Corrick v Silich
[2017] NZHC 2033
•24 August 2017
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV-2015-404-001805 [2017] NZHC 2033
BETWEEN DAVID CORRICK
First Plaintiff
STEVEN MITCHELL Second Plaintiff
DAVID PRALONG Third Plaintiff
PAUL STENT Fourth Plaintiff
MATTHEW WILCOCK Fifth Plaintiff
AND
ROBERT SILICH First Defendant
…/contd
Hearing: On the papers Judgment:
24 August 2017
JUDGMENT OF WYLIE J [COSTS]
This judgment was delivered by Justice Wylie
On 24 August 2017 at 10.00am Pursuant to r 11.5 of the High Court Rules Registrar/Deputy Registrar
Date:…………………………
Solicitors/counsel: Amicus Law, Auckland
Hollister Jones Lellman, Tauranga/D Marriott, Auckland
CORRICK v SILICH [2017] NZHC 2033 [24 August 2017]
/contd…..
CHRIS SNELSON Second Defendant
GLENN MCCREADY Third Defendant
FRANK PARKER Fourth Defendant
BRETT EMENY Fifth Defendant
DARRYL MCEVEDY Sixth Defendant
ALISTAIR RUSSELL Seventh Defendant
ALISTAIR SCOTT Eighth Defendant
BRYAN LOCKIE Ninth Defendant
DOUG MOULIN Tenth Defendant
MICHAEL JENKINS Eleventh Defendant
KEN MULGREW Twelfth Defendant
BRIAN STEWART Thirteenth Defendant
BLAIR O’BRIEN
Fourteenth Defendant
DARYL HONE Fifteenth Defendant
ANDREW GORMLIE Sixteenth Defendant
Introduction
[1] I refer to my judgment of 14 July 2017. I found the plaintiffs had failed in each of the causes of action advanced by them, and I dismissed their claims. I also held that the first to fifth defendants were entitled to their reasonable costs and disbursements, and invited the parties to try and agree costs.
[2] Counsel advise that they have been unable to agree costs. They have filed memoranda.
[3] The first to fifth defendants say they have incurred increased and unnecessary costs, defending proceedings that could never have succeeded, and which have resulted almost entirely from a situation created by the misconduct of the first plaintiff, Mr Corrick. They say that even if the matter had been correctly pleaded and efficiently pursued, the plaintiffs were never entitled to the relief claimed. They argue that the plaintiffs, by issuing proceedings against all syndicate members other than themselves, and by singling out the first five defendants, must be regarded as having acted vexatiously. They seek indemnity costs, in the total sum of $79,326.49 (inclusive of GST). In the alternative, they seek costs on a 2B basis, together with an uplift. They accept that the costs on some Schedule 3 items should properly be fixed on a 2A basis; they seek preparation costs in relation to the first hearing, which had to be vacated because of the late filing of an amended statement of claim by the plaintiffs.
[4] The plaintiffs say that there is no proper basis in fact or in law for either indemnity costs, or increased costs. They argue that the first to fifth defendants have not sought scale costs, and that therefore there is no jurisdictional basis to award them scale costs in the alternative. In any event, they assert that the total costs claimed are excessive, and that their costs liability should be no more than $40,000. They also argue that any award of costs should be set off against monies they say are owed to them by the syndicate. They claim costs in relation to an interlocutory undertaking they say they successfully obtained from the fifth defendant. They also argue that GST must be excluded if indemnity costs are awarded.
Analysis
[5] The High Court Rules 2016 set out general principles relating to costs awards in r 14.2. The rules aim to achieve predictability, consistency and expediency in the determination of costs awards. They contain rates and steps designed to deliver to the successful party approximately two thirds of the daily rate considered reasonable once the proceeding has been placed in the appropriate category reflecting its complexity.
[6] The rules do envisage that in defined circumstances, either increased costs or indemnity costs can be awarded – r 14.6.
[7] In the present case, the first five defendants, who are the only defendants who took any active steps in the proceedings, seek indemnity costs under r 14.6(4)(a) and (f). They argue that the plaintiffs acted vexatiously in commencing and continuing the proceedings, and that other reasons exist which justify the Court making an order for indemnity costs, despite the principle that the determination of costs should be predictable and expeditious.
[8] I have considered the various matters raised by Mr Marriott on behalf of the first to fifth defendants. I agree that:
(a) the plaintiffs’ pleadings were poor,
(b) the plaintiffs made numerous false starts;
(c) some of the plaintiffs’ evidence was irrelevant and prejudicial;
(d)numerous arguments were run which were not pleaded and were irrelevant; and
(e) the damages claim could never have succeeded as pleaded.
[9] Nevertheless, I am not persuaded that an award of indemnity costs is appropriate. The confusion which has swirled around the sale of the aircraft at issue in these proceedings arose in part because of the actions of the management group.
The third and fourth defendants were members of that group. As I noted in my judgment at [58], the management group did not indicate to other members of the syndicate how they proposed to go about selling the aircraft; they did not agree or put in place a form of tender; they did not require that tenderers could not withdraw tenders made; they did not disclose how tenders would be evaluated; they did not reserve to themselves the right not to accept any tender that might be made. Further, they, together with the plaintiffs, ignored the written agreement between syndicate members which inter alia set out how the aircraft was owned and could be sold. Further, the email correspondence, which I have referred to in my judgment in relation to the sale, and which emanated from the management group, was not carefully worded. On its face, it encouraged the plaintiffs into the belief – albeit mistaken – that they had entered into a contract with other syndicate members. I am not persuaded that the plaintiffs acted vexatiously in commencing the proceeding – r
14.6(4)(a), or that there is any other reason which justifies an award of indemnity costs – r 14.6(4)(f).
[10] In the alternative, the first to fifth defendants seek costs on a 2B basis.
[11] I do not understand the submission made by Mr Zhang that the defendants have not sought scale costs, and that therefore there is no jurisdictional basis to award them. Clearly the defendants have sought scale costs as an alternative to indemnity costs. Equally clearly, jurisdiction lies with the Court to award costs. I reject Mr Zhang’s contention in this regard.
[12] The proceedings were confirmed as category 2 proceedings at an early stage. There is no challenge to that categorisation and in my judgment it is appropriate. The matters raised were not unduly complex. They required counsel of average skill and experience. I am also satisfied that it is appropriate to fix costs by reference to band B as detailed in r 14.5. In large part, they required the normal amount of time that would have been considered reasonable.
[13] I am satisfied that it is appropriate to award costs on a 2B basis, but subject to the following:
(a) the first to fifth defendants’ concession that costs should be fixed on a 2A basis in relation to the matters listed items 20 to 21 in Schedule 3 to the High Court Rules (dealing with discovery and inspection). Comparatively little time was required in attending to these matters;
(b)the defendants should be entitled to claim preparation costs for the original trial set down for 30-31 May 2016. That trial was vacated only two working days prior to its commencement, following the last minute filing of an amended statement of claim by the plaintiffs, which added a new cause of action, and removed the then primary prayer for relief seeking specific performance. The defendants would have been required to prepare for that trial in anticipation that it was going to proceed. They should be entitled to recover, under item 33 in Schedule 3, the preparation costs for that first trial, notwithstanding that it did not go ahead.
[14] I now turn to consider whether or not it is appropriate to award increased costs under r 14.6(3). I have adopted the approach discussed by the Court of Appeal in Holdfast NZ Ltd v Selleys Pty Ltd.1 I have already categorised the proceedings – largely on a 2B basis. I have discounted the time allowance for some of the steps taken, but increased it, under r 14.6(3)(a), in respect of the preparation undertaken for the trial which had to be vacated. Unfortunately, counsel for the defendants has not calculated the costs which follow. My research clerk has done so, albeit in a broad brush fashion. Costs, calculated on a 2B basis total (except for items 20, 21),
total approximately $47,500 (see “Annexure A”).
[15] The Court uplifts from scale, and it is not a question of awarding a percentage of actual costs. I have ignored the first to fifth defendants’ actual costs in determining whether or not to award increased costs.
[16] In my view, increased costs are appropriate in this case for the following reasons:
1 Holdfast NZ Ltd v Selleys Pty Ltd (2005) 17 PRNZ 897 (CA).
(a) the matter was poorly pleaded by the plaintiffs. At the outset, the primary relief claimed was specific performance. Given that title to the plane had passed to the fifth defendant, for valuable consideration and with the knowledge of the plaintiffs, it is unlikely that that relief could have been granted;
(b)the pleadings had to be amended twice, but even then the plaintiffs failed to particularise the damages sought, instead indicating that they would be disclosed at trial;
(c) the damages ultimately sought were untenable. The plaintiffs claimed the costs of sourcing a replacement aeroplane in the United States, disassembling and transporting that plane to Australia, reassembling and inspecting the plane in Australia, disassembling the plane and transporting it to New Zealand, and then reassembling it in this country. There was clearly unnecessary duplication in the damages claimed;
(d) the plaintiffs made no attempt to mitigate their claimed damages.
While the defendants did not take this point in their pleadings, it would have caused very real difficulties had the plaintiffs established liability. The plaintiffs could simply have re-engaged in the reopened bidding process, outbid Mr Emeny, and then sought to claim the difference between the amount they were ultimately required to pay and their original bid. It is likely that the matter would have been in the Disputes Tribunal;
(e) the plaintiffs seemingly failed to appreciate that they had to establish that a contract had come into existence between them and the defendants. They pleaded a written offer, which it was clear had never been executed by anyone other than Mr Corrick and ultimately one other member of the management group. The plaintiffs failed to address the legal requirements they had to prove;
(f) the remaining claims were, to a large extent, dependent upon a finding that there was a concluded contract;
(g)the plaintiffs issued proceedings against the syndicate, but excluded themselves, notwithstanding that they were liable together with other syndicate members, given their own pleadings. Further, they singled out the first to fifth defendants for no obvious reason;
(h)as I found in the substantive judgment, Mr Corrick owed the other syndicate members fiduciary duties, and he breached those duties;
(i)the plaintiffs subpoenaed all five defendants to attend the original trial, and required them to produce, inter alia, the log books for the aircraft. Mr Corrick was forced to concede under cross- examination that those log books were, and at all relevant times had been, under his control. He abused the Court’s processes by requiring the defendants to produce them;
(j)the plaintiffs’ evidence – particularly the evidence of Mr Corrick – was poorly prepared. It contained much that was irrelevant, much that was opinion, and considerable conjecture. In large part it was inadmissible; and
(k)the plaintiffs failed to focus on the real issue at trial, and instead wasted considerable time and effort addressing issues which were not pleaded and which were irrelevant to the matters in dispute – for example – whether or not the first defendant, Mr Silich, was entitled to act as the chair of the syndicate.
[17] I am satisfied that it is appropriate to increase the costs calculated on the basis set out in para [13] above by 50 per cent. In my judgment, the plaintiffs took unnecessary steps and advanced arguments that lacked merit – r 14.6(3)(b)(ii); they failed without reasonable justification to accept patently sound legal arguments – r 14.6(3)(b)(iii). In my view, the various matters I have set out above justify the
making of an order for increased costs despite the principle that the determination of costs should be predictable and expeditious – r 14.6(3)(d).
[18] Mr Zhang seeks to set off various amounts he asserts are owing to the plaintiffs. I decline to so order. There is no finding in regard to the various assertions made by Mr Zhang. The matters relied on were not raised in the pleadings and the liability of the first to fifth defendants for the amounts asserted is far from clear.
[19] There is nothing in Mr Zhang’s assertion that the plaintiffs are entitled to costs on the interlocutory application which was made for an injunction. That application was withdrawn – see the minute of Woolford J dated 18 February 2016. The fifth defendant gave an undertaking to maintain and preserve the plane simply in order to progress the matter expeditiously, notwithstanding the defendants’ position that specific performance (as then claimed) was not available to the plaintiffs.
[20] Mr Zhang raises the issue of GST. Increased costs are generally awarded on the basis that the successful party is GST registered, and so able to recover the GST component of his or her costs. If a party is not GST registered, then that party is required to inform the Court as to the correct position.2 I have received no such advice from the first to fifth defendants in the present case.
Conclusion - Costs
[21] For the reasons I have set out, I award costs against the plaintiffs and in favour of the first to fifth defendants on a 2B basis, increased by 50 per cent, except that:
(a) the costs involved in listing documents on discovery, and in the inspection of the documents, are to be calculated on a 2A basis;
and
2 New Zealand Venue and Event Management Ltd v Worldwide NZ LLC [2016] NZCA 282, (2016)
27 NZTC 22-058 at [12].
(b)the first to fifth defendants are in addition entitled to claim costs on a 2B basis, for preparing for the first trial which was vacated, in accordance with item 33 in Schedule 3 of the High Court Rules.
The liability of the plaintiffs for the costs so calculated is joint and several.
Disbursements
[22] I have not been expressly advised by the first to fifth defendants of any disbursements incurred by them. The only disbursements listed in the invoices annexed in Mr Marriott’s memorandum are as follows:
(a) Court filing fees - $191.30;
(b) Photocopying and printing - $18.20;
(c) Photocopying and printing - $29.40; and
(d) Court filing fee - $95.65.
[23] I do not know if any additional disbursements were incurred or whether the plaintiffs challenge any of the disbursements listed.
[24] I direct that, within five working days of the date of release of this judgment, the first to fifth defendants are to file and serve an itemised list of any and all disbursements claimed. Within a further five working days, the plaintiffs are to advise whether they accept these disbursements.
General
[25] In the event counsel have any difficulty in calculating the costs awarded pursuant to this judgment, or in fixing disbursements, the same is to be referred to
the Registrar.
Wylie J
Annexure “A”
Estimated scale costs on 2B basis (except for items 20 and 21)
| Item | Days allocated (Band B) | Time allocations for general civil proceeding |
| 2 | 2 | Commencement of defence by defendant |
| 9 | 0.6 | Pleading in response to amended pleading |
| 10 | 0.4 | Preparation for first case management conference |
| 11 | 0.4 (x3) | Filing memorandum for first or subsequent case management conference or mentions hearing Conferences were on the following dates: · 18 February 2016 (Woolford J) · 26 May 2016 (Courtney J) – the telephone conference discussed in Courtney J’s minute arose immediately after an appearance in the duty Judge list. I do not consider it likely that counsel filed additional memoranda, and have not located any memorandum on file to indicate otherwise. I therefore have not included this conference in the time allocations for filing memoranda for conferences. · 6 October 2016 (Associate Judge Sargisson) · 11 April 2017 (Venning J) |
| 12 | 0.2 | Appearance at mentions hearing or callover |
| 13 | 0.3 (x4) | Appearance at first or subsequent case management conference |
| 20 | 0.7* | List of documents on discovery |
| 21 | 0.5* | Inspection of documents |
| 30 | 2.5 | Defendant’s preparation of briefs |
| 32 | 2 | Defendant’s preparation of list of issues, authorities, and common bundle |
| 33 | 3 (x2) | Preparation for hearing |
| 34 | 4 | Appearance at hearing (4 days) |
Total days: 21.3
Daily recovery rate for category 2 proceedings: $2230
Estimated costs of defendants on 2B
(with items 20 and 21 on a 2A basis): $47,499
2
0