H and H v S (no.2)

[2015] NZHC 696

THISJUDGMENT IS SUBJECT TO THE NON-PUBLICATION ORDER REFERRED TO AT PARAGRAPH [19]

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2013-404-2404 [2015] NZHC 696

BETWEEN

H and H

First Plaintiffs

XYZ LIMITED Second Plaintiff

AND

S
First Defendant

S and Others as trustees of the T  Trust

Second Defendants

On the Papers
Counsel:	K G Davenport QC for Plaintiffs R J Katz QC for Defendants
Judgment:	14 April 2015

JUDGMENT (No. 2) OF ASSOCIATE JUDGE SMITH

[1]      The defendants seek costs following the plaintiffs’ unsuccessful application

to strike out parts of their amended statement of defence and counterclaim.

[2]      Counsel are agreed that costs should be calculated on the “category 2” basis of $1,990 per day.  However, there is disagreement between them as to the time band which should be applied under schedule 3 to the High Court Rules.  Mr Katz submits that time band C is appropriate for all steps where a different time band may be applied, on account of the complexity of the issues in the proceeding and the need for significantly greater preparation time than would be required for an ordinary “2B” case.  Where different time bands cannot be applied to a particular step (the

hearings held on 28 February 2014 and 13 August 2014), the defendants submit that

H and H v S [2015] NZHC 696 [14 April 2015]

there should be a 50 per cent uplift on the $1,990 per day which would otherwise have been awarded under category 2 for the two hearing days.

[3]      The plaintiffs disagree.  Ms Davenport submits that band B should be applied to all of the steps taken by the defendants.  She further submits that no costs should be awarded for certain steps taken by the defendants.

[4]      The defendants claim the total sum of $1,414.58 for disbursements.   The plaintiffs object to only one item in the disbursements claim.   That is a claim for

$277 for a non-refundable Auckland/Wellington return airfare, that sum being lost when a fixture allocated for 8 May 2014 was abandoned following the relatively late filing of an amended statement of defence and counterclaim.

Discussion

[5]      I accept Mr Katz’s submission that the strike-out application raised matters of real complexity, and that band C is appropriate for a number of steps taken by the defendants in opposition to the strike-out application.  In particular, I am of the view that costs should be calculated on a band C basis for the defendants’ first notice of opposition and both sets of written submissions.  As for the second set of written submissions, it seems to me that it was necessary for the defendants to respond in detail to the arguments put forward by the plaintiffs for the August 2014 hearing.  A number of those arguments were additional to the arguments which had been advanced  by the  plaintiffs  at  the  28 February hearing.    For  example,  at  the 28

February hearing the plaintiffs put considerable emphasis on their arguments based on breach of legal professional privilege and/or breach of confidentiality, and the submission that the plaintiffs did not need to rely on any illegality to establish their case.  At the August hearing, there was far more focus on the plaintiffs’ allegation that  the  defendants  were  attempting  in  their  amended  statement of defence  and counterclaim to indirectly enforce the tax laws of foreign country B.  There was also greater focus on the provisions of the two relevant trust deeds.

[6]      I  also  accept  that  the  case  involved  sufficient  complexity  that  it  was appropriate  that  Mr  Katz  be  assisted  by  junior  counsel  at  the  hearing  on

28 February 2014.  I note that both counsel were assisted by juniors at that hearing.

[7]      I do not accept Ms Davenport’s submission that the matters which made the case more complicated and made it take longer were limited to those set out at para [5] of her memorandum on costs.   As is apparent from my judgment on the strike-out application, the case involved consideration of complex areas of law, and they inevitably required detailed consideration by both counsel and the Court.  Time band B would be quiet inadequate to reflect the time required to prepare the evidence and legal argument on the difficult issues involved.

[8]      With the complexity of some of the issues involved in the application, I think it was hardly surprising that both sides used the period between the first hearing in February 2014 and the resumed hearing in August 2014 to amend their pleadings (and the plaintiffs’ application and defendants’ notice of opposition).   I think the defendants’ costs on filing their amended notice of opposition should lie where they fall.  In coming to that view, I bear in mind that the plaintiffs’ amended application was filed substantially in response to amendments made by the defendants to their defence and counterclaim.   The amended statement of defence set out in greater detail the allegations of breach of the tax laws of foreign country B.

[9]      The telephone conference convened on 29 April 2014 was occasioned at least in part by the relatively late filing of the defendants’ amended pleading before the fixture scheduled for 8 May 2014.  I decline to award costs on that conference or the memorandum which the defendant filed for it.  Those considerations do not apply to the 19 June 2014 conference, however, and there will be an order for costs to the defendants in respect of that conference on a 2B basis.

[10]     The final disputed costs item claimed by the defendants is the 50 per cent uplift claimed for each of the hearings on 28 February 2014 and 13 August 2014. Counsel agree that the hearing time was one day in each case, and on that basis a category 2 costs award would be $3,980 (the category 2 rate of $1,990 x 2 days).

[11]     Rule 14.6(3) provides:

14.6     Increased costs and indemnity costs

...

(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.

[12]     I do not think that any of paras (a), (b) or (c) of r 14.6(3) applies in this case. To otherwise come within r 14.6(3), the defendants must show that some other reason exists which justifies the Court in making an order for increased costs, despite the principle that determination of costs should be predictable and expeditious.1

[13]     It  seems  to  me  that  the  defendants’  real  argument,  that  the  application involved a high level of complexity, is an argument which really goes to the distinction between categories 2 and 3.  However, the defendants have accepted that

category 2 is the appropriate category for the proceeding.

1      High Court Rules, r 14.6(3)(d).

[14]     The starting point under para (d) of r 14.6(3) is that the determination of costs should be predictable and expeditious.  However, the Court has a broad discretion on the question of costs payable for any step in a proceeding,2 and there is also a general principle that an award of costs should reflect the complexity and significance of the proceeding.3

[15]     Weighing the considerations, I am not satisfied that the claimed uplift from scale of $1,990 is justified, under either r 14.6(3)(d), or under my broad general discretion.  In my view, issues of complexity in a proceeding are prima facie to be decided in the allocation of the correct category to the proceeding under r 14.3, and neither party in this case has suggested that category 3 is appropriate.   Of course greater complexity will also affect the amount of time required for a particular step, and to that extent I accept that greater complexity can form the basis for a band C time allocation in a category 2 case.  But where the time is fixed and known, as with the  two  hearings  in  this  case,  I do  not  see  that  an  uplift  from  the  category  2 allowance should be made based on complexity alone.

[16]     The remaining matter in issue is the defendants’ claim of $277 for the non- refundable return airfare relating to the May 2014 fixture which was abandoned.  I decline to award this disbursement.   I accept Ms Davenport’s submission that the reason for the vacating of the 8 May 2014 fixture was substantially the lateness of the pleading filed by the defendants.

Orders

[17]     I award costs to the defendants of $22,288 made up as follows:

Item	Document	Time Band	Amount
23	Notice of opposition to interlocutory application to strike-out	C	$3,980

2      Rule 14.1.

3      Rule 14.2(b).

24	Submissions               for              hearing 28 February 2014	C	$5,970
24	Submissions for hearing 13 August 2014	C	$5,970
35	Junior counsel 28 February 2014	C	$995
26	Appearance 28 February 2014	$1,990
26	Appearance 13 August 2014	$1,990
11	Memorandum for telephone     conference 19 June 2014	B	$796
13	Attendance at teleconference 19 June 2014	B	$597
Total $22,288

[18]     In addition, the plaintiffs are to pay the defendants’ disbursements totalling

$1,137.58, making a total figure for costs and disbursements of $23,425.58.

Non-publication orders

[19]     The  order  that  I  made  in  my  (re-issued)  judgment  on  the  strike-out application delivered on 2 April 2015 (that, pending further order of the Court, the names of the parties to this proceeding and any information which may tend to identify them or any of the related entities are not to be published), applies equally in respect of this judgment.

Associate Judge Smith