Dunedin Catering Supplies v Mr Chips Ltd - [2013] NZHC 1815

IN THE HIGH COURT OF NEW ZEALAND DUNEDIN REGISTRY

CIV-2012-412-001002 [2013] NZHC 1815

IN THE MATTER of the Companies Act 1993

AND

IN THE MATTER of a Statutory Demand

BETWEEN DUNEDIN CATERING SUPPLIES Applicant

ANDMR CHIPS LIMITED Respondent

Submissions: Memorandum filed 9 May 2013

Counsel: D W Sim for the Applicant
A M Hutton for the Respondent

Judgment: 18 July 2013

JUDGMENT OF ASSOCIATE JUDGE OSBORNE
as to costs

[1] The application for an order setting aside a statutory demand issued by the respondent was for hearing on 7 May 2013. The applicant filed a notice of discontinuance on 22 April 2013.

[2] The respondent seeks an order for costs and disbursements. It seeks costs and disbursements on a solicitor/client basis.

[3] The credit account application completed by the applicant and containing the terms and conditions of the contractual relationship includes a provision as to costs:

DUNEDIN CATERING SUPPLIES v MR CHIPS LIMITED [2013] NZHC 1815 [18 July 2013]

I/We agree to pay any costs, commissions and legal expenses whatsoever, arising from the collection of any overdue monies. I/We agree that all collection costs on unrecoverable solicitor costs expended in recovering payment of this account will be paid on demand.

The principles – indemnity costs pursuant to contract

[4] Courts and lawyers interchangeably talk of either “indemnity costs” or

“solicitor/client costs” although there are potentially differences between the two.

[5] The term “indemnity costs” is defined by r 14.6(1)(b) High Court Rules as meaning

…the actual costs, disbursements, and witness expenses reasonably incurred
by a party.

[6] The Court’s power to award indemnity costs is a matter of contractual right

arising under r 14.6(4)(e) which provides:

The court may order a party to pay indemnity costs if—

…

(e) the party claiming costs is entitled to indemnity costs under a contract or deed;

…

[7] The Court of Appeal in Black v ASB Bank Ltd observed the following features of the indemnity costs provision:1

(a) Indemnity costs pursuant to a contractual provision are of a distinctly different nature from orders for indemnity costs under other limbs of r 14.6(4).2

(b)The word reasonable in r 14.6(1)(b) does not import a discretion in the usual sense.3

1 Black v ASB Bank Ltd [2012] NZCA 384 at [77] – [99].
2 At [79].
3 At [78] citing Frater Williams & Co Ltd v Australian Guarantee Corp (NZ) Ltd (1994) 2 NZ ConvC 191, 873 (CA) at 191, 886 – 191, 887 and Beecher v Mills [1993] MCLR 19 (CA).

(c) Rule 14.6(4)(e) recognises the well-established principle that one party may contractually bind itself to pay the other’s full solicitor/client costs.4

(d)In assessing whether the indemnity costs claimed under a contract are reasonable, the Court makes an objective assessment of whether the tasks undertaken were reasonably necessary and were covered by the contract, whether the charge rates were reasonable, and whether any other general contract law principles should deny the claimant its prima facie right to judgment.5

(e) The time and other pressures on…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2013] NZHC 1815
Decision Date: 18 July 2013

CaseChat Overview and Summary

Dunedin Catering Supplies sought to discontinue an application for an order setting aside a statutory demand issued by Mr Chips Limited. Mr Chips Limited sought an order for costs and disbursements on a solicitor/client basis. The contractual credit account agreement between the parties included a provision for the payment of any costs, commissions, and legal expenses arising from the collection of overdue monies, including costs on unrecoverable solicitor costs expended in recovering payment of the account. Associate Judge Osborne concluded that the respondent was entitled to costs on a solicitor/client basis pursuant to the contractual agreement. The Court made an objective assessment of whether the tasks undertaken were reasonably necessary and were covered by the contract, whether the charge rates were reasonable, and whether any other general contract law principles should deny the claimant its prima facie right to judgment. The Court found that the fees and disbursements claimed by Mr Chips Limited were reasonable. The Court concluded that the appropriate order for costs in this case was an order that Dunedin Catering Supplies pay the respondent’s costs and disbursements in the sum of $10,749.86.

Orders