarily   in…continuing,   or   defending   a

proceeding or step in the proceeding; or

…

f)        Some other reason exists which justifies the court making an order for indemnity costs despite the principle that costs should be predictable and expeditious.

[9]      Counsel submits that indemnity costs are warranted because:

a)        The defendant was in effect the successful party;

b)The plaintiffs were put on notice that an application would be made on the date set in the timetable for the filing of interlocutory applications if the particulars of quantum were not provided;

c)       Due to the lack of response, the defendant had no choice but to make the application;

d)The  application  was  entirely  unnecessary  as  the  plaintiffs  were prepared to quantify their alleged damages, yet failed to advise the defendant of this prior to the due date for filing the application;

e)       The plaintiffs consented to the application following the filing of the application and the affidavit in support.

[10]     Counsel for the plaintiffs submits that costs should be reserved pending the final outcome of the proceeding.  Though he does not disagree with the background to the application, he submits that:

a)        The plaintiffs’ conduct falls well short of circumstances justifing an

award of indemnity costs;

b)In an injunctive proceeding like the present, quantifying damages can be difficult until discovery is completed. Even then, some problems can remain;

c)       Though the proceeding is classified as category 3, the quantum of costs claimed is extraordinary, given that only an interlocutory application was filed and that it was one that any competent junior solicitor should be able to draw;

d)If costs are to be awarded and not reserved, they should be limited to costs on a 2B basis.

Decision

[11]     I do not accept that costs should be reserved.

[12]     There is nothing to suggest that the general principle that, so far as possible, the determination of costs should be predictable and expeditious should not apply to this application.[1]

Issues

[1] High Court Rules, 14.6(4)(f).

[13]     The issue is therefore whether sufficient reason exists to award costs on other than a 3B basis; that is:

a)        2B costs, as the plaintiff contends;

b)Indemnity costs, as the defendant seeks.  (As counsel notes such costs are in fact less than 3B costs, but more than 2B costs).

Should I award costs on a 2B basis?

[14]     As recorded in the court’s minute of 23 May 2011, the proceeding has been classified as category 3 under r 14.3 for the purpose of determining the appropriate daily recovery rate for steps taken in the proceeding.   Given this classification, r14.3(2) requires that category 3 apply to all subsequent determinations of costs in the proceeding, unless there are special reasons to the contrary.

[15]     Relevantly, r 14.2(c) provides that costs should be assessed by applying the appropriate daily recovery rate to the time considered reasonable in relation to the proceeding or interlocutory application. The determination of what is reasonable time for any given step is to be made by reference to band A, B or C under r 14.5(2). There is no dispute that a normal amount of time is reasonable for the steps in this case and accordingly the calculation must be made by reference band B in schedule 3 to the High Court Rules.

[16]     On this basis, ordinarily the defendant would be entitled to costs on a 3B

basis.

[17]     I accept the plaintiffs’ submission that there is special reason to depart from category 3 when determining scale costs on the application.  The application is not one that warrants costs under category 3.  Though the proceeding is generally one of complexity requiring counsel of special skill and experience, the application does not fall comfortably into that category.  In my assessment, it is one requiring counsel of average skill and experience in terms of r 14.3.   Further, there is no suggestion counsel having special skill and experience was or needed to be involved.

Is an award of indemnity costs justified?

[18]     The party claiming indemnity costs carries the onus of persuading the court that the award is justified.[2]

[2] Andrew Beck and Others McGechan (looseleaf ed, Brookers, accessed on 14 December 2011) at

[HR 14.6.01].

[19]     Such award is not justified under r 14.6(a) as the plaintiffs did not actually defend the application.   Instead, the plaintiffs failed to advise that they were not defending.

[20]     Though I agree with counsel for the defendant that the plaintiffs should as a matter of courtesy, have made clear that they would not be defending, such conduct though irksome is not so unreasonable as to warrant an order for indemnity costs.  It falls short of that which I would treat as vexatious, frivolous or improper.   I am satisfied that reasonable compensation for the costs incurred will be provided if an order is made on a category 2B basis.

Result

[21]     I order that the defendant is awarded costs on the application of $1,128 (0.6 of a day x $1,880), plus disbursements as fixed by the Registrar.

[22]     I make no allowance on the costs memorandum because neither side has been wholly successful on the arguments on which it has relied.

Associate Judge Sargisson