DKMK Limited v Skibo Limited

[2020] NZHC 3293

IN THE HIGH COURT OF NEW ZEALAND WHANGAREI REGISTRY

I TE KŌTI MATUA O AOTEAROA WHANGĀREI-TERENGA-PARĀOA ROHE

CIV-2020-488-38

[2020] NZHC 3293

BETWEEN

DKMK LIMITED

Plaintiff

AND

SKIBO LIMITED

First Defendant

ALLAN JOHN GRAY

Second Defendant

Hearing:	On the papers
Counsel:	S Davies-Colley for the Plaintiff P R Cogswell for the Defendants
Judgment:	15 December 2020

JUDGMENT OF GAULT J

(Costs)

This judgment was delivered by me on 15 December 2020 at 10:00 am pursuant to r 11.5 of the High Court Rules 2016.

Registrar/Deputy Registrar

……………………………………

Solicitors:

Mr S Davies-Colley and Mr D P Adams, WRMK, Whangarei Mr P R Cogswell, Cogswell Law, Auckland

DKMK LTD v SKIBO LTD [2020] NZHC 3293 [15 December 2020]

[1]                 On 14 September 2020 I made orders by consent resolving the plaintiff’s claim in relation to the provision of financial information and contractual restrictions on the first defendant.1

[2]                 In relation to costs, by consent, I made an order requiring the first defendant to pay all of the plaintiff’s actual and reasonable costs (legal, accounting and otherwise) incurred in relation to attempts to obtain and assess information. I made timetable directions by consent for costs memoranda (or affidavits if necessary) to be filed and served and for costs to be determined on the papers.

[3]                 As a preliminary point, Mr Davies-Colley, for the plaintiff, submits that at the hearing on 14 September 2020 it was agreed that the costs award should be made against the second defendant or, at least, jointly and severally against both defendants. Mr Cogswell, for the defendants, submits that is incorrect. As I made the orders on 14 September 2020 by consent, it would not be appropriate to vary the order now given the defendants’ opposition.

Approach to actual and reasonable costs

[4]                 It is common ground that the approach to costs on an indemnity, solicitor/client or actual and reasonable basis where a party is entitled to such under a contract is that effect should be given to such an entitlement, subject to an assessment of the reasonableness of the costs claimed. In Black v ASB Bank Ltd the Court of Appeal said:2

[77] As this Court held in Frater Williams & Co Ltd v  Australian  Guarantee Corporation (NZ) Ltd,³ 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? That is because r 14.6(1)(b) permits the Court to order payment of costs “reasonably incurred”. It follows from the wording of r 14.6(1)(b) that indemnity costs are determined with reference to actual costs, but may be less than the actual costs if the Court considers the actual costs were not reasonably incurred.

…

1      DKMK Ltd v SKIBO Ltd HC Auckland CIV-2020-488-38, Minute / Orders 14 September 2020.

2      Black v ASB Bank Ltd [2012] NZCA 384.

3      Frater Williams & Co Ltd v Australian Guarantee Corp (NZ) Ltd (1994) 2 NZ ConvC 191,873 (CA) at 191,886–191,887.

[80]      Assessing whether the indemnity costs claimed under a contract are reasonable involves the Court making an objective assessment of these matters:⁴

(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.

[5]                 As the Court of Appeal said in Frater Williams, the time and other pressures on judges leave “room for robust judgment as to the costs considered reasonable in all the circumstances”.5

Discussion

[6]                 The plaintiff seeks $80,514.23 (including disbursements and experts’ costs),6 together with $1,170 to produce its costs memoranda and additional schedules required by the second defendant, which were considered an unnecessary further cost.

[7]                 It is common ground that, as the consent order stated, the plaintiff’s actual and reasonable costs are those “incurred in relation to attempts to obtain and access information”. Other costs are outside the scope of the indemnity (and there is no suggestion there are other costs recoverable as scale costs in the proceeding at this stage). Therefore, the first question for determination is whether the claimed costs relate to attempts to obtain and access information.

4      Frater Williams & Co Ltd v Australian Guarantee Corp (NZ) Ltd (1994) 2 NZ ConvC 191,873 (CA) at 191,887, endorsed by [the Court of Appeal] in Watson & Son Ltd v Active Manuka Honey Association [2009] NZCA 595 at [20].

5      Frater Williams at 191,887.

6      This figure was recalculated as the plaintiff accepted the defendants’ objection to GST inclusive figures, and to include a further expert’s invoice to which no objection was taken.

[8]                 Mr Cogswell disputed that all the costs claimed are within the scope of the indemnity. He submitted it is difficult to say what proportion of the attendances related to the plaintiff’s attempts to obtain and assess information. He submitted that only detailed  time  records  would  assist,  and  the  plaintiff  has  not  provided  those.  He accepted that the Court must make a robust judgment as to costs. He submitted that  for  those  attendances   prior  to  the  initiation  of  the  injunction  application, a reduction of at least 70 per cent is appropriate because the narrations indicate that the attendances were primarily concerned with the unfolding dispute about pre-contractual misrepresentation rather than attempts to obtain and assess information.

[9]                 In reply, Mr Davies-Colley submitted that as it was accepted the work occurred and the hourly rates were reasonable, the Court need not look further. But the Court’s assessment of reasonableness extends beyond the applicable hourly rates. As the Court of Appeal said in Black v ASB Bank Ltd, an assessment is required as to whether the steps undertaken were reasonably necessary in pursuance of the tasks (contemplated in the contract).

[10]              However, I accept Mr Davies-Colley’s further submission that the work done and full amount claimed were reasonable. He confirmed that costs in relation to the counterclaim or issues with the lease have not been included. I accept that the costs claimed for this period before proceedings ($11,984 plus $2,070 accountants’ fees) related to steps undertaken that were reasonably necessary in order to obtain and assess information and the amounts are reasonable. I do not accept that a 70 per cent, or any, discount is appropriate.

[11]              In relation to subsequent attendances in the proceeding, Mr Cogswell submitted that the costs of independent counsel ($4,951.50 excl GST) should be disallowed, and a discount for second counsel in relation to the substantive hearing (of an unknown amount) should also be made. Mr Davies-Colley explained that independent counsel was engaged for the interim injunction because he was unavailable, which I accept, and that no claim has been made for second counsel.     I accept the other amounts claimed were also reasonably incurred in relation to attempts to obtain and access information. I accept the $66,460.23 claimed.

[12]              Mr Cogswell also opposes costs on costs, submitting that the plaintiff could have avoided much of the costs it claims by disclosing narrations and time records up front. While the Court has power to award costs in relation to costs, they are unusual and the Court is reluctant to award them.7 While I have not accepted a number of the defendants’ objections to the costs claimed, given that actual and reasonable costs are in issue and the plaintiff needs to justify the reasonableness of the costs claimed, I do not consider that an additional award of $1,170 for costs on costs is appropriate.

Result

[13]The first defendant is to pay the plaintiff’s actual and reasonable costs of

$80,514.23 incurred in relation to attempts to obtain and assess information.

Gault J

7      Jeffreys v Morgenstern [2013] NZHC 1361 at [40]; Barry Park Investments Ltd v Body Corporate No 95388 [2016] NZHC 1527 at [25]; and Epsom Woods Ltd v Waitakere Farms Ltd [2020] NZHC 3137 at [4].