Highley Limited v Vodafone New Zealand Limited HC Auckland CIV-2006-404-002870

[2011] NZHC 1098

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2006-404-002870

BETWEEN  HIGHLEY LIMITED First Plaintiff

ANDADVANCED PAYMENT SYSTEMS LIMITED

Second Plaintiff

ANDVODAFONE NEW ZEALAND LIMITED First Defendant

ANDBANK OF NEW ZEALAND LIMITED Second Defendant

Counsel:         P H Lowndes for Plaintiffs

C P Browne and N J Scampion for First Defendant
J H Stevens and K J Dobbs for Second Defendant

Judgment:      6 September 2011 at 11:30 AM (On the Papers)

COSTS DECISION OF VENNING J

This judgment was delivered by me on 6 September 2011 at 11.30 am, pursuant to Rule 11.5 of the

High Court Rules.

Registrar/Deputy Registrar

Date……………

Solicitors:           Henley-Smith Law, Glen Eden, Auckland  [email protected]

Wilson Harle, Auckland  [email protected]
Bell Gully, Wellington  [email protected] [email protected]

Ogles Podwin & Associates, Auckland  [email protected]

Copy to:            P H Lowndes, Auckland  [email protected]

L Herzog, Auckland  [email protected]

HIGHLEY LIMITED V VODAFONE NZ LTD HC AK CIV-2006-404-002870 (costs) 6 September 2011

[1]      On 20 June 2011, after conclusion of the plaintiffs’ case, for the reasons set out in the ruling of that date (ruling 3), this case was adjourned part-heard at the plaintiffs’ request.  Costs were a condition of the adjournment brought about by the actions of the plaintiffs.  Costs were reserved to be dealt with on the papers.

[2]      In a minute dated 19 August 2011 I responded to a memorandum from Mr Lowndes in which he sought a number of directions in relation to discovery prior to settling the issue of costs.  In the minute of 19 August 2011 I declined to make the directions sought by the plaintiffs.  I did, however, extend the time for the plaintiffs to file their submissions in relation to costs until 26 August 2011.   Although the plaintiffs’ costs memorandum was not filed in accordance with that direction it was filed on 29 August 2011.  The defendants have filed a joint memorandum in response dated 2 September 2011.   I now fix costs on the adjournment on the basis of the memoranda filed.

Preliminary issue – discovery/confidentiality

[3]      In his memorandum of 29 August on behalf of the plaintiff Mr Lowndes again  seeks  to  address  the  issue  of  the  defendants’ claim  for  confidentiality in relation to certain documents and submits that the defendants must bear a degree of responsibility for the difficulties experienced by the plaintiffs in preparation for trial. I reject that submission.

[4]      As noted in the minute of 19 August 2011 the plaintiffs and their former advisers, both solicitor and counsel, had ample time to raise  any and all issues relating to discovery and the defendants’ claim to confidentiality by way of application prior to trial.  For their own reasons they did not do so.  The plaintiffs cannot now raise the issue to oppose the wasted costs incurred by the defendants on the adjournment.   The adjournment was necessitated because of the plaintiffs’ decision to terminate counsel’s instructions mid-way through trial.

[5]      Mr  Lowndes  is  instructed  to  seek  an  award  of  costs,  (effectively  a contribution) from the plaintiffs’ former counsel Mr Herzog with respect to  the preparation and conduct of the proceedings in order to compensate the plaintiffs for the need to pay the costs of the adjournment and the costs associated with instructing new counsel.  The plaintiffs suggest 15 per cent of the combined costs awarded to the defendants should be payable by Mr Herzog.

[6]      I am not prepared to make any order for costs against Mr Herzog in relation to the wasted costs of the adjournment.

[7]      While  this  Court  retains  jurisdiction  to  award  costs  against  a  barrister personally the purpose of such an award is to punish a practitioner for failure to fulfil a duty owed by the practitioner to the Court.   Generally costs orders will only be appropriate where the Court can summarily deal with them.  That will be so where the actions in issue arise out of matters where the conduct is a matter of notice

because the facts took place in Court or can easily be verified:  Harley v McDonald.[1]

[1] Harley v McDonald [2002] 1 NZLR 1.

[8]      The basis of the suggested costs award against Mr Herzog raise issues of trial preparation, conduct and general tactical conduct at trial.   They involve dealings between counsel and client.  They are not suitable for summary determination.  Mr Herzog would obviously be entitled to be heard on what are essentially allegations of negligence or professional misconduct involving breaches of duty to the plaintiffs.  If there are such issues they should be addressed in a separate forum.  They are not relevant to this application for costs between the parties.

The application for costs

[9]      Each of the defendants seeks costs calculated on the basis of preparation for nine and a half days of hearing, the appearance and argument in relation to the adjournment application (including second counsel) and on the memoranda relating

to costs.  They also seek an uplift of 50 per cent of those sums.  They submit the

plaintiffs have sought and been granted an indulgence by the Court on the adjournment and the defendants should not be required to contribute one-third of the costs of that adjournment themselves.

The plaintiff ’s position regarding costs

[10]     While accepting that  in  principle  an  award  of  costs  was  appropriate  Mr Lowndes submitted that the defendants’ costs should be calculated on the basis of preparation for the resumed hearing of five days (i.e. 10 days) discounted by 70 per cent to 30 per cent of that figure.  Mr Lowndes acknowledged that in addition each of the defendants were entitled to costs on the adjournment application (including costs of second counsel) but submitted that no costs should be awarded for preparation  of  the  costs  memoranda.     He  properly  acknowledged  the  expert witnesses’ fees and other wasted disbursements could be correctly categorised as wasted costs on adjournment and were payable.

Decision

[11]     Counsel were unable to identify any other decisions where an appropriate order  for  costs  payable  on  adjournment  of  a  part-heard  civil  trial  had  been considered.  There are a number of cases where trials have been adjourned shortly before  the  start  date  where  costs  were  awarded.    In  one  of  those,  Hamilton  v Papakura District Council the Court observed:[2]

[T]he gearing up of counsel and witnesses and litigants’ employees to deal with the case, putting the time aside and the unscrambling of all of that to be geared up again at a later stage, is not a minor undertaking.

[2] Hamilton v Papakura District Council (1997) 11 PRNZ 43 at 45.

[12]     The position is similar in relation to a case adjourned part-heard.  There is also the issue observed by this Court in Fu Hao Construction Ltd v Landco Albany Ltd[3]  that other litigants are affected by such actions, a point also made in Raiser

Developments Ltd v Trefoil Properties Ltd & Anor.[4]

[3] Fu Hao Construction Ltd v Landco Albany Ltd HC Auckland CIV-2005-404-006608, 23 May 2008.

[4] Raiser Developments Ltd v Trefoil Properties Ltd & Anor HC Auckland CIV-2005-404-005883, 5 May 2008).

[13]     I accept that in addition to readying the defence cases which remain to be presented to prepare for the five days of resumed hearing the defendants’ counsel will also be required to re-read the notes of evidence and refamiliarise themselves with briefs of evidence and the legal issues and documents.  In addition time will be spent arranging for the attendance of witnesses.  However, in large part those costs are costs which will ultimately be provided for if the defendants are successful after the case is concluded.  Put another way, if the defendants succeed at trial, they will be entitled to costs in the usual way based on the time it took for the case to be heard (including the five days already used).  The defendants will be compensated for costs relating to the entire proceeding.

[14]     By contrast, on this application the Court is concerned to address the wasted costs which have been lost and will not be recoverable in any event.  The way to address that is to start with the point that five days that were effectively allocated for presentation of the defendants’ cases (and for completion of the case), and fix costs on the wasted preparation in relation to those five days because, at the plaintiffs’ request, the fixture was adjourned part-heard.  To that extent the rationale underlying the  costs  award  is  similar  to  the  rationale  for  a  costs  award  on  a  very  late adjournment application in advance of trial.  But it must be recognised that part of the case  has  been  presented, and  those  costs  have not  been  wasted.    They are effectively reserved to await the completion of the trial.

[15]     To that extent I agree with Mr Lowndes’ submission that the appropriate basis for calculating the wasted costs is on the basis of preparation for the five days presentation of the case which was adjourned.

[16]     The defendants are entitled to an award to address the wasted preparation for those five days of hearing.  The next issue is whether there should be any adjustment in relation to the resulting base figure.  Mr Lowndes submits, without providing any basis for it, that the preparation time should be discounted by 70 per cent to 30 per cent.  I am unable to see any principled basis for doing so.  To the contrary, as the position stands, the defendants have expended costs on a fixture which, because of the plaintiffs’ actions, was not concluded.  To the extent that scale costs are used as a basis to address those wasted costs  I do not consider the defendants  should be

disadvantaged.  The full five days and the associated, “geared up” costs have been

lost.

[17]     In my judgment an uplift of 50 per cent is justified on the basis of the r 14.6(d).  Some other reason particular to the circumstances of this case applies to this case, namely an adjournment part way through a hearing because the plaintiffs terminated their instructions to counsel.  That uplift, however, is to be limited to the wasted preparation for the lost five days.   It does not apply to the costs of the adjournment application  nor to the costs  of the memoranda in  relation to costs (which I allow).

Result

[18]     Each of the defendants is to have costs calculated as follows:

Wasted costs, being preparation for the lost five

days  of  hearing  calculated  at  twice  the  time allocated for the hearing of five days = 10 days

@ $1,880

$18,800.00

That sum is to be uplifted by 50 per cent to a total of:

$28,200.00

In addition each defendant is to have costs on the adjournment application for two counsel in the total sum of:

$1,410.00

Further, each defendant is to have costs on three memoranda in  relation  to  costs  (including the response to the application for directions) in the sum of $752 on each occasion in total:

$2,256.00

$31,866.00

[19]     As  noted,  the plaintiffs do  not  take issue with disbursements.    The first defendants  are,  in  addition,  to  have  an  order  for  costs  and  disbursements  of

$2,530.00 in relation to Mr Brisk in total, costs and disbursements of $34,396.00 and

the second defendants are to have disbursements in the sum of $5,472.61, in total costs and disbursements of $37,338.61.

Source of payments/conditions of payment

[20]     There is currently $85,000 held on trust in respect of each defendant to provide total security for costs of $170,000.   Mr Lowndes submits that any costs awarded should be paid out of the security for costs fund.

[21]     The security was  provided in three tranches  following application to the Court.   In some cases it has been provided by agreement.   The security has been allocated to cover the usual interlocutory steps and for the costs of the hearing in the event the defendants are ultimately successful in defending the plaintiffs’ claims. As noted, if ultimately the plaintiffs are unsuccessful against the defendants, then for the above reasons the defendants will be entitled to seek costs calculated on the basis of the full nine days hearing, together with all relevant interlocutory steps.  The security for costs fund is to cover those costs.  The security for costs was not provided to satisfy costs fixed on a wasted costs award such as the present.  That would defeat the purpose of the security.  The plaintiffs will have to meet the costs awards from other resources if they wish to pursue their claims against the defendants.

[22]     The defendants have sought an additional order providing that, unless the costs are paid by a certain date the plaintiffs’ claims against them will be struck out. I am not prepared to accede to that request at this stage.

[23]     However, this case has been on foot since 2006.   It should be determined. The Court has time available to deal with the case in early 2012.  The Registry have allocated a resumed hearing for the week of 7 February 2012.  It is in the interests of both the plaintiffs and the defendants that there be certainty in this matter and that fixture be maintained.

[24]     If the parties are to incur the additional costs of gearing up for a fixture in

February 2012, including confirming the availability of expert witnesses, they will

need a reasonable lead in period. There must be some certainty about the payment of the wasted costs award.

Result/orders

[25]     The plaintiffs are to pay the first defendant costs and disbursements in the sum of $34,396.00.

[26]     The plaintiffs are to pay the second defendant costs and disbursements in the sum of $37,338.61.

[27]     The costs are to be paid to both defendants by 14 October 2011.  As directed previously, no other steps are to be taken in this proceeding until the costs are paid. Unless the costs are paid by that date I reserve the defendants’ position to renew an

application for unless orders at that time.

Venning J