Helilogging Limited (in receivership and liquidation) v Civil Aviation Authority of New Zealand
[2021] NZHC 1676
•6 July 2021
IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY
I TE KŌTI MATUA O AOTEAROA TE WHANGANUI-A-TARA ROHE
CIV-2014-485-11204
[2021] NZHC 1676
BETWEEN HELILOGGING LIMITED (in receivership and liquidation)
First PlaintiffMARK WAYNE FORD (as trustee of the WESSEX TRUST)
Second Plaintiff
AND
M W FORD
Third Plaintiff
AND
CIVIL AVIATION AUTHORITY OF NEW ZEALAND
Defendant
Hearing: On the papers Counsel:
P J Dale QC for Plaintiffs
L J Taylor QC and G M Richards for Defendant
Judgment:
6 July 2021
JUDGMENT OF COOKE J
(Costs)
[1] Following a trial of little over seven weeks I dismissed the plaintiffs’ claims of misfeasance in a public office and deceit.1 Following a three-day hearing in the Court of Appeal, the plaintiffs’ appeal was dismissed.2 The Supreme Court declined leave to appeal.3
1 Helilogging Ltd (in rec and liq) v Civil Aviation Authority of New Zealand [2019] NZHC 3305.
2 Helilogging Ltd (in rec and liq) v Civil Aviation Authority of New Zealand [2021] NZCA 21.
3 Helilogging Ltd (in rec and liq) v Civil Aviation Authority of New Zealand [2021] NZSC 49.
HELILOGGING LIMITED (in receivership and liquidation) v CIVIL AVIATION AUTHORITY OF NEW ZEALAND [2021] NZHC 1676 [6 July 2021]
[2] The defendant now seek costs in this Court. There are substantial areas of agreement between the parties on the award of costs to the defendant, including that this was a category 3 case, but there are also significant differences. The defendant has set out their position by counsels’ memorandum dated 9 June 2021. This has been responded to by counsel for the plaintiffs by memorandum dated 21 June 2021, and a reply memorandum has been provided by counsel for the defendant of the same date.
Claims for time band C
[3] Some of the steps in the schedule are claimed by the defendant in time band C rather than time band B and the plaintiffs dispute some of these.
[4] As a general point this was a complex proceeding involving serious allegations of misfeasance in a public office and deceit. Some of the plaintiffs’ allegations of wrongdoing were complicated, and the case overall involved a detailed forensic exercise. In that context it is not surprising that some of the steps in the schedule are claimed under time band C. But it is important to address the individual steps to decide whether the claim is appropriate.
Filing of statement of defence (step 2)
[5] The defendant seeks this step in band C involving six days. This is apparently disputed by the plaintiff but was not addressed in the memorandum filed for the plaintiffs.
[6] This is an appropriate claim. The suggestion that the defendant’s defence to a complex proceeding involving allegations of misfeasance and deceit could be properly attended to within the two days contemplated by band B is not realistic. It is to be remembered that this is a time allowance not simply for preparing and then filing the statement of defence, but for researching the allegations made by the plaintiffs and preparing a defence. This allowance is justified.
Amended statements of defence
[7] The defendant’s claims for amended statements of defence in response to amended statements of claim in May 2019 and September 2019. Again the claim is
under time band C. This is apparently disputed but not addressed in the memorandum for the plaintiffs.
[8] Again I accept that the allocations are appropriate. They involve two days each, but the allegations advanced by the plaintiffs were changing, and needed to be fully investigated by the defendant for the purposes of filing the amended defences. These steps are allowed.
Interrogatories
[9] The defendant seeks an allowance under time band C of four days (rather than one day under category B) for answering 77 questions by way of interrogatories under step 17. The defendant says that they involved a number of questions that required careful investigation. The plaintiffs accept that the allowance should be greater than for band B, but say that only two days should be allowed.
[10] Given that it is accepted that the allowance under time band B is not adequate I allow the allowance in band C. It may be that four days is on the high side, but costs should not descend into a very detailed assessment of time in this way. The reason for having three time bands in the schedule is to avoid such an exercise. Time band C is appropriate because, in the words of the rule, a “comparatively large amount of time” rather than a “normal amount of time” is considered reasonable for the particular step.4 Any departures are then regulated by rr 14.6(3)(a) and 14.7(a), and they do not apply here. The claim is accordingly allowed.
Split trial application
[11] The defendant seeks two days under band C for filing the interlocutory application for a split trial. That involves 2 days rather than the normal 0.6 days. That is apparently disputed but not addressed in the memorandum for the plaintiffs. I again accept that this is appropriate for the reasons addressed above. This was a complex application as working out whether and how a trial would be split was difficult, and it
4 High Court Rules 2016, r 14.5(2)(c).
was not agreed. It required more than the normal amount of time. Accordingly the claim is allowed.
Case management
[12] In the first memorandum of counsel for the defendant, three case management conferences are identified as requiring a band C allocation. That has not been responded to in counsel for the plaintiffs’ memorandum and I accept the allocations are appropriate.
Discovery
[13] The defendant not only seeks allowances under time band C for discovery, but it also seeks an uplift under r 14.6(3)(a). Counsel for the plaintiffs appears to suggest there should be a reduction for step 20 (lists) and step 21 (inspection) to only five days each.
[14] There is agreement that the discovery exercise in this case was extensive. The allegations traversed factual and technical issues from at least 2002–2005, and probably earlier. The events were some 11 years ago. This involved retrieving archived material and approaching former Civil Aviation Authority (CAA) employees. For that reason I accept that “a comparatively large amount of time for the particular step is considered reasonable” under r 14.5(2) particularly in relation to listing and providing the defendant’s discovery, but also inspecting the plaintiffs’ documents. I accordingly reject the argument by counsel for the plaintiffs that the band C allocations are inappropriate.
[15] But for similar reasons I do not accept the argument that there should be an uplift under r 14.6(3)(a). I do not accept that the time of the party claiming costs “substantially exceed the time allocated under band C”. The allocated number of days of seven and six days respectively is substantial. It is the equivalent of a person on the daily recovery rate working nearly three working weeks on discovery and inspection, and it could also be expected that solicitors or legal executives with lower charge out rates would be attending to this work. Accordingly I allow only seven and six days for these steps.
Disbursements: Fees charged by witnesses
[16] Two of the witnesses called by the defendant charged for their attendances. The first is Mr Bernie Lewis who was an external consultant retained by CAA at the time of the decisions in question who gave evidence about the advice he provided. His fees were $13,660.40. The second is Mr John Fogden, who was an employee of CAA at the time who is now a self-employed aviation safety consultant who gave evidence of the role he performed, and his advice. His fees were $14,431.25.
[17] Disbursements are allowed under r 14.12. This requires the Court to approve a class of disbursement for the purposes of the proceeding under r 14.12(2)(a), and that the particular claim be specific to the conduct of the proceeding, reasonably necessary for it, and reasonable in amount.
[18] Mr Lewis’ position is not addressed in the memorandum of counsel for the plaintiffs. The fees of experts are a well-recognised class of disbursement. Strictly speaking Mr Lewis was not giving expert evidence at trial, but evidence of fact of the expert advice that he gave at the time. But that distinction is immaterial, and I accept this is an appropriate category of expenditure, that it was necessary for the conduct of the proceeding, and it was reasonable an amount.
[19] Mr Fogden is in a different position because he was giving evidence of fact, and he was an employee of CAA and not an external expert at the time. I agree with the approach taken by Andrews J in Trustpower Ltd v Commissioner of Inland Revenue that this expenditure can be allowed, however, and for the reasons she gave.5 As a matter of principle if a claim or defence advanced by a party has put the opposing party to the cost of retaining a person to give evidence, and if it was reasonable for the person to charge for their time, then as a matter of principle reasonable costs should be able to be recovered if they are reasonable. Mr Fogden was no longer an employee of CAA and he operates as a consultant who charges for his time. It was reasonable for him to charge for his time here. The nature of the plaintiffs’ allegations required the defendant to call him as a witness, and to give evidence. The evidence was technical in nature and included matters of opinion that he gave at the time. It was
5 Trustpower Ltd v Commissioner of Inland Revenue [2014] NZHC 3072 at [69]–[71] and [80]
evidence in the area in which he is now a consultant. It needed to be carefully prepared. His attendances were necessary, and his charges reasonable. They should be allowed.
[20] The memorandum of counsel for the plaintiffs objects to the claim on the basis that the plaintiffs should not be liable for Mr Fogden taking legal advice regarding his evidence. Counsel for the defendant have confirmed in the response that that is not what the claim relates to. So that objection seems to be based on a misunderstanding.
Third counsel
[21] The defendant seeks recovery for third counsel appearing at the trial in 2019. This is not accepted by the plaintiffs who point out that third counsel did not take an active role in the proceedings, and that the defendant would also have benefited from the assistance of in-house counsel.
[22] Step 35 of Schedule 3 refers to “second and subsequent counsel” if allowed by the Court. As the defendants acknowledge the allowance for third counsel is unusual and needs to be justified by the nature of the proceeding. Such allowances can be made, however. For example it was permitted in Commerce Commission v Bay of Plenty Electricity Ltd on the basis that it was “quite appropriate given the nature of the proceeding and the legal and factual complexity”.6
[23] I accept that such an allowance is appropriate here. This was a long and complex case, and it justified two counsel in addition to senior counsel in order for it to be appropriately managed. But it seems to me that it needs to be recognised that third counsel will be exercising a more junior role unlikely to involve active advocacy, and likely involving a more junior solicitor. For that reason, rather than the award being 50 per cent of senior counsel the award should be 25 per cent. That is consistent with the general approach of only allowing second counsel half the allowance of lead counsel. I do not suggest that it may not be appropriate to allow third counsel at the higher rate in other situations. But in the present case the third counsel had a more
6 Commerce Commission v Bay of Plenty Electricity Ltd HC Wellington CIV-2001-485-917, 4 December 2008 at [46].
minor role. An award of 25 per cent of senior counsel for attendance at the trial in 2019 is accordingly allowed.
Claims uplift and reduction
[24] Both the defendant and the plaintiffs advance arguments for an uplift in the costs award under r 14.6, and a reduction in the award under r 14.7 respectively.
Uplift
[25] The defendant seeks an uplift under r 14.6(3)(b)(ii) and (iii) on the basis that the plaintiffs contributed unnecessarily to the time and expense of the proceeding by pursuing unnecessary arguments that lacked merit, and failing to admit facts. This is based on the proposition that the plaintiffs made and pursued wide ranging and unfocused allegations of fraud and dishonesty which were all unsuccessful. This included allegations:
(a)in relation to the 9 November 2004 memorandum which I subsequently held was only a draft memorandum;
(b)in relation to a suggested admission to a reporter for the Close Up television programme;
(c)that were complicated and convoluted in relation to the so called vibration flight and Mr Lewis’ email of 14 December 2005;
(d)that were unsubstantiated in relation to amendments made to Mr Lewis’ letter;
(e)that involved allegations of vicarious liability in relation to Mr Lewis;
(f)and that generally involved an excessive volume of evidence directed to peripheral issues that was repetitive, duplicated other evidence, and which was directed to the wrong questions.
[26] The defendant says that the allegations generally lack proper focus and consequently led to a greater volume of evidence than necessary to fairly address the case.
[27] In response the plaintiffs say that the Court accepted that the plaintiffs had been unfairly treated, that there were matters emerging from the evidence for which there was not adequate explanation, that they had properly investigated all matters as far as they could before trial, and ultimately that this was not a hopeless case that was misconceived or based on unreasonable arguments.
[28] I have sympathy for the defendant’s argument in this respect. Much of the plaintiffs’ case appeared to be misconceived and at times based on quite unusual allegations of fraud that suggested a lack of objectivity in the formulation of the allegations. But I am not prepared to uplift costs on this basis. As the plaintiffs say, there was a basis to contend that the decisions involved unfair decision-making. Whilst the plaintiffs saw dishonesty when there was none, it is not unusual for those adversely affected by unfair decision-making to lose objectivity and perspective. I have the impression that the plaintiffs’ advisors also came to believe the allegations that were being advanced. Some care needs to be exercised when applying the uplift principles in cases involving alleged fraud and dishonesty. A person alleging dishonesty has just as much a right to approach the Court as someone who does not. An uplift should not be granted simply because such allegations are made, and fail.
[29] It is appropriate to reiterate, however, that the allegations had no foundation. The individuals associated with the defendant have had to respond to allegations of fraud and dishonesty that would have impacted on them personally, and which were shown to have no foundation. Some of the evidence was of little or no relevance. But the costs regime works to properly compensate a successful party for the time taken to respond to allegations, and the decisions I have already made address elements of the claim by allowing more time. The allowance for the trial itself compensates for the time actually taken.
[30] In the circumstances an award of costs on a category 3 basis, including some time allowance on time band C properly compensates the defendant for responding to the plaintiffs wide ranging allegations.
Reduction
[31] The plaintiffs make an application that there should be a reduction in the costs awarded to the defendant on the basis that there was extensive cross-examination on issues that had no bearing on liability issues. Counsel suggest a week of hearing time was occupied by unnecessary cross-examination. An issue is also raised concerning two days of the trial taken up by what ended up being unhelpful cross-examination of Mr John Jones, the former Director, who for reasons I have addressed was not able to give helpful evidence. It is argued that the cost wasted by his evidence should not be visited upon the plaintiffs.
[32] I do not accept either of these arguments. Whilst some of the lines of cross- examination pursued by the defendant might be criticised, I do not agree that anything like one week was involved with such issues. A far greater proportion of the case was also devoted to evidence and lines of argument advanced by the plaintiffs that proved to be unhelpful, irrelevant, and at times misconceived. I see no basis to discount the defendant’s recovery because of its own lines of defence.
[33] In terms of Mr Jones, it was inevitable that he needed to be called as a witness given the plaintiffs’ allegations. Neither the defendant nor the plaintiffs can be said to be responsible for the fact that he was unable to give helpful evidence. The defendant raised this issue before his cross-examination. It is simply a ramification of the fact that the allegations were made so many years after the events. In other words it is an implication that the losing party needed to wear as part of the cost of the case. I also see no reason to disallow disbursements relating to Mr Jones.
Costs on costs
[34] The defendant seeks an award of costs on the costs application. Given that not all of its arguments on costs have prevailed I decline to award costs on costs.
Order against Commercial Factors Ltd
[35] The defendant seeks that the cost order be made not only against all of the plaintiffs but also their funder, Commercial Factors Ltd, on a joint and several basis. The plaintiffs say that that is not necessary because Commercial Factors Ltd accepts liability. But given that it is necessary to make a costs order, and it is accepted that Commercial Factors Ltd is included as a liable party, then the orders should be against it as well as the plaintiffs (on a joint and several basis).
Conclusion
[36] The award of costs will be on the basis outlined above. I proceed on the basis that the final calculation will be able to be agreed without further Court involvement.
Cooke J
Solicitors:
Neilsons Lawyers Ltd, Auckland for plaintiffs Darroch Forrest Lawyers, Wellington for defendant
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