General Finance Limited v Serepisos

[2017] NZHC 2823

IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY

I TE KŌTI MATUA O AOTEAROA TE WHANGANUI-Ā-TARA ROHE

CIV-2016-485-835 [2017] NZHC 2823

BETWEEN

GENERAL FINANCE LIMITED

Plaintiff

AND

ALLIKI SEREPISOS Defendant

on the papers
Counsel:	S O McAnally for the Plaintiff K R Smith for the Defendant
Judgment:	17 November 2017

JUDGMENT OF ASSOCIATE JUDGE SMITH - COSTS

[1]      On 28 September 2017 I dismissed an application for particular discovery by the defendant (Mrs Serepisos) against the plaintiff (General Finance).   In my judgment, I indicated that “costs will be at least on a 2B basis, but it may be that General Finance is entitled to assert a claim for indemnity costs under cl 7(f) of the relevant term loan agreement”.1    I invited counsel to confer over costs, and if they were unable to agree, General Finance was to file and serve a memorandum on costs within 10 working days.

[2]      The parties have been unable to agree on costs, and General Finance now seeks indemnity  costs  of  $9,660.00  (including  GST)  and  disbursements  of  $1,010.47

(including GST). General Finance notes that, being a finance company, it is unable to

1      General Finance Ltd v Serepisos [2017] NZHC 2367 at [48].

GENERAL FINANCE LIMITED v SEREPISOS [2017] NZHC 2823 [17 November 2017]

recover GST by way of input credit due to s 14(1)(a) of the Goods and Services Tax

Act 1985.

[3]      General Finance also asks for an additional award of costs in the sum of

$2,012.50 (including GST), for producing its counsel’s memorandum on costs. Counsel refers to Mrs Serepisos’ “apparent unwillingness to engage on this particular question in a timely fashion”.

Legal principles applicable to indemnity costs

[4]      Pursuant to r 14.6(4)(e) of the High Court Rules 2016 (HCR), the court may order a party to pay indemnity costs if the party claiming costs is entitled to indemnity costs under a contract or deed.

[5]      In Black v ASB Bank, the Court of Appeal discussed the proper approach to an application such as the present:2

[80] Assessing whether the indemnity costs claimed under a contract are reasonable involves the Court making an objective assessment of these matters:

(a)       what tasks attract a costs indemnity on a proper construction of the contract;

(b)       whether the tasks undertaken were those contemplated in the contract;

(c)       whether the steps undertaken were reasonably necessary in pursuance of those tasks;

(d)       whether  the  rate  at  which  the  steps  were  charged  was reasonable   having   regard   to   the   principles   normally applicable to solicitor/client costs; and

(e)       whether any other principles drawn from the general law of contract would in whole or in part deny the claimant its prima facie right to judgment.

[6]      In Frater Williams, the Court observed that there is “room for robust judgment as to the costs considered reasonable in all the circumstances”.3

2      Black v ASB Bank Ltd [2012] NZCA 384 at [80].

3      Frater Williams & Co Ltd v Australian Guarantee Corp (NZ) Ltd (1994) 2 NZ ConvC 191,873 (CA) at 191,887.

Relevant contractual terms

[7]      Clause 7(f) of the term loan agreement provided:

Costs of default are payable: All sums expended by [General Finance] in the exercise of [General Finance’s] rights and powers following a default or in exercising or enforcing or attempting to exercise or enforce any power, right or remedy contained or implied in this contract are payable by [Mrs Serepisos] to [General Finance] upon demand. This clause does not limit any other term of this contract relating to costs; nor is it limited by any other such term.

[8]      Clause 12(a)(ii) of the term loan agreement provided:

Costs payable by [Mrs Serepisos]: [Mrs Serepisos] must pay to [General Finance] upon demand, [General Finance’s] legal costs (as between solicitor and client) for:

…

(ii)       costs on default: legal services arising from or relating to any default under this contract or the enforcement or exercise or attempted enforcement or exercise of any of [General Finance] rights, remedies and power under this contract…

Submissions

[9]      Mr McAnally submits that while the costs General Finance seeks were incurred opposing Mrs Serepisos’ application, that application was brought in the course of a proceeding to enforce General Finance’s right to payment under the loan contract following her default.  He submits that this brings the costs within the meaning of cl

7(f), and that equally applies to disbursements.

[10]     Mr McAnally argues that the $9,660.00 fee was reasonable.  He notes that on a 2B basis costs would have been $7,024.50, and given that scale costs are intended to reflect two-thirds of a reasonable fee, the fee in fact charged can be considered modest.4

[11]     Mr  Smith  questions  whether  the  steps  taken  by  General  Finance  were reasonably necessary.  He submits that this matter was not overly complex, and it did not justify the time expended by General Finance. However, he did not take issue with

the hourly rate of $500.00 claimed for Mr McAnally’s attendances, nor with the

4      High Court Rules 2016, r 14.2(1)(d).

reasonableness of the disbursements claimed, or the reasonableness of the “costs on costs” claim.

Discussion and conclusions

[12]     There are two preliminary matters.  First, I accept Mr McAnally’s submission that the costs now claimed are costs incurred by General Finance in enforcing or attempting to enforce its rights, and are thus covered by cls 7(f) and 12(a)(ii) of the term loan agreement.

[13]     Secondly, the concern I raised in my costs judgment on the summary judgment application about the ultimate recovery General Finance might make at trial does not apply here.5  Costs on a summary judgment application are not required to be fixed on the determination of that application.6   But r 14.8(1) of the HCR provides that costs on other kinds of opposed interlocutory application are to be fixed when the application is determined, unless there are special reasons to the contrary. In Chapman v Badon Limited, the Court of Appeal noted that:7

[the requirement that costs are normally to be fixed when an interlocutory application is determined] reflects the fact that the merits of particular applications and the merits of the substantive proceedings are different matters.

[14]     I  am  satisfied  that  that  is  the  position  with  Ms  Serepisos’ unsuccessful discovery application, and that there are no “special reasons” why costs on that application should not be fixed now.

[15]     I consider that Mr McAnally’s comparison of the amount claimed with scale costs for the discovery application provides a good indication that the amount of time spent by counsel for General Finance was not unreasonable.  I further note that the amount of time spent was increased by the need to prepare the bundle of documents, which was not done by Mrs Serepisos.   I consider that the costs claimed on the

discovery application were reasonable in all the circumstances.

5      See General Finance v Serepisos [2017] NZHC 1367 at [14]-[17].

6      High Court Rules, r 14.8(3).

7      Chapman v Badon Ltd [2010] NZCA 613 at [12].

[16]     On the question of disbursements, I note that the majority are for travel expenses. It has been held that travel expenses are a disbursement under r 14.12(1) of the HCR so long as they were reasonably necessary for the conduct of the proceedings, in accordance with r 14.12(2)(c).8

[17]     Mr McAnally refers to the following dicta from Fisher J in Russell v Taxation

Review Authority:9

It would be hard to argue necessity where there is an adequate choice of suitable counsel in the High Court centre involved and no other special justification for instructing out of town counsel.  Of course that is only the starting point.  Available experience and expertise is one obvious dimension

… Another could be the location of the client.   If the client comes from a different region the cost of transporting counsel from that region might well be outweighed by efficiencies gained during the preparatory stage.

[18]     Mr McAnally submits that the travel expenses were reasonably necessary in this case, because General Finance is Auckland-based, and this is a serious matter for it.  He refers to the connection between the discovery application and the substantive proceeding, and submits that the cost of briefing outside counsel would likely have exceeded the travel expenses sought ($840.04) in any event.

[19]     I accept that it was reasonable for General Finance to incur these travel expenses, and that they are not excessive.  If General Finance had briefed Wellington counsel to appear at the hearing of the discovery application that counsel would have been required to spend “reading in” time, the cost of which would likely have equalled or exceeded the $840.04 now claimed as a disbursement.

[20]     The remainder of the disbursements comprise the filing fee for the notice of opposition, binding supplies, office expenses and courier charges.  I do not consider that any of these expenses were unreasonable.

[21]     With respect to the claim for “costs on costs”, Mr McAnally refers to the following statement of Allan J in Body Corporate Administration Limited v Mehta (No

4):10

8      Buis v Accident Compensation Corporation (2010) 19 PRNZ 585.

9      Russell v Taxation Review Authority (2000) 14 PRZN 515 at [25].

10     Body Corporate Administration Limited v Mehta (No 4) [2013] NZHC 213 at [85].

It is now well established that costs may be awarded in respect of an application for costs.  An application for costs is to be treated no differently for costs purposes from an ordinary interlocutory application, so costs may be awarded according to scale or on an increased or indemnity basis as appropriate.

[22]     Mr McAnally notes that Mrs Sereposis rejected an offer to settle costs at a total of $9,500, and that this application would not have been necessary but for that rejection.

[23]     In light of the conclusions reached above, I agree with Mr McAnally that the offer regarding costs was a reasonable one in the circumstances. I accept that General Finance is entitled to an award of “costs on costs”.

[24]     However, I consider that $2,012.50 is rather high for the memorandum on costs, where concerns over the importance of the proceeding would not have been as significant a factor as may have been the case on the summary judgment application or on Mrs Serepisos’ discovery application.  I think the justice of the case will be met by an award of $1,500 for the “costs on costs” claim.

Result

[25]     Mrs  Serepisos  is  to  pay  General  Finance  costs  totalling  $12,170.47, comprising:

(a)       costs  of  $9,660  (including  GST)  on  the  unsuccessful  discovery application;

(b)      disbursements of $1,010.47 (including GST); and

(c)      “Costs on costs” of $1,500.00 (including GST).

Associate Judge Smith

Solicitors:

Keegan Alexander, Auckland for the Plaintiff

Peter C Gilbert – Willis Street, Wellington for the Defendant