Harvey v Harvey

[2020] NZHC 2405

IN THE HIGH COURT OF NEW ZEALAND HAMILTON REGISTRY

I TE KŌTI MATUA O AOTEAROA KIRIKIRIROA ROHE

CIV-2019-419-021

[2020] NZHC 2405

BETWEEN

BRYCE CHARLES HARVEY

Plaintiff

AND

PAUL MARTIN HARVEY and CLARK

ROWLAND HARVEY as executors and administrators of the estate of MARTIN LEONARD HARVEY

Defendants

Hearing:

On the papers

Appearances:

K Badcock for Plaintiff

No appearance for Defendants (abide decision of Court) D R I Gay for B A Harvey Ltd

A MacMillan for New Zealand Watermelon Distributors Ltd

Judgment:

17 September 2020

JUDGMENT OF LANG J

[on costs]

This judgment was delivered by me on 17 September 2020 at 3.30 pm, pursuant to Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar Date……………

Solicitors:

Badcock Law, Rotorua

Allen Needham & Co Ltd, Morrinsville Barbara Knowles, Auckland

Counsel:

D R I Gay, Auckland

A MacMillan, Auckland

HARVEY v HARVEY [2020] NZHC 2405 [17 September 2020]

[1]    On 31 July 2020 I issued a judgment dismissing an application by the plaintiff seeking orders requiring two non-parties, New Zealand Watermelon Distributors and B A Harvey Ltd, to provide discovery of their financial statements going back to 2009.1 Both non-parties had opposed the plaintiff’s application.

[2]    The parties have been unable to reach agreement regarding costs. I am therefore required to determine that issue on the basis of the memoranda all three counsel have filed.

Relevant principles

[3]    Both non-parties seek to recover their actual costs on a solicitor-client basis. Mr Badcock submits for the plaintiff that this would be inappropriate. He contends the non-parties should receive costs on a category 2A basis because the application was not complex and the hearing ultimately took less than an hour. At most he says the plaintiff should not be required to pay costs greater than would be payable under category 2B.

[4]    Generally speaking, the approach taken to costs when an application for discovery is made against a non-party is different to that taken when one party to a proceeding seeks discovery against another. When the Court makes an order for non- party discovery it will usually require the applicant to pay the non-party’s actual and reasonable costs. Jurisdiction for making such an order is contained in r 8.22(3) of the High Court Rules 2016, which provides:

8.22     Costs of discovery

…

(3) If an order is made under rule 8.20(2) or 8.21(2) the Judge may, if the Judge thinks it just, order the applicant to pay to the person from whom discovery is sought the whole or part of that person's expenses (including solicitor and client costs) incurred in relation to the application and in complying with any order made on the application.

[5]    In the present case the non-parties succeeded in defending the plaintiff’s application so r 8.22(3) does not apply. Nevertheless, although costs remain at the

1      Harvey v Harvey [2020] NZHC 1886.

discretion of the Court, the courts generally proceed on the basis that a non-party will be reimbursed on an indemnity basis for its reasonable costs in responding to the application.2

Approach

[6]    Mr Badcock submits that the approach usually taken to costs in the context of non-party discovery is inappropriate in the circumstances of this case. He contends the present proceeding is inextricably linked with four other proceedings in which members of the Harvey family advance claims against the estate of the late Martin Leonard Harvey. He says this is not a case in which the plaintiff sought discovery against parties who had nothing to do with the claims raised in the proceeding. Rather, the directors and shareholders of the two non-parties are parties in their own right in the other proceedings and are therefore familiar with all of the issues raised in the five proceedings.

[7]    I do not regard this factor to be sufficient to displace the principle that non- parties should ordinarily be reimbursed for the actual costs they incur when responding to applications for discovery. The principle reflects the fact that, provided non-parties act reasonably in doing so, they should not be left out of pocket when they are required to incur expenditure responding to an application filed in proceedings in which they have no direct involvement.

[8]    In the present case the two non-parties are separate legal entities to the parties in the five proceedings even though their shareholders and directors are parties in those proceedings. As such the non-parties have been required to expend their own resources responding to the plaintiff’s application. The position of each was different and I am satisfied each was entitled to be separately represented by counsel. The fact that the non-parties succeeded in defending the application confirms they acted reasonably in opposing it.

2      Churchill Group Holdings Ltd v Aral Property Holdings Ltd HC Auckland CIV-2001-404-2301, 3 August 2005 at [33] and [36]; and Clear Communications Ltd v Telecom Corporation of New Zealand (1994) 8 PRNZ 200 (HC) at 202.

[9]    I therefore reject the submission for the plaintiff that the non-parties should be awarded costs according to scale.

Are the costs incurred by the non-parties reasonable?

[10]   New Zealand Watermelon Distributors Ltd has incurred costs on a GST exclusive basis totalling $24,100 and disbursements totalling $1,230.71.3 B A Harvey Ltd has incurred costs of $22,608 and disbursements totalling $278. Of these amounts the sums of $4,665 and $3,570 respectively relate to costs incurred in filing memoranda on costs. Counsel for the non-parties were obliged to take this step after the plaintiff suggested costs should be limited to those calculated on a category 2A basis.

[11]   In assessing the reasonableness of the costs the non-parties have incurred I bear in mind the steps that counsel for both non-parties were required to take to respond to the application. These included the need to consider the impact of the amended statement of claim filed by the plaintiff after he had filed his application for non-party discovery and the affidavits filed in support of the application. I also note that counsel for the non-parties co-operated in preparing the chronology and supplementary bundle of documents to be presented at the hearing so as to avoid duplication of effort in undertaking those tasks. Taking into account these factors I do not consider the fees charged by counsel for either non-party to have been unreasonable.

[12]   Finally, as a form of cross-check it is often useful to compare actual costs incurred against those permitted by the scale. This flows from the fact that r 14.2(1)(d) of the High Court Rules provides that an appropriate daily recovery rate under the scale should normally be two-thirds of the daily rate considered reasonable in relation to a proceeding or interlocutory application. Costs on a category 2B basis for the present application would amount to slightly less than $14,000.4 This suggests the actual costs incurred by the non-parties would be considered reasonable using the criteria set out in r 14.2(1)(d).

3      I assume that as trading entities both non-parties are registered for GST and will be able to recover the GST component of the fees they have been charged. It is therefore appropriate to require any payment of costs by the plaintiff to be on a GST exclusive basis.

4      Using the calculations contained in Appendix “A” to the memorandum of counsel for New Zealand Watermelon Distributors dated 10 September 2020.

Result

[13]   The non-parties are entitled to be reimbursed by the plaintiff for their actual costs and disbursements.

Lang J