De Lage Landen Limited v Reddy
[2025] NZHC 1185
•16 May 2025
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2024-404-3188 [2025] NZHC 1185
BETWEEN DE LAGE LANDEN LIMITED
Applicant
AND
MADHAVA REDDY GOPI REDDY
First Respondent
NIKITA GOPI REDDY
Second Respondent
NEW LYNN PROPERTY LIMITED
Third Respondent
PAPAKURA PROPERTY LIMITED
Fourth Respondent
PUKEKOHE PROPERTY LIMITED
Fifth Respondent
Hearing: On the papers Counsel:
S D Campbell, T P Westaway and I M M Whitticase for Applicant N H Malarao and T J Powell for Respondents
Judgment:
16 May 2025
JUDGMENT OF O’GORMAN J
[as to costs]
This judgment was delivered by me on 16 May 2025 at 10 am pursuant to r 11.5 of the High Court Rules 2016.
Registrar/Deputy Registrar
…………………………………
Solicitors/Counsel:
Wynn Williams, Auckland N H Malarao, Auckland Parker Law, Auckland
DE LAGE LANDEN LTD v REDDY [2025] NZHC 1185 [16 May 2025]
Introduction
[1]In a judgment dated 18 March 2025, I determined:1
(a)an on notice hearing of whether freezing orders granted (without notice) by Edwards J on 11 December 2024 should be continued; and
(b)an application by the respondents seeking a discharge of those freezing orders.
[2] The result was an order continuing the freezing orders until further order of the Court and I dismissed the respondents’ application seeking a discharge. I determined that the applicant was entitled to costs and made a timetable for memoranda to be filed.
[3] The applicant, De Lage Landen Ltd (DLL), has filed a memorandum seeking costs on an indemnity basis under the contractual provisions of their hire purchase agreements (HPAs). DLL seeks a total indemnity sum of $89,319.90 comprised of
$72,492.52 for legal fees and $2,189.67 for disbursements, plus office expenses (at four per cent as charged by its solicitors) and GST in the sum of $11,650.42.
[4]The respondents2 submit that:
(a)it is premature for the Court to make any determination on indemnity costs, because there has been no substantive ruling by the Court on contractual liability to the applicant;
(b)in any event the amount claimed is unreasonable; and
(c)the Court should instead award scale costs on a 2B basis, in which case the respondents submit that the appropriate amount is $10,755 (not allowing for second counsel) and disbursements of $1,925.63 (excluding travel for the second counsel).
1 De Lage Landen Ltd v Reddy [2025] NZHC 554.
2 In this judgment, for convenience “respondents” does not include the second respondent, Ms Reddy, against whom no orders were sought in the applications that I determined.
Contractual right to indemnity
[5] DLL relies on the following clauses in its HPAs for a contractual right to recover its actual legal costs:
25. Indemnity
Except to the extent caused or contributed to by our own negligence, the Guarantor indemnifies us against, and must pay us for, any liability, loss, Costs (reasonably incurred), and Taxes we suffer or pay: (a) in connection with our exercise or attempted exercise of any right or remedy under the Guarantee and Indemnity; (b) if you do not, are not obliged to or are unable to, pay us or perform any obligation, under this agreement; (c) if the Guarantor is not obliged to pay us an amount under clause 24; or (d) if we are obliged or we agree to pay an amount to a trustee in bankruptcy or liquidator in connection with a Guarantor’s payment.
30. Definitions
…
Costs means any fees, charges, expenses (including in connection with advisers), fines and penalties and legal fees and expenses (on a full indemnity basis).
[6] Pursuant to the above clauses, DLL claims its actual legal costs for seeking and maintaining the freezing orders (both in respect of the without notice application and the on notice hearing).
Deferral and scope
[7] The respondents argue that the interlocutory applications did not ask the Court to decide substantive liability issues or whether cl 25 of the HPAs is applicable. They contend that these matters should be deferred for determination in the substantive proceeding. Furthermore, the respondents say that the costs claimed are for interim preservation measures that fall outside the scope of DLL’s “exercise or attempted exercise of any right or remedy under the Guarantee and Indemnity”. Interim preservation measures like freezing orders simply maintain the status quo pending determination of the substantive rights. As such, they are “ancillary to a substantive pecuniary claim”.3
3 Siskina v Distos Compania Naviera SA [1979] AC 210 at 253. See also Laws of New Zealand
Nature of Freezing Orders (online ed) at [5].
[8] Contrary to the arguments advanced on behalf of the respondents, I accept that the costs in relation to the freezing orders fall within the scope of cl 25 of each of the HPAs. Those steps were taken “in connection with” the exercise of any right or remedy under the guarantees. While recovery of the substantive amounts payable by the guarantors are being pursued in the substantive proceedings, the freezing orders were a necessary part of enforcement because they were designed to prevent dissipation of the respondents’ assets in the meantime. That connection is established by my analysis of the requirements for granting a freezing order, namely a good arguable case on the substantive claim and a real risk the respondents would dissipate or dispose of assets to defeat any such judgment. The fact that freezing order relief is ancillary to the substantive claim does not undermine it as a step taken in connection with the exercise or attempted exercise of such rights.
[9] I also reject the respondents’ contention that it would necessarily be inappropriate for an indemnity claim for costs to be determined under r 14.6(4)(e) of the High Court Rules 2016 in respect of an interim or interlocutory hearing, if this is prior to determination of substantive issues of liability. I accept that such considerations might validly arise in some cases, if the basis for denying contractual liability is raised (at least to an arguable issue standard) in the interlocutory costs process. To the contrary, in the freezing order applications in this proceeding, the respondents did not deny liability as guarantors, even if the precise quantum was not necessarily admitted.4 Similarly, the correspondence between the parties did not deny liability and overdue debts, but rather sought to put in place a repayment plan.5
[10] In those circumstances, I do not accept that there is any proper reason for deferring determination of the cost issues on the freezing orders. To the contrary, r 14.8 of the High Court Rules creates a presumption that costs on opposed interlocutory applications are to be fixed by the court when the application is determined. In Chapman v Badon Ltd, the Court of Appeal said:6
4 De Lage Landen Ltd v Reddy, above n 1, at [34].
5 At [44].
6 Chapman v Badon Ltd [2010] NZCA 613, (2010) 20 PRNZ 83 at [12] (footnote omitted).
Apart from applications for summary judgment, the general approach to costs in respect of interlocutory applications is that they are dealt with at the time the applications are determined rather than being held over until the outcome of the proceedings is known. This reflects the fact that the merits of particular applications and the merits of the substantive proceedings are different matters.
[11] I note that r 14.8(2) of the High Court Rules expressly provides that, despite the requirement to fix costs on an interlocutory application, the court may reverse, vary, or discharge an order for costs if it is satisfied subsequently that the original order should not have been made.7 The respondents may make an application under r 14.8(2) if they are later found not liable as debtors/guarantors in the substantive claim.
Reasonably incurred
[12] The entitlement to full indemnity costs under cl 25 is subject to a requirement that they are “reasonably incurred”. In Frater Williams & Co Ltd v Australian Guarantee Corporation (NZ) Ltd, the Court of Appeal held that, where there is a contractual right to indemnity costs, “the question for the Court asked to make an order is: for the necessary steps, are the costs claimed reasonable in amount?”.8 However, the word “reasonable” does not import a discretion in the usual sense.9 The Court must be cautious about eroding the contractual protection the indemnity was intended to provide.10
[13] In Black v ASB Bank Ltd, the Court found that assessing whether contractual indemnity costs are reasonable involves the court making an objective assessment of the following:11
(a)what tasks attract a costs indemnity on a proper construction of the contract;
7 David Bullock and Tim Mullins The Law of Costs in New Zealand (LexisNexis, Wellington, 2022) at [2.51]; Palmerston North City Council v Hardiway Enterprises Ltd (struck off) [2018] NZHC 3005 at [6]–[8]; and Jindal v Kamal [2024] NZHC 827 at [13].
8 Frater Williams & Co Ltd v Australian Guarantee Corp (NZ) Ltd (1994) 2 NZ ConvC 191,873 (CA) at 191,886–191,887. See also Black v ASB Bank Ltd [2012] NZCA 384 at [77].
9 Black v ASB Bank Ltd, above n 8, at [78].
10 At [78], quoting Beecher v Mills [1993] MCLR 19 (CA) at 25.11 At [80], citing Frater Williams & Co Ltd v Australian Guarantee Corp (NZ) Ltd, above n 8, at 191,887.
(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.
[14] In this case, DLL has provided copies of its invoices, but only a portion of the fees in those invoices is claimed. In the present application, DLL is not seeking any costs in relation to the substantive proceedings. Accordingly, the invoices have been redacted to remove reference to irrelevant attendances and to protect confidential and privileged information. I have reviewed the proportion of fees claimed for the freezing order steps, compared with the larger amounts in the invoices. I consider those actual fees are reasonable for the attendances, given the sums involved and the facts addressed in the affidavit evidence. I accept those issues can be assessed in the round, relying on the assurance from DLL’s solicitors that they have apportioned actual costs in the way they have described.
[15] The respondents contend that the inclusion of Ms Reddy as a party was a waste of costs and was entirely unsuccessful. However, I have no basis to believe that any specific steps were taken solely in respect of Ms Reddy. She was included initially because she is a joint owner of two of the properties subject to the application.12 Edwards J made no orders against her. It was accepted for the purposes of the applications I determined that no orders were being sought against Ms Reddy. Accordingly, I reject the submission that the invoices should be reduced on those grounds.
12 De Lage Landen Ltd v Reddy [2024] NZHC 3787 at [21].
[16] Similarly, my assessment of the disclosure issues was that the without notice freezing order would have been granted in any event, and that non-disclosure occurred only inadvertently. In the hearing before me, the freezing orders were still opposed despite those further disclosures, so I cannot see that any costs were wasted by Edwards J not having that material before her. It was given due weight in the second hearing before me, which is what the respondents contend should have happened anyway. I do not consider that time addressing the legal principles about disclosure on without notice applications was particularly material for cost purposes, as opposed to assessing the merits of that underlying evidence. Accordingly, I do not accept that the non-disclosure issues justify any deduction from actual costs.
[17] DLL seeks a flat rate fee of four per cent on total fees and disbursements, to reflect the billing practices of DLL’s solicitors Wynn Williams. It has been held that unparticularised expenses fixed as a percentage of fees payable for professional services are not recoverable as they are not identifiable as an expense payable and incurred for the purposes of the proceeding, and do not allow the reasonableness of the charge to be assessed.13 For those reasons, I am not satisfied that such a charge is appropriate for the costs award in this case.
[18] On the facts presently available, I am also not satisfied that it is appropriate to award a GST element. A GST-registered party will generally recover from the Commissioner of Inland Revenue a GST input credit for invoices that the GST party has paid. To avoid double counting, GST costs are therefore not recoverable by a GST-registered party.14
Result
[19] Accordingly, I award the applicant indemnity costs against the first, third, fourth and fifth respondents (but not the second respondent) in the sum of $72,492.52 for legal fees, and $2,189.67 for disbursements.
13 Beatson v Property Brokers Ltd [2024] NZHC 2057 at [14]. See also Sax v Dempsey Wood Civil Ltd [2013] NZHC 1126 at [42]–[46]; and David Bullock and Tim Mullins, above n 7, at [6.30].
14 New Zealand Venue and Event Management Ltd v Worldwide NZ LLC [2016] NZCA 282, (2016) 23 PRNZ 260 at [6].
[20] If the applicant is not GST-registered and has received no input credit, then GST may be sought by establishing those facts with the Registrar.
O’Gorman J
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