FTG Securities Ltd v Bank of New Zealand
[2017] NZHC 358
•7 March 2017
IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY
CIV-2016-409-001128 [2017] NZHC 358
BETWEEN FTG SECURITIES LIMITED
Plaintiff
AND
BANK OF NEW ZEALAND Defendant
Hearing: Dealt with on the papers Counsel:
D J Ballantyne for Plaintiff
K M Paterson and J D Silcock for DefendantJudgment
at 12:57 p.m.:7 March 2017
Reissued
at 3:50 p.m.:
7 March 2017
JUDGMENT OF GENDALL J [AS TO COSTS]
Introduction
[1] Following my dismissal of application by the plaintiff FTG Securities Limited (FTG) for an interim injunction to restrain a mortgagee sale of 179 Tuam Street (the property), the defendant Bank of New Zealand (BNZ) now seeks costs. In my oral judgment dated 22 November 2016 dismissing the application and my reasons judgment dated 25
November 2016, I reserved costs but expressed the original tentative view that costs should follow the event in the usual way. However, on this issue of costs I invited counsel for the parties to make submissions in the event that costs could not be agreed upon between them. Submissions have now been received and I now give my decision on this costs issue.
Background
[2] On 18 November 2016, FTG sought an interim injunction to restrain BNZ
from selling the property by mortgagee sale. The hearing took place under urgency
FTG SECURITIES LTD v BANK OF NEW ZEALAND [2017] NZHC 358 [7 March 2017]
on 22 November 2016 at 3pm before the auction scheduled for and to take place the following today.
[3] Following the hearing, I gave the oral judgment mentioned above dismissing the application and confirming that the interim injunction sought to restrain the mortgagee sale was refused.1 Full reasons for my decision were issued on
25 November 2016 as I have noted.2
General Principles
[4] The starting point to any costs judgment is that all maters with regard to costs are at the discretion of the Court.3 However, this discretion is not an unfettered one and should be guided by the general principles of r 14.2 which state:
14.2 Principles applying to determination of costs
The following general principles apply to the determination of costs:
(a) the party who fails with respect to a proceeding or an interlocutory application should pay costs to the party who succeeds:
(b) an award of costs should reflect the complexity and significance of the proceeding:
(c) costs should be assessed by applying the appropriate daily recovery rate to the time considered reasonable for each step reasonably required in relation to the proceeding or interlocutory application:
(d) an appropriate daily recovery rate should normally be two-thirds of the daily rate considered reasonable in relation to the proceeding or interlocutory application:
(e) what is an appropriate daily recovery rate and what is a reasonable time should not depend on the skill or experience of the solicitor or counsel involved or on the time actually spent by the solicitor or counsel involved or on the costs actually incurred by the party claiming costs:
(f) an award of costs should not exceed the costs incurred by the party claiming costs:
(g) so far as possible the determination of costs should be predictable and expeditious.
1 FTG Securities Limited v Bank of New Zealand [2016] NZHC 2809.
2 FTG Securities Limited v Bank of New Zealand [2016] NZHC 2827/.
3 High Court Rules, r 14.1
BNZ’s Submissions
[5] BNZ as the successful party here seeks an award of costs calculated on a category 2B and 2C scale basis plus disbursements. BNZ claims initial scale costs totalling $18,620.50 and then in part a 50 per cent increased costs uplift. The
breakdown of these costs, all on a category 2 scale, is as follows:
Step Band Days Amount at $2,300
per day
Commencement of defence B 2 $4,460.00 Filing opposition to application for injunction C 2 $4,460.00 Preparation of written submissions C 3 $6,690.00 Appearance at hearing B 0.5 $1,115.00 Second counsel B 0.5 $557.50 Sealing order (dismissing injunction) B 0.2 $446.00 Sealing order (final suppression orders) B 0.2 $446.00 Sealing order (for costs) B 0.2 $446.00 Cost total
8.35
$18,620.50
Disbursements
Filing Fee $95.65 Sealing orders (x3) $130.55 $226.09 Total costs and disbursements
$18,846.59
[6] BNZ’s calculation of scale costs includes an allocation for commencement of defence. It acknowledges that no statement of defence has been prepared and filed prior to the hearing. However it submits that the circumstances warrant allowing that item to be included in the costs awarded for BNZ’s response to the application.
[7] As I have noted, BNZ further claims costs on an increased basis for filing its opposition to the injunction application and preparation of written submissions. BNZ submits that increased costs are justified on the grounds that the nature of the particular steps is such that the time required by the party claiming costs would substantially exceed the time allocated under Band C. In the alternative, BNZ submits that it is entitled to increased costs, as FTG has contributed unnecessarily to
the time and expense of the costs incurred in the proceeding by taking or pursuing an unnecessary step or argument that lacks merit.
FTG’s submissions
[8] FTG disagrees with several aspects of the defendant’s assessment on scale costs. These include, first, categorising the preparation of written submissions as 2C, and secondly, the inclusion of filing a commencement of defence as an item incurred.
[9] FTG disputes too that BNZ’s costs were greatly increased due to the last minute notice of the plaintiff’s injunction application. It contends that BNZ and its solicitors were well acquainted with the facts and circumstances of the case and were therefore not required to “marshall in the relevant documents under urgency”.
[10] With regard to the issue of increased costs, FTG disagrees with the plaintiff’s assessment and submits that increased costs in the present circumstance are not appropriate.
Scale Costs
[11] Both parties agree that, for the most part, this proceeding should be considered as a category 2 proceeding, that is a proceeding of average complexity requiring counsel of skill and experience considered average in the High Court. The High Court Rules also require a determination of reasonable time to be made. A decision as to what is reasonable in this respect must be made with reference to:
(a) Band A, if a comparatively small amount of time for a step is considered reasonable; or
(b)Band B, if a normal amount of time for the particular step is considered reasonable, or
(c) Band C, if a comparatively large amount of time is considered reasonable.
[12] The Band may differ for each step. A blanket assessment for banding does not accord with the rules, unless it reflects that the case is an average one requiring a normal amount of time for each step.4
[13] The issues to be decided in this case include a first question as to whether BNZ is entitled to claim 2B costs for “commencement of a defence” and 2C costs for preparation of written submissions. As I have noted above, FTG disputes that costs for “commencement of a defence” should be included as no defence had been filed. Furthermore, FTG submits that preparation of written submission should be categorised as 2B only, as opposed to 2C.
[14] I disagree however. I find that including the filing of opposition to the applicant’s interim injunction and categorising the preparation of written submissions into Band C better reflects the particular circumstances of this particular case. As I see it, this was not a case where an interlocutory application was made within an existing proceeding which was on foot. In this case, the interlocutory application at issue was filed concurrently with the statement of claim, and under particularly urgent circumstances. This would have necessitated a significant allocation of resources on the part of BNZ between the date of service and the hearing to fully understand the claim being made and the legal and evidential issues required to meet it.
[15] Taking a broad overview of what was required on the part of BNZ here, I therefore conclude that BNZ is entitled to claim 2B costs for “commencement of defence” and to further categorise preparation of its written submissions here on a
2C basis.
Increased Costs
[16] BNZ also applies here for a 50 per cent uplift on scale costs for the opposition to the interim injunction and for preparation of its written submissions.
On this aspect, r 14.6 states:
4 Commissioner of Inland Revenue v Chesterfields Preschool Ltd [2010] NZCA 400, (2010) 24
NZTC 24,500 at [161], citing Paper Reclaim Ltd v Aotearoa International ltd [2007] NZCA 544, (2007) 18 PRNZ 743.
14.6 Increased costs and indemnity costs
(1) Despite rules 14.2 to 14.5, the court may make an order—
(a) increasing costs otherwise payable under those rules
(increased costs); or
(b) that the costs payable are the actual costs, disbursements, and witness expenses reasonably incurred by a party (indemnity costs).
(2) The court may make the order at any stage of a proceeding and in relation to any step in it.
(3) The court may order a party to pay increased costs if—
(a) the nature of the proceeding or the step in it is such that the time required by the party claiming costs would substantially exceed the time allocated under band C; or
(b) the party opposing costs has contributed unnecessarily to the time or expense of the proceeding or step in it by—
(i) failing to comply with these rules or with a direction of the court; or
(ii) taking or pursuing an unnecessary step or an argument that lacks merit; or
(iii) failing, without reasonable justification, to admit facts, evidence, documents, or accept a legal argument; or
(iv) failing, without reasonable justification, to comply with an order for discovery, a notice for further particulars, a notice for interrogatories, or other similar requirement under these rules; or
(v) failing, without reasonable justification, to accept an offer of settlement whether in the form of an offer under rule 14.10 or some other offer to settle or dispose of the proceeding; or
(c) the proceeding is of general importance to persons other than just the parties and it was reasonably necessary for the party claiming costs to bring it or participate in it in the interests of those affected; or
(d) some other reason exists which justifies the court making an order for increased costs despite the principle that the determination of costs should be predictable and expeditious.
[17] Overall, increased costs may be ordered where there is a failure by the paying party to act reasonably. In Holdfast NZ Ltd v Selleys Pty Ltd, the Court of Appeal set out the correct approach to an award of increased costs:5
(a) Step 1: categorise the proceeding under r 14.3.
(b)Step 2: work out a reasonable time for each step in the proceeding under r 14.5
(c) Step 3: as part of the step 2 exercise a party can, under r 14.6(3)(a), apply for extra time for a particular step.
(d)Step 4: the application for costs should step back and look at the costs award it could be entitled to at this point. If it considers it can argue for additional costs under r 14.6(3)(b) it should do so, but any increase above 50 per cent on the cost produced by steps 1 and 2 is unlikely, given that the daily recovery rate is two-thirds of the daily rate considered reasonable for the particular proceeding.
[18] Given the extremely compressed timeframe which arose here between service of the application and the hearing of the matter, BNZ submits that the time required by it to prepare the opposition, the affidavits and written submissions substantially exceeded the time allocation even under Band C of the scale.
[19] FTG in response maintains that increased costs are not appropriate in this case. In addition, FTG says they are contrary to the principle that costs should so far as possible be predictable and expeditious. FTG contends that there is nothing unique in these proceedings that necessitate anything other than an award of scale costs. In the opinion advanced by counsel for FTG, an allowance has been made by FTG to account for the short period of time between the hearing and the application by agreeing to the categorisation of BNZ’s claim for “filing of submissions” as Band C. I disagree however.
[20] In my view, increased costs are clearly justified here under r 14.6(3)(b)(ii) and (iii). FTG’s application for an interim injunction entirely lacked merit. In my oral judgment delivered on 25 November 2016, I had little difficulty in dismissing FTG’s application on all grounds. I concluded that FTG, by a significant margin, had been unable to establish that there was a serious issue to be tried. I held that the balance of convenience weighed heavily in favour of BNZ. I found that FTG ought to have recognised this substantial lack of merit and not proceeded with its application.
[21] Furthermore, as I see it, under r 14(d), a further justification for increased costs is the delay and what might conceivably be argued as a degree of tactical abuse employed by FTG in serving the interim injunction less than one week before the auction. Despite being aware since at least 20 October 2016 that the mortgagee sale was proceeding, FTG filed this application for an interim injunction only on
17 November 2016 and had it served on the BNZ on 18 November 2016, some five days (including a weekend) before the mortgagee sale auction. The delay placed significant pressure on BNZ and its solicitors, and a number of issues were raised in the application, necessitating comprehensive evidence and submissions to be provided under urgency by BNZ.
[22] In Greenhalgh v Body Corporate 330324, the Court ordered a 50 per cent uplift on scale costs with respect to an application for an interim injunction in recognition of the urgency of the matter and the conduct of the unsuccessful party opposing costs.6 As I see it, in the current circumstance, a 50 per cent uplift is justified given, too, that it relates only to filing opposition to the application for injunction and preparation of written submissions. This results in the additional award of $5,575 sought here by the BNZ which is approved.
[23] The upshot of all this is that the scale costs claimed by the BNZ which I find to be in order totalling $18,620.50 are uplifted for items 23 and 24 by 50 per cent (2.5 days at $2,230 per day) amounting to $5,575, giving an overall scale costs total of $24,195.50. This is the costs amount to be awarded here to the BNZ together with
disbursements of $226.09 (the disbursements amount being an amount which counsel for FTG accepts is not objected to).
[24] The fees award of $24,195.50 represents something less than two thirds of the actual costs incurred by BNZ in opposing the injunction application. Before the Court is evidence from the BNZ provided by Ms Paterson its counsel confirming that the actual solicitor/client legal fees incurred by the BNZ here totalled $37,500 plus GST. Two thirds of this amount is $25,000. Given that scale costs under the High Court Rules are generally estimated to provide a return of about two thirds of actual costs incurred, the figure here of $24,195.50 is entirely appropriate.
Result
[25] For all the reasons outlined above, BNZ is entitled to an award of costs here totalling $24,195.50 together with disbursements totalling $226.09.
[26] An order is made therefore that FTG is to pay to BNZ costs and disbursements on its unsuccessful application for an interim injunction amounting to
$24,195.50 for costs and $226.09 for disbursements.
...................................................
Gendall J
Solicitors:
Canterbury Legal, Christchurch
Buddle Finlay, Christchurch
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