Hemmingson v Rod
[2015] NZHC 2021
•26 August 2015
IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY
CIV-2014-485-9532 [2015] NZHC 2021
UNDER The Land Transfer Act 1952 IN THE MATTER OF
an application to prevent a caveat lapsing
BETWEEN
ROBERT NEIL HEMMINGSON Plaintiff
AND
STEVEN ROD AND THE CLANARD PROPERTY TRUST COMPANY LIMITED
Defendants
On the Papers Counsel:
G Cruden for Mr and Mrs Davis, non-parties against whom discovery order was sought
J Mahuta-Coyle for the first-named defendant
Judgment:
26 August 2015
JUDGMENT OF ASSOCIATE JUDGE SMITH
[1] This is an application for costs by Mr and Mrs Davis, non-parties who responded to a non-party discovery application which was withdrawn when the application was called on 31 March 2015.
[2] When the non-party discovery application was withdrawn at the hearing, I directed that Mr and Mrs Davis would be entitled to reasonable costs on a solicitor/client basis.1 In directing that reasonable solicitor/client costs could be sought, however, I indicated that I had some questions as to the extent to which the response by Mr and Mrs Davis to the discovery application may have been more
than was necessary in the circumstances. I directed that Mr and Mrs Davis were to
1 Under r 14.6(4)(d), the Court may make an indemnity costs order if the person in whose favour the order of costs is made is not a party to the proceeding and has acted reasonably in relation to it.
ROBERT NEIL HEMMINGSON v STEVEN ROD AND THE CLANARD PROPERTY TRUST COMPANY LIMITED [2015] NZHC 2021 [26 August 2015]
file and serve a memorandum setting out their claim for costs and expenses incurred to 31 March 2015 in responding to the non-party discovery application.
[3] Mr and Mrs Davis subsequently filed a memorandum setting out a claim for costs and expenses totalling $26,332.35 (including GST and disbursements). A memorandum opposing those costs was subsequently filed by the first-named defendant Mr Rod, who had made the non-party discovery application.
Background
[4] The background to the proceeding is set out in two judgments I gave on
30 April 2014 and 13 April 2015. It is not necessary to repeat all that was said in those judgments on this non-party costs application. I note simply that the proceeding was concerned with an application by Mr Hemmingson to establish an interest in the land on which the Foxton Hotel is located. Until 19 July 2011
Mr Hemmingson and Cheryl Hemmingson were the registered proprietors of the land, which they held as trustees of a family trust or trusts associated with Mr Hemmingson. There were then two mortgages on the title, a first mortgage to Avanti Finance Ltd (Avanti) and a second mortgage to Mr and Mrs Davis.
[5] Mr Hemmingson ran into financial difficulties, and Avanti put in train mortgagee sale proceedings. The defendants, Mr Rod and the Clanard Property Trust Company Ltd, purchased the land from Avanti as mortgagee on 19 July 2011 for $275,000.
[6] Mr and Mrs Davis had held a second mortgage over the land, securing an advance of $50,000. Their interest in the land under that mortgage was effectively extinguished by the transfer from Avanti as first mortgagee to Mr Rod and the Clanard Property Trust Company Ltd. No doubt with that fact in mind, Mr and Mrs Davis agreed to fund the entire purchase price of $275,000 paid by the defendants to Avanti, on terms which would enable Mr Hemmingson to continue to operate the hotel business. In the Court proceeding, Mr Hemmingson alleged that the arrangement was that Mr and Mrs Davis would advance the money required to purchase the land to an asset-owning trust which would purchase the land, and that Mr Rod agreed that Mr Hemmingson would be the sole beneficiary of the trust. Mr
Hemmingson contended that he left it to Mr Rod to establish the trust, and that a trust (the R&S trust) was established. Mr Hemmingson’s case was that, unbeknown to him, Mr Rod established the trust without naming Mr Hemmingson as beneficiary.
[7] Mr Hemmingson believed that he would eventually have the land transfer to him as the sole proprietor. He contended that he did not find out that he was not named as beneficiary until early 2012.
[8] Mr Hemmingson lodged a caveat against the land, and my judgment of
30 April 2014 was given on an application by Mr Hemmingson to sustain that caveat. In the caveat proceeding, Mr Hemmingson contended that Mr and Mrs Davis’ real intention had been to lend the money to acquire the land from Avanti to Mr Hemmingson, and that the defendants would hold the land and the hotel assets as trustees for Mr Hemmingson. Mr Davis gave evidence in the caveat proceeding to similar effect. He said that he understood that he would be lending the money to Mr Hemmingson, who would form a trust which would become the registered proprietor of the land. Mr Rod and Mr Hemmingson would be the trustees. Mr Davis gave evidence in the caveat proceeding that he would never have contemplated a loan to buy the land if it had not been for a representation by Mr Rod that Mr Hemmingson would be a party to the ownership of the land.
[9] In my decision on the caveat proceeding, I concluded that there were deficiencies in the caveat document such that it could not be sustained, but that Mr Hemmingson had shown an arguable interest in the land and that he should be permitted to lodge a second caveat.
[10] In July 2014, Mr Hemmingson commenced the present proceeding, in which he sought a declaration that the Foxton Hotel land was and remained his property. The defendants in this proceeding were Mr Rod and the Clanard Property Trust Company Ltd. Mr and Mrs Davis were not named as parties.
[11] At a case management conference convened on 28 October 2014, I gave directions for the exchange of briefs of evidence, and preparation of a common bundle of documents for trial. I directed the registrar to allocate two days for the
hearing of the proceeding, and the proceeding was subsequently set down for trial on
2 and 3 June 2015.
[12] On 23 February 2015, Mr Rod filed three interlocutory applications. There were applications for particular discovery by the plaintiff and for security for costs; there was also the application seeking non-party discovery from Mr and Mrs Davis.
[13] The non-party discovery application asked for orders directing Mr and
Mrs Davis to make discovery of two categories of documents:
(1)any records of payments by Mr Hemmingson to Mr and Mrs Davis between 11 June 2011 and July 2014; and
(2)any communications received or sent by Mr and Mrs Davis to Mr Hemmingson about the Foxton Hotel and/or the 2011 sale transaction, until 31 July 2014.
[14] By memorandum filed with the three applications, Mr Mahuta-Coyle, counsel for Mr Rod, advised that the application for particular discovery against Mr Hemmingson might be sufficient to yield the documents Mr Rod was seeking from Mr and Mrs Davis. In those circumstances, he asked that the non-party discovery application not be listed for hearing until the determination of the application for particular discovery against Mr Hemmingson.
[15] The matters came before me by way of telephone conference on
4 March 2015. Particularly given that the trial of the proceeding was only approximately three months away, I directed that all three interlocutory applications were to be heard at 2.15pm on 31 March 2015. At that stage, the application for non-party discovery against Mr and Mrs Davis had not been served (Mr Mahuta- Coyle had indicated in his 23 February 2015 memorandum that he would refrain from serving the non-party discovery application pending the Court’s direction as to whether the hearing of that application could be deferred until after the particular discovery application against Mr Hemmingson was determined).
[16] I directed that Mr Rod was to serve the non-party discovery application on Mr and Mrs Davis by 6 March 2015. If there was difficulty in effecting service by that date, leave was reserved to Mr Rod to apply by memorandum for an extension of time to effect the service. I further directed that any notice of opposition and affidavits in opposition by Mr and Mrs Davis were to be filed and served by
13 March 2015. I reserved leave to them to apply by memorandum for an extension of time to take that step in the event of Mr Rod being unable to effect service of the application on them by 6 March 2015.
[17] Mr and Mrs Davis filed a five page notice of opposition on 11 March 2015. The notice of opposition was mostly directed to a request for an extension of time beyond 13 March 2015 to file an affidavit in support of the notice of opposition.
[18] The notice of opposition appeared to proceed on the basis that an order for non-party discovery by Mr and Mrs Davis had actually been made on 4 March 2015 (no such order had been made). The notice of opposition referred to difficulties in that Mr and Mrs Davis would be away from Foxton for about ten days, and accordingly they would not be able to file their affidavit by 13 March 2015. Mr and Mrs Davis also complained in the notice of opposition that Mr Rod had failed to serve them by 6 March 2015 (a copy was received by email by the solicitor for Mr and Mrs Davis after 5pm on 6 March 2015).
[19] On 25 March 2015, Mr Rod’s counsel advised by memorandum that his client did not oppose the extension of time to 27 March 2015 for Mr and Mrs Davis to file any affidavit in opposition to the non-party discovery application. In the memorandum, Mr Mahuta-Coyle indicated that his client considered that a “negotiated solution to the outstanding discovery issues might be possible”. He invited the Court to direct that Mr and Mrs Davis file any affidavits by
31 March 2015 and that the two discovery applications be adjourned to the next available date.
[20] Also on 25 March 2015, counsel for Mr and Mrs Davis filed a memorandum advising that, after considering legal advice, his clients were now prepared to file an affidavit of documents. He advised that there would be no application to expand the
notice of opposition or delete or vary the proposed discovery terms. However he advised that, before filing any discovery document, his clients sought an order for payment into Court by Mr Rod of reasonable costs, being guaranteed by the Clanard Property Trust Company Ltd as co-defendant. Mr Cruden asked for specific orders that Mr Rod pay the whole of his clients’ expenses (including solicitor and client costs and disbursements) in relation to the application by Mr Rod and subsequent compliance with the Court’s orders. He asked for a direction that Mr Rod forthwith pay into Court the sum of $10,000 towards such expenses, to be guaranteed (as a principle debtor) by Clanard Property Trust Company Ltd. He advised that the non- party discovery list could be provided by 17 April 2015.
[21] The substantive proceeding was settled shortly before the June 2015 hearing. However, no agreement was reached with respect to the application for costs by Mr and Mrs Davis. I now give judgment on that application.
Costs on non-party discovery applications – legal principles
[22] Rule 8.21 of the High Court Rules provides:
8.21Order for particular discovery against non-party after proceeding commenced
(1) This rule applies if it appears to a Judge that a person who is not a party to a proceeding may be or may have been in the control of 1 or more documents or a group of documents that the person would have had to discover if the person were a party to the proceeding.
(2) The Judge may, on application, order the person—
(a) to file an affidavit stating—
(i) whether the documents are or have been in the person's control; and
(ii) if the documents have been but are no longer in the person's control, the person's best knowledge and belief as to when the documents ceased to be in the person's control and who now has control of them; and
(b) to serve the affidavit on a party or parties specified in the order; and
(c) if the documents are in the control of the person, to make those documents available for inspection, in accordance with rule 8.27, to the party or parties specified in the order.
(3) An application for an order under subclause (2) must be made on notice to the person and to every other party who has filed an address for service.
[23] Rule 8.22(3) relevantly provides:
8.22 Costs of discovery
…
(3) If an order is made under rule…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.
[24] In this case, no order under r 8.21 was actually made; the order awarding Mr and Mrs Davis reasonable non-party costs incurred to 31 March 2015 was made under r 14.6(4)(d). That rule provides:
14.6 Increased costs and indemnity costs
…
(4) The court may order a party to pay indemnity costs if—
…
(d) the person in whose favour the order of costs is made was not a party to the proceeding and has acted reasonably in relation to it;…
…
[25] McGechan J in Clear Communications Ltd v Telecom Corporation of NZ Ltd,2 stated that costs for non-party discovery are best approached in two stages: first, the costs of the application, and second, the cost of compliance. His Honour stated:3
Once the order was made, whether or not justifiably resisted, it was the third
parties’ duty to comply…Costs involved in that operation should, in the
2 Clear Communications Ltd v Telecom Corporation of NZ Ltd (1994) 8 PRNZ 200 (HC).
3 At 202.
absence of good reason to the contrary, be recoverable from the party requiring discovery. Third parties brought in as by a sidewind should not be left meeting their own expenses. Those costs are of course to be reasonable in the circumstances…
[26] That statement was cited with approval by Giles J in Wrightson Ltd v
Fletcher Challenge Nominees Ltd.4
[27] In Churchill Group Holdings Ltd v Aral Property Holdings Ltd, this Court stated that the usual principle is that the party who applies for non-party discovery should pay the non-party’s costs.5
[28] In Air New Zealand Ltd v E-Gatematrix New Zealand Ltd,6
Associate Judge Abbott considered that in a situation where non-party discovery has been sought but no order made, similar costs considerations apply as in the situation where an order has been made – the questions are whether the non-party opposition has been reasonable, particularly having regard to the outcome and the motivation for the opposition.
The parties’ submissions
The non-parties
[29] The non-parties’ costs claim is calculated on a time and attendance basis. Mr Goodman, the non-parties’ solicitor, has charged for 26.6 hours of time at $350 per hour ($9,100). Counsel, Mr Cruden, has charged for 38 hours of time at $400 per hour ($15,200). In addition, the non-parties claim GST on the fees charged by their solicitors, and disbursements totalling $667.35.
[30] In his written submissions in support of the costs application, Mr Cruden refers to the various factors set out in the Lawyers Conduct and Care Rules 2008, chapter 9, which are to be taken into account when considering whether a lawyer’s
fees are fair and reasonable. The factors referred to are time and labour expended,
4 Wrightson Ltd v Fletcher Challenge Nominees Ltd HC Auckland CP129/96, 12 December 1997.
5 Churchill Group Holdings Ltd v Aral Property Holdings Ltd HC Auckland CIV-2001-404-2302,
3 August 2005 at [33],[36].
6 Air New Zealand Ltd v E-Gatematrix New Zealand Ltd (2007) 18 PRNZ 501 at [19], citing
Clear Communications Ltd v Telecom Corporation of NZ Ltd above n 2.
any skill, specialised knowledge, or responsibility, the importance of the matter to the client, the urgency and the circumstances in which the matter is undertaken, the degree of risks assumed by the lawyer, the complexity of the matter and difficulty or novelty of the questions involved, and the experience, reputation and ability of the lawyer.
[31] Under the heading “Time and Labour Expended”, Mr Cruden refers to an alleged failure by Mr Rod to serve notice of the application for non-party discovery prior to the teleconference held on 4 March 2015, at which I directed that the non- party discovery application should be served, and that Mr and Mrs Davis were to file and serve any notice of opposition by 13 March 2015. Mr Cruden submits that a strict timetable for compliance was fixed against the non-parties in their absence. The time limit fixed for a reply to the non-party discovery application meant that the non-parties’ legal advisors had to deal with the application with some urgency.
[32] Mr Cruden says that the non-parties were anxious to avoid delays, and that, apparently for that reason, he commenced from 12 March 2015 considering the nature of the documents, and assembling and classifying from several of Goodmans’ files over 500 pages of documents “during a period when the discovery order was in place subject to non-parties successfully opposing”.
[33] The non-parties instructed their solicitors not to oppose the application on
25 March 2015.
[34] The non-parties say that their solicitor and counsel possessed the required levels of skill, specialised knowledge and responsibility, and that they promptly, properly and responsibly performed and applied that skill and knowledge.
[35] Under the heading “The Importance of the Matter to the Client”, Mr Cruden submitted that Mr and Mrs Davis were angered and extremely surprised at being brought into the litigation (in which they were not parties), involved in the merits or affected by the outcome. He submits that when Mr and Mrs Davis were at risk of being in breach of a Court order, and that it was extremely important to them not to incur costs, other sanctions, or have their reputations damaged.
[36] He refers to Mr and Mrs Davis’ concern over whether any costs award obtained would be enforceable, as Mr and Mrs Davis considered it was unlikely that Mr Rod would be able to satisfy a costs order. Mr Cruden submits that he and Mr Goodman were duty-bound to take practical steps to protect Mr and Mrs Davis from that costs exposure and ensure that any costs order would be enforceable against both defendants.
[37] Under the heading “The Degree of Risks Assumed by the Lawyer”, Mr Cruden submitted that Mr and Mrs Davis were faced with “an uncommon application compounded by [Mr] Rod’s breaches”. He submits that the legal advisors’ duty was to take all reasonable protective steps for the non-parties, including securing their costs exposure against both defendants.
[38] Under the heading “The Complexity of the Matter and Difficulty or Novelty of the Questions Involved”, Mr Cruden submits that non-party costs application are in themselves uncommon, with special r 8.22 provisions as to costs which are different to the general costs provisions under r 14. Counsel considered a number of issues, including the impact of Mr Rod “failing to serve” the application on the non- parties as required by r 8.21(3), depriving Mr and Mrs Davis of their right under r 7.24 to file a notice of opposition before the 4 March 2015 teleconference. He further submitted that the notice of opposition filed on Mr and Mrs Davis’ behalf was “exceptionally…against an order of the Court”. The effect for Mr and Mrs Davis is said to have been that their opposition was “more analogous to a setting aside, review, or quasi-appeal”. He further submits that a “difficulty” arose because only one of the two joint defendants made the application for discovery, although the discovery would benefit both defendants equally. That “complex” factor required counsel to file further applications involving “difficult” and “novel” questions of fact and law in discharge of the duty to protect the non-parties’ interests. Mr Cruden advised in his submissions that work assembling and classifying the documents for discovery continued until 29 March 2015. That work included re-drafting a Form G affidavit by subdividing part one into three new separate categories:
(1) General documents
(2) Documents relating to the $275,000 paid by Mr and Mrs Davis to
Mr Rod’s former solicitor
(3)Documents relating to certain findings by the Wellington Law Society relating to the conduct of that solicitor
[39] Mr Cruden also alleges rule breaches and improper practice by or on behalf of Mr Rod which have included serious breaches of natural justice principles.
[40] Mr Cruden submits that the advice given, and time and labour expended, were within the professional duties of the non-parties’ legal advisors. He referred to the decision of Rodney Hansen J in Commerce Commission, where the Judge noted that the costs claimed were high but not disproportionately so. His Honour stated “I should not be overly prescriptive…solicitors were entitled to advance their client’s
interests in the best way they saw fit”.7 Mr Cruden also referred to the similar
approach taken in a number of other decisions in this Court, generally supporting the view that it is inappropriate for the Court to attempt to reach an “analysed mathematical conclusion – a robust approach may be applied, without reference to lawyers’ invoices or records”.8 In International Roofing, Associate Judge Bell referred to the tendency of the Courts to take a light-handed approach.9
[41] Mr Cruden submits that reasonable work for Mr and Mrs Davis in this case necessarily included more detailed and longer drafting of memoranda, and expending time on other matters, than is common in typical unexceptional applications for non-party discovery or generally for inter-partes discovery.
[42] Mr Cruden also submitted that at no time until after the 31 March 2015 hearing commenced were Mr and Mrs Davis informed that Mr Rod was applying to
withdraw the non-party discovery application “and set aside the discovery order”.
7 Commerce Commission v Cards NZ Ltd HC Auckland CIV-2006-485-2535, 10 December 2009 at [33].
8 International Roofing Ltd v Sukkel & Ors [2014] NZHC 2913 and Murrell v W E Hamilton
Family Trust [2012] NZHC 2931. See also Siemer v Paragon Services Ltd HC Auckland CIV-
2003-404-5782, 2 October 2008.
9 At [19].
Mr Cruden submits that he reasonably expected his applications to be opposed, and that he had prepared accordingly.
[43] Finally, Mr Cruden submits that costs should be awarded against both defendants, and not just Mr Rod. He submits that an award of costs against the second-named defendant is appropriate, based on the risk of non-recovery of any award if Mr and Mrs Davis are awarded costs only against Mr Rod. Mr Cruden notes that the defendants are jointly registered as proprietors of the Foxton Hotel land, and that they were sued jointly by Mr Hemmingson. An affirmation filed by Mr Rod’s former solicitor refers in the plural to the “defendants”.
[44] In summary, Mr Cruden submits that the response of Mr and Mrs Davis to the non-party discovery application was no more than was necessary in the circumstances. He submits that Mr and Mrs Davis’ legal advisors were duty-bound to seek a reasonable time to comply with discovery, and concurrently commence discovery work to ensure compliance with the enclosed timetable.
Submissions for Mr Rod
[45] Mr Mahuta-Coyle submits that there was no “default” on his client’s part in failing to serve the non-parties before the 4 March 2015 conference: he made it clear before and at that conference that the non-party discovery might not be necessary if further discovery was provided by the plaintiff (it eventually was, and the non-party discovery application was then withdrawn). Mr Mahuta-Coyle says the plaintiff’s original list served in November 2014 listed a total of only nine documents: there had to be more documents, but if the plaintiff did not have them, Mr Rod reasoned that the documents would be in the possession or control of Mr and Mrs Davis. Mr Rod did not want to draw the non-party into the proceeding unless it proved necessary, and to that extent the filing of the non-party discovery application was in a sense a precaution against the possibility that the documents would not be obtained on a particular discovery application against the plaintiff. Directions were accordingly sought permitting Mr Rod to defer service of the non-party discovery application, and only have it brought on for hearing if the plaintiff remained in default under its discovery obligations. However, given the proximity of the trial
scheduled for early June 2015, the Court directed that both applications should proceed, and that the non-party discovery application was to be served by
6 March 2015. At the time that direction was made, the application for particular discovery against the plaintiff was opposed, and in those circumstances Mr Rod elected to proceed with service of the non-party discovery application, rather than abandon it.
[46] Mr Mahuta-Coyle submits that Mr Rod subsequently took a number of steps designed to minimise the costs which would be incurred by Mr and Mrs Davis. First, when serving a copy of the non-party discovery application by email on
6 March 2015, Mr Mahuta-Coyle advised that he would seek instructions from Mr Rod to assess whether the documents might be provided voluntarily by Mr and Mrs Davis, without the need for a formal (possibly opposed) application.
[47] Mr Mahuta-Coyle submits that, initially, Mr Goodman had invited him to attend his offices and inspect the relevant files for discoverable documents. However, it appears that Mr and Mrs Davis instructed Mr Goodman not to proceed on that basis: by email dated 8 March 2015 he advised Mr Mahuta-Coyle that he was seeking counsel’s advice, and that a draft notice of opposition was being prepared. A decision on whether to oppose the application was to be made within the next couple of days. Mr Goodman advised that he had re-thought his invitation to Mr Mahuta- Coyle to call to inspect his voluminous files, and that he had taken advice. That advice was that it would be inappropriate for Mr Mahuta-Coyle to call to inspect the files.
[48] Mr Mahuta-Coyle advises that on 18 March 2015 the plaintiff offered to provide Mr Rod with “all bank statements he has showing payments made either to the Davis Family Trust, insurance, liquor purchases, or other loan repayments”. However, the plaintiff also filed a notice of opposition to Mr Rod’s application for particular discovery, on 19 March 2015.
[49] When Mr and Mrs Davis sought an extension of time to file an affidavit, that was consented to by Mr Rod (by memorandum dated 25 March 2015). That memorandum also advised the Court that a negotiated solution to the outstanding
discovery seemed possible in light of the plaintiff’s offer in its 18 March 2015 notice of opposition. Mr Mahuta-Coyle’s memorandum of 25 March 2015 invited the Court to adjourn both discovery applications.
[50] Mr Mahuta-Coyle says that a copy of that memorandum was emailed to counsel for Mr and Mrs Davis. Initially, the document was not sent to Mr Goodman, but that omission was rectified later the same day.
[51] There was an email exchange between Mr Mahuta-Coyle and Mr Goodman on 25 March 2015. In one of his emails sent to Mr Goodman that day, Mr Mahuta- Coyle stated:
I trust a teleconference tomorrow might be in order for the purpose of exploring whether the question of discovery may be possibly resolved.
[52] Mr Mahuta-Coyle says that he received no response to the request for a teleconference.
[53] As for the hearing scheduled for 31 March 2015, Mr Mahuta-Coyle says that he endeavoured to reach Mr Cruden at 5.08pm on 30 March 2015, and to call Mr Goodman at 5.10pm on the same day. He was not able to reach either of the two lawyers. He says that he tried again to reach Mr Cruden and Mr Goodman the following morning (the morning of the hearing) shortly after 9am, but was again unsuccessful.
[54] Mr Mahuta-Coyle submits that at most costs on a category 2B basis, and disbursements, plus a modest uplift, are appropriate.
[55] He submits that the authorities referred to by Mr Cruden are of limited assistance in that they concern either cases in which a discovery order was actually made, and/or cases involving the cost of compliance with a discovery order. In this case, no order was made, and there is no basis for any costs award for compliance. He referred to Air New Zealand Ltd v E-Gatematrix New Zealand Ltd,10 in support of
the submission that relevant factors in the exercise of the Court’s discretion include
10 Air New Zealand Ltd v E-Gatematrix New Zealand Ltd, above n 6.
whether the opposition to the application was reasonable, the outcome of the application, and the motivation for the opposition.
[56] Mr Mahuta-Coyle points to the relatively limited nature of the application, which was concerned only with payments to Mr and Mrs Davis and correspondence passing between the plaintiff and Mr and Mrs Davis at relevant periods. The plaintiff subsequently offered to provide those documents, having earlier failed to discover them.
[57] As for the time and effort put in by Mr Goodman and Mr Cruden, Mr Mahuta-Coyle does not suggest that their hourly charge-out rates were inappropriate, but contends that a great deal of work was carried out by them was completely unnecessary. He submits that the merits of the application could have and should have been acknowledged early, particularly given the importance of Mr Davis’ evidence and his involvement already in the litigation (Mr Davis having filed affidavits in the caveat proceeding). The detail of the involvement of Mr and Mrs Davis was already well known to their lawyers, particularly given their ongoing involvement in a complaint made to the New Zealand Law Society about the conduct of Mr Rod’s former solicitor, who had also acted for Mr and Mrs Davis in the transaction.
[58] Mr Mahuta-Coyle refers to the change of position by Mr and Mrs Davis on
26 March 2015, when they consented to the application and shifted their focus to a claim for costs. In his submission, no substantive evidence in opposition to the application was required, and nor were submissions outlining the basis for any opposition. All of the time and effort expended by the non-parties’ lawyers after
26 March 2015 appears to have been directed towards the costs objective.
[59] Mr Mahuta-Coyle challenges the non-parties’ motives for opposing the application, submitting that the opposition was driven by feelings of antipathy towards Mr Rod arising from the events that led to the litigation.
[60] Mr Mahuta-Coyle submits that it is appropriate for the Court to take into account the outcome of the application, namely that a consent was eventually
provided by the non-parties (but only after their lawyers had undertaken considerable work), and that Mr Rod’s withdrawal of the application was occasioned by the belated discovery provided by the plaintiff.
[61] Turning to the quantum of the costs claim, Mr Mahuta-Coyle submits that two lawyers spending a total of 64.4 hours of time on this application cannot be justified. Nor can the amount of time attributed to the work be considered necessary in circumstances where the non-parties eventually consented to the application, but never had to comply with a discovery order. He emphasises that no discovery order was ever made against Mr and Mrs Davis and in those circumstances there is no basis for any claim for compliance costs. To the extent that time has been spent on compliance with an order which was never made (and which the non-parties were opposing until 25 March 2015), costs claimed for compliance cannot be regarded as reasonable. At no stage was there any basis to begin actual discovery work.
[62] As for the specifics of the claims made by the non-parties for attendances of their lawyers, Mr Mahuta-Coyle submits first that Mr Rod had no obligation to notify the non-parties of the hearing scheduled for 4 March 2015 – Mr Rod’s position at that stage was that he was asking the Court to defer any consideration of the non-party discovery application pending a hopefully favourable outcome on the application for particular discovery against the plaintiff.
[63] As for the difficulties occasioned by Mr and Mrs Davis heading off on vacation for 10 days shortly after 6 March 2015, Mr Mahuta-Coyle submits that all that was required was a short memorandum requesting an extension of time until proper instructions could be taken. Once advice had been taken and instructions given by the non-parties on 25 March 2015 to consent, Mr Mahuta-Coyle says that no substantive argument was necessary, and no evidence in opposition was necessary. All that was required was a short notice of consent together with a memorandum as to costs. Instead, detailed submissions and a full bundle of authorities were filed. Requests for cooperation, that would have avoided the need for the further work and attendance at the hearing, went ignored and/or unanswered.
[64] Mr Mahuta-Coyle generally rejects the submissions made by Mr Cruden on the topics of skill and specialised knowledge, importance of the matter to Mr and Mrs Davis, and the urgency and circumstances of the attendances. He submits that there was nothing unusual about the work that created any real risk to counsel, and that there was nothing particularly complex or novel about the application.
[65] Mr Mahuta-Coyle challenges the inclusion of GST on Mr Goodman’s
invoice. Mr Mahuta-Coyle accepts that the following attendances were necessary: (1) Filing an initial memorandum seeking an extension of time.
(2)Advising Mr and Mrs Davis on an uncomplicated interlocutory application where the subject matter was already known.
(3)Filing a notice of consent (once instructions had been received to consent to the application).
(4) Preparing and filing the costs memorandum. (5) Attendance at the hearing on 31 March 2015.
[66] Mr Mahuta-Coyle calculates costs for those attendances on a category 2B basis at $4,676.50. Rule 14.2 provides that an appropriate daily rate should normally be two thirds of the daily rate considered reasonable in relation to the application, and on that basis a reasonable fee would have totalled $7,085 plus disbursements. Alternatively, Mr Mahuta-Coyle submits that 2.35 days (18.8 hours) worth of time assessed at blended hourly rate of $375, would produce a reasonable fee of $7,050 plus disbursements. Mr Mahuta-Coyle contends that 18.8 hours would have been a reasonable amount of time to undertake the work identified by him as being actually necessary.
Discussion and conclusions
The non-parties’ application for costs against the second-named defendant, and the attendances relating to their application for an order for security for their costs of complying
[67] In my view there is no basis for any costs award against the Clanard Property Trust Company Ltd (Clanard). While a statement of defence was filed initially by Whitmarsh Law on behalf of both defendants, on 12 November 2014 Mr Rod filed a notice of change of solicitor and address for service. From that time, Mr Rod was separately represented by P H Mitchell, Barrister and Solicitor Ltd, Wellington. Clanard continued to be (separately) represented by Whitmarsh Law. It took no further step in the proceeding after the statement of defence was filed, and eventually a memorandum was filed (shortly before the trial scheduled for early June 2015) advising that Clanard, as a professional trustee company, would abide the decision of the Court.
[68] The application for non-party discovery was quite clearly made by Mr Rod, and not Clanard. In the foregoing circumstances, I can see no basis on which Clanard could or should be visited with a costs order on an application made by another party and in which it took no part. The fact that the discovery which was anticipated to be provided might have been of equal benefit to Clanard, as one of the joint owners of the Foxton Hotel, makes no difference to that conclusion. It is commonplace in litigation that a party to a proceeding may derive benefit from an application made by some other party in the proceeding, and in those circumstances there is no question of the benefiting (but not participating) party being exposed to liability to an order for costs. The application for costs against Clanard is accordingly dismissed.
[69] As for the attendances relating to the non-parties’ application for an order for security for their costs in the sum of $10,000, I see no evidential basis for the making of such an order. While Mr and Mrs Davis may have harboured suspicions about Mr Rod’s ability to pay any costs order, they did not produce any evidence in support of those suspicions. In their affidavit filed in support of their notice of opposition, Mr and Mrs Davis stated only that they sought the $10,000 security order “for
unwillingly being made a non-party”. They also referred to the “complicated discovery process” making it necessary for them instruct solicitors and counsel, and to the fact that they had instructed their solicitor to recover the legal costs from Mr Rod “for making us a non-party and also causing us to incur these filing fees”.
[70] Of course the non-party application discovery application did not proceed, and there was no need for the question of security for costs to be considered.
[71] If Mr and Mrs Davis’ concern was the ability of Mr Rod to meet their costs, some evidential foundation should have been put forward to support the application for the order for security. In my view, the obvious first question for Mr and Mrs Davis and their advisors was “what evidence do we have that Mr Rod will not be able to pay an award of costs?”. If there was no evidence, then it seems to me that any further time spent on that issue was time which was not reasonably spent.
The application for costs against Mr Rod
[72] Mr and Mrs Davis appear to have been labouring under the significant misapprehension that orders were made on 4 March 2015 requiring them to provide non-party discovery. The only relevant orders made on 4 March 2015 were orders directing Mr Rod to serve his application on Mr and Mrs Davis, and fixing the time by which they were to file any notice of opposition at 13 March 2015. The fixing of that time did create some urgency for Mr and Mrs Davis in making their initial response, but there was nothing particularly unusual about it: the proceeding had been set down for trial in early June 2015, and a date of hearing had been allocated for the three outstanding interlocutory applications for 31 March 2015. Not surprisingly in those circumstances, the Court fixed an abridged time for the non- parties to file a notice of opposition.
[73] How Mr and Mrs Davis apparently misunderstood the effect of the orders made on 4 March 2015 is perhaps explained in their affidavit sworn in opposition on
25 March 2015. In that affidavit they deposed to having received a telephone call from Mr Goodman on 5 March 2015, in which Mr Goodman informed Mr and Mrs Davis that he understood that the Court had made orders on 4 March 2015
which “made us a non-party in the proceeding” and required Mr and Mrs Davis to
make particular discovery.
[74] When Mr Goodman received a copy of the non-party discovery application on 6 March 2015, it was incumbent on him to obtain details of the Court orders made on 4 March 2015 – Mr and Mrs Davis’ affidavit makes it clear that Mr Goodman was aware that certain orders had been made on 4 March 2015. The obvious first step for him was to obtain a copy of the orders, at least insofar as they affected his clients. It appears that that did not occur. In any event, there was never any question of Mr Goodman and Mr Cruden being confronted with an application which was in some way “exceptional” in that it required them to mount something in the nature of a quasi-appeal or review.
[75] On that basis, I accept Mr Mahuta-Coyle’s submission that there was substantial “overkill” in the non-parties’ response to the non-party discovery application.
[76] Having regard to the terms of the order that was made, it seems to me that there is no basis for a costs order in respect of the apparently substantial attendances of Mr Cruden from as early as 12 March 2015 assembling and preparing a list of documents.
[77] I am of the view also that there would have been substantial scope for costs savings if Mr and Mrs Davis had not taken a strong adversarial stance in the matter from the outset. This was not a substantial or complex non-party discovery exercise, and I note that Mr Goodman appears to have been willing to make his files available on an informal basis at the outset. It is not at all clear why that sort of cooperative attitude did not continue, and it is certainly no answer to say that Mr and Mrs Davis were surprised, or angry, at being involved in the matter. No relief was sought from them, and it is difficult to see how a non-party discovery application could have affected their reputations (at least without detailed evidence directed to the point).
[78] A degree of simple cooperation between counsel would have resulted in costs savings. In particular, an application for extension of the 13 March 2015 timetable
date for filing and service of a notice of opposition could have been sought by filing a memorandum. Given the stance Mr Rod had taken at the 4 March 2015 conference, in which he sought to have the non-party discovery application deferred, it seems likely that consent to a short extension could have been readily obtained (as indeed it was for the later filing of the affidavit by Mr and Mrs Davis).
[79] There is no evidence of any communications between the non-parties and Mr Hemmingson, although it seems likely that there must have been some level of contact – Mr Davis had provided affidavits in support of Mr Hemmingson’s case in the caveat proceedings, and later provided a supplementary brief in the substantive proceeding. I think a fairly obvious question would have been whether Mr Hemmingson had the documents which Mr Rod was seeking, and would provide them, but I have not been provided with details of any such enquiries made by Mr and Mrs Davis of Mr Hemmingson. The most that can be said is that, if Mr and Mrs Davis had made enquiries of Mr Hemmingson or his solicitor on or about
18 March 2015, they would have learned that Mr Hemmingson had offered to provide Mr Rod with all bank statements he held showing payments made to Mr and Mrs Davis’ trust. And when Mr Mahuta-Coyle suggested on 25 March 2015 that the issue of the discovery could perhaps be fruitfully discussed the following day, it appears that there was no response.
[80] In the end, I am satisfied on the evidence and submissions that this was no more than a relatively straight forward non-party discovery exercise, involving documents within a fairly narrow compass. In respect of the first category sought (records of payments by Mr Hemmingson to Mr and Mrs Davis between
11 June 2011 and July 2014), Mr and Mrs Davis could presumably have collated relevant records without legal assistance, and the same applies to communications passing between them or either of them and Mr Hemmingson. Certainly it was appropriate that they then take appropriate legal advice on any issues of privilege or the like, but I can see nothing in the circumstances of the case that required the amount of time that was spent. Mr and Mrs Davis were not being sued, and their apparent anger and/or surprise at being involved does not justify what appears to have been an unduly adversarial stance adopted from as early as 8 March 2015.
[81] I accept Mr Mahuta-Coyle’s submission that a comparison with what would have been awarded by way of scale costs can be of assistance. I refer in that regard to the judgment of Master Lang (as he then was), in Davis v Independent Newspapers & Anor,11 where the learned Master dealt with submissions that the relevant attendances for which costs were sought had been excessive. The learned Master noted that the issue in the case was whether the costs which the plaintiff was
being asked to meet were reasonable. The Master referred to costs which would have been awarded on a 2B basis, and noted that, even on a category 3 basis, scale costs would only have been approximately $7,000.12 The Master noted that the scales provided by the High Court Rules were not directly relevant to the issue before the Court, but that they are designed to provide a reasonable rate of recovery for a successful party. His Honour considered that the scales are “nevertheless of some value as a point of broad comparison with the level of costs being sought, noting that the costs sought were six times greater than the costs which would normally be awarded on an interlocutory application of the relevant type and
complexity”. That in itself was considered sufficient to call into question the reasonableness of the costs sought by the defendant.13
[82] Master Lang noted that the Court is regularly apprised of actual costs incurred by parties, and, in the circumstances of the particular case, noted that the likely range of costs would have been between $7,000 and $14,000 (coincidentally, the costs claimed in the case were approximately $26,000). On the facts of the case, the Master concluded that reasonable costs should be fixed at $14,000, inclusive of disbursements, being at the top of the likely range.
[83] In this case, I accept Mr Mahuta-Coyle’s submission that scale costs would have been approximately $4,700 plus disbursements. However, I have directed that reasonable solicitor/client costs are to be awarded, and in accordance with r 14.2 the broad rule is that scale costs are generally to be treated as two thirds of a reasonable daily recovery rate. On that basis reasonable solicitor/client costs would be a little
over $7,000, say $7,100.
11 Davis v Independent Newspapers & Anor CP67SD02 HC Auckland, 16 May 2003.
12 At [34].
13 At [35].
[84] However, I think there are considerations of urgency in this case which justify an increase over that figure. Although the plaintiff’s (apparently inadequate) discovery list had been filed on 25 November 2014, the applications for particular discovery and non-party discovery were not filed until 23 February 2015, and by the time the applications were called at the 4 March 2015 conference the trial was scheduled for only three months away. It was necessary to deal with the interlocutory applications with some urgency, to ensure that the trial would proceed as scheduled. Accordingly, a 31 March 2015 hearing date was allocated for the interlocutory applications, and Mr and Mrs Davis were directed to file any notice of opposition by 13 March 2015. I accept too that Mr Goodman and Mr Cruden were confronted with a degree of difficulty in that Mr and Mrs Davis were heading off on holiday shortly after the application was served.
[85] Weighing it up, I think it appropriate to increase the costs which would otherwise have been awarded by the sum of $2,500 to reflect the urgency with which Mr and Mrs Davis’ advisors were required to respond in the early stages. The appropriate figure to award for reasonable solicitor/client costs calculated up to the
31 March 2015 hearing (and including the submissions on costs made later by Mr Cruden) is the sum of $9,600, plus disbursements in the total sum of $667.35. There will be orders accordingly.
Associate Judge Smith
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