Formax Finance Limited v Funstar Finance Limited

[2020] NZHC 1067

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2019-404-1284

[2020] NZHC 1067

BETWEEN

FORMAX FINANCE LIMITED

Plaintiff

AND

FUNDSTAR FINANCE LIMITED

First Defendant

FUNDSTAR HOLDINGS LIMITED

Second Defendant

Hearing:

On the papers

Appearances:

JJ Brown for the Plaintiff

A Barker QC and E Fox for the Defendants

Judgment:

21 May 2020

JUDGMENT NO.2 OF ASSOCIATE JUDGE SMITH – COSTS & INTEREST

This judgment was delivered by me on 21 May 2020 at 11am pursuant to r 11.5 of the High Court Rules

Registrar/Deputy Registrar

Solicitors:

Chapman Tripp, Wellington Anderson Creagh Lai Ltd, Auckland

Formax Finance Ltd v Fundstar Finance Ltd [2020] NZHC 1067 [21 May 2020]

[1]        In a judgment given on 26 February 20201, I entered summary judgment for the plaintiff (Formax) for the sum of NZ$1,650,000. I also gave judgment for interest calculated to 25 June 2019, in the total sum of $595,692.

[2]        I held that Formax was entitled to costs, and further interest at least to the date of judgment. I invited counsel to file memoranda addressing the costs and interest issues.

[3]        A memorandum has since been filed by Mr Brown for Formax. Counsel for the defendants has advised that his clients do not object to the Formax memorandum.

The claim for costs

[4]        Formax claims indemnity costs of $148,409.66, pursuant to clause 8.2 of the Master Deed entered into between the parties. Clause 8.2 provided:

Enforcement: The Borrower will pay all validly incurred costs and expenses (including all legal expenses on a solicitor and own client basis) sustained or incurred by the Lender as a result of the exercise of, or in protecting or enforcing or otherwise in connection with, its rights under this deed or other Relevant Document, in each case on demand and on a full indemnity basis where there has been an Event of Default.

[5]        Insofar as its legal costs in this proceeding are concerned, Formax seeks the indemnity costs under r 14.6(4)(e) of the High Court Rules 2016. That rule provides:

14.6 Increased costs and indemnity costs

…

(4) 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;

…

[6]        Mr Brown provided copies of his firm’s invoices making up the claim for costs. The total invoice for fees was $138,586.50, and the total for disbursements $9,823.16

– total $148,409.66.

1      Formax Finance Ltd v Fundstar Finance Ltd [2020] NZHC 208. A copy of the judgment with minor corrections was re-issued on 28 February 2020.

[7]        The total claimed for fees is not limited to the costs of preparing and prosecuting the Court proceeding. The claim includes the solicitors’ time for initial advice, drafting the notice of cancellation of the Borrower Loans, drafting notices of assignment of Customer Loans, and arranging translation of the documents from Chinese to English. Thereafter, the costs claim covers the drafting of the statement of claim, application for summary judgment and evidence in support, and the other steps one would expect to see taken on a summary judgment application in a substantial commercial claim. Attendances also included preparing a draft application for freezing orders and evidence in support, although that application was not in the event filed. Also, the solicitors’ time included negotiating an undertaking with the defendants’ counsel, and lodging a caveat on a property secured under one of the relevant loans.

[8]        I am satisfied that all of these attendances come within the broad ambit of clause 8.2 of the Master Deed, as “validly incurred costs and expenses … sustained or incurred by [Formax] as a result of the exercise of, or in protecting or enforcing or otherwise in connection with, its rights under the [relevant contract documents]”.

[9]        Mr Brown acknowledges that the actual costs and disbursements claimed are not insignificant. However, he submits that they are reasonable in the context of a claim for a sum in excess of $2.2 million, and having regard to the fact that the further time and expense of a full trial was avoided. He submitted that there was complexity with the body of communications to consider, many of which required translation from Chinese to English. Also, Formax carried the greater part of the burden of setting out relevant correspondence in evidence, and “introducing” the dispute to the Court.

[10]      Mr Brown noted that, based on correspondence from the defendants’ solicitors, costs incurred by the defendants on the case were at least $93,000 (including disbursements). The defendants have not disputed that amount.

[11]      The defendants have not suggested that any part of the costs and expenses claimed was not “validly incurred”, or that they were not incurred in protecting or otherwise enforcing Formax’s rights under the contract documents. Nor has there been any challenge to the claimed disbursements.

[12]      The claim was a substantial commercial claim, in which it appears that the defendants’ costs have probably been charged at a fairly similar level to the fees charged by Formax’s solicitors (accepting that Formax, as plaintiff, carried the greater burden of the party commencing and opening the case).

[13]      In those circumstances, I see no basis to reduce the claim for costs and disbursements. I make an order for costs in favour of Formax in the total sum of

$148,409.66 (including disbursements). The defendants are jointly and severally liable for that sum.

The claim for interest

[14]      In its statement of claim, Formax claimed the “normal and default interest” on the two relevant Borrower Loans, from 25 June 2019 until the date of repayment.

[15]      Under the Master Deed, the normal rate of interest on the Borrower Loans is 12% per annum. However, under clause 3.3, the defendants are liable to pay interest at the default rate on all “Outstanding Moneys” until such time as all defaults are fully remedied (calculated on a daily basis, and before and after judgment where applicable). The default rate is 16% per annum (4% above the normal interest rate).

[16]      The expression “Outstanding Moneys” was defined in cl 1.1 of the Master Deed as:

… at any time, the principal, accrued interest (including default interest), fees, costs, and all other amounts owed by the Borrower to the Lender including all Moneys owing under the Borrower Loan documents or this deed owing and outstanding at that time.

[17]      Based on those provisions, Formax claims interest from 26 June 2019 to the date of judgment (26 February 2020) in the sum of $242,165.58 (246 days of interest from 26 June 2019 to 26 February 2020 on $2,245,692, at 16% per annum).

[18]      Formax also seeks ongoing interest at the default rate of 16% per annum, from 26 February 2020 until the date of actual repayment of the Outstanding Moneys.

[19]      I am satisfied that the “Outstanding Moneys” as at the date of cancellation of the relevant Borrower Loans came to the $2,245,692 claimed by Formax in its statement of claim, and that it is entitled under clause 3.3 of the Master Deed to claim default interest on that sum from 26 June 2019 to the date of actual payment.

[20]      Accordingly, I give judgment for further interest, calculated from 26 June 2019 to 26 February 2020, in the total sum of $242,165.58. In addition, I declare that Formax is entitled to ongoing interest at the rate of 16% per annum on the sum of

$2,245,692,  from 27  February  2020  down  to  the  date  of actual  repayment of the

$2,245,692.

Associate Judge Smith