Directus South East Asia Limited v CNG International Limited

[2023] NZHC 3163

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2022-404-1286

[2023] NZHC 3163

BETWEEN

DIRECTUS SOUTH EAST ASIA LIMITED

Plaintiff

AND

CNG INTERNATIONAL LIMITED

First Defendant

CHARLES JARED GEDDES BEATTIE

Second Defendant

Hearing:	On the papers
Appearances:	C R Andrews/M C Staines for the Plaintiff Kenneth Sun for the Defendants
Judgment:	10 November 2023

COSTS JUDGMENT OF ASSOCIATE JUDGE C B TAYLOR

This judgment was delivered by me on 10 November 2023 at 3:00pm

pursuant to Rule 11.5 of the High Court Rules

…………………………. Registrar/Deputy Registrar

Solicitors:

McVeagh Fleming (C R Andrews/M C Staines), Auckland, for the Plaintiff Capstone Law Limited (K Sun), Parnell, Auckland, for the Defendants

DIRECTUS SOUTH EAST ASIA LIMITED v CNG INTERNATIONAL LIMITED [2023] NZHC 3163 [10

November 2023]

Introduction

[1]                  In a judgment dated 16 May 2023 (the Judgment),1 the Court granted Directus South East Asia Limited’s (Directus) application for summary judgment against the first defendant, CNG International Ltd (CNG) and the second defendant, Charles Jared Geddes Beattie (Mr Beattie) (together, the defendants).

[2]                  Directus sought orders for its costs against the defendants on an indemnity basis pursuant to Directus’s contractual entitlement. In the Judgment, the Court made an award to Directus in the amount of NZD14,848.79 for costs incurred by Directus prior to the commencement of the proceeding. In respect of Directus’ claim for costs post-commencement of the proceeding, the Judgment directed counsel to endeavour to agree costs within 20 working days and if costs could not be agreed, then counsel were to file memoranda as to costs, with the costs being determined on the papers.

[3]                  Directus and the defendants have been unable to agree costs and Directus filed a memorandum dated 21 June 2023, counsel for the defendants filed a memorandum dated 28 June 2023, and counsel for Directus filed a response dated the same date.

[4]                  The Court apologises for the delay, but this matter has only just been referred to me.

Directus’ submissions

[5]Directus has is seeking an order for indemnity costs of $32,958.60.

[6]                  Counsel makes the following submissions in support of the application for indemnity costs:

(a)Directus has a contractual entitlement to indemnity costs against the defendants;

1      Directus South East Asia Ltd v CNG International Ltd & Anor [2023] NZHC 1161.

(b)Directus is registered for GST and claims only the GST exclusive portion of the legal costs as recorded in the invoices issued by McVeagh Fleming. Therefore no deduction of the GST component of any costs award is required.

(c)The solicitors who carried out the work on this matter were Mr Craig Andrews (litigation partner) and Meggan Staines (senior solicitor) of McVeagh Fleming, and their charge-out rates are respectively $535.00 and $250.00 per hour.

(d)The quantum of scale costs which would otherwise be available on a 2B basis is calculated at $18,249.50, which is just over half of Directus’ actual costs.

(e)The actual legal costs incurred by Directus in this proceeding for the sum of $32,958.60 were reasonable and necessary.

[7]                  In addition to its costs, Directus seeks an order of $50.00 in respect of the prescribed filing fee for sealing the costs order once made.

Defendants’ submissions

[8]                  Counsel for the defendants submits that the defendants filed a notice of appeal with the Court of Appeal on 14 June 2023. Counsel also submits that the defendants are intending to file an interlocutory application with the High Court, seeking a stay of execution of the Judgment. Counsel submits that if a stay is granted, then the defendants would not be obliged to pay costs to the plaintiff, including any judgment sum, until the appeal has been determined. Counsel submits that even if the stay is not granted, it would be prejudicial to impose costs on the defendants at this stage as the dispute between the parties has not been fully resolved and accordingly submits that costs ought to be reserved until the appeal has been determined.

[9]                  Counsel for the defendants also submits that Directus does not have a contractual entitlement to indemnity costs against the defendants. Clause 25.4 of the

sale and purchase agreement between Directus and the defendants, dated 5 August 2020, states:

The Purchaser and the Guarantor indemnify the Vendor against all costs, losses, claims, liabilities, proceedings, damages and expenses incurred and any loss or damage suffered by the Vendor arising by reason of, or in connection with, the Purchaser’s non-performance after the settlement date of any obligations under any of the Business Contracts.

[10]              Counsel for the defendants submits that a general right to be indemnified for costs associated with a breach of contract does not extend to solicitor-client costs and refers to the decision of the Court of Appeal in Newfoundworld Site 2 (Hotel) Limited v Air New Zealand Limited2 where counsel submits that the Court of Appeal found that to be entitled to indemnity costs:

(a)such entitlement must be “plainly and unambiguously express” (this could be demonstrated by use of specific language such as “legal fees” and “between solicitor and client”); or

(b)there must be words that suggest such an indemnity was contemplated.

[11]              Counsel for the defendants submits that cl 25.4 does not explicitly state nor imply that Directus is entitled to claim solicitor to client costs from the defendants.

Directus’ reply

[12]Counsel for Directus, in reply, makes the following submissions:

(a)the filing of an appeal does not operate as a stay of proceeding in which a decision is given or the enforcing of that decision (citing r 20.10 of the High Court Rules and r 12 of the Court of Appeal (Civil) Rules 2005. It is important that costs be determined promptly following the completion of the judgment, citing Commissioner of Police v Pirini.3

2      Newfoundworld Site 2 (Hotel) Limited v Air New Zealand Limited [2018] NZCA 261 at [84].

3      Commissioner of Police v Pirini [2022] NZHC 2768 at [18].

(b)The defendants have not yet filed an application for a stay (this remains the case as at the date of this Judgment) and, in any event, stays are far from automatically granted. An expressed intention to apply for a stay should not result in the Court needing to speculate on whether or not a stay of enforcement will actually be granted.

(c)Neither the filing of an appeal nor a stay application are good reasons to defer the determination of costs, citing Commissioner of Police v Salter.4 The defendants remain free to pursue their appeal and to bring an application for a stay, notwithstanding the determination of costs.

(d)As to the defendants’ reliance on the decision of Newfoundworld Site 2 (Hotel) Limited5 as authority for the proposition that Directus is not entitled to indemnity costs, the indemnity provision with which the Court of Appeal was concerned explicitly excluded any indirect or consequential losses. The Court, being satisfied that the costs in question were consequential or indirect, held that they fell within the exclusion and refused to allow them. There is no such exclusion in the relevant indemnity clause in this proceeding. Further, the Court of Appeal referred to two cases in which it was held that there was a necessary implication that solicitor/client costs fell within the relevant indemnity. In the present case, “indemnity” expressly includes “all costs, losses, claims liabilities, proceedings, damages and expenses incurred and any loss or damage suffered” by Directus in the event of the first defendant’s breach (emphasis added by counsel). The possibility of legal proceedings in connection with a breach by the defendants was plainly contemplated by the parties, and that solicitor/client costs fall within the indemnity by necessary implication.

4      Commissioner of Police v Salter [2021] NZHC 2164 at [22].

5      Above, n 2.

Result

[13]              I am of the view that Directus is entitled to indemnity costs as sought. The reasons for this are:

(a)The filing of an appeal does not operate as a stay of the proceeding and it is noted that an application for a stay has not been made by the defendants. Even if a stay application had been made by the defendants, there is no certainty the stay would be granted. In line with the authority of Commissioner of Police v Salter6, neither the filing of an appeal nor a stay application are good reasons to defer the determination of costs.

(b)Directus is entitled to indemnity costs under its contractual arrangements with the defendants. In my view the reference to the “proceedings” and “expenses” in cl 25.4 of the sale and purchase agreement contemplates that the indemnity will apply to legal proceedings resulting from the defendants default and accordingly the entitles Directus to indemnity costs on a solicitor-client basis.

Orders

[14]              I order that the defendants are to pay Directus indemnity costs of $32,958.60 together with a disbursement of $50.00, totalling $33,008.60.

…………………………….. Associate Judge Taylor

6      Above, no 4.