Fairclough v McManemin

[2016] NZHC 2645

IN THE HIGH COURT OF NEW ZEALAND HAMILTON REGISTRY

CIV-2015-470-127 [2016] NZHC 2645

BETWEEN

FERN AROHA FAIRCLOUGH,

THERESA LYNLEY MCMANEMIN AND PETER MICHAEL MCMANEMIN Plaintiff

AND

HELMA JOANE MCMANEMIN Defendant

Hearing:	2 November 2016 (by telephone link)
Appearances:	Mr C T Gudsell QC for Plaintiffs Mr D M OʼNeill for Defendant
Judgment:	7 November 2016

JUDGMENT OF ASSOCIATE JUDGE J P DOOGUE

This judgment was delivered by me on

07.11.16 at 3.30 pm, pursuant to

Rule 11.5  of the High Court Rules.

Registrar/Deputy Registrar

Date……………

FAIRCLOUGH & ORS v MCMANEMIN [2016] NZHC 2645 [7 November 2016]

[1]      An  application  for  security  for  costs  was  scheduled  for  hearing  on  2

November 2016.  The parties, no doubt as a result of sensible advice from counsel, came to an agreement that the plaintiffs will deposit a further $25,000 into the trust account of Harkness Henry & Co, solicitors on account of security for costs and to be held for such purposes.

[2]      A number of issues arise out of the security for costs arrangements.  The first is the matter of the costs that are payable which the defendant says it is entitled to as the successful party, presumably, in relation to the application for security for costs. There is no real dispute that in this case application of the principles contained in r 14.2(a) would justify the making of an order for costs.

[3]      The next issue concerns the quantum of any order for costs.  The first point is that  the  plaintiffs  say  that  they  do  not  know  what  the  actual  costs  which  the defendant expended on solicitor/client fees and disbursements attributable to this application actually are.   Mr O’Neill has given information to the Court about the total amount of fees that have been charged since 2015 but that is not broken down in such a way as to isolate out that part of it attributable to the application for security for costs.

[4]      The dispute involves consideration of the appropriate scale amounts which ought to be directed to be paid.   The provisions of r 14.5 make it clear that the provisions of the High Court Rules contained in HCR 14.5 have mandatory application.  The Court must adopt as a reasonable time the amount of time that is stated in Schedule 3 depending upon whether the proceeding belongs to Band A, B or C.  The Court is required to come to a judgment of which of those bands best fits the circumstances of the case before the Court that requires the Court to decide whether a small amount of time, a normal amount of time or a comparatively large amount of time “is considered reasonable”.  In general, this issue is resolved by the Court making a judgment that has regard to matters such as the number of issues that the application gives rise to, any elements of complexity, the extent of evidence required, matters such as whether the application and opposition to it require legal research that was unusually large having regard to a lack of clarity as to what the law

provided and other matters.  The extent of the submissions reasonably made on each side is another factor which will inform the judgment.  The judgment that is required is therefore (as I have said) to be made by reference to the factors in HCR 14.5 (2). It is not made on the basis of what time expended in the proceeding.   That is the Court does not consider how long counsel was actually involved in taking the steps required.

[5]      Based upon such an approach in this case, I would have thought that there would be little argument that Band B would be the appropriate band.  The case is a run of the mill type application. The principles relating to ordering security for costs would have had to have been considered and their application to the facts before the Court analyzed and explained.  Evidence would have to be prepared of the various factors  that  the  Court  is  required  to  take  into  account  in  making  a  decision. Discussion of the law and principles applicable does not really change whether the case is one in which large amounts of money are at stake or small amounts are at stake. The legal approach will not necessarily be affected by whether the substantive case of which the application is a part is one of great complexity or not.

[6]      In all of the circumstances, I consider Band B to be the appropriate band.  Mr Gudsell QC however raised another point that arises under HCR 14.2(f) and that was the so called “no profit” aspect of the matter.  That is, an award of costs should not exceed the costs incurred by the party claiming costs.  Mr Gudsell observed that he did  not  know  what  amount  of  costs  had  been  charged  to  the  defendant  for attendances relating to this application.   The Rules make no explicit provision regarding a claimant for an award of cost under the Rules supplying information when making the application which informs the Court of how much the client was actually  charged  for  the  various  steps  which  are  those  in  regard  to  which  an allocation of costs under the Rules is being considered.  That may be because it was assumed when the Rules were promulgated that it would not be common for an award of costs (which has traditionally been regarded as “contribution” to costs) would equal or exceed the amount of actual solicitor and client costs.

[7]      There may however be cases where exactly that is the outcome.  The Court has experience of cases where counsel, in some insolvency cases eschew an award of costs based on Part 14 and Schedule 3 because their actual costs are less.

[8]      Given that the matter has been raised and that Mr O’Neill was unable to provide any helpful response in the context of the conference, I consider that the most pragmatic way of dealing with the point is to require counsel for the defendant/applicant not to enforce a costs order based upon Part 14 and Schedule 3 which is the appropriate order unless and until counsel provides a brief certificate stating that based on his enquiries and assessment the amount of costs resulting from the costs order does not exceed the actual amounts charged to the defendant in this case.  On that basis I make an order directing that costs are to be on a 2B basis.

[9]      The above direction is suitable for this case.   It may not be applicable in future cases where the factual context differs.

[10]     The next issue concerns the terms of the payment of the security for costs. Broadly speaking the defendant seeks payment at an early date and the plaintiffs at a later date.  The parties have told me that they will abide my decision in the matter.

[11]     I consider it is correct in principal that payment of security for costs should be  paid  proportionately  as  the  work  which  generates  costs  on  the  part  of  the applicant mounts up.  If payment is left to be made at too late a stage, the risk is that only after the applicant has incurred substantial costs liabilities for legal fees, will it be discovered that the security that would be available as a contribution to those costs has not been met.

[12]     The next substantial point in this proceeding at which costs will begin to escalate at an accelerated rate will be when the defendant’s briefs of evidence are due  to  be  filed.    Therefore,  I  consider  that  the  appropriate  point  at  which  the plaintiffs should pay security for costs is at the conclusion of supplying their briefs of evidence to the defendant in accordance with the pre-trial directions which are discussed below.

[13]     A number of timetabling issues need to be resolved at this point which are the date for completion of discovery by the defendant, the serving of a notice/application for particulars of the plaintiffs’ pleading, service of plaintiffs’ reply to statement of defence, allocation of trial and pre-trial programme.

[14]     Further,  the  plaintiff  is  to  provide  any  notice  requiring  particulars  by  4

November 2016.   (I appreciate that date will have passed by the time that the judgment is issued.  But the direction confirms the parties’ understanding).

[15]     I direct that the defendant’s affidavit of documents is to be provided by 29

November 2016

[16]     Any response to a notice of particulars is to be supplied by 2 December

2016.

[17]     The parties are to consult on the question of a suitable pre-trial programme and then submit proposed arrangements for consideration to me.  Because the trial date is not known at this point, the construction of the timetable should be based on a count back from the notional start of trial date.   So that close of pleadings, for example, might be directed to be 70 working days prior to the trial date etc.

[18]     Based upon the witness numbers which the parties have indicated, that is some nine or ten witnesses in total, a five day trial will be required and the Registrar is to allocate a trial of that duration after consultation with counsel about suitable dates.   The intent of this direction is that the proceeding will have a trial date allocated before the end of this year.  If any difficulties are encountered, counsel are at liberty to seek further directions.

[19]     Once the pre-trial programme has been settled, the date by which the next tranche of security is to be paid will became apparent.  However I reserve leave to either party to seek further directions if required.

J.P. Doogue

Associate Judge