Donovan v Lynskey HC Auckland CIV 2006-406-293

[2010] NZHC 1403

IN THE HIGH COURT OF NEW ZEALAND BLENHEIM REGISTRY

CIV-2006-406-293

BETWEEN  PATRICK DONOVAN First Plaintiff

ANDPATRICK DONOVAN (AS TRUSTEE OF THE DONOVAN TRUST)

Second Plaintiff

ANDKATHERINE FAY LYNSKEY First Defendant

ANDKATHY LYNSKEY WINES LIMITED Second Defendant

Judgment:      9 August 2010 at 12.30 pm

DECISION OF ASSOCIATE JUDGE D.I. GENDALL

This judgment was delivered by me

on 9 August 2010 at

12.30 pm pursuant to r 11.5 of the High Court Rules.

Solicitors:           Gascoigne Wicks, Solicitors, PO Box 2, Blenheim

Radich Law, Solicitors, PO Box 842, Blenheim

PATRICK DONOVAN AND ANOR V KATHERINE FAY LYNSKEY AND ANOR HC BLE CIV-2006-406-

293  9 August 2010

[1]      On 26 March 2010 the second defendant in this proceeding filed a Notice of

Discontinuance of the counter-claim it had brought earlier against the first plaintiff.

[2]      The first plaintiff now seeks costs against the second defendant as a result of that discontinuance.   In a Minute I issued on 10 May 2010 regarding this costs question I noted the various memoranda and submissions on costs which had been received from counsel and acknowledged that the second defendant wished to have a further opportunity to file and serve what it described as “comprehensive” submissions on the issue of costs.

[3]      That Minute then directed that those submissions from the second defendant were to be filed and served by 24 May 2010 with the plaintiff having an opportunity by 7 June 2010 to file and serve any final reply submissions.

[4]      Counsel for the second defendant did avail himself of that opportunity to file those further “comprehensive” submissions on costs.   They were filed on 24 May

2010.

[5]      Counsel for the first plaintiff then filed his submissions in reply on 4 June

2010.

[6]      All submissions have now been referred to me for a decision to be made on the  costs  question.    I  apologise  to  the  parties  and  to  counsel  for  the  delay  in providing this decision – I was away on leave for the period 31 May 2010 to 23 July

2010 and have only just been provided with counsels’ various submissions. [7]       I now address the costs question based upon all the material filed.

[8]      In doing so, I note that the first plaintiff seeks costs on a Category 2B scale basis on the discontinued counter-claim from the second defendant which he calculates at $15,250.00.   In addition, disbursements as fixed by the Registrar are sought.  Any award of costs at this point is opposed by the second defendant.  Its counsel, Mr Radich, contends that these costs should be reserved to be dealt with at the conclusion of the hearing of the plaintiff’s substantive claim.  But in any event, if

costs are to be imposed now, Mr Radich in his submissions takes issue strongly with the quantum sought by the first plaintiff.

[9]      It is also significant and regrettable, in my view, at this stage to note the substantial number and length of submissions I have received from counsel on what is  a  relatively straight  forward  costs  issue.    Since  the  discontinuance  was  filed submissions and memoranda have been filed in this Court as follows:

(a)On 9 April 2010 initial submissions on costs were made by counsel for the plaintiff, Mr Davies, and these ran to a total of six pages.

(b)On 16 April 2010 counsel for the second defendant, Mr Radich provided a memorandum in relation to the discontinuance and costs which ran to two pages.

(c)On 30 April 2010 Mr Davies for the plaintiff provided a memorandum in reply running to two pages.

(d)On   5   May   2010   Mr   Radich   for   the   second   defendant   provided   a memorandum described as a “Supplementary Memorandum Concerning Costs” which ran to one page.

(e)On  24  May  2010  Mr  Radich  for  the  second  defendant  filed  a  lengthy submission on costs which ran to eight pages together with four pages of attachments.

(f)On 4 June 2010 Mr Davies for the first plaintiff filed a reply submission which ran to 3 pages.

[10]     I question whether a costs issue such as the present one before the Court, on which a total amount at issue is something a little over $15,000.00 at most, warrants the  not  inconsiderable  amount  of  time  and  effort  which  has  been  expanded  by counsel and the parties here.  That clearly must be a matter of some concern.

[11]     Nevertheless, I must leave that aspect on one side and now turn to address that specific costs issue which requires decision by this Court.

[12]     The starting point in considering any costs claim on a discontinuance must be r 15.23 High Court Rules which states:

15.23     Costs

Unless the defendant otherwise agrees or the Court otherwise orders, a plaintiff who discontinues a proceeding against a defendant must pay costs to the defendant of and incidental to the proceeding up to and including the discontinuance.

[13]      Here, the second defendant is effectively in the position of a plaintiff so far as  the  counter-claim  is  concerned  and  the  first  plaintiff  is  the  counter-claim defendant.  And, it is clear too from the authorities that the presumption contained in r 15.23 may be displaced if the circumstances in a particular case make a different costs outcome just and equitable – Kroma Colour Prints v Tridonicatco NZ Limited (2008) 18PRNZ 973.

[14]     The reasonableness of the stance of both parties needs to be considered.  Did the counter claim plaintiff act reasonably here in commencing its proceeding, and the counter claim defendant in defending it?

[15]     Thus, where a discontinuing plaintiff has achieved all it set out to achieve in issuing its proceeding, it is prime facie entitled to costs or to a departure from the starting presumption (Carmel College Auckland Ltd v North Shore CC 20/1/09, Venning J, HC Auckland CIV-2007-404-5894).

[16]     A further example is where a defendant acted reasonably in taking a step negating the point of the proceeding and the plaintiff then discontinued.  In such a situation, costs are likely to lie where they fall (Olive Francis Retirement Home Ltd v Director-General of Health 13/7/05, Simon France J, HC Auckland CIV 2005-404-

1367).

[17]     In the present case the discontinuance of the counter-claim by the second defendant was filed on 26 March 2010.  A possibly complicating factor here needs to be mentioned however.  The second defendant was apparently placed into liquidation

in November 2009, some four months before the discontinuance was filed.  In terms of s 248 Companies Act 1993, from the time of liquidation of the second defendant, the appointed liquidator has custody and control of all the company’s assets and would have needed to provide the necessary instructions    for    a    discontinuance. Further,  and  as  an  aside,  s 248(1)(c)(ii) Companies Act 1993 needs noting to the effect that, on liquidation of the company, unless the Court orders otherwise or the liquidator  agrees,  the  present  proceeding  by  the  plaintiffs  against  the  second defendant is unable to be continued.

[18]     But, as I understand the position from material before the Court, questions have  been  raised  regarding  the  propriety  of  the  appointment  of  the  second defendant’s present liquidator.  Some suggestion has been made that the liquidator is effectively disqualified and thus, in terms of s 283 Companies Act 1993 a vacancy in that office has occurred which needs to be remedied.

[19]     Clearly these are all issues which may need some resolution here.

[20]     Given  this,  should  a  decision  regarding  costs  on  the  discontinuance  be deferred for consideration at the substantive trial?  That is the position taken here by the second defendant.  And, certainly, on the issue of quantum, as I have noted, Mr Radich for the second defendant takes issue with the total quantum claimed by Mr Davies for the first plaintiff.  On this, areas of concern appear to be Mr Davies’ claim for completing a list of documents on discovery ($2,400.00), producing documents for inspection ($1,600.00), inspecting documents ($2,400.00), for filing memoranda for 10 case management conferences (at a one-third allocation being $213.00 per conference)  and  appearing  at  those  conferences  (at  a  one-third  allocation  being

$160.00 per conference).   Mr Radich complains that given this proceeding is continuing to trial and the counter-claim would have occupied little time at the conferences  in  question  and  involved  little  additional  discovery,  all  these  costs claims are both excessive and inappropriate here in any event.

[21]     Turning now to the question whether there is any reason to depart from the presumption  in  r  15.23  High  Court  Rules  that  a  counter-claim  plaintiff  who

discontinues against a counter-claim defendant must pay costs up to that time.  I am satisfied in this case that the answer to that question must be “no”.

[22] This is not a case where a discontinuing plaintiff has achieved all it set out to achieve in issuing the proceeding as noted in para. 15 above, nor is it a case where a defendant acted reasonably in taking a step negating the point of the proceeding and the plaintiff then discontinued as noted in para. [16] above.

[23]     This  is  a  relatively  simple  matter  of  the  second  defendant  instituting  a counter-claim and then, upon challenge, deciding to discontinue that action.   I am satisfied therefore that there is nothing here to displace the presumption in r 15.23 nor any reason to deviate from the normal principle that costs on a discontinuance should be awarded against the discontinuing party.

[24]     Turning now to address the quantum of costs to be awarded, the following amounts in my view are properly claimed by the first plaintiff:

(a)       Item 2 – commencement of defence – 2 x $1,600.00 = $3,200.00.

(b)       Item 3.6 – pleading in response to other party’s amended pleading –

amended  statement  of  defence  to  amended  counter-claim  dated  8

September 2008 – 0.6 x $1,600.00 = $960.00.

(c)       Item 4.12 – preparing interlocutory application (strike out) – 0.6 x

$1,600.00 = $960.00. Total = $5,120.00.

[25]     The  next  claims  by  the  first  plaintiff  in  his  costs  computation  are  for completing a list of documents on discovery ($2,400.00), production of documents for inspection ($1,600.00) and inspection of documents ($2,400.00).  On these, there is nothing before the Court to indicate that this discovery and inspection related particularly or exclusively to the plaintiff’s discontinued counter-claim.  Mr Davies for the first plaintiff in his Memorandum dated 3 June 2010 noted at para. 7:

it is true that very few documents were discovered in relation to the counter-claim by the second defendants

but went on to contend at para. 8 of that Memorandum:

..... faced with an unparticularised counter-claim, the plaintiffs had to make sure that all documents that could possibly have any relevance to any issue that may arise out of the counter-claim is (sic) discovered.

[26]     As  I  have  noted  above,  here  the  total  amount  claimed  for  discovery, production and inspection is $6,400.00.   In my view a fraction of this amount, at most  is  justifiable.     An  award  of  $1,000.00  for  discovery  and  inspection  is appropriate and will be made here.   The balance of the first plaintiff’s claim for discovery can only relate to the substantive claim itself and can be the subject of further consideration at trial.

[27]     Last, two matters need addressing.  As I have noted at para [20] above, the first plaintiff has claimed some $2,130.00 representing a one-third allocation of 10 attendances at case management conferences from March 2007 to February 2010 (being 0.4 x $1,600.00 ÷ 3 = $213.00 per conference).  In addition the first plaintiff has claimed $1,600.00 for 10 appearances at those case management conferences (a one third allocation in each case represented by 0.3 x $1,600.00 ÷ 3 = $160.00 per conference.)

[28]     With respect to these 10 case management conferences Mr Radich for the second defendant argues that a rudimentary consideration of the minutes and memoranda from these conferences would demonstrate that the counter-claim occupied virtually no time at each of the conferences.  He goes on to contend that the reason that this proceeding as a whole has been ongoing for 3 ½ years and required so many judicial conferences is that the plaintiffs have been remiss in particularising their claim and have approached discovery in a piecemeal way.  He notes that the plaintiffs have filed six statements of claim and seven separate lists of documents.

[29]     Mr Davies for the first plaintiff disputes these contentions but appears to provide little further explanation.

[30]     Faced with this dilemma, I can do nothing more than make a broad estimate of what might be a fair costs charge for preparing memoranda and attending at these conferences relative to the counter-claim in issue here.  To endeavour to dissect in retrospect what occurred at 10 separate case management conferences dating back to March 2007 is, in my view, quite inappropriate.

[31]     That  said  I allow  here  by  way  of  costs  for  filing  memoranda  for  these conferences the sum of $500.00 and for appearance at the case management conferences a further sum of $500.00.

[32]     The total costs quantum therefore to be awarded here is to be $7,120.00 representing  $3,200.00  for  commencement  of  the  defence  to  the  counter-claim,

$960.00 for the amended statement of defence in response to the other party’s amended pleading, $960.00 for preparing the strike-out application, $1,000.00 for discovery and inspection and $1,000.00 for filing memoranda and appearing at case management conferences.

[33]     An order is now made therefore awarding costs to the first plaintiff on the second defendant’s discontinuance of its counter-claim in the sum of $7,120.00 together with disbursements, if any, as are fixed by the Registrar.

‘Associate Judge D.I. Gendall’