Fulton Hogan Limited v Kymona Systems Limited (in liq) HC Auckland CIV-2011-404-004520

[2011] NZHC 1659

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2011-404-004520

BETWEEN  FULTON HOGAN LIMITED Plaintiff

ANDKYMONA SYSTEMS LIMITED (IN LIQUIDATION0

First Defendant

ANDBIOTHERMAL TEHCNOLOGIES LIMITED

Second Defendant

Appearances: C P Baldock for Plaintiff/Interpleader Applicant

M M Edwards for First Defendant/Interpleader Claimant

A E Malone for Second Defendant/Interpleader Claimant

Judgment:      9 November 2011

ORAL JUDGMENT OF ASSOCIATE JUDGE ABBOTT

Counsel/Solicitors:

Anthony Harper, Christchurch. (C P Baldock, Auckland) Email: [email protected]
Wynyard Wood, Auckland. Email: [email protected]

Duncan Cotterill, Auckland. Email: [email protected]

FULTON HOGAN LTD V KYMONA SYSTEMS LTD (IN LIQUIDATION0 HC AK CIV-2011-404-004520 9

November 2011

[1]      The plaintiff, Fulton Hogan  Limited, issued this proceeding to interplead between competing claims of the first and second defendants to money due under a subcontract  initially made with  the first  defendant,  but  partly performed by the second  defendant  (after  the  first  defendant  went  into  liquidation).   There  is  no dispute over the fact that the sum of $237,110.76 (inclusive of GST) is payable by the plaintiff under the subcontract.  An issue has arisen between the defendants as to entitlement to the sum.  The plaintiff issued this proceeding.  Shortly before the first case management conference for the proceeding the defendants reached agreement in principle as to their respective entitlements.

[2]      By the time of the first conference an issue had also arisen over a claim by the plaintiff to costs.  The plaintiff sought indemnity costs and an order pursuant to r 4.64 that the fund be charged with payment of those costs.  An order was made at the conference to that effect, and for the amount of the costs to be fixed by the Registrar.

[3]      The matter has come back before the Court because the parties have been unable to resolve differences as to the costs being sought.   In essence the plaintiff seeks indemnity for all costs incurred, on the basis that it has made a full disclosure of those costs and they were reasonably incurred.  The defendants have challenged the costs on two bases.  First all of the costs incurred prior to the drafting and issue of the proceeding were not reasonable.  Secondly there was no need for the plaintiff to incur costs after the defendants informed the plaintiff (either ahead of or at the conference on 5 October 2011) that agreement had been reached in principle.

[4]      I am not persuaded that any basis has been established for the objection over costs incurred prior to drafting of the interpleader proceedings.   Counsel for the plaintiff states that there were significant costs incurred initially in establishing that there were in fact competing claims and establishing the nature of those claims. That contention is supported by the detail of the attendances, which has been produced in evidence.   The defendants have not put forward any evidence to show that those attendances were unnecessary or excessive.   I accept that costs incurred in establishing the existence and nature of competing claims are costs “of and incidental” to an interpleader proceeding.

[5]      The second aspect of the dispute is perhaps more open to argument.  I am not persuaded that the plaintiff acted unreasonably in incurring costs after the first case management conference.  At that point steps were still to be taken to confirm the agreement  in  principle, and  some  further attendances  were obviously needed  to effect  payment  out  of  the  fund  following  advice  of  the  concluded  agreement. Further, there was the unresolved issue at that time of the plaintiffs “pre-issue” costs. It was reasonable for the plaintiff to incur further costs needed to support its claim for those “pre-issue” attendances.

[6]      Counsel for the first defendant has argued that all of these costs could have been avoided had the plaintiff paid the fund into Court.  He has referred to an offer to do so, made by the plaintiff at a relatively early stage, and submitted that it was incumbent upon the plaintiff to take that course.  I am not persuaded that that is the case.  The plaintiff offered to take that course.  The defendants did not take it up on that offer.  Further, even if attendances in relation to receiving the final settlement agreement and arranging distribution might have been avoided, attendances were still required to settle the dispute over the pre-issue attendances.

[7]      The plaintiff has provided details of the costs incurred up to 27 October 2011 (a total of $21,775.08 inclusive of GST and disbursements).  It also seeks a further sum (estimated at $1,200) for attendances since 27 October 2011. As far as I can tell those attendances largely relate to responding to a joint request made by the defendants on 1 November 2011 for an interim payment of the fund (less the sum of

$21,775.08  being  claimed  for  costs),  and  attendances  since,  in  filing  further

memoranda, and appearing at today’s mention hearing.

[8]      At least part of these further costs appear to relate to the position taken by the plaintiff over the defendants’ request for release of the interim payment, and the plaintiff’s stipulation that it would be released on an acknowledgment that the payment out would be made “in full and final settlement of any claims that either of the defendants/claimants may have against Fulton Hogan Limited in relation to the sum (as defined in the interpleader statement of claim).  This appears to have given rise to a further dispute as to the need for such a disclaimer.

[9]      The plaintiff has provided a detailed breakdown of the costs incurred up to 27

October 2011.   The defendants have not challenged any particular aspect of those costs.   There is nothing obviously unreasonable about them.   Having said that, I accept that some of the contention could have been removed if the plaintiff had, following advice of the agreement in principle and knowledge of the dispute over its claim for costs, lodged the funds into the High Court.  This may have avoided some of the costs subsequently incurred, particularly in relation to its stipulation as to the acknowledgment in relation to release.

[10]     The Court has a discretion as to the costs that may be awarded.   It must exercise that discretion on a principled basis.   The total costs sought are approximately $23,000 (allowing for the estimated amount claimed for attendances since 27 October 2011).  In my view, a reasonable allowance for costs, taking into account the respects in which the plaintiff could have reduced its attendances is the sum of $21,500.

[11]     Counsel have raised the incidence of interest on the fund.  No claim is made by the plaintiff (as I understand it) to any interest earned, nor do I see any rational basis for doing so.   On that basis I consider that any interest earned on the fund should be paid out to the defendants.

[12]     Lastly I record that the defendants have requested that the fund be paid out to the trust account of the first defendant’s solicitors, then to be distributed by them in accordance with the agreement between the defendants.

[13]     I make the following orders:

(a)       The plaintiff is entitled to be indemnified from the fund in the sum of

$21,500, inclusive of disbursements and GST.

(b)      The  plaintiff  is  to  pay  the  balance  of  the  fund,  amounting  to

$215,610.76, together with interest earned on the total fund, to the trust account of the first defendant’s solicitors Wynyard Wood, as already notified to the first defendant, such payment to be made by 4

pm on 11 November 2011 (but with leave to the plaintiff to seek extension of time if that time frame proves to be impossible).

(c)       The plaintiff is to be released, upon such payment, from all claims against it in relation to the fund at issue in this proceeding.

(d)The   proceeding   is   to   be   discontinued   upon   the   filing   of   a memorandum by the first defendant advising that the payment has

been made as above.

Associate Judge Abbott