Eliahu v Eliahu
[2021] NZHC 3544
•17 December 2021
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2021-404-475
[2021] NZHC 3544
BETWEEN DANIEL ELIAHU and YARON ELIAHU as
trustees of the PITA BUSINESS TRUST Intending Plaintiffs
AND
YARON ELIAHU
Intended First Defendant
PITA BREAD LIMITED
Intended Seconded DefendantCont/….
Hearing: On the papers Counsel:
KF Gould for the first-named Intending Plaintiff
CR Andrews for the Intended First Defendant and the second- named Intended Plaintiff
A Challis for the Intended Fourth and Fifth DefendantsMinute:
17 December 2021
COSTS JUDGMENT OF ASSOCIATE JUDGE SUSSOCK
This judgment was delivered by me on 17 December 2021 at 4.30pm pursuant to r 11.5 of the High Court Rules
Registrar/Deputy Registrar
Solicitors/Counsel:
DMG Solicitors, Auckland McVeagh Fleming, Auckland McElroys, Auckland,
K Gould, Barrister, Auckland
ELIAHU and ELIAHU as trustees of the PITA BUSINESS TRUST v ELIAHU [2021] NZHC 3544 [17
December 2021]
PITA HOLDINGS LIMITED
Intended Third Defendant
TERENCE JAMES QUINN BAUCHER
Intended Fourth Defendant
BAUCHER CONSULTING LIMITED
Intended Fifth Defendant
Introduction
[1] This proceeding is an application for pre-commencement discovery. Following the filing of the application the intended defendants furnished the requested documents, to the extent that they exist, to the first named intending plaintiff.
[2]The only unresolved matter between the parties is the costs of the application.
[3] Memoranda have been filed on behalf of the first named intending plaintiff, the intended first defendant and the intended fourth and fifth defendants jointly. I record at the outset my apologies for the delay in issuing this decision.
[4] The first named intending plaintiff, Mr Daniel Eliahu (“Daniel”), submits costs should be ordered against the intended defendants on the basis that the application was necessary because the documents sought were not provided following request.
[5] The intended defendants submit in response that the question of costs is to be determined in accordance with r 8.22 of the High Court Rules 2016 and not whether the application was necessary.
[6] Mr Yaron Eliahu (“Yaron”), the intended first defendant, considers that costs between himself and Daniel ought to lie where they fall.
[7] The intended fourth and fifth defendants, Mr Terence Baucher and Baucher Consulting Limited (“BCL”), seek an award of costs in their favour of $4,060.00.
Relevant legal principles
[8] Rule 8.22 of the High Court Rules 2016 provides that if an order for pre- commencement discovery is made under r 8.20 the Judge may, if they think it just, order the applicant to pay to the person from whom discovery is sought the whole or part of that person’s expenses (including solicitor and client costs) incurred in relation to the application and in complying with any order made on the application.
[9] Even though r 8.22(3) appears to be predicated on an order being made, the same factors are relevant when an application does not proceed, namely whether opposition to it was reasonable, particularly having regard to the outcome and the motivation for the opposition.1
[10]The question of costs is considered in relation to the two separate stages:
(a)the application for pre-commencement discovery itself; and
(b)the costs of complying with any order made on the application.2
[11]The Court will generally make an order in favour of a non-party.3
Relevant correspondence
[12] Daniel filed an affidavit in support of the application for pre-commencement discovery attaching relevant correspondence. Copies of further letters were attached to the intended fourth and fifth defendants’ memorandum. I set out below a chronology of the correspondence in relation to the application based on these documents.
[13] On 3 September 2020 Daniel’s solicitors first wrote to McVeagh Fleming and BCL for the attention of Mr Baucher requesting copies of documents “to progress matters between our client and yours”. There was no response to this letter.
[14] On 15 December 2020 a letter was sent by Mr Kevin Gould, as counsel for Daniel, to McVeagh Fleming saying that as there had been no response his instructions were to seek pre-commencement discovery within the next seven days (unless the information sought in the original letter was provided within seven days).
1 Air New Zealand Ltd v E-Gate Matrix New Zealand Ltd (2007) 18 PRNZ 501 (HC) at [19].
2 Clear Communications Ltd v Telecom Corporation of NZ Ltd (1994) PRNZ 200 (HC) at 201.
3 Churchill Group Holdings Ltd v Aral Property Holdings Ltd HC Auckland CIV-2001-404-2302, 3 August 2005 at [33] and [36].
[15] McVeagh Fleming replied on the same day, 15 December 2020, saying they were somewhat surprised to see a suggestion of pre-commencement discovery and asking Mr Gould to outline what the proposed cause of action would be.
[16] On 18 January 2021 McVeagh Fleming again emailed Mr Gould noting that they had not received a reply to their email of 15 December 2020 and stating that their client, Yaron, was confused as to why Daniel was asking for this information. The email confirmed that McVeagh Fleming did not act for “the company” but only for Yaron. The email then states that as Daniel is a director of the company he is entitled to the information requested as of right. McVeagh Fleming confirmed that their client had not done anything to prevent Daniel from having access to the information or given any instructions that the information not be supplied. McVeagh Fleming finished by saying Daniel needed to ask the company’s accountant for this information.
[17] The application for pre-commencement discovery was then filed on 25 March 2021 against not only Yaron but two companies and the intended fourth and fifth defendants, Mr Baucher and BCL.
[18] On 10 May 2021 Ms Challis of McElroys, the solicitors for the intended fourth and fifth defendants, wrote to Daniel’s counsel and solicitors providing a zip file of documents and requesting confirmation as to whether the application for pre- commencement discovery was brought against BCL and Mr Baucher simply as parties who may have relevant documents or as potential defendants. The letter further asked counsel to advise if Daniel intended to proceed with the pre-commencement discovery application against BCL and Mr Baucher and noted that if an appearance at the scheduled hearing of the application on 21 May 2021 was required then they would be seeking costs of doing so from Daniel.
[19] A notice of opposition was filed by Yaron, the intended first defendant (and purportedly second named intending plaintiff), on 13 May 2021 challenging Daniel’s authority to bring the application in the first place and saying Daniel and Yaron already had access to the information sought in their capacities as trustees and directors.
[20] On 17 May 2021 Mr Gould wrote to McElroys confirming that the application was brought against the intended fourth and fifth defendants as persons who may have relevant documents, not as potential defendants. The letter then stated that the application would be discontinued against the fourth and fifth defendants following payment of scale costs.
[21] On 18 May 2021 Ms Challis responded to Mr Gould saying that there was no basis upon which his client could seek costs from BCL or Mr Baucher and recording that in fact the contrary is the case. An extract from McGechan on Procedure was included in the email which stated that the Court will generally make an order in favour of a non-party against whom pre-commencement discovery is ordered, citing Jagwar Holdings Ltd v Fullers Corp Ltd (No 1).4
[22] McElroys’ email further stated that if a request had been made for the documents, instead of joining BCL and Mr Baucher as intended defendants, they would have provided the information sent under cover of their 10 May 2021 letter. The email finishes by proposing that Daniel pay BCL and Mr Baucher’s costs on a solicitor/client basis in the amount of $2,300.00, noting that if an appearance is required on 21 May 2020 that those costs would also be sought.
[23] On 18 May 2021 Mr Gould replied to McElroys saying the application for pre- commencement discovery was necessary, referring to the letter sent on 3 September 2020 which was addressed to BCL and Terry Baucher and recording that there was no reply.
[24] A joint memorandum was filed on 20 May 2021 confirming that the intended defendants had furnished the requested documents and that the only outstanding issue was costs.
Discussion
[25] The memorandum filed on behalf of the intending plaintiff seeks costs on the basis that the application was necessary. As is clear from the above, this is not the test
4 McGechan on Procedure (online ed, Thomson Reuters) at [HR8.20.06], citing Jagwar Holdings Ltd v Fullers Corp Ltd (No 1) (1989) 2 PRNZ 654 (HC).
for the award of costs for pre-commencement discovery applications. Although the intending plaintiff was successful in obtaining the documents, there are questions regarding whether he had authority to bring the application and whether he had requested them from the company’s accountants as directed. In my view, no costs award in his favour is appropriate.
[26] The memorandum filed on behalf of Yaron submits that, although Yaron would have been entitled to costs, costs between Yaron and Daniel ought to lie where they fall. I consider that Yaron may have been entitled to costs but as it is proposed that costs lie where they fall between Daniel and Yaron, I make this order below.
[27] The memorandum filed on behalf of the intended fourth and fifth defendants, Mr Baucher and BCL, seeks costs in the amount of $4,060.00. This is made up of McElroys’ invoice to BCL as at 31 May 2021 of $3,060.00 plus $1,000.00 for estimated costs to be incurred for receiving and reviewing the intending plaintiff’s memorandum on costs, preparing, filing and serving the costs memorandum and reviewing the judgment. The memorandum records that these costs should be no more than $1,000.00 but states if actual costs incurred are less than this, then the excess would be repaid to Daniel.
[28] I consider that it is appropriate for an order for costs to be made in favour of the intended fourth and fifth defendants in accordance with the usual principle in relation to applications pursuant to r 8.20 of the High Court Rules 2016. The application was only brought against these parties because they were parties who may have relevant documents. The letter sent in September 2020 to BCL for the attention of Mr Baucher did not mention that a pre-commencement discovery application would be made. The correspondence after that date was only sent to McVeagh Fleming and not to BCL or Mr Baucher. They therefore had no warning that the application was going to be filed. Furthermore, the correspondence with the solicitors for Yaron suggested that Daniel ask the company’s accountants for the documents.
[29] In the circumstances I therefore award the full amount of McElroys 31 May 2021 invoice of $3,060.00 plus $500.00 as a contribution to further costs incurred. These further costs are in respect of the costs memoranda and associated steps. An
award is not usually made for “costs on costs”5 but the position in respect of applications pursuant to r 8.20 was clearly set out in correspondence on behalf of the fourth and fifth defendants. Despite this, the intending plaintiff continued to pursue costs in any event. In these circumstances I consider it is appropriate to award a contribution to costs for the steps in relation to costs as well.
Result
[30]I order:
(a)that the first named intending plaintiff’s application for costs is declined;
(b)costs as between the first named intending plaintiff and the intended first defendant are to lie where they fall; and
(c)costs are awarded to the intended fourth and fifth defendants in the amount of $3,560.00 (or less if actual costs incurred are less) to be paid by the first named intending plaintiff, Daniel Eliahu.
Associate Judge Sussock
5 Jeffreys v Morgenstern [2013] NZHC 1361 at [40]; Barry Park Investments Ltd v Body Corporate Number 95388 [2016] NZHC 1527 at [25]; Epsom Woods Ltd v Waitakere Farms Ltd [2020] NZHC 3137 at [4]; and for a recent example, Combined Property Maintenance Ltd v Singh [2021] NZHC 621 at [19].
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