Hannam v Herd HC Auckland CIV 2008-404-5195

[2010] NZHC 2279

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV 2008-404-5195

IN THE MATTER OF     Part 4 of the High Court Rules

BETWEEN  TERRENCE RODERICK HANNAM Plaintiff

ANDROBERT JOHN HERD Defendant

Hearing:         29 November 2010

Appearances: G P Blanchard for the Plaintiff

J B Samuel for the Defendant

Judgment:      16 December 2010 at 4.30 pm

JUDGMENT OF WHITE J (quantum of order for indemnity costs)

This judgment was delivered by me on 16 December 2010 at 4.30 pm pursuant to Rule 11.5 of the High Court Rules. Registrar/Deputy Registrar

Date: .............................

Solicitors:           J G Connell, PO Box 29 172, Greenwoods Corner, Auckland 1030

Counsel:            G Blanchard, PO Box 1235, Shortland Street, Auckland 1140

HANNAM V HERD HC AK CIV 2008-404-5195  16 December 2010

[1] Having declined the application by the defendant for a stay under s 161(1) of the Lawyers and Conveyancers Act 2006 and the parties not having been able to reach agreement on the quantum of the order of indemnity costs, this Court is required to determine the quantum of the order under rule 14.6(1)(b) of the High Court Rules: see my interim judgment dated 3 December 2010.

[2]     Under rule 14.6(1)(b) the issue is whether the actual legal costs and disbursements of the plaintiff, Mr Hannam, were “reasonably incurred” by him in this proceeding.   The approach to be followed in determining the amount of costs “reasonably  incurred”  by  a  party  in  this  context  is  the  approach  described  by

Harrison J in Bradbury v Westpac Banking Corporation1  which was upheld by the

Court  of  Appeal  in  Bradbury  v  Westpac  Banking  Corporation.2 The approach requires a close and careful examination of the successful parties’ actual legal costs and an exercise of judgment, necessarily imprecise and unscientific, to determine whether the costs were “reasonably incurred”. As Harrison J explained at [207], the assessment should be approached in the following way:

The concept of reasonableness is well known. It is an objective criterion which is necessarily fact and circumstance specific. While the ultimate result must be just and fair for B&M [the unsuccessful party], what is reasonable is to be determined so as not to defeat the purpose and spirit of a rule which provides a right to recover actual costs. Care must be taken not to apply an unduly rigorous measure when acting with the benefit of hindsight, or to subject items of expenditure to an unnecessarily exacting examination. The resulting  figure  will  reflect  an  overall  evaluation  of  what  costs  are reasonably incurred.

[3]      In this case, following an exchange of memoranda, Mr Hannam has reduced his total claim for indemnity costs from $41,170.15 to $37,911.87.  The claim now comprises three bills of costs, namely:

Macky Roberton (solicitors)       $9,655.50

James Doughty (solicitor)           $7,373.23   (reduced by $516.25)

G P Blanchard (counsel)           $20,883.14   (reduced by $525 and $1,855)

$37,911.87

1 Bradbury v Westpac Banking Corporation (2008) 18 PRNZ 859 (HC) at [205]-[219].

2 Bradbury v Westpac Banking Corporation [2009] 3 NZLR 400 (CA) at [88].

[4]      As it is necessary to determine whether the costs charged by each of the lawyers was reasonably incurred in the proceeding, I propose to examine each of their bills of costs separately, taking into account the submissions for Mr Herd in the memorandum on his behalf dated 23 December 2008.

[5]      In carrying out this task, I recognise that I do not have the advantage that John Hansen J, the judge who decided the case on 17 November 2008 and who made the order for indemnity costs, would have had, but I have read the pleadings and affidavits on the Court file and the judgment.   I have noted in particular that in addition to the initial pleadings Mr Hannam applied for an expedited fixture and trial directions with an affidavit and memorandum of counsel in support and, in response to Mr Herd’s appearance under protest to jurisdiction, an application to set aside that appearance which led to the allocation of a half day hearing.  On the application of Mr Hannam with further supporting affidavits and a memorandum of counsel that fixture was vacated and an earlier shorter one allocated.   The hearing proceeded before John Hansen J with further affidavit evidence from Mr Herd and an amended statement of claim.  The order sought by Mr Hannam for the transfer of the shares was made in an oral judgment delivered on 17 November 2008.  John Hansen J gave the following reasons for the indemnity costs order at [20]:

There is an application for indemnity costs.   Mr Samuel accepted in his submissions on cost [sic] that Spada Limited was always a bare trustee for Mr Hannam.  He submits, however, that Mr Herd has done nothing wrong, that the matter was effectively decided on an affidavit filed late this morning and that indemnity costs would be inappropriate.  However, in the course of those  submissions  he  did  accept  that  Mr  Herd  was  effectively  denying Mr Hannam’s rights to the assets as leverage, or as an attempt to use them in the dispute these men have in Vanuatu.  The correspondence exhibited make [sic]  it  plain  that  that  is  the  case.    These  assets  clearly  were  always Mr Hannam’s.   On the acknowledgement that Spada Limited was a bare trustee, I can see no reason why indemnity costs should not follow.

[6]      On the basis of my reading of the file and the oral judgment I apprehend that John Hansen J would have accepted that all the legal costs “reasonably incurred” by Mr Hannam in relation to this proceeding would have been included in the quantum of the indemnity costs order.   This case does not involve the complex issues or extensive consideration required in a case such as Bradbury v Westpac Banking Corporation.

[7]      Counsel  for  Mr  Herd  in  his  memorandum  dated  23  December  2008 calculated that scale costs amounted to $11,200, but, as Harrison J pointed out in Bradbury v Westpac Banking Corporation at [209], there is nothing in the High Court Rules to suggest that the scale is relevant to an award for actual or indemnity costs. The appropriate course for assessing what actual costs were reasonably incurred is to:

(1) determine whether a particular item of expenditure is reasonably incurred

– for example, preparation of a statement of defence; (2) fix what would be a reasonable   allocation   of   actual   costs,   measured   by   reference   to   an

appropriate time taken and allowing for the significance and complexity of

the category of work; and (3) quantify the costs by reference to a median hourly rate reasonably applicable to it.

Macky Roberton

[8]      Macky Roberton rendered a bill of costs to Mr Hannam in relation to this proceeding totalling $9,655.50 (including GST).  Copies of Macky Roberton’s bill of costs and relevant extracts from their time sheets were provided to the Court with the memorandum for Mr Hannam dated 11 December 2008.  The time sheets disclosed that Macky Roberton has spent 22.2 hours on the case, but that they reduced that figure to 20 hours.  Their hourly rate was $425 giving a fee without GST of $8,500.

[9]      The  memorandum  in  response  for  Mr  Herd  dated  23  December  2008 contained the following criticisms of the Macky Roberton’s fee:

10.Macky  Roberton  Accounts.    These  are  attached  and  Mr  Herd’s comments and marked “B”. There is

a.        complaint of excessive time and consequent over-charging,

b.attendances   which   are   not   related   to   the   proceeding, especially 4.5 hours for apparently a one page Affidavit is excessive

c.        not sufficient information to enable a determination to be made as to whether or not this ought to be the attendances relating to the proceeding.

11.A  further  complaint  generally  about  Macky  Roberton’s  costs  is whether or not the costs as detailed all or partially come within the prayer for relief contained in the amended Statement of Claim (filed Friday   14   November   2008   –   with   a   hearing   on   Monday

17 November 2008 which sought “costs of and incidental to the proceeding”.

12.The time cost commenced on 10 July 2008 and the proceedings were issued on 13 August 2008 by Mr Doughty, the Commercial Lawyer who in turn had instructed Mr Blanchard.   I submit that the involvement of Macky Roberton prior to the issue of proceedings and registering a caveat, etc, does not form part of “costs of the incidental to the proceeding”.

13.This expression has been rarely judicially considered but was in Kahukiwa v Westpac and Others CP No.418/98 (attached).   A decision of as he was then Master JCA Thompson).

14.His  Honour  noted  that  the  words  “costs  of  proceeding”  (which related to a settlement) meant “in my view the reference to “proceeding” refers to the actual proceeding before the Court.  Thus costs of preliminary advice, and advising on alternative proceedings (herein junctive proceedings) should not be taken into account”.

15.Concededly   there   were   two   very   small   Affidavits   filed   by Mr Roberton which appeared to have been more than adequately charged for.   Mr Roberton, although he does not specifically note, may  have  had  a  hand  in  part  preparation  of  the  affidavit  by Mr Hannam on 12 August 2008 but again this would appear to have been more than adequately charged for elsewhere.   In any event a charge  just  under  $2,000  for  any  affidavit  in  this  particular proceeding in my respectful submission is grossly excessive.

16.Furthermore, one of the affidavits filed by Mr Roberton was late filed on morning of the hearing and in an effort to shore up the Plaintiff’s case, Mr Herd’s evidence was that he had never seen the letter  dated  21  December  2005  (Exhibit  “D”  Hannam  Affidavit sworn 12 August 2008) which was said to modify the basis upon which he held the shares in Spada Limited, (although Mr Herd had always acknowledged that Spada, as his Company, held as Trustee the assets of that Company in trust for Mr Hannam).

17The letter dated 21 December 2005 had been incorrectly addressed to Mr Herd and had contained Mr Herd’s incorrect email.

18.Mr Roberton filed his second affidavit so as to show that he had in fact sent the letter 21 December 2005 to Mr Herd’s correct email address.

19.Mr Herd had prepared the case on the basis that the letter had been improperly  addressed  to  both  him  personally  and  to  his  email address and that this supported his evidence that he had never seen the letter.   Had Mr Herd been aware of the Mr Roberton’s contentions, which he was not given an opportunity to answer, he would sought orders to have the appropriate technologist check both his computer and Mr Roberton’s computer so as to ascertain whether Mr Roberton had in fact sent the letter, as he had claimed, and whether Mr Herd’s computer had received the letter.

20.Even if Mr Herd’s computer had received the letter that there is still not evidence that Mr Herd had seen the letter.  However, he at least would have had the opportunity to have accepted that the letter came

to his office and whilst he had not seen it, nonetheless could have elected to have abided by its contents.  This element of the case was critical and was sprung on the Defendant at the last minute and with no opportunity to respond.

21.I submit this is an aspect that the Court in exercising your overall discretion in relation to costs might take into consideration.

22.If there was to be a claim for Mr Roberton’s costs I submit that these should have been incorporated in the Amended Statement of Claim.

[10]     The memorandum in reply for Mr Hannam dated 21 January 2009 answered these criticisms as follows:

Macky Roberton’s Costs

7.The defendant refers to the decision of Master Thompson in Kahukiwa v Westpac CP No. 418/98 in relation to the meaning of the costs of the “proceeding”.  The plaintiff accepts that the reference to “proceeding” refers to the actual proceedings before the Court, thus costs of preliminary advice and advising on alternative proceedings should not be taken into account.

8.However,  with  one  exception,  all  of  the  time  charged  by  Macky Roberton relates to “the proceeding”.  The exception is the time spent on 17 July 2008 preparing and registering a caveat over the Tairua property.  Seven units were spent in relation to the caveat (see item 7 in attachment “B” to the defendant’s memorandum).   Although the plaintiff only had to incur this costs due to the illegitimate actions of the defendant, this is strictly-speaking not a cost of the proceeding. Nevertheless, it is submitted that no deduction should be made in respect of this time because the breakdown Macky Roberton has provided makes it clear that while Mr Roberton recorded 222 units of time, he actually only charged in respect of 200 of those units.  This more than makes up for the inclusion of the seven units.

9.At  paragraphs  16-20  the  defendant  complains  about  the  fact  that Mr Roberton filed one of his affidavits on the morning of the hearing. It is submitted that this was “in an effort to shore up the plaintiff’s case”.  However, the purpose of the affidavit was simply to respond to the contention that Macky Roberton’s letter of 21 December 2005 had been sent to the wrong email address and the contention was made by the defendant for the first time only in the lead up to the hearing (at page  9  of  the  submissions  on  behalf  of  the  defendant  dated

14 November 2008).

10.The   defendant   suggests   at   paragraph   19   that   had   he   had Mr Roberton’s   affidavit   earlier   he   could   have   obtained   the “appropriate   technology   check”    of   both    his   computer    and Mr Roberton’s  to  ascertain  whether  the  email  letter  was  sent  and received.  It is then suggested that this was a critical element of the case.   However, in fact it is submitted that it is clear from Your Honour’s judgment at paragraphs 11-13 that the result would have

been the same even if Mr Herd’s evidence that he did not receive the letter was accepted.   This is because Mr Herd’s second/alternative cause  of  action  would  have  succeeded  in  light  of  Mr Herd’s acceptance at paragraph 35 of his affidavit dated 13 November 2008 that Spada Limited was holding the property as trustee on behalf of Mr Hannam personally, as his personal funds had been used to acquire the property.

[11]     I agree with the answers provided for Mr Hannam.  There is no dispute that the costs incurred by Mr Hannam in the proceeding included the fee rendered by Macky Roberton who were his original solicitors.  On the basis of the steps which Macky Roberton were required to take in the proceeding, which are recorded in their fee note and in the summary of their time sheets, and in the absence of any challenge to the hourly rate adopted, I consider that a fee of $8,500 was reasonable.  As the criticisms of the fee by counsel for Mr Herd have been answered by counsel for Mr Hannam, it cannot be said that the fee was not reasonably incurred by Mr Hannam.

James Doughty

[12]     James Doughty rendered four bills of costs to Mr Hannam in relation to this proceeding totalling $7,954.01 (including disbursements and GST).   Copies of Mr Doughty’s bills of costs were provided to the Court with the memorandum for Mr Hannam dated 11 December 2008.   Copies of Mr Doughty’s timesheets were not provided with that memorandum, but were obtained by counsel for Mr Herd and provided to the Court with the memorandum for Mr Herd dated 23 December 2008. The timesheets disclosed that Mr Doughty had spent 21.41 hours on the case which means an hourly rate of approximately $314, giving a fee without GST of $6,721.55.

[13]     The memorandum for Mr Hannam dated 11 December 2008 acknowledged that  significant  costs  had  been  incurred  by  both  Macky  Roberton  and  James Doughty.   It was pointed out that this was because of Mr Herd’s insistence that Macky Roberton could not act for Mr Hannam in relation to this matter “due to a spurious claim of conflict of interest”.   This necessitated involving Mr Doughty which inevitably significantly increased the costs incurred.  Mr Herd had been put on notice that Mr Hannam would be seeking to recover all of the extra costs of instructing Mr Doughty.

[14]     The  memorandum  in  response  for  Mr  Herd  dated  23  December  2008 contained the following criticisms of Mr Doughty’s fee:

Mr Doughty’s Invoices

23.These are attached and marked with the Exhibit “C” together with the Defendant’s comments in relation thereto.   The Defendant complains of:

i.         lack of detail

ii         excessive charging and duplication of work

iii.       attendances which have nothing to do with the New Zealand

Court matter.

iv.       attendances in relation to the Duncan Knight matter which is not related to this matter

v.        Apparent double charging.

24.I submit that the deficient information contained in all three [sic] bills of costs is to such an extent and of such a nature that it makes it impossible for this Court to be satisfied as to the quantum of costs on the material before it from the Plaintiff.

25.The further issue is whether the Plaintiff is entitled to indemnity costs when solicitor/client costs only were awarded.  The authorities such as Adelphi Hotels Limited (attached) make it clear that there is a distinction between costs on an indemnity basis (which comes to much the same as between solicitor and own client) or as between solicitor and client.  Given the Court’s wide discretion in the issue of costs this is not being pursued.

[15]     The memorandum in reply for Mr Hannam dated 21 January 2009 answered these criticisms as follows:

James Doughty’s Charges

11.      Again, it is not accepted that there has been any excessive charging.

All of these costs are reasonable in the circumstances.

12.It is certainly accepted that there has been some duplication of work as between Macky Roberton and James Doughty.   However, as explained  at  paragraph  4  of  the  plaintiff’s  memorandum  dated

11 December 2008, this is the case only because of the defendant’s insistence that Macky Roberton could not act for the plaintiff in

relation to this matter due to a spurious claim of conflict of interest.

This necessitated involving James Doughty, which inevitably increased the costs incurred.  The defendant was put on notice at the outset that the plaintiff would be seeking to recover all of the extra costs of instructing Mr Doughty.

13.As in the case of Counsel’s invoices, it is accepted that charges related to the complainant made to the Queensland Legal Services Commission  and  related  to  the  claim  by  Spada  Limited  against Mr Knight should be excluded.  These are the charges that have been numbered 14-15 and 25-30 in attachment “C” to the defendant’s memorandum.   These charges total $516.25 (excluding GST) and should be excluded.  Notwithstanding that the costs only had to be incurred due to the illegimate actions of the defendant, they are not strictly-speaking costs of the proceeding.

[16]     I agree with the answers provided for Mr Hannam.  Again there is no dispute that the costs incurred by Mr Hannam in the proceeding included the fees rendered by Mr Doughty who acted as his solicitor in the proceeding.   On the basis of the steps which Mr Doughty was required to take in the proceeding and which are recorded his fee notes and the summaries of his timesheets, and in the absence of any challenge to the hourly rate adopted, I consider that a fee of $6,721.55 was reasonable.  As the criticisms of the fee by counsel for Mr Herd have been answered by counsel for Mr Hannam, it cannot be said that the fee was unreasonable.

G P Blanchard

[17]     Mr   Blanchard   rendered   four   fee   notes   to   his   instructing   solicitor, Mr Doughty, totalling $23,560.64 (including GST).  Copies of Mr Blanchard’s fee notes and extracts from time records were provided to the Court with the memorandum for Mr Hannam dated 11 December 2008.  The timesheets disclosed that Mr Blanchard’s hourly rate was $350.

[18]     The  memorandum  in  response  for  Mr  Herd  dated  23  December  2008 contained the following criticisms of Mr Blanchard’s fees:

Analysis of costs charge

4.Annexed hereto and marked with the letter “A” are copies of some of the time costs schedules rendered by Mr Blanchard, Counsel for the Plaintiff.   It will be noted that these documents were faxed by Macky Roberton to the Defendant.

5.The  items  have  been  numbered  1-50  with  appropriate  comment made by the Defendant.   It will be immediately obvious from the Defendant’s comment in relation to the items referred to that:

a.        There is not sufficient detail on various of the items to be satisfied that such attendance was necessary to this proceeding

b.There would appear to be excessive charging and items of double up

c.        No indication as to who drafted what proceedings.

6.        Furthermore, it is to be noted that the information which attached to the Memorandum of Counsel for the Plaintiff in relation to Costs dated 11 December 2008 attached the following:

a.        Invoice  No.  0045  for  professional  services  10/7/08  to

22/8/08  and  with  an  expanded  but  insufficient  time  cost sheet.

b.        Invoice No. 0063 for professional services for the period

23/8/08 to 22/9/08 for $6775.63. No detail was provided in relation to the time cost.  The only detail provided was the

disbursement  of  $200  for  the  filing  of  the  Interlocutory
Application.

c.Tax invoice No. 0082 for the period 23/9/08 to 30/10/08 expanded but insufficient time cost sheet.

d.        Invoice No. 0098 dated 21/11/08 for the period 31/10/08 to

19/11/08 of $4263.75.  No detail.

7.        The missing invoice would appear to be for $1855.00 for the periods

25/08/08 to 16/09/08.   The invoice 0098 for $4263.75 has been omitted in so far as the Defendant is concerned.

8.The invoice not provided in the Memorandum before the Court runs from 25/8/08 to 16/09/08 and is for $1855.  The tax invoice before the Court is number 0063 and is said to run from 23/8/08 to 22/9/08 for $6775.63.  This covers the same period to an extent and give rise to a double-up.

9.Substantial amounts of work have not been properly verified by informative time cost statements.  Furthermore, there is evidence of omission/inaccuracy, for example Mr Blanchard’s first entry is on

10/2/2008 with a telephone call to Mr Roberton with a duration of

.3.  Mr Roberton starts his time cost sheets on 10/7/08 but does not mention that telephone call.  Similarly, Mr Blanchard in the second

entry refers to a telephone call with Mr Roberton, but again this is

not noted in Mr Roberton’s 11/07/08 entry.  There are many other examples of this.

[19]     The memorandum in reply for Mr Hannam dated 21 January 2009 answered these criticisms as follows:

Counsel’s Costs

4.The  plaintiff  certainly  does  not  accept  that  there  has  been  any “excessive charging”.  It is submitted that the amounts claimed are reasonable in the circumstances.

5.However, it is accepted that the time in invoice no. 0045 relating to the  complaint  made  by  Mr  Hannam  about  Mr  Herd  to  the Queensland  Legal  Services  Commission  should  not  be  included. This complaint concerns the exact same issues as in this proceeding (ie, Mr Herd’s refusal to transfer the shares in Spada Limited to Mr Hannam)  and  the  plaintiff  has  only  had  to  incur  these  costs because of the illegitimate actions of the defendant, but it is acknowledged that it does not follow that costs incurred in relation to the complaint are of “the proceeding”.  Thus, the costs should be reduced  by  $525.00  (plus  GST),  as  suggested  by  the  defendant. These are the charges that have been numbered 21-22 in attachment “A” to the defendant’s memorandum.

6.In addition, in preparing this memorandum in reply Counsel has also become aware that invoice no. 0061 has incorrectly been included. A copy of this invoice is included in attachment “A” to the memorandum of counsel for the defendant.  It can be seen that this related to the dispute between Spada Limited and Duncan Knight. Although the dispute is related and the costs the plaintiff has had to incur in the Spada/Knight case have been significantly increased due to the illegitimate interference of the defendant, it is accepted that strictly-speaking this invoice should not be included.   Thus, the amount claimed in respect of Counsel’s charges should be reduced by $1,855.00 (plus GST).   The mistaken inclusion of this invoice explains the “double-up” referred to at paragraphs 7-8 of the defendant’s memorandum.  Apart from invoice no. 0061, all of the invoices included (ie nos. 45, 63, 82 and 98) relate to the dispute with Mr Herd in this proceeding.

[20]     The reductions to Mr Blanchard’s fee notes made by him quite properly in response to the issues raised for Mr Herd reduced the costs incurred by Mr Hannam in respect of counsel to $20,883.14.  On this basis I agree with the answers provided for Mr Hannam.  There is no dispute that the costs incurred by Mr Hannam in the proceeding  included  the  fees  rendered  by Mr  Blanchard  who  was  instructed  as counsel.  On the basis of the steps which Mr Blanchard was required to take in the proceeding and which are recorded in his fee notes and in his summary of his timesheets, and in the absence of any challenge to the hourly rate adopted, I consider that a fee of $20,883.14 (including GST) was reasonable.  As the criticisms of the fee by counsel for Mr Herd have been answered by counsel for Mr Hannam, it cannot be said that the fee was unreasonable.

[21]     I also note that Mr Samuel, counsel for Mr Herd, did not seek to provide any further submissions or response to the memorandum in reply for Mr Hannam dated

21 January 2009.

[22]   The resulting figure of $37,911.87 (including GST) reflects my overall evaluation of the amount of costs reasonably incurred by Mr Hannam in this proceeding.  In light of the judgment of John Hansen J, I consider that the ultimate result is just and fair for Mr Herd.

Result

[23]     For the reasons given, I consider that in terms of rule 14.6(1)(b) of the High Court Rules, costs of $37,911.87 (including GST) were “reasonably incurred” by Mr Hannam in this proceeding.   He is therefore entitled to an order for indemnity costs in that amount.

[24]     As Mr Hannam has been successful on this application, he is also entitled to an  order  for  costs  in  respect  of  this  application  on  a  category  2B  basis  with

disbursements, if any, to be fixed by the Registrar.

D J White J