General Finance Limited v Serepisos

[2017] NZHC 1367

IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY

CIV-2016-485-835 [2017] NZHC 1367

BETWEEN

GENERAL FINANCE LIMITED

Plaintiff

AND

ALIKI SEREPISOS Defendant

On thepapers:
Counsel:	S O McAnally for the plaintiff K R Smith for the defendant
Judgment:	21 June 2017

COSTS JUDGMENT OF ASSOCIATE JUDGE SMITH

Introduction

[1]      On   13   April   2017   I   entered   summary   judgment   for   the   plaintiff

(General Finance) in the sum of $50,000.1    General Finance had claimed a total of

$294,667.59, being the balance of advances made to Ms Serepisos, interest and costs.   In my judgment, I found that Ms Serepisos had an arguable defence under s 176 of the Property Law Act 2007 (mortgagee’s duty to take reasonable care to obtain the best price reasonably obtainable on a sale of the security), to the extent that the claim exceeded the sum of $50,000.   I entered summary judgment for the

$50,000, and directed that if counsel could not agree on costs, memoranda could be filed.

[2]      Counsel have both filed memoranda on costs, and I now give judgment on that issue.

1      General Finance Ltd v Serepisos [2017] NZHC 749.

Counsel’s submissions

[3]      For General Finance, Mr McAnally submits that his client was substantially successful with its summary judgment application.   Of the four issues raised by Ms Serepisos, three were dismissed, and the court entered judgment on the fourth for part of the amount claimed.

[4]      Mr McAnally submits that General Finance is entitled to indemnity costs under cl  7(f)  of the  relevant Term Loan Agreement,  under which  Ms  Serepisos agreed to pay on demand:

All sums expended by the lender in the exercise of the lender’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.

[5]      General Finance relies on r 14.6(4)(e) of the High Court Rules 2016, which permits the court to award indemnity costs if the contract between the parties so provides.

[6]      General Finance claims a total of $30,475.93 (including disbursements and GST) under that clause.  The actual legal costs claimed are $23,810.00.  The balance of  the  claim  is  made  up  of  GST  and  disbursements.    As  a  finance  company, General Finance does not have the benefit of input credits on its legal costs; hence the GST is included within its claim.  Mr McAnally produced a breakdown of his firm’s  time  transactions  for  the  period  from  29 August  2016  to  21 April  2017, together with copies of the firm’s nine invoices rendered in respect of the matter to date.

[7]      The overarching question for the court asked to make such an order is: “for the necessary steps, are the costs claimed reasonable in amount?”.2

[8]      Mr McAnally submits that there is no basis to question the reasonableness of

Keegan Alexander’s fees relating to some sixty three hours of time spent over an

2      Black v ASB Bank Ltd [2012] NZCA 384 at [77]–[99].

eight month period by a staff solicitor at an hourly rate of $325.00, and a partner at an hourly rate of $450.00.

[9]      In  support of the submission that the claim of $30,475.93 for costs  and disbursements is reasonable, Mr McAnally produced a table for comparative purchases,   showing   the   amount   which   would   have   been   recoverable   by General Finance  if  costs  had  been  awarded  under  Category  2,  Band  B,  of  the High Court Rules. Total costs on a 2B basis would have been $15,164.00.

[10]     In reply, Mr Smith submits that costs should either be reserved, or each party should meet its own costs (each having enjoyed a measure of success at the hearing).

[11]     He submits that in fact it was Ms Serepisos who was substantially successful on  the  summary  judgment  application:  while  General  Finance  had  claimed

$294,667.59, it only succeeded in obtaining summary judgment for $50,000.   He also submits that Ms Serepisos was never in a position to consider the amount awarded on the summary judgment application as a separate claim:  General Finance had adopted an “all or nothing” attitude to the proceeding, and Ms Serepisos was accordingly obliged to oppose the application in respect of the total claim.

[12]     Mr Smith further submits that General Finance has claimed considerable costs for work which was not associated with the application for summary judgment. He refers to claims made in respect of attendances after the 16 March 2017 hearing date.

[13]     As General Finance was largely unsuccessful in its application, Mr Smith also submits that indemnity costs can not apply.

Discussion and conclusions

[14]     I accept Mr Smith’s submission that the appropriate course is to reserve costs

on the summary judgment application.   Although General Finance has recovered

$50,000 at this stage, that sum is only slightly more than one sixth of the amount claimed, and it is a sum which would have been  within the jurisdiction of the

District Court.  Rule 14.13 of the High Court Rules provides in such a case that:

14.13   Proceedings within jurisdiction of District Court

Costs ordered to be paid to a successful plaintiff must not exceed the costs and   disbursements   that   the   plaintiff   would   have   recovered   in   the District Court if the proceeding could have been brought there, unless the court otherwise directs.

[15]     General Finance may be found at trial to be entitled to recover all, or nearly all, of the amount claimed by it: that is not something on which I can express any opinion  at  this  stage,  before  all  of  the  evidence  has  been  heard.     But  if General Finance  were  to  recover  only  approximately  one  sixth  of  the  amount claimed (the amount for which the judgment has been entered so far) I think it likely that  there  would  be  some  discount  from  the  costs  which  would  otherwise  be awarded.  In those circumstances, I think the fairest course is to reserve costs, so that they can be fixed with full knowledge of General Finance’s ultimate recovery.   I think that approach accords with the court’s general approach where a plaintiff fails

on a summary judgment application; in such cases, costs are normally reserved.3

[16]     I do not think the fact that General Finance relies on a costs indemnity clause affects that view.   While there remains a possibility that General Finance may be held to have claimed far more than it was entitled to recover, I think there must be a question as to whether the costs claimed were reasonable (for example, if the claim had  only  been  for  the  sum  of  $50,000,  I  do  not  think  it  would  have  been unreasonable for Ms Serepisos to query whether the summary judgment application could have been handled by a more junior lawyer, at lower cost).

[17]     For those reasons, the issue of costs on the summary judgment application is reserved.

Solicitors:

Keegan Alexander, Auckland for the plaintiff

Associate Judge Smith

3      High Court Rules, r 14.8(3) and NZI Bank Ltd v Philpott [1990] 2 NZLR 403 (CA). See also

Johnstone v R B Road 391 Ltd [2011] NZCA 393 at [48].