Houghton v Saunders
[2015] NZHC 548
•24 March 2015
IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY
CIV-2008-409-348 [2015] NZHC 548
BETWEEN ERIC MESERVE HOUGHTON
Plaintiff
AND
TIMOTHY ERNEST CORBETT SAUNDERS, SAMUEL JOHN MAGILL, JOHN MICHAEL FEENEY, CRAIG EDGEWORTH HORROCKS, PETER DAVID HUNTER, PETER THOMAS and JOAN WITHERS
First Defendants
CREDIT SUISSE PRIVATE EQUITY INC (FORMERLY CREDIT SUISSE FIRST BOSTON PRIVATE EQUITY INC)
Second Defendant
CREDIT SUISSE FIRST BOSTON ASIAN MERCHANT PARTNERS LP Third Defendant
FIRST NEW ZEALAND CAPITAL Fourth Defendant
FORSYTH BARR LIMITED Fifth Defendant
Hearing: 3-4 February 2015 Counsel:
P A B Mills for plaintiff
D J Cooper and S V A East for first defendantsJ B M Smith QC and O E Jaques for second and third defendants
D H McLellan QC and J S Cooper for fourth defendant
A C Challis and D P Turnbull for fifth defendant
K M Paterson for Harbour Litigation Investment Fund LP and
Joint Action Funding Limited (the non-parties)Judgment:
24 March 2015
HOUGHTON v SAUNDERS [2015] NZHC 548 [24 March 2015]
RESERVED JUDGMENT OF DOBSON J (Costs)
Contents
Does the plaintiff ’s funded status entitle the defendants to indemnity costs? .............................. [5] The nature of the litigation funders’ liability to pay costs orders ............................................... [16] Increased costs ................................................................................................................................. [29] Indemnity costs ................................................................................................................................ [36] Varying previous costs categorisation............................................................................................ [44] Directors’ scale costs entitlement ................................................................................................... [51] Directors’ claim for increased costs ............................................................................................... [66] Directors’ disbursements ................................................................................................................ [80] Mr Horrocks’ scale costs entitlement............................................................................................[112] Mr Horrocks’ disbursements.........................................................................................................[118] Credit Suisse scale costs entitlement ............................................................................................ [120] Credit Suisse claim for increased costs ........................................................................................ [135] Credit Suisse disbursements ......................................................................................................... [136] FNZC scale costs entitlement ....................................................................................................... [148] FNZC claim for increased costs ................................................................................................... [152] FNZC disbursements .................................................................................................................... [156] ForBar scale costs entitlement...................................................................................................... [158] ForBar claim for increased costs.................................................................................................. [162] ForBar disbursements................................................................................................................... [164] Another approach: Holdfast not applying to protracted cases .................................................. [166] Costs on the costs application....................................................................................................... [174]
[1] On 15 September 2014, I delivered judgment in this proceeding which represents a claim by shareholders of Feltex Carpets Limited for losses flowing from allegedly misleading content in, or omissions from, a prospectus issued in May
2004.1 My judgment was in favour of the defendants on all of numerous causes of
action.
[2] The plaintiff accepted that costs should follow the event, but disputed various claims for increased or indemnity costs, challenged the category of scale costs claimed for some pre-trial aspects on which costs have not previously been settled, and questioned numerous items of disbursements claimed on behalf of various defendants.
[3] With a thoroughness commensurate with the rest of the proceedings, counsel spoke to detailed written submissions over two full days, with contrasting final positions on a substantial number of the components of relevant costs claims.
[4] Before addressing the contested aspects of the claims for each defendant, it is appropriate to determine various issues that have broader relevance.
Does the plaintiff ’s funded status entitle the defendants to indemnity costs?
[5] Mr Smith QC for the second and third defendants (Credit Suisse) took the lead on an argument that because the proceedings had been pursued by litigation funders acting in pursuit of a substantial profit, defendants successfully opposing the action should be entitled to indemnity costs. The essence of Mr Smith’s argument was that causes of action open to subscribers in the Feltex float had been used by litigation funders as a means of pursuing litigation for profit.2 He argued that, whatever the niceties of the arrangements put in place to run the litigation for the shareholders, the commercial reality was that he who paid the piper, called the tune.
Therefore it would be naïve of the Court to treat the proceeding as being run other
than by the litigation funders.
1 Houghton v Saunders [2014] NZHC 2229.
2 His calculation was that if the claim succeeded for the full amount of $185 million claimed, the funders’ portion would be approximately $60 million, which would mean the funders achieved the largest recovery.
[6] Mr Smith submitted that the costs consequences of failure should be assessed from a different perspective when those driving the litigation had not suffered any loss or damage as a result of the alleged wrongdoing of the defendants. Rather, they were pursuing the litigation as a commercial venture to invest in the claims of others (the investors) who were notionally the ones seeking vindication of their rights.
[7] Mr Smith sought support for his argument from observations in the judgment of the Court of Appeal on an interlocutory appeal that addressed the status of the funded representative action.3 That judgment included the following:4
The making of orders for both representation and admission of a funder substantially alters the balance between plaintiffs and defendants. We consider that the change is so radical as to justify the High Court, in exercise of its inherent jurisdiction under s 16 of the Judicature Act, to consider ordering security as a term of such orders, even where numerous natural persons are among the plaintiffs, as the price of the privilege to employ such a procedure. That is in order to protect a defendant against the effect of a procedure which could otherwise be oppressive. The facts that the funder has no personal right at stake, that it takes part of the proceeds of any claim, and that it is motivated by the financial considerations that gave rise to the common law prohibition of champerty point to the need for the funder to provide security for costs in most cases. Arkin v Borchard Lines Ltd [2005]
1 WLR 3055 (CA) applied to a litigation funder Lord Denning MR’s dictum in Hill v Archbold [1968] 1 QB 686 (CA) at 695 that maintenance “[is] lawful, provided always that the one who supports the litigation, if it fails, pays the costs of the other side”.
[8] Mr Smith submitted that the three risks recognised by the Court of Appeal in the above judgment as potentially arising in funded representative proceedings had ensued in this case. First, that the funding enabled a very substantial case to be pursued when it was ultimately without merit. Secondly, that the representative plaintiff’s funded status added to the pressure on the defendants. The plaintiff characterised the proceedings as seeking up to $185 million damages and interest, and in both reputational and financial respects the diverse claims simply had to be taken seriously by all of the defendants. The third risk contended by Mr Smith to have manifested in the proceeding was that the funders had enjoyed considerable
influence over the way the proceeding ran.
3 Saunders v Houghton [2009] NZCA 610, [2010] 3 NZLR 331.
4 At [36].
[9] Further, Mr Smith argued that the potential advantages of representative proceedings had not been realised in this case. A first potential advantage is the efficient and economic resolution of class actions, and secondly the deterrence of misconduct that would otherwise persist.5 Credit Suisse disputed that the case had been efficiently and economically resolved, and also denied that the proceeding had identified and deterred any relevant misconduct.
[10] It followed, on Mr Smith’s argument, that facilitation of the proceeding for financial gain when the outcome was a complete failure that did not contribute any of the advantages that might accrue in other contexts, ought to require the funders to indemnify the defendants for all reasonable costs they had incurred.
[11] For the plaintiff, Ms Mills opposed any notion that the funded status of the representative action justified an entitlement for the defendants to indemnity costs. She emphasised the one advantage acknowledged by the Court of Appeal that had not been addressed by Mr Smith, namely that funding arrangements in cases such as this facilitate access to justice. She characterised that advantage as so important as to outweigh all other considerations that might suggest costs issues ought to be determined on a different basis from a conventionally funded proceeding. In her characterisation, the Feltex shareholders were confronted with the reality of needing to find a substantial funder to pursue claims that had been recognised, in provisional terms, as bona fide and tenable by both the High Court and the Court of Appeal. She urged that, particularly in the absence of settled class action rules, this case ought not to be resolved on a basis that unnecessarily deterred the pursuit of class actions in other cases where a tenable basis for them existed, and claims by individuals or small groups of adversely affected persons without such support were clearly impracticable.
[12] In addition, Ms Mills argued that imposing an indemnity costs liability on the funders in this case when there was no precedent, or recognition of a fundamentally different costs regime applying against funders of unsuccessful plaintiffs in class actions, would be grossly unfair to the funders in the present case. They had
embarked on their commitment, reasonably expecting that the usual rules as to
5 Saunders v Houghton, above n 3, at [16].
adverse costs liabilities would apply, and there was nothing in their conduct of the litigation that could justify changing the rules against their interests after the event.
[13] Ms Mills resisted the notion that litigation funders had promoted the action, advising that the original shareholders’ group co-ordinated by Christchurch solicitors had raised some $431,000 for initial legal and accounting advice. She also disputed that the funders had run the case. She submitted that effective control of the proceeding had rested with Mr Forbes QC, senior counsel briefed for the plaintiff.
[14] The most important consideration here is preventing the erosion of access to justice. As the Court of Appeal has observed, maintaining access to justice is a significant, although not dominant, factor supporting the New Zealand position in limiting a losing party’s liability for costs.6 New Zealand may be some way behind larger common law jurisdictions in adjusting to the presence of litigation funders as a feature in the conduct of civil litigation. There is no justification in the circumstances of this case to impose indemnity costs merely because the plaintiff was supported by litigation funders, when that would inevitably have some chilling
effect on the potential availability of such arrangements in cases where they may well be justified in the interests of facilitating access to justice.
[15] The nature of the funding arrangements and the influence that their involvement had on the course of the proceedings cannot justify attributing liability to the funders for indemnity costs, if there was otherwise no basis for doing so. Funding arrangements are one factor in assessing the overall conduct of the litigation when considering the defendants’ entitlement to an award of increased costs beyond scale, but this factor cannot of itself transform the defendants’ entitlement to one for indemnity costs.
The nature of the litigation funders’ liability to pay costs orders
[16] At pre-trial stages of the proceedings, the defendants sought increases in the extent of security for costs, and also sought orders that would allow them, if
6 Bradbury v Westpac Banking Corporation [2009] NZCA 234, [2009] 3 NZLR 400 at [10].
successful, to enforce costs awards in their favour in New Zealand against entities with sufficient assets to meet such costs orders.
[17] Subsequent to my substantive judgment and as an aspect of their costs applications, the defendants applied jointly for non-party costs orders against the two litigation funders that have been involved, Harbour Litigation Investment Fund LP (HLIF) and Joint Action Funding Limited (JAFL). The rationale for doing so was so that the defendants would not have to exhaust attempts to enforce costs orders in their favour against Mr Houghton personally, and then follow the chain of responsibility from him to one or more of the funders and/or the indemnifier under an adverse costs liability insurance that had been arranged by HLIF. Mr Cooper presented argument on this point on behalf of all defendants.
[18] HLIF and JAFL (the non-parties) were served with the application, and directions given to facilitate separate representation on their behalf in relation to this aspect of the costs applications.
[19] I received separate submissions on behalf of the non-parties from Ms Paterson. Her more detailed arguments against a straightforward order for joint and several liability imposed on the non-parties were supported by Ms Mills on behalf of the plaintiff.
[20] The stance adopted on behalf of the non-parties during preparation of the proceeding suggested an acceptance of their liability in some form for adverse costs orders that might be made against the plaintiff. In JAFL’s case, its agreement with Mr Houghton and all other represented persons provided that it would pay any adverse costs order made against the plaintiff. So far as HLIF was concerned, an affidavit sworn in October 2012 by Ms Susan Dunn, a solicitor employed by HLIF, acknowledged as normal a provision that a litigation funder would have a liability for adverse costs. That affidavit described the adverse costs insurance cover that HLIF had obtained for its costs liability in the present case.
[21] The acknowledgement on behalf of HLIF was realistic, given the statement from the Privy Council in Dymocks Franchise Systems (NSW) Pty Ltd v Todd (No 2)
to the effect that where a non-party funds proceedings, and also substantially controls them or is to benefit from them, then justice ordinarily requires that the funder will pay the successful party’s costs if the action is unsuccessful.7
[22] Ms Paterson resisted any order for joint and several liability being attributed to the non-parties. She disputed that the position as contemplated in Dymocks ought necessarily to apply in the present circumstances. In that litigation, Mr and Mrs Todd, the individual protagonists, and their company that was involved in the litigation, were insolvent by the time of the appeal to the Privy Council. Their case was funded by a private company owned by members of Mrs Todd’s family. When the adverse costs order made by the Privy Council could not be met by the Todds, application was made to the Privy Council for a non-party costs order against the funding company. Ms Paterson argued that those circumstances distinguished the approach adopted in Dymocks from the present situation where the involvement of third party litigation funders had always been transparent and conducted appropriately.
[23] Ms Paterson resisted the notion that liability of non-parties for adverse costs orders ought to be determined on a formulaic or any overly complicated basis. She cited cautions by the English Court of Appeal in Petromec Inc v Petroleo Brasileiro SA Petrobas to that effect.8 Similar observations were made by the English Court of Appeal in the more recent decision in Systemcare (UK) Ltd v Services Design Technology Ltd.9
[24] For his part, Mr Cooper’s fallback position was that defendants ought not to be obstructed by the need to follow a sequence of steps when the basis on which security for costs had been assessed prior to trial, and the commercial reality of the position confronting those liable for costs post-judgment, was clear. The defendants had no desire, for example, to bankrupt Mr Houghton to establish that they could
exercise his right to the contractual commitment by JAFL to meet costs liabilities
7 Dymocks Franchise Systems (NSW) Pty Ltd v Todd (No 2) [2004] UKPC 39, [2005] 1 NZLR 145 at [25].
8 Petromec Inc v Petroleo Brasileiro SA Petrobas [2006] EWCA Civ 1038, [2007] 2 Costs LR 212 at [11], [12] and [19].
9 Systemcare (UK) Ltd v Services Design Technology Ltd [2011] EWCA Civ 546, [2011] 4 Costs
LR 666 at [26].
and, through JAFL, to the assigned benefit of the adverse costs insurance policy. The defendants also wanted to avoid the need for subsequent referral back to the Court for additional orders to pursue the ultimate entitlement to recover costs orders made in their favour.
[25] This is not a case in which the litigation funders can avoid liability for the adverse costs orders. The prospect was realistically acknowledged by Ms Dunn in
2012, and the circumstances as they have played out ought to be within the reasonable contemplation of the position she addressed at that time. The issue is therefore the form that the non-parties’ liability for costs should take.
[26] Ms Paterson’s fallback position was to the effect that the sequence of steps arranged prior to the substantive hearing for meeting substantive adverse costs orders ought to be given the opportunity of working as the parties to those arrangements contemplated. This would mean that resort to the non-parties was only a fallback position that needed to be pursued if the proceeds of the adverse costs insurance policy did not for any reason become available.
[27] In the circumstances of this case, I am satisfied that orders confirming the liabilities of the non-parties for the extent of adverse costs orders are appropriate. In the case of HLIF, I note that its contractual liability to indemnify for adverse costs orders is capped at $5 million, and note also that it is not to be liable for whatever modest component of the costs orders relates to steps taken in the proceedings prior to July 2011.
[28] However, the terms of costs orders against the non-parties should not simply be on the basis of joint and several liability. They are to be jointly and severally liable for the extent of costs orders, subject in the case of HLIF to the limits recognised in the previous paragraph, and subject to the order in respect of their liability lying in Court for a period of 56 days after the delivery of this judgment. That period is somewhat longer than was contemplated during argument because the parties may take a little time to resolve the final quantum of disbursements that are recoverable in accordance with the determinations I have made on contested items.
Increased costs
[29] All defendants advanced claims for increased costs, or indemnity costs. Before considering the detail of the claims for each of them, it is appropriate to confirm the approach that is to apply to these aspects of their claims.
[30] The provision is made for orders for increased costs in r 14.6. The criteria are in r 14.6(3) as follows:
(3) The court may order a party to pay increased costs if—
(a) the nature of the proceeding or the step in it is such that the time required by the party claiming costs would substantially exceed the time allocated under band C; or
(b) the party opposing costs has contributed unnecessarily to the time or expense of the proceeding or step in it by—
(i) failing to comply with these rules or with a direction of the court; or
(ii) taking or pursuing an unnecessary step or an argument that lacks merit; or
(iii) failing, without reasonable justification, to admit facts, evidence, documents, or accept a legal argument; or
(iv) failing, without reasonable justification, to comply with an order for discovery, a notice for further particulars, a notice for interrogatories, or other similar requirement under these rules; or
(v) failing, without reasonable justification, to accept an offer of settlement whether in the form of an offer under rule 14.10 or some other offer to settle or dispose of the proceeding; or
(c) the proceeding is of general importance to persons other than just the parties and it was reasonably necessary for the party claiming costs to bring it or participate in it in the interests of those affected; or
(d) some other reason exists which justifies the court making an order for increased costs despite the principle that the determination of costs should be predictable and expeditious.
[31] Guidance was provided by the Court of Appeal in Holdfast NZ Ltd v Selleys Pty Ltd.10 Where increased costs are sought, the Court should first calculate the costs entitlement by reference to scale, making a decision on the category for costs and the band within that category.11 Having arrived at that amount, the Court should then consider whether increased costs are warranted by reference to the criteria in r 14.6(3). In Holdfast, the appellant had criticised the approach adopted in that case in the High Court where increased costs were awarded by reference to actual costs incurred. The appellant submitted that the Court could not arrive at a figure approaching four times over scale in a principled way. The Court of Appeal recognised the force in that submission and cautioned against a determination reflecting actual costs, where that could mean the party paying costs would contribute to the other party’s choice of special counsel.12
[32] I was left by the parties to apply this methodology to the various differences between them, on a large number of steps in the proceedings. I will revert at the end of the judgment to the views I have come to on doing so in a case of this scale.13
[33] In Holdfast, the Court of Appeal was sympathetic to the appellant’s submission that an uplift should not be more than 50 per cent on the appropriate scale. It observed:14
An increase of 50% on scale costs should therefore grant the costs-claiming party a fair recovery for the step unnecessarily forced on it, assuming that the time allocated to the step has been reasonably calculated under the bands or under r 48C(3)(a). Any greater recovery than that would mean that the party paying costs is contributing to the other party’s choice of special counsel.
The Court of Appeal immediately qualified that observation, to the effect that this statement was not to be taken as saying that an uplift of more than 50 per cent could
never be justified.
10 Holdfast NZ Ltd v Selleys Pty Ltd (2005) 17 PRNZ 897 (CA).
11 High Court Rules, rr 14.3 and 14.5.
12 Holdfast at [43], [47].
13 See [166] to [173] below.
14 Holdfast at [47].
[34] The defendants urged that I not be constrained by the observation in Holdfast that treated a 50 per cent increase on scale as the potential maximum. The first defendants (the directors) cited three decisions in which analyses of the extent of work actually required had justified specific increases not related to a 50 per cent maximum. Unpersuasively, two of those decisions are my own.15
[35] Counsel for Credit Suisse cited two cases in which uplifts in excess of
50 per cent had been ordered.16 To the extent that increased costs are a prospect, I treat a 50 per cent uplift as a level that should achieve reimbursement to the successful parties of a reasonable contribution for the costs of the extent of work reasonably involved in the steps in the proceedings being considered. Where the extent and complexity of work involved means that a 50 uplift is inadequate to achieve that outcome, then that percentage is by no means an insurmountable level.
Indemnity costs
[36] The High Court Rules require more to justify an award of indemnity costs. The criteria in r 14.6(4) are as follows:
(4) The court may order a party to pay indemnity costs if—
(a) the party has acted vexatiously, frivolously, improperly, or unnecessarily in commencing, continuing, or defending a proceeding or a step in a proceeding; or
(b) the party has ignored or disobeyed an order or direction of the court or breached an undertaking given to the court or another party; or
(c) costs are payable from a fund, the party claiming costs is a necessary party to the proceeding affecting the fund, and the party claiming costs has acted reasonably in the proceeding; or
(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; or
15 Todd Pohokura Ltd v Shell Exploration NZ Ltd HC Wellington CIV-2006-485-1600, 1 July 2011; Sovereign Assurance Co Ltd v Commissioner of Inland Revenue [2012] NZHC 3573. Also Trustpower v Commissioner of Inland Revenue [2014] NZHC 3072.
16 Isolare Investments Ltd v Fetherston HC Auckland CIV-2002-404-1791, 9 June 2005 (85 per cent) and Mueller v Hendren (2009) 19 PRNZ 432 (HC) (75 per cent).
(e) the party claiming costs is entitled to indemnity costs under a contract or deed; or
(f) some other reason exists which justifies the court making an order for indemnity costs despite the principle that the determination of costs should be predictable and expeditious.
[37] The defendants advanced a range of propositions in relation to indemnity costs. The directors submitted that certain aspects of the conduct of the plaintiff’s claim provided grounds for indemnity costs in relation to defined parts of the proceeding, but I did not understand them to contend that those criticisms were sufficient to justify an award of indemnity costs for the trial overall. Rather, it was submitted for the directors that a potential entitlement to indemnity costs in relation to some aspects should be applied as additional justification for an award of increased costs overall. I address those criticisms at [68] to [76] below.
[38] For Credit Suisse, Mr Smith was somewhat more aggressive in his criticisms of the plaintiff’s conduct. The written submissions in support of Credit Suisse’s costs claim confined the claim to indemnity costs to the ground that such an order should follow from the circumstances of the plaintiff’s funded arrangements. However, I took Mr Smith’s oral submissions to include an argument that the plaintiff had either improperly or unnecessarily commenced or continued the proceeding against Credit Suisse to an extent that indemnity costs were appropriate. Credit Suisse’s fallback position was that if those criticisms were not sufficient to make out the case for indemnity costs, then they nonetheless were relevant in considering its entitlement to increased costs.
[39] Mr Smith characterised the claim as having been inadequately researched prior to commencement, and persisted with as against Credit Suisse when it ought to have been apparent by the outset of the trial that the claims against Credit Suisse were untenable. Mr Smith argued that even if misleading content in, or omissions from, the prospectus were made out, the plaintiff had no answer to Credit Suisse’s entitlement to invoke the due diligence defence. He characterised this aspect of the plaintiff’s case as resting on an unsupported plea from Mr Forbes QC. That was Mr Forbes’ repeated refrain that the thorough form of the due diligence process “ought not to triumph over the substance” of the inadequacies the plaintiff sought to
establish, by way of the content in, or omissions, from the prospectus that were alleged to be misleading. Mr Smith argued that that was always going to be entirely inadequate to address the due diligence defence, reliance on which had been signalled from the outset.
[40] Further, Mr Smith argued that once the plaintiff elected not to engage with the defendants on their argument that there had not been any loss suffered in any event, the plaintiff ought to have realised that further pursuit of the claim was futile. This was not a case in which there was any utility in pursuing a declaratory order that there was misleading content or omissions, if other options available to the plaintiff could have avoided the loss he subsequently claims to have suffered.
[41] On these and other grounds, Mr Smith submitted that the claim should not have been pursued against Credit Suisse so as to trigger the criteria in r 14.6(4)(a), giving rise to the prospect of indemnity costs.
[42] The fourth and fifth defendants (FNZC and ForBar) did not address indemnity costs, and instead focused on claims for substantial increases above scale, which they argued were justified on a number of the criteria for increased costs.
[43] There is some justification for Mr Smith’s criticisms that the nature of the claims were not well defined at the outset, and were pursued to trial without adequate research and reflection on their tenability in light of the evidence that had been exchanged. However, in the context of a claim on behalf of shareholders relying on a prospectus as occurred here, there would need to be some form of misconduct, or something outrageous in the way the case had been pursued, before indemnity costs could be justified. Having reflected on all the arguments I heard, I am satisfied that the criticisms of the plaintiff’s case fall materially short of the standard I would require for an award of indemnity costs in these circumstances.
Varying previous costs categorisation
[44] There has not been an order categorising the proceedings for costs purposes. However, costs orders on interlocutory steps, to the extent they have been made, have been on a 2B basis. Ms Mills submitted that the pattern of previous costs
orders was such that the parties should have treated the proceedings as if categorised
2B, and there was no sufficient justification for a change to that categorisation. She argued that the pattern of costs orders was sufficient to entitle the plaintiff to assume that 2B would continue to apply. Its presumptive application was reinforced by the fact that parties succeeding on interlocutory steps had always been unsuccessful when seeking category 3 costs. Ms Mills submitted that consistency required the same categorisation to continue.
[45] In determining costs claims on behalf of various defendants for interlocutory hearings between July and September 2013, I declined claims for category 3B costs, in part on the basis that 2B had been applied until then. I observed:17
A proceeding can generally only have one categorisation as category 1, 2 or
3. The categorisation applies to the whole proceeding, as the proceeding cannot be considered partly complex and partly straightforward.
[46] Had there been a formal categorisation of the proceedings, there would certainly have been an onus on the defendants to persuade the Court that the trial (or trial and other steps in the proceedings to which the current costs arguments apply) had changed sufficiently to warrant a re-categorisation. Rule 14.3(2) requires that once a proceeding has been categorised, the nominated category is to apply to all subsequent determinations “unless there are special reasons for the contrary”. The fact that the parties deferred seeking any categorisation of the whole proceeding tends to imply a recognition that it was inappropriate to do so.
[47] In the circumstances of this case, I consider that the defendants would have been able to justify a re-categorisation beyond 2B, given the extent and complexity of matters involved in trial preparation, and for the hearing.18
[48] Certainly in the period I supervised the proceedings from February 2013, costs issues that were addressed were on a self-contained basis reflecting the scope of work involved in the steps to which those costs applications related. Throughout
the period I have managed the proceeding, I consider it would be reasonable for the
17 Houghton v Saunders [2013] NZHC 3452 at [27]. I supported the latter proposition by reference to McGechan on Procedure (online looseleaf ed, Brookers) at [HR14.3.01].
18 Compare with considerations in Delegat v Norman [2014] NZHC 1099 at [18].
parties to have developed an expectation as the case neared trial that trial preparation and the trial would be on a substantially larger scale, so that the categorisation for costs purposes would be implicitly at large, and likely to be at higher than 2B. I maintain that view, notwithstanding my observation about a single category for costs purposes, quoted at [45] above. It is consistent with the plaintiff’s acceptance of 3C costs as appropriate for trial preparation and trial.
[49] The presentation of the case for various defendants at the significant pre-trial hearings, and throughout the trial, reflected a sensible measure of co-operation. One or other of the directors as a group, or Credit Suisse, tended to take the lead on an issue that was common to them, with counsel for the other defendants only supplementing as was necessary to pursue additional relevant points. On most issues, FNZC and ForBar were able to adopt what had been done by the prior defendants, and as between FNZC and ForBar there was a similarly co-operative approach so that the same ground was rarely traversed twice.
[50] I am content that there will be an aspect of unders and overs in the outcome where I consider it necessary, in determining the costs entitlement, to recognise that whilst separate representation to the extent it occurred was appropriate, there were nonetheless substantial opportunities for co-operation so as to minimise the work done on behalf of individual defendants. That has influenced my overall analysis in relation, first, to the directors, and subsequently in considering the costs claimed for each of the other defendants.
Directors’ scale costs entitlement
[51] The differences between the plaintiff and the directors (other than Mr Horrocks) in terms of those directors’ claim for costs relative to scale were reduced to a schedule handed up by Mr Cooper and spoken to by both sides. I will append to this judgment my determination on each component of that schedule.19
The amounts claimed totalled $795,704, whereas the plaintiff proposed sums
totalling $590,621. My determination on the appropriate calculation by reference to scale totals $670,825. My rationale for the amounts is briefly as follows.
19 Schedule 1.
[52] As to the pleadings, I consider the original and first two amended statements of defence should attract costs on a 2C basis, whereas the April 2013 amended statement of defence, although not in response to a new pleading, and the final amended statement of defence in September 2013 should be allocated at 3C. Scale costs for the pleading steps for the directors is quantified at $28,880.
[53] There were numerous aspects to the divergent views on the appropriate classification of the case management steps. I would be minded to allocate 2C costs for a number of the case management steps. However, in a number of instances the directors proposed 3B, which is quantified at a somewhat lower sum. Whilst as a matter of principle that introduces different categorisations for some of the steps of the same character in this proceeding, the application of 3B to those steps produces an outcome that I am comfortable with. For a memorandum on 20 March 2009, I have ordered 3B, despite the directors’ claim for 2C.
[54] I have not accepted the plaintiff’s protest that certain case management steps were covered by costs orders previously made, or where the plaintiff claims that the Court previously directed that costs in relation to the relevant step would lie where they fell. On each such step, I am satisfied on the grounds cited for the defendants that costs should now be allocated.
[55] The total for scale costs on the case management steps I have calculated at
$29,256. Certainly in respect of case management for the proceeding in the period in which I have been managing it, I consider the classification of individual steps, when reviewed in relation to this aspect of the proceedings overall, understates what would be a reasonable contribution to the costs I apprehend were incurred on behalf of the directors.
[56] The directors’ claims for discovery, inspection and interrogatories sought 3B costs for preparation of their discovery affidavits, with the exception of a second discovery affidavit for Mr Hunter that required substantially more work. The plaintiff argued for costs on a 2B basis with the exception of Mr Hunter’s second affidavit, for which they accepted 2C.
[57] I am satisfied the scope of the tasks for each director are appropriately reflected in 3B for all but Mr Hunter’s second discovery affidavit. I am also satisfied that inspection of the plaintiff’s documents justifies 3C characterisation.
[58] The directors also sought 3C costs for inspection of the other defendants’ (including Mr Horrocks) documents, but those tasks, although likely to be of somewhat uneven size, were limited to an extent that I consider costs on a 2C basis are appropriate. The directors also claimed an additional item for inspection of the plaintiff’s supplementary discovery and 3C is justified for that.
[59] The directors also sought 3C costs for a notice requiring the plaintiff to answer interrogatories. That was a relatively simple matter and 2B is appropriate.
[60] The result is that the directors’ claim of $176,040 for this aspect of the case reduces to $128,020.
[61] As to interlocutory applications, costs on the more significant of these steps were determined as they were dealt with. Of the remainder, the directors’ claim in relation to the first interlocutory application was challenged where a memorandum was mischaracterised as an interlocutory application (13 May 2010). I have allocated costs on that on a 2C basis.
[62] The plaintiff disputed claims for submissions and an appearance in support of an interlocutory application in May 2010 on the basis that that step in the proceeding resulted in mixed success for the parties. It was relatively significant, and I consider that 3C costs may have been justified. However, I have awarded half of what 3C costs for those two steps would have been, to reflect the mixed outcome.
[63] For the interlocutory applications thereafter, there was only one item in dispute. The plaintiff contended costs on a 3B basis would have been appropriate for a March 2014 notice of opposition, and I agree.
[64] My determination on the interlocutory applications for the directors results in a scale entitlement of $26,029.
[65] The plaintiff accepts that trial preparation and appearances ought to be categorised at 3C. He also accepted that costs ought to be awarded to the directors for third counsel, as well as separate representation for Mr Magill. However, the plaintiff opposed costs being awarded on a blanket basis for three counsel for the directors for every day of the hearing, and in addition for Mr Magill, when there were a number of days on which Mr Weston QC for Mr Magill and Mr Galbraith QC for the remaining directors did not appear. In the assessment I have undertaken of this case overall, I consider that reduction is appropriate. I have dealt with it as the plaintiff proposed by reducing the entitlement for third counsel for the directors on the days when Mr Galbraith was not present, and not allocating a cost entitlement for Mr Magill’s representation when Mr Weston was not present. I did not understand there to be a factual difference between the parties on the number of days for which those counsel were absent, and on that assumption my scale costs allocation for trial preparation and appearance for the directors would be $458,640. The total, which is summarised by category in a table at the end of Schedule 1, is $670,825.
Directors’ claim for increased costs
[66] The directors sought an order for increased costs, citing a number of the criteria from r 14.6(3). First, they submitted that the case was more complex and time-consuming than most proceedings covered by band C. They cited in particular the five day allowance for preparation of briefs, four days for preparation of a list of issues, authorities and common bundles, and five days for preparation for hearing. On this aspect of the plaintiff’s opposition to the costs applications, Ms Mills was unconvincing in her submission that the case was quite run-of-the-mill, and did not involve any unusual complexity or greater scale. With respect, the features accurately cited for the directors dispel that notion:
·this was the first class action for a claim under the Securities Act 1978 of its type in New Zealand;
·it involved many untested legal issues including the relationship between potential causes of action under the Securities Act, the Fair Trading Act 1986 and in tort;
·the factual allegations were complex involving (on the plaintiff’s characterisation from his opening submission) “some 36 principal allegations, with some 50 further particulars” of untrue statements and, in addition, “some 25 principal allegations, with some 30 further particulars” of omissions;
·the hearing ran for 52 sitting days and evidence was heard from 33 witnesses including 11 experts;
·the common bundle comprised 1,852 documents and that was liberally supplemented throughout the hearing;
·the plaintiff attributed the value to the total claims as $185 million including interest.
[67] The case is justifiably characterised as towards the top of the scale in terms of complexity and the time reasonably taken in adequately defending the claims that were brought.
[68] The directors also criticised the plaintiff’s conduct of his case as having contributed unnecessarily to the time and expense involved.20 The terms of the statement of claim on which the proceeding went to trial remained diffuse and lacking in focus. That character persisted, despite pleas for clarification and simplification advanced in the course of interlocutory applications for further particulars of the allegations against the directors. Although the range of arguments
attacking the opaque nature of the statement of claim may in some respects have been overstated, the task of defending the causes of action brought against the directors was inarguably made more difficult by the state of the pleadings.
[69] The directors argued that the course of their preparation was unnecessarily disrupted by the lateness of service of the plaintiff’s briefs. There was significant non-compliance when the date for service of the plaintiff’s briefs had been set some
seven months in advance. As was pointed out for the directors, it transpired at trial
20 High Court Rules, r 14.6(3)(b).
that a number of the plaintiff’s witnesses had not been engaged, or at least not fully briefed, until after the date by which their evidence was due to have been served. I accept that those defaults would have made the task for the directors’ advisers more difficult, in respects that would likely have increased the costs reasonably incurred in responding to all the plaintiff’s evidence.
[70] The directors also complained that the preparation of their case was unnecessarily expanded by the inclusion in briefs for the plaintiffs of inadmissible evidence. That is accurate, but it is not a criticism to which I would attach great weight, if it were being considered on its own.
[71] The directors raised the plaintiff’s refusal to give them access to the so-called
GSM data in usable form as increasing the costs of their defence. In a ruling on
20 March 2014, I dealt with concerns about the repeated refusal to afford access to electronically stored data in the usable form to which it subsequently transpired the plaintiff had access. I also reviewed the topic in my judgment.21
[72] In opposing this as a consideration for increased costs, Ms Mills sought to justify the withholding of the GSM data in usable form. She argued, for the first time, that her claims throughout that the electronically translated form of the raw data was privileged relied on English Court of Appeal authority.22 That case is distinguishable, for the same reason as her previous justifications, because it dealt with a form of collation of data into a partial set of the larger scope of the original
data. Here, the first step undertaken by an expert on behalf of the plaintiff did not involve any selection, but rather indiscriminately transformed the data as provided to the plaintiff’s advisers in what was essentially an unusable format, into the same data in a format able to be used in electronic form.
[73] Ultimately, the directors’ defence of the claims brought against them was not impeded by the lengthy delay in gaining access to a usable form of the GSM data. However, it is reasonable for the directors to claim that the lack of access to a usable
form for as long as they were denied it should be taken into account as another
21 At [419]–[422].
22 Sumitomo Corporation v Credit Lyonnais Rouse Ltd [2001] EWCA Civ 1152.
feature of the conduct of the case on behalf of the plaintiff that would have caused additional costs to be incurred.
[74] The directors also criticised the plaintiff for having failed to abandon specific heads of criticism, or aspects of the claim, which he ought reasonably to have appreciated were untenable. The point is valid, but given the scale of the case that I ultimately had to determine, I am not satisfied that this is an aspect of the criticisms of the plaintiff that would, of itself, justify any significant increase. The extent of criticisms pleaded reflected the matters of concern to a small shareholder after Feltex had collapsed. The concerned shareholders appear to have been materially influenced by criticisms of the directors made in two relatively extensive media articles after the company had collapsed, and it was understandable, in the circumstances of Feltex’s collapse, that they would fire a scattergun broadside at as much of the content of the rather dense prospectus document as seemed credible.
[75] A discrete criticism for the directors was that the plaintiff had insisted on including in the common bundle a substantial number of unnecessary documents. On reflection at the end of the trial, they make the point that the vast majority of the plaintiff’s nominated documents in the common bundle were never referred to in evidence or in submissions.
[76] Finally, the conduct of the case for the plaintiff was criticised for general delay and non-compliance with timetabling orders. That criticism is justified, and there is an extent to which, in a complex case like this, non-compliance with timetables causes the opposing parties to undertake more work, or to be frustrated in preparing their case in the most efficient way.
[77] These considerations are sufficient to justify an award of increased costs. Having reviewed all the relevant arguments, I am also of the view that a distinction is appropriately drawn between the earlier stages of the proceedings up to conclusion of interlocutory applications, where the battle lines were in some respects less clearly defined, and the basis for criticism of the plaintiff’s conduct is arguably less. The appropriate uplift to the scale award for those steps is 15 per cent. The calculation is
$212,185 plus 15 per cent, making a total of $244,012.75.
[78] The trial preparation and appearances involved a more meaningful extent of the grounds for criticism of the plaintiff’s conduct, and I am satisfied that a greater increase is warranted in relation to those steps. One specific point Ms Mills raised against an award of increased costs in relation to the trial was that the plaintiff conceded the justification for an award for third counsel, to the extent that three counsel were present in Court. Ms Mills submitted that that concession was generous and, having made it, it provided a ground either against what might otherwise be increased costs, or was to be factored in when reducing the extent of increase that might otherwise be justified. Certainly for the directors and Credit Suisse, I am comfortable that the scale of the case justified appearances by three counsel.
[79] I award an uplift of 50 per cent on the scale calculation for trial preparation and appearances of $458,640, which increases that amount to $687,960. Accordingly, I order that the directors (except Mr Horrocks) are entitled to costs of
$931,972.75.
Directors’ disbursements
[80] Some rationalisation of the directors’ claims for disbursements had occurred before the hearing. The total sought was $656,549.31. Of that amount, the plaintiff conceded $203,843.25 was claimable. The aim of resolving disputes over large value disbursements by the clear application of principle so as to avoid unnecessary commitment of resources has to bend in some respects to the fair outcome in the particular circumstances of the case. However, it is regrettable that the parties were not able to apply the guidelines that narrow the scope for such differences.
[81] A first dispute related to a component notionally attributed to Mr Galbraith’s travelling costs of $3,506.88. The plaintiff disputed this aspect of a larger component of costs which relate to meal and beverage charges at the Wellington hotel where the directors’ counsel stayed throughout the hearing. There is no issue that out of town counsel were appropriately retained for the directors. This proceeding commenced in Christchurch, and was subsequently transferred to Wellington over the preference of the defendants for it to be relocated to Auckland.
It is therefore understandable that the plaintiff did not object to the travel and
remaining accommodation expenses for the directors’ counsel.
[82] Ms Mills argued that sustenance for counsel away from home should not be recoverable as a disbursement in terms of r 14.12 of the High Court Rules. I did not agree with that proposition, given that the reasonable cost of meals for counsel required to be away from home are appropriately recognised as a recoverable disbursement.
[83] Ms Mills took particular exception to this (and other) disbursement claims including the cost of alcoholic beverages. Without wishing to suggest any personal view on the reasonableness of counsel enjoying a glass of wine with dinner, I uphold this aspect of Ms Mills’ objection. As a matter of policy, the Court should not be requiring a losing party to meet the costs of the winning parties’ counsel’s alcoholic beverages, which cannot be justified as a necessity when counsel are required to be away from home.
[84] I appreciate that identifying and deducting the component of invoices for meals that relate to alcoholic beverages may now be difficult in some cases, but wherever possible I direct that the solicitors for the directors are to identify and deduct the extent of the disputed amount that relates to alcoholic beverages.
[85] The plaintiff also disputed the extent of Mr Tolan’s charges for meals. I
accept that he had to be away from home for eight days and the disputed amount of
$347.82 does not appear unreasonable for that length of time. However, to the extent that there are identifiable charges for alcoholic beverages included in that sum, then they too should be identified and deducted.
[86] The directors claimed their travel and accommodation expenses for all the time that each of them spent in Court during the trial. The plaintiff objected to the component of these costs that related to days on which the directors were not required to give evidence.
[87] The directors persisted with this claim for reimbursement on the basis that they were sued in their individual capacities as directors. It followed that they were entitled to attend for the purposes of monitoring the evidence in the trial, and to contribute to the provision of instructions to their counsel.
[88] I do not consider it reasonable to require that attendance at a trial away from their city of residence had to be at the directors’ own expense except for the days on which they were giving evidence, when it had significance for them as individuals. In the context of this case, the claim for their travel and accommodation expenses is allowable as a disbursement. The exception to that is the component, if any, of the amounts claimed that relate to alcoholic beverages.
[89] Bell Gully resourced the conduct of the case for the directors by relocating solicitors from their Auckland office to Wellington during the period of the trial. The plaintiff objected to the travel and accommodation costs incurred in doing so, arguing that this is a matter that ought to be absorbed within the office overheads of the solicitors. Alternatively, that the plaintiff could expect a national firm of Bell Gully’s size to commit local resources from its Wellington office.
[90] The rejoinder to this was that it was unreasonable for the plaintiff to assume that the Wellington office had additional capacity sufficient to service the work required. Further, that it would have been either inefficient or impracticable to induct the appropriate personnel into the complexities of the case for trial when the remainder of the preparation had been done using those solicitors in the Auckland office.
[91] Again in the circumstances of this case, those travel and accommodation costs are allowable as a disbursement. Consistently, the exception is for any component of those costs claimed that relates to alcoholic beverages.
[92] Mr Gilbertson, a Bell Gully commercial partner who had responsibility for preparation of the prospectus, was called, mostly as a witness of fact, to describe the process for the preparation of the prospectus. He has charged on a usual solicitor/client basis for the time taken in reviewing the files he maintained at the
time, for researching the content of a brief of evidence and then preparing for and giving that evidence. The plaintiff objected to inclusion of those fees as a disbursement, arguing that it falls outside the categories of expense appropriately allowed as a disbursement. Mr Gilbertson was seen as fulfilling a residual obligation in respect of his retainer by Feltex, and it was a cost the directors ought reasonably to be expected to meet when the company that they directed to retain him in the first place was unable to do so.
[93] I am satisfied Mr Gilbertson’s fee is appropriately recovered as a disbursement. No authority was cited that was precisely on point, but the commentary in McGechan does acknowledge the recoverability of a lawyer’s expenses in somewhat similar circumstances.23
[94] Different grounds of objection were raised to the directors’ claim to recover their portion of fees paid to Professor Cornell and Mr Rob Cameron, experts called jointly by the directors and Credit Suisse. The total fees and disbursements sought for Professor Cornell was approximately $820,600 and for Mr Cameron $211,750.24
The directors’ portion of these costs was 30 per cent.
[95] The plaintiff objected to the extent of Professor Cornell’s charges as being unreasonable, and supported his submissions with a report from a Sydney economist, Mr Greg Houston, who had been retained by the non-parties to analyse the scale of work and the task undertaken. Mr Houston projected the likely extent of fees that his firm would charge to do the same work at some A$135,000. Mr Houston was critical of the number of hours charged, both for Professor Cornell personally, and also for the numerous others who contributed to the work that he assumed responsibility for in the report that comprised part of his evidence. In addition to the extent of the work claimed as necessary to produce his report, the plaintiff
challenged the hourly rate of US$995 as being at “the very highest level”, when the
23 See McGechan on Procedure (online looseleaf ed, Brookers) at [HR14.12.01(4)(e)].
24 Precision with the amounts is difficult. Payments to Professor Cornell’s consultancy appear to
have been remitted into New Zealand dollars on the dates of various payments made, so that the
30:70 split does not calculate the finite sum precisely. On Mr Cameron’s fees, Credit Suisse included GST, whereas the directors did not. GST is excluded from the round sum used in my consideration.
relevant expertise could have been found in New Zealand or Australian economists who would charge substantially less.
[96] In addition, the plaintiff rejected the reasonableness of a business class return airfare for Professor Cornell and the fact that he appeared to have charged for his travelling time of approximately 17 hours each way from the United States to New Zealand.
[97] On this and other aspects of the experts’ fees, the plaintiff also criticised the disproportionality of the work undertaken by experts on behalf of the directors and Credit Suisse. Ms Mills criticised the scale of these fees relative to Mr Houghton’s personal claim for $20,000. The premise for that criticism is flawed. So, too, is the criticism that Professor Cornell was addressing an issue that ought only to have been litigated at the second stage of the proceedings. Well before trial, the plaintiff was on notice that the defendants would argue at the hearing that they could not be liable because the plaintiff had failed to identify a recoverable form of loss.
[98] In response to Mr Houston’s analysis of Professor Cornell’s charges, the defendants filed an affidavit from Mr John Haut, a colleague of Professor Cornell’s at Compass Lexicon, and a significant contributor to the report prepared by Professor Cornell that formed the basis of his evidence.25 Mr Haut treated Mr Houston’s analysis as deficient in a number of respects. In particular, it did not take account of the difficulties encountered in rationalising the nature of the criticisms of the
prospectus, from the plaintiff’s statement of claim. That is a valid point. Further, Mr Haut criticised Mr Houston’s absence of an allowance for the research required to support the views expressed by reference to appropriate academic literature. In addition, Mr Houston was said to have wrongly assumed the scope of Feltex documents that had been reviewed in the preparation of Professor Cornell’s report.
[99] In complex commercial and regulatory cases, the Court has been relatively liberal in not questioning the reasonableness of what, by New Zealand standards, are
eye-wateringly high charges demanded by economists of international repute and
25 In fact, Mr Haut charged for 387 hours of his time within Professor Cornell’s invoices, whereas
Professor Cornell charged for 171.5 hours.
other specialist experts in similarly arcane areas. I am not prepared to reduce the recoverable extent of Professor Cornell’s charges by applying the comparison the plaintiff invites with Mr Houston’s estimate of what he might have charged to undertake the same assignment. The opinion sought from him after the event was a somewhat invidious one and, with no disrespect to Mr Houston, his assessment is not a sufficient basis to make out the unreasonableness of Professor Cornell’s charges.
[100] However, in retaining Professor Cornell, the directors and Credit Suisse elected to retain a very senior practitioner in a relatively arcane area. It is reasonable to infer that they did so because the strength of his reputation was likely to enhance the prospects of his analysis being accepted, to the extent it might be challenged by a competing analysis in evidence in reply on behalf of the plaintiff. It follows that they can be treated as electing to retain one of the senior economists of international repute whose rate of charging reflects that seniority.
[101] It is not relevant that there was no challenge to Professor Cornell’s analysis. There may well have been. However, the topic on which he opined was not so arcane as to be beyond competent economists in New Zealand or Australia, who could have adapted the economic theory to the facts in the way Professor Cornell did. Mr Cameron’s evidence extended to an endorsement of Professor Cornell’s analysis, and a confirmation of its relevance in the context of the New Zealand market. From that evidence, and evidence from Mr Cameron I have had to consider in other proceedings, a leaner defence strategy might have depended on his evidence alone.
[102] Without interfering with the autonomy of parties in the choices they make to retain experts, parties cannot rely on the Court to endorse the reasonableness of choices made when it comes to recovering experts’ costs and where the matters addressed might be dealt with by a competent expert closer to home. The circumstances in which international experts are retained need to be assessed in the evidentiary context and the relative importance of opinion evidence to the matters in issue.
[103] I have noted that the plaintiff criticised Professor Cornell’s charges for apparently including his usual rate for travelling time from the United States to New Zealand, and return. There can be no criticism of Professor Cornell if indeed he stipulated that as a condition of his retainer by the directors and Credit Suisse, and it is likely that he spent at least part of the time travelling to New Zealand working on the relevant assignment. However, there is an issue as to the reasonableness of passing on the cost of all travelling time, if indeed that was the case.
[104] In the circumstances of the challenge to this retainer, I uphold the objection to Professor Cornell’s invoices to the extent of 35 per cent of the total invoices paid to his firm. The remaining 65 per cent of those invoices is recoverable, and may be claimed proportionately on behalf of the directors and Credit Suisse.
[105] The plaintiff made a more confined objection to Mr Cameron’s fees that totalled some $211,750. The plaintiff relied on a similar exercise that Mr Houston had been instructed by the non-parties to carry out in relation to Mr Cameron’s fees. In this case, Mr Houston prepared an estimate of fees that his firm might charge of between A$154,800 and A$198,200. That comparison is hardly an encouraging starting point for attacking Mr Cameron’s fees as unreasonable.
[106] Mr Cameron had a relatively extensive brief, responding to a range of the criticisms made in the plaintiff’s claims. In my view, the scope of his response was reasonable, and I see no merit in the grounds of objection raised in relation to the reasonableness of his charges.
[107] The directors have claimed as a disbursement fees of $15,200 paid to Mr David Cameron-Brown. He is an investment banking expert and had been retained by the directors to provide an expert opinion, including on the due diligence process. Counsel advised that Mr Cameron-Brown was retained in part because of doubts about the ultimate availability of Mr Cameron when the matter came to trial, but given the latter’s availability, matters were not advanced further with Mr Cameron-Brown.
[108] The plaintiff objected to the reasonableness of this claim, when no brief was served from Mr Cameron-Brown, and the plaintiff was not in a position to assess the relevance or utility of any evidence he may have provided.
[109] There are precedents for allowing, as disbursements, fees incurred with experts who are subsequently not called as witnesses. Each claim is to be assessed within the context of preparation for, and presentation of, cases at trial. In this case, given the extent of fees I have approved for Mr Cameron, and the absence of any brief for Mr Cameron-Brown, I consider the plaintiff’s objection is a reasonable one. I am not prepared to authorise the fee for Mr Cameron-Brown as a recoverable disbursement.
[110] The directors’ disbursement claims had a wash-up category of “other disbursements” totalling $17,539.85. A summary document provided during the costs hearing treated $11,123.03 of this category as disputed on the basis that they comprised components of the directors’ solicitors’ overhead costs. However, the terms of a 19 November 2014 document on behalf of the plaintiff treated that amount as the unopposed portion of this category of disbursements. Doing the best I can with the detail I was left with, the components of “other disbursements” that I am not satisfied are reasonable are those for “book/report requests” ($536.41) and “stationery” ($787.44). I note that a significant component of the remainder is for Streamline litigation support and allowing that as a disbursement is a factor in the extent to which I have been prepared to grant above scale costs to the directors.
[111] In summary, the disallowed components of “other disbursements” total
$1,323.85, making the recoverable part of that category $16,216.
Mr Horrocks’ scale costs entitlement
[112] Mr Horrocks was separately represented throughout the proceedings, and has made his own claim for costs and disbursements, reflecting the discrete extent of work done on his behalf. Mr Horrocks’ solicitors filed a memorandum setting out the grounds for the costs and disbursements claimed. After that was responded to on behalf of the plaintiff, a second memorandum was filed endeavouring to narrow the
differences, and responding to the items that were challenged on behalf of the plaintiff.
[113] Mr Horrocks was not separately represented at the costs hearing, but Mr Cooper made brief reference to the two memoranda filed on his behalf, supporting Mr Horrocks’ claim for costs and disbursements in its final form.
[114] Mr Horrocks did not seek an uplift beyond scale. The differences between his claim and the plaintiff’s response to it reflected mostly the category and band that should be adopted for various interlocutory steps, and also whether Mr Horrocks was entitled to an award in relation to certain early interlocutory steps.
[115] I have considered the differences in relation to each individual item, but can adequately address them by the differences between Mr Horrocks’ claim and the
plaintiff’s proposed level, by reference to stages of the case. That is as follows:
Stage of proceeding Mr Horrocks Plaintiff Commencement $31,220 $11,336 Case management 9,09926 2,477 Discovery, inspection and interrogatories 139,100 55,065 Trial preparation and appearance 99,960 99,960 Total scale costs $279,379 $168,838
[116] Having reviewed the competing positions in relation to discovery, inspection and interrogatories, I accept the plaintiff’s argument that the amount of time claimed on behalf of Mr Horrocks for those steps is more than is reasonable. The reasonable figure for that stage of the work on behalf of Mr Horrocks is $120,000.
[117] In all other respects, I consider Mr Horrocks’ band and category proposals are
reasonable. The result is that his claim of $279,379 is to be reduced by $19,100. I
accordingly order costs in favour of Mr Horrocks of $260,279.
26 This sum was reduced in Mr Horrocks’ reply memorandum by $1,545, reflecting concessions on
steps taken on 1 December 2009 and 10 August 2010.
Mr Horrocks’ disbursements
[118] Mr Horrocks sought recovery of $31,185.98 for disbursements incurred. The only item disputed on behalf of the plaintiff was Mr Horrocks’ claim for the costs of attendance at trial. He attended the hearing on three occasions, and the plaintiff argued that only the third trip was attributable to his attendance as a witness. The plaintiff objected to travel and accommodation expenses for the two other occasions.
[119] However, Mr Horrocks argued that all three attendances were reasonably necessary. The first was when the plaintiff opened his case, given that the content of the opening conflicted directly with the evidence Mr Horrocks anticipated giving. The second attendance was to observe the evidence of Dr Blakemore, which specifically conflicted with, and was addressed by, Mr Horrocks’ own evidence. The third attendance was when he gave evidence. I am satisfied that the costs of all three attendances were reasonable and accordingly order disbursements in favour of Mr Horrocks in the sum he sought of $31,185.98.
Credit Suisse scale costs entitlement
[120] The outcome of my review on this is set out in Schedule 2 to this judgment. In terms of scale costs entitlement, my approach to Credit Suisse’s pleadings is to grant 2C costs for the first statements of defence in May 2008 and August 2011, and
3C for the third one in September 2013. The result is to reduce Credit Suisse’s
consistent claim under 3C, which would amount to $25,660 for pleadings, to
$19,240.
[121] On case management steps, I have considered the individual points of dispute as set out in written submissions and addressed by Mr Smith and Ms Mills. The result is reflected in Schedule 2 attached. Of Credit Suisse’s claim for $41,626, I have allowed $33,777.
[122] As to the items disallowed, these include memoranda filed on the topic of possible recusal of the Judge then managing the proceedings. Credit Suisse claimed for memoranda dated 20 August and 17 September 2010, responding to an issue raised by Justice French about the appropriateness of her continuing to manage the
proceedings. Subsequently, on 8 March 2012, Credit Suisse claimed for a memorandum filed jointly on behalf of defendants suggesting that the Judge ought to recuse herself. In the context of this case, I am not persuaded that the unsuccessful plaintiff ought to make a contribution to Credit Suisse’s costs for those steps. Subsequently, on 6 December 2012, Credit Suisse filed a memorandum responding to a plaintiff’s proposal on recusal. The plaintiff accepts Credit Suisse are entitled to
2B costs on that filing.
[123] I have also disallowed Credit Suisse’s claim for a memorandum that was
required to address the change of form and name of the second defendant on 2 April
2012. Where Credit Suisse has agreed to a counter-proposal on behalf of the plaintiff as to costs classification for a case management step, I have accepted the plaintiff’s proposal (for instance on the joint memorandum of counsel for defendants that was organised by Credit Suisse’s solicitors, 6 December 2012).27
[124] I have upheld the plaintiff’s objection to the claim for memoranda of a case management type after the commencement of the trial: they are to be reflected in the scale of work I assess as required to defend Credit Suisse’s position at trial.
[125] As to Credit Suisse’s scale cost claims in relation to discovery, inspection and interrogatories, I treat its claim in relation to the notice to answer interrogatories consistently with the directors, allocating it 2B scale cost. The scope of the task in listing Credit Suisse’s documents, which it did in two affidavits in February and May
2012, justifies a 3C category. Credit Suisse has also claimed 3C for the production of documents for inspection. I agree with the plaintiff that the appropriate category for that aspect of the task is 2C. Credit Suisse seeks 3C categories for each of two supplementary lists of documents in October 2012 and December 2013. I consider it appropriate to treat that as one step, attracting 3C category.
[126] In terms of inspection, Credit Suisse claims 3B costs for inspecting the documents discovered by Messrs Feeney, Magill, Thomas, Saunders, Ms Withers and Mr Hunter’s first tranche of discovery. Credit Suisse also seeks 3C costs for the
initial inspection of the plaintiff’s discovered documents, Mr Hunter’s second
27 Those items are marked with an asterisk.
tranche of discovery, the disclosure by Mr Horrocks, FCNZ and ForBar, and the subsequent inspection of the plaintiff’s supplementary affidavit of documents, being those obtained from Godfrey Hirst. For the most part, the plaintiff contends for 2B and, in some cases, 2C costs for these steps.
[127] Consistently with the categorisations for inspection on behalf of the directors, I allocate 3C to both the initial and supplementary inspection of plaintiff’s documents, as well as to Mr Hunter’s second round of discovery, and I would grant
2C on the remaining claims for scale costs on inspection. However, given Credit Suisse’s own categorisation of those steps at 3B, it is appropriate to treat the claims as being at that level, notwithstanding the inconsistency it produces between these components of the scale cost calculation for Credit Suisse when compared with the directors.
[128] In terms of interlocutory applications, I confirm the agreed items as set out in Credit Suisse’s schedule, but uphold the objections to its claim for a separate costs allocation on the notice of opposition to the plaintiff’s s 130 application in early April 2014, and preparation of argument on that application. That is also to be treated as subsumed in the work for trial.
[129] The same approach leads to rejection of Credit Suisse’s claim for a notice of opposition to the plaintiff’s application for leave to file a reply to the affirmative defences after the trial had been going for some time in May 2014. So, too, with:
· the supplementary submissions regarding particular discovery for the opening day of trial;
· the claims for separate items in relation to preparing the bundle on the admissibility of the GSM data; and
· Credit Suisse’s response to the plaintiff’s list of matters not pleaded or advanced.
They are subsumed within the award for preparation and trial.
[130] The relatively straightforward application in December 2013 for Mr Millard’s evidence to be heard by videolink is sufficiently reflected in 2C costs as the plaintiff contends.
[131] The scale costs for interlocutory applications (bearing in mind that most have been the subject of their own costs orders) is $32,762.
[132] Accordingly, the scale costs for all pre-trial matters is $242,479. This may be compared with Credit Suisse’s proposed categorisation which would total $334,652 for those pre-trial steps, and the plaintiff’s at $146,210.
[133] The plaintiff accepts that 3C should apply for the trial preparation and appearance components of scale cost claims, with all steps being in category 3C, and an allowance for third counsel. Accordingly, the agreed component for trial preparation and appearances was $349,860.
[134] The total according to the scale cost categorisations I have determined for
Credit Suisse would be $592,339.
Credit Suisse claim for increased costs
[135] Credit Suisse sought a 100 per cent uplift on its proposed scale cost categorisation, which would make a total of $1,369,024. I am not persuaded that all the circumstances I have already reviewed justify an increase for Credit Suisse that is any different from that I have settled on for the directors. I accordingly direct an uplift of 15 per cent for all pre-trial matters and 50 per cent for trial preparation and appearances. The outcome is:
$242,479 +15% $278,850.85 $349,860 + 50% $524,790.00 Total $803,640.85
Credit Suisse disbursements
[136] The plaintiff makes the same objection to the extent of experts’ fees for Professor Cornell and Mr Cameron, as I have considered in relation to the directors. The same ruling applies in relation to each expert.
[137] I confirm the expert witness fees paid to Mr Farley as reasonable, and recoverable in total as a disbursement.
[138] Mr Millard was a witness of fact who was constrained from moving from Texas, and gave his evidence by videolink. He was no longer employed by a Credit Suisse entity, and required to be paid for the time involved in researching his brief of evidence, and then preparing for and giving evidence. A disbursement for these expenses is claimed of $55,362.90. The plaintiff objects to it, on the basis that payments to witnesses of fact should not be recoverable as a disbursement. There is
precedent for doing so,28 and I am satisfied that this expense in the context of this
case was a reasonable disbursement recoverable from the losing party.
[139] Three further expenses in relation to Mr Millard’s evidence were claimed. These were video-conferencing expenses of $10,598.58, legal support fees for a representative of an otherwise uninvolved law firm to sit with Mr Millard through the provision of his evidence to facilitate the provision of electronic copies of the documents to him, and a further expense of $3,185.85 for video-conferencing expenses in the course of briefing Mr Millard. Given the role Mr Millard had played in the preparation of the prospectus on behalf of the vendor, and the part his evidence played in the whole case, these were reasonably incurred, given his location and constraints on his movements.
[140] In terms of travel and accommodation expenses, the plaintiff took exception to the inclusion of meal charges for Mr Stewart, a Credit Suisse Australia representative who gave evidence at the trial. Those expenses are recoverable, subject to the exclusion of the cost of alcoholic beverages, on the same basis as I
considered in dealing with disbursements for the directors.
28 See Trustpower v Commissioner of Inland Revenue [2014] NZHC 3072 at [80].
[141] Credit Suisse’s solicitors retained the accounting firm Deloitte to provide expert accounting support. Deloitte’s expertise was applied in analysing the accounting evidence proffered for the plaintiff, and those costs ($14,017.50) are claimed as a recoverable disbursement in circumstances where the directors and Credit Suisse jointly called only one accounting expert, Professor van Zyl.
[142] Without criticising the decisions made in preparing Credit Suisse’s case, given the complexion of the expert evidence presented co-operatively by the defendants, I am not persuaded that the additional costs of retaining Deloitte can be added to those of the experts who did give evidence, as a recoverable disbursement. I do not intend this to reflect any rule of principle, as such items will need to be assessed in their context on a case by case basis.
[143] Credit Suisse claims significant sums for electronic discovery support:
CDS $268,702.95 Pangea3 $155,849.51 Deloitte $68,501.92 Streamline $1,729.83
[144] Credit Suisse’s solicitors assumed the primary burden of electronic document management for the trial. It worked well to the extent that there were very few disruptions to the course of evidence and submissions, caused by the unavailability of electronic documents. Reflecting the scale of that task and its importance in this case, I am satisfied that all components of these expenses should be recoverable as disbursements in this case.
[145] Credit Suisse claimed $18,061.21 for its legal team’s expenses when undertaking briefing trips. The extent to which the components of this sum were contested was set out in a comparative table as item 14 of schedule 2 provided by Mr Smith in the course of his oral submissions. That schedule recorded concessions on behalf of Credit Suisse that it did not claim the cost of flights from Wellington to Auckland in June 2013, visa application fees and flights and booking fees for travel in June 2013. Subject to those concessions, and the need to remove any component of meal and accommodation charges that relate to alcoholic beverages, I approve the remainder of this item as reasonable disbursements and accordingly recoverable.
[146] Credit Suisse claimed for the costs of its representative, Mr Charter, to attend trial. He attended at phases of the trial that were critical to Credit Suisse, and it is reasonable that a corporate litigant in this context have a representative present to liaise on the spot with counsel. It is not suggested that any one of the witnesses called for Credit Suisse ought to have fulfilled that role, and in the circumstances of this case the charges are therefore reasonable.
[147] I also uphold the miscellaneous expenses for printing the common bundle, the USB sticks, couriers, Court filing fees and courtroom wireless internet access.
FNZC scale costs entitlement
[148] The outcome on this aspect is set out in Schedule 3. In reviewing the scale costs claimed on behalf of FNZC, I have considered the reasons for objection on behalf of the plaintiff, and have also endeavoured to achieve a measure of comparability between FNZC and the remaining defendants. The latter consideration has resulted in some downward adjustment. For instance, the first two statements of defence were claimed as 3C, as was the step for producing FNZC’s documents for inspection, and I have reduced each to 2C. Because the costs claim aggregates the inspection of all first defendants’ documents under one head, I recognise 3C as appropriate and the scale of the inspection required on issues as between Credit Suisse and FNZC similarly justifies 3C categorisation. I have reduced the category for inspecting ForBar’s documents to 2C.
[149] I have allowed claims for preparing for, and appearing at, the hearing on
17 May 2010 that addressed the lifting of an interim stay then in place. Consistently with the approach adopted for Credit Suisse, I have rejected FNZC’s claim for a memorandum in relation to a defendants’ initiative to seek recusal of the Judge in March 2012.29 The total scale entitlement for all pre-trial steps is $148,303.
[150] As to FNZC’s scale cost entitlement for trial preparation and the hearing, the plaintiff disputed FNZC’s claim for a third counsel. Ms Mills argued that the
relatively more confined part that FNZC had to take, and the ability for it to rely on
29 See [122] above.
the competent presentation of the case for the directors and Credit Suisse in respect of most issues, rendered the involvement of a third counsel throughout the hearing unnecessary. Ms Mills made the point that FNZC called only two witnesses, and Mr McLellan QC’s cross-examinations of plaintiff witnesses were, with few exceptions, very limited.
[151] I can understand a reasonable decision made on behalf of FNZC to resource its defence with three counsel at trial. In preparing for trial, it may have been risky to rely on substantial matters relevant to FNZC’s defence being dealt with by counsel for the directors and Credit Suisse to the extent that they subsequently were. Nonetheless, as the trial played out, the presence of a third counsel was beyond the reasonable resourcing to which the unsuccessful plaintiff should be required to contribute. I accordingly uphold the objection to the claim for costs for third counsel for FNZC. The result is to reduce the scale costs’ component for trial preparation and appearances on behalf of FNZC to $270,480.
FNZC claim for increased costs
[152] Having dealt with the contested items in the scale costs calculation in the manner I have, I consider that their entitlement to an increase on that level of costs should be treated the same as the costs entitlement for the directors and Credit Suisse. As numerous issues prior to and during trial were dealt with, the plaintiff could complain that FNZC should not receive any increased costs because of the extent to which it was able to take advantage of the work done on behalf of the directors and Credit Suisse. That is not justified in many respects because the ground would reasonably have to be covered for FNZC’s own purposes, to ensure that its position would be adequately advanced on the topics as they were dealt with.
[153] In addition, there were a number of discrete issues such as the allegation that FNZC participated as a promoter in the statutory sense on which FNZC took a lead. Those issues were of critical importance to the defence of its position, not only in the context of this proceeding, but more generally in terms of the liability of sharebrokers, participating as managers, for the content of prospectuses.
[154] FNZC and ForBar had their own difficulties in discerning the nature of the allegations against them, as the various amended versions of the statement of claim were produced. FNZC had to take its own points in relation to the application for particulars. As between defendants’ counsel, Mr McLellan assumed primary responsibility for cross-examination of Mr Lim, whose brief was produced very late and in a less than fully ordered state.
[155] For all those reasons, and having reduced the scale costs in the respects that I
have, I apply the same percentage uplifts for increased costs to FNZC. The outcome is:
Scale entitlement for al pre-trial steps -
$148,303 + 15% uplift
$170,548.45 Trial preparation and appearance -
$270,480 + 50% uplift
$405,720.00 Total $576,268.45
FNZC disbursements
[156] I treat the extent of disbursements claimed for FNZC as reflected in the schedule headed “Calculation of Disbursements” that appeared at the end of their costs submissions dated 13 October 2014. The extent to which those claims are challenged on behalf of the plaintiff is confined to the items in the paper handed up during the course of his submissions by Mr McLellan that itemised the disbursements which were challenged by the plaintiff.
[157] Of the items challenged, I allow the cost of the Summation software licences for Mr McLellan and Ms Cooper. I allow airfares, accommodation and taxis for Ms Cooper as second counsel. I disallow the disbursements of the same type for Mr Stewart. I allow the meeting room charge to provide a shared workspace for counsel, given that they were defending a substantial case away from the location of their own offices.
ForBar scale costs entitlement
[158] The initial difference between ForBar’s scale costs claim of some $540,000
and the plaintiff ’s response at some $361,000 was narrowed substantially in the reply
memorandum for ForBar, so that the extent of the differences by stages of the
proceeding were as follows:
Stage of proceeding ForBar Plaintiff Commencement $14,658 $8,308 Case management 29,324 12,551 Discovery, inspection and interrogatories 113,288 64,180 Interlocutory applications 7,680 2,940 Trial preparation and appearance 318,990 273,420 Total scale costs $483,940 $361,399
[159] There are minor differences in the justification for FNZC and ForBar’s respective costs calculations. Having considered them, and being satisfied of elements of unders and overs, I consider that the scale costs entitlement for ForBar ought to be the same as I have determined for FNZC in relation to all stages up to trial preparation and appearance.
[160] As to the claim for trial preparation and appearances, the major difference between the plaintiff and ForBar was the extent, if any, of allowance for third counsel. Consistently with the position for FNZC, I would have disallowed the claim for third counsel, but the plaintiff quite fairly made an acknowledgement of a one day appearance for Mr McIntosh as third counsel, presumably to acknowledge his material contribution in cross-examining one of the plaintiff’s witnesses. In all other respects, the plaintiff and ForBar agreed that category 3C should apply. ForBar’s final position on the claim for appearances was for 50 days for Ms Challis as principal counsel, 25 days (being 50 per cent of principal counsel) for Mr Turnbull, and 39 days for Mr McIntosh. I confirm a scale entitlement as sought for Ms Challis and Mr Turnbull, adding the one day conceded by the plaintiff for
Mr McIntosh. The result is as follows:
Description Amount Preparation of briefs $14,700 Preparation of list of issues, authorities and common
bundle
11,760 Preparation for hearing 14,700 Appearance – principal counsel 147,000 Appearance – second counsel 73,500 Appearance – third counsel 2,940 Total $264,600
[161] Accordingly, the ForBar scale costs entitlement is as follows:
Stage of proceeding Amount Pleadings $19,240 Case management 19,443 Discovery, inspection and interrogatories 101,940 Interlocutory applications 7,680 Trial preparation and appearance 264,600 Total scale costs $412,903
ForBar claim for increased costs
[162] ForBar understandably had to protect its position by thorough preparation on its own behalf in relevant aspects of the claim. In that sense, ForBar was put to additional work in the same way as the other defendants were, by the way in which the plaintiff’s case was run, and the breadth of the allegations pursued. I am satisfied that it is within the circumstances justifying an increase on costs from scale.
[163] However, in reflecting on the extent to which, both before and during trial, ForBar could reasonably review work done either for the directors and Credit Suisse, or for FNZC, a lesser increase on scale costs is justifiable. Weighing these considerations as best I can, I consider the increase on pre-trial matters should be limited to 10 per cent and that on trial preparation and appearances to 25 per cent of
the respective scale costs I have determined. The outcome is:
$148,303 + 10% $163,133 $264,600 + 25% 330,750 Total $493,883
ForBar disbursements
[164] An adjustment is required because of the concession made to not claim for Ms Challis or Mr Turnbull on the days they were absent, so that the claim in respect of each of them is 50 days rather than 52 days of trial.
[165] I also agree there should be a deduction of $2,025 for accommodation costs running through the Easter break. Subject to those deductions, I allow ForBar’s disbursements as claimed. In particular, I allow the electronic discovery disbursements, despite the plaintiff’s objection to these.
Another approach: Holdfast not applying to protracted cases
[166] The plaintiff insisted that a principled consideration of the defendants’ cost claims required me to apply the sequence of considerations suggested by the Court of Appeal in Holdfast,30 in relation to every one of the components of the costs claims that had not previously been addressed by interlocutory costs orders.
[167] Although submissions for some of the defendants suggested that the requirement to individually consider the appropriate scale costs for every step may not be necessary, the submissions for all defendants proceeded from analyses that complied with that form of consideration.
[168] Counsel left me with detailed schedules for all defendants, and the extent of the plaintiff’s objection to the cost categories claimed. Counsel touched on many individual items only briefly, or not at all, in submissions that were presented at a more abstracted level. The post-hearing process of considering the competing positions on every step has taken substantially more than the two days required for the hearing. At the end of that exercise, my firm view is that any enhancement in the quality of my costs determination resulting from it could not possibly justify the extent of the judicial resource required to complete it.
[169] The Court of Appeal’s judgment in Holdfast was a reaction to a trial Judge having the confidence to assess increased costs by a truncated process, and quantifying costs at least in part by reference to the actual costs that solicitors for the successful parties had incurred.
[170] A concern to rationalise in detail the justification for the amounts an unsuccessful litigant is required to pay the successful one on a step by step basis diminishes significantly when dealing with proceedings as protracted and complex as the present case has been. If there are, say, 40 to 50 line items making up a claim for all steps in the proceedings where costs have not been resolved, then differing approaches, such as between, say, 2A and 3B costs, will make a very substantial
difference to the scale costs entitlement.
30 Holdfast NZ Ltd v Selleys Pty Ltd, above n 10, at [43]–[48].
[171] A strong case can be made for confining the Holdfast approach of a line-by-line analysis of scale cost entitlement to cases such as that, involving relatively modest components, and a relatively standard range of issues.
[172] In protracted and complex litigation such as the present, I am satisfied that an equally principled costs determination can be produced if individual steps are aggregated into larger stages such as pleadings, discovery, inspection and interrogatories, interlocutory arguments and case management, and trial preparation and appearance. Particularly where the trial judge has managed the proceedings through those stages, her or his view at that level of abstraction would enable just as reasoned and principled a determination as the labyrinthine process that I have undertaken here.
[173] I make these observations for the sake of parties and the Court in costs disputes in similar cases in the future, in the hope that concerns to deal with such matters proportionately can prevail.
Costs on the costs application
[174] Given the scale of matters in issue, and the extent of the defendants’ aspirations as to costs, it is unreasonable to expect the plaintiff to have agreed with the claims as advanced. The plaintiff’s counsel advised in a memorandum on
11 November 2014 that the terms of the adverse costs insurance policy required the plaintiff to oppose all applications for costs. A hearing was therefore apparently inevitable. Nonetheless, it might have been expected that reasonable parties would endeavour to narrow the differences between them more than occurred.
[175] The defendants have succeeded substantially in awards above scale, which were firmly resisted by the plaintiff, and have also made out the reasonableness of significant disbursements, the recoverability of which were disputed.
[176] I am accordingly satisfied that this is a case in which it is appropriate to order costs on the costs application and each of the defendants is to have an order in their
favour for preparation and appearances at the costs hearing on a 2B basis, together
with reasonable disbursements related to this step in the proceeding.
Solicitors:
Wilson McKay, Auckland for plaintiff
Dobson J
Bell Gully, Auckland for first to third-named and fifth to seventh-named first defendants
Clendons, Auckland for fourth-named first defendant
Russell McVeagh, Wellington for second and third defendantsJones Fee, Auckland for fourth defendant
McElroys, Auckland for fifth defendant
Buddle Findlay, Christchurch for HLIF
Directors – Scale Costs Entitlement
Step31 Date Description Category/
Band
Days Amount
$
Pleadings 2 7 April 2008 Statement of defence 2C 6 9,600 3.6 19 August 2011 Amended statement of defence 2C 2 3,760 3.6 14 December 2011 Amended statement of defence 2C 2 3,760 9 15 April 2013 Amended statement of defence 3C 2 5,880 9 30 September 2013 Amended statement of defence 3C 2 5,880 28,880
Step Date Description Category/
Band
Days Amount
$
Case management 4.10 19 May 2008 Memorandum 3B 0.4 948 4.11 16 December 2008 Telephone conference (French J) 3B 0.3 711 4.11 10 March 2009 Telephone conference (French J) 3B 0.3 711 4.10 20 March 2009 Memorandum 3B 0.4 948 4.11 24 March 2009 Telephone conference (French J) 3B 0.3 711 4.11 18 March 2010 Telephone conference (French J) 3B 0.3 711 4.11 6 May 2010 Telephone conference (French J) 3B 0.3 711 4.11 11 May 2010 Telephone conference (French J) 3B 0.3 711 4.10 16 June 2010 Memorandum 3B 0.4 1,112 4.11 5 October 2010 Telephone conference (French J) 3B 0.3 834 4.11 22 June 2011 Telephone conference (French J) 3B 0.3 834 4.11 20 July 2011 Telephone conference (French J) 3B 0.3 834 4.11 19 August 2011 Telephone conference (French J) 3B 0.3 834 4.11 29 November 2011 Telephone conference (French J) 3B 0.3 834 4.11 10 February 2012 Telephone conference (French J) 3B 0.3 834 4.11 24 February 2012 Telephone conference (French J) 3B 0.3 834 4.10 8 March 2012 Memorandum 3B 0.4 1,112 4.11 9 March 2012 Telephone conference (French J) 3B 0.3 834 4.10 15 March 2012 Memorandum 3B 0.4 1,112 4.11 23 March 2012 Telephone conference (French J) 3B 0.3 834 4.11 11 May 2012 Telephone conference (French J) 3B 0.3 834 4.11 16 May 2012 Telephone conference (French J) 3B 0.3 834 11 3 December 2012 Memorandum 3B 0.4 1,176 11 6 December 2012 Joint memorandum 3B 0.4 1,176 11 8 March 2013 Memorandum 3B 0.4 1,176 11 25 March 2013 Memorandum 3B 0.4 1,176 13 10 April 2013 Telephone conference (Dobson J) 3B 0.3 882 13 4 June 2013 Telephone conference (Dobson J 3B 0.3 882 11 18 November 2013 Joint memorandum 3B 0.4 1,176 13 21 November 2013 Telephone conference (Dobson J) 3B 0.3 882 11 12 December 2013 Memorandum 3B 0.4 1,176 13 13 December 2013 Telephone conference (Dobson J) 3B 0.3 882 29,256
31 By reference to the steps as defined in Schedule 3 of the Schedule that applied at the date of the relevant step taken.
Step Date Description Category/
Band
Days Amount
$
Discovery, inspection and interrogatories 4.5 5 March 2012 Feeney’s discovery affidavit 3B 1.5 4,170 4.5 5 March 2012 Hunter’s discovery affidavit 3B 1.5 4,170 4.5 26 March 2012 Magill’s discovery affidavit 3B 1.5 4,170 4.5 30 March 2012 Thomas’s discovery affidavit 3B 1.5 4,170 4.5 3 April 2012 Withers’ discovery affidavit 3B 1.5 4,170 4.5 27 April 2012 Saunders’ discovery affidavit 3B 1.5 4,170 20 31 July 2012 Hunter’s second discovery affidavit 3C 7 20,580 4.7 20 January 2012 Inspection of plaintiff’s and other class
members’ discovery affidavits
3C 6 16,680 4.7 28 February 201232
14 May 2012
Inspection of the second and third
defendants’ discovery affidavits
2C 3 5,640 21 9 October 2012
3 December 2012Inspection of the second and third
defendants’ discovery affidavits2C 3 5,970 4.7 5 March 2012
17 May 2012
Inspection of Horrocks’ discovery
affidavits
2C 6 11,280 4.7 20 April 2012 Inspection of fourth defendant’s
discovery affidavit
2C 6 11,280 21 18 October 2012 Inspection of plaintiff’s supplementary
discovery
3C 6 17,640 16 9 July 2013 Notice requiring plaintiff to answer
interrogatories2B 1 1,990 21 11 November 2013 Inspection of fifth defendant’s
discovery affidavit
2C 6 11,940 128,020
Step Date Description Category/
Band
Days Amount
$
Interlocutory applications 4.10 13 May 2010 Memorandum by first defendants 2C 1 1,600 4.12 17 May 2010 Submissions in support of interlocutory
application (50% - see [62])
3C 1 2,370 4.15 17 May 2010 Appearance at hearing by principal
counsel (50% - see [62])
3C 0.5 1,185 22 10 February 2014 Interlocutory application by first defendants in respect of evidence 3C 2 5,880 24 24 February 2014 Submissions in support 3C 3 8,820 23 3 March 2014 Notice of opposition 3B 0.6 1,764 26 4 March 2014 Appearance at hearing by principal
counsel
3C 1 2,940 27 4 March 2014 Appearance at hearing by second
counsel
3C 0.5 1,470 26,029
Step Date Description Category/ Band Days Amount
$
Trial preparation and appearance 30 Preparation of briefs 3C 5 14,700 32 Preparation of list of issues, authorities
and common bundle
3C 4 11,760 33 Preparation for hearing 3C 5 14,700 34 Appearance at hearing by principal
counsel
3C 52 152,880 35 Appearance at hearing by second counsel 3C 26 76,440
32 The costs schedule was revised with effect from 14 June 2012. I have allowed for three days each, before and after that date.
Step Date Description Category/
Band
Days Amount
$
35 Appearance at hearing by third counsel 3C 22 64,680 34 Appearance at hearing by Mr Magill 3C 42 123,480 458,640
Summary: Directors’ scale costs entitlement Pleadings $28,880 Case management 29,256 Discovery, inspection and interrogatories 128,020 Interlocutory applications (not otherwise dealt with) 26,029 Trial preparation and appearance 458,640 Total $670,825
Directors’ increased costs (see [77], [79]) Pre-trial $212,185 + 15% 244,012.75 Trial preparation and appearance: $458,640 + 50% 687,960.00 Total costs $931,972.75
Credit Suisse – Scale Costs Entitlement
Step Date Description Category/
Band
Days Amount
$
Pleadings 2 22 May 2008 Statement of defence 2C 6 9,600 3.6 19 August 2011 Statement of defence to second
amended statement of claim2C 2 3,760 9 27 September 2013 Statement of defence to third amended
statement of claim
3C 2 5,880 19,240
Step Date Description Category/
Band
Days Amount
$
Case management 4.11 2 April 2008 Appearance – timetabling 3B 0.3 711 4.10 5 November 2008 Memorandum 3B 0.4 948 4.10 2 December 2008 Memorandum 3B 0.4 948 4.10 15 December 2008 Memorandum 3B 0.4 948 4.11 16 December 2008 Minute of French J (telephone
conference)
3B 0.3 711 4.11 10 March 2009 Minute of French J (telephone
conference)
3B 0.3 711 4.11 18 March 2010 Minute of French J (telephone
conference)
3B 0.3 711 4.10 5 May 2010 Memorandum 3B 0.4 711 4.11 6 May 2010 Minute of French J (telephone
conference)
3B 0.3 711 4.11 11 May 2010 Minute of French J (telephone
conference)
3B 0.3 711 4.10 19 May 2010 Memorandum 3B 0.4 711 4.11 5 October 2010 Minute of French J (telephone
conference)
3B 0.3 834 4.11 22 June 2011 Minute of French J (telephone
conference)
3B 0.3 834 4.10 18 July 2011 Memorandum 3B 0.4 1,112 4.11 20 July 2011 Minute of French J (telephone
conference)
3B 0.3 834 4.11 29 November 2011 Minute of French J (telephone conference) 3B 0.3 834 4.10 23 December 2011 Memorandum 3B 0.4 1,112 4.10 7 February 2012 Memorandum 3B 0.4 1,112 4.11 10 February 2012 Minute of French J (telephone
conference)
3B 0.3 834 4.11 24 February 2012 Minute of French J (telephone conference) 3B 0.3 834 4.11 9 March 2012 Minute of French J (telephone
conference)
3B 0.3 834 4.11 23 March 2012 Minute of French J (telephone
conference)
3B 0.3 834 4.10 8 May 2012 Memorandum 3B 0.4 1,112 4.11 11 May 2012 Minute of French J (telephone
conference)
3B 0.3 834 11 3 December 2012 Memorandum 3B 0.4 1,176 11 6 December 2012 Memorandum *33 2B 0.4 796 11 20 December 2012 Memorandum 3B 0.4 1,176
33 * = as agreed.
Step Date Description Category/
Band
Days Amount
$
11 8 March 2013 Memorandum * 3C 0.25 735 11 25 March 2013 Memorandum * 3B 0.1 294 11 5 April 2013 Memorandum * 3B 0.2 588 13 10 April 2013 Minute of Dobson J (telephone conference) 3B 0.3 882 11 4 June 2013 Memorandum 3B 0.4 1,176 13 4 June 2013 Minute of Dobson J (telephone conference) 3B 0.3 882 11 12 June 2013 Memorandum 3B 0.4 1,176 11 18 November 2013 Memorandum * 3C 0.25 735 13 21 November 2013 Minute of Dobson J (telephone
conference)
3B 0.3 882 11 12 December 2013 Memorandum * 3C 0.25 735 13 13 December 2013 Minute of Dobson J (telephone
conference)
3B 0.3 882 11 28 February 2014 Memorandum 3B 0.4 1,176 33,777
Step Date Description Category/
Band
Days Amount
$
Discovery, inspection and interrogatories 4.5 28 February 2012
and 14 May 2012
List of documents – first and second
affidavits
3C 6 16,680 4.6 Production of documents for inspection 2C 3 5,970 20 8 October 2012 and
3 December 2013
Lists of documents – third and fourth
affidavits
3C 7 20,580 4.7 20 January 2012 Inspection of plaintiff’s documents 3C 6 16,680 4.7 5 March 2012 Inspection of Feeney documents 3B 1.5 4,170 4.7 5 March 2012 Inspection of Hunter documents 3B 1.5 4,170 4.7 26 March 2012 Inspection of Magill documents 3B 1.5 4,170 4.7 30 March 2012 Inspection of Thomas documents 3B 1.5 4,170 4.7 3 April 2012 Inspection of Withers documents 3B 1.5 4,170 4.7 20 April 2012 Inspection of FNZC documents 2C 6 11,280 4.7 27 April 2012 Inspection of Saunders documents 3B 1.5 4,170 4.7 5 March 2012 and
17 May 2012
Inspection of Horrocks documents 2C 6 11,280 21 18 October 2012 Inspection of Godfrey Hirst documents 3C 6 17,640 21 31 July 2013 Inspection of Hunter documents
(second affidavit)
3C 6 17,640 16 19 July 2013 Notice to answer interrogatories 2B 1 1,990 21 11 November 2013 Inspection of ForBar documents 2C 6 11,940 156,700
Step Date Description Category/
Band
Days Amount
$
Interlocutory applications 22 Preparing objections to plaintiff’s
evidence *
3C 2 5,880 24 24 February 2014 Submissions in support of interlocutory
application *
3C 3 8,820 26 4 March 2014 Appearance at hearing by principal
counsel *
3C 1 2,940 27 4 March 2014 Appearance at hearing by second counsel * 3C 0.5 1,470 27 4 March 2014 Appearance at hearing by third counsel
*3C 0.5 1,470 22 12 December 2013 Notice of application re Millard
evidence
2C 2 3,980
Step Date Description Category/
Band
Days Amount
$
23 3 March 2014 Notice of opposition re leave to file
amended statement of claim
3C 2 5,880 25 4 March 2014 Preparation of bundle – admissibility
hearing *3B 0.6 1,764 25 Preparation of bundle * 3A 0.2 558 32,762
Step Date Description Category/ Band Days Amount
$
Trial preparation and appearance 30 Preparation of briefs * 3C 5 14,700 31 Preparation of list of issues, authorities
and common bundle *
3C 5 14,700 33 Preparation for hearing * 3C 5 14,700 34 Appearance at hearing by principal
counsel *
3C 52 152,880 35 Appearance at hearing by second counsel * 3C 26 76,440 35 Appearance at hearing by third counsel
*3C 26 76,440 349,860
Summary: Credit Suisse scale costs entitlement Pleadings $19,240 Case management 33,777 Discovery, inspection and interrogatories 156,700 Interlocutory applications 32,762 Trial preparation and appearance 349,860 Total $592,339
Credit Suisse increased costs (see [135]) Pre-trial $242,479 + 15% $278,850.85 Trial preparation and appearance $349,860 + 50% 524,790.00 Total costs $803,640.85
FNZC – Scale Costs Entitlement
Step Date Description Category/
Band
Days Amount
$
Pleadings 2 7 April 2008 Statement of defence 2C 6 9,600 3.6 26 August 2011 Statement of defence to second
amended statement of claim2C 2 3,760 9 3 October 2013 Statement of defence to third amended
statement of claim
3C 2 5,880 19,240
Step Date Description Category/
Band
Days Amount
$
Case management 4.11 16 December 2008 Appearance – case management
conference (CMC)
3B 0.3 711 4.11 10 March 2009 Appearance – CMC 3B 0.3 711 4.10 20 March 2009 Memorandum (25% claimed) 3B 0.4 237 4.11 24 March 2009 Appearance – CMC 3B 0.3 711 4.11 18 March 2010 Appearance – CMC 3B 0.3 711 4.11 6 May 2010 Appearance – CMC 3B 0.3 711 4.10 15 June 2010 Joint memorandum (25% claimed) 3B 0.4 278 4.11 5 October 2010 Appearance – CMC 3B 0.3 834 4.11 22 June 2011 Appearance – CMC 3B 0.3 834 4.11 20 July 2011 Appearance – CMC 3B 0.3 834 4.11 19 August 2011 Appearance – CMC 3B 0.3 834 4.11 29 November 2011 Appearance – CMC 3B 0.3 834 4.11 9 December 2011 Appearance – CMC 3B 0.3 834 4.11 10 February 2012 Appearance – CMC 3B 0.3 834 4.10 13 February 2012 Memorandum 3B 0.3 834 4.11 24 February 2012 Appearance – CMC 3B 0.3 834 4.11 9 March 2012 Appearance – CMC 3B 0.3 834 4.10 15 March 2012 Joint memorandum (33% claimed) 3B 0.4 367 4.11 23 March 2012 Appearance – CMC 3B 0.3 834 4.11 10 May 2012 Appearance – CMC 3B 0.3 834 11 3 December 2012 Joint memorandum (25% claimed) 3B 0.4 294 11 6 December 2012 Joint memorandum 3B 0.4 294 11 8 March 2013 Joint memorandum (25% claimed) 3B 0.4 294 11 25 March 2013 Joint memorandum (25% claimed) 3B 0.4 294 11 5 April 2013 Memorandum 3A 0.2 588 13 10 April 2013 Appearance – CMC 3B 0.3 882 11 18 November 2013 Joint memorandum (25% claimed) 3B 0.4 294 13 21 November 2013 Appearance – CMC 3B 0.3 882 11 12 December 2013 Joint memorandum (25% claimed) 3B 0.4 294 13 13 December 2013 Appearance – CMC 3B 0.3 882 19,443
Step Date Description Category/
Band
Days Amount
$
Discovery, inspection and interrogatories 4.5 20 April 2012 List of documents – review over 10,000
documents
3C 6 16,680 4.6 Production of documents for inspection 2C 3 5,640 4.7/
21
Inspection of first defendants’
documents
3C 6 16,680 4.7/
21
Inspection of second and third
defendants’ documents
3C 6 16,680
Step Date Description Category/
Band
Days Amount
$
4.7/
21
Inspection of fifth defendant’s
documents
2C 6 11,940 4.7/
21
Inspection of plaintiff’s documents 3C 6 16,680 21 October 2012 Inspection of supplementary affidavit
of documents
3C 6 17,640 101,940
Step Date Description Category/
Band
Days Amount
$
Interlocutory applications 4.14 Preparation for defended interlocutory
application
3C 1 2,370 4.15 17 May 2010 Appearance – defended interlocutory
application
3C 1 2,370 26 4 March 2014 Appearance – pre-trial applications 3C 1 2,940 7,680
Step Date Description Category/
Band
Days Amount
$
Trial preparation and appearance 30 Preparation of briefs 3C 5 14,700 33 Preparation for hearing 3C 5 14,700 31 Preparation of list of issues, authorities
and common bundle3C 4 11,760 34 Appearance at hearing by principal
counsel
3C 52 152,880 35 Appearance at hearing by second
counsel
3C 26 76,440 270,480
Summary: FNZC scale costs entitlement Pleadings $19,240 Case management 19,443 Discovery, inspection and interrogatories 101,940 Interlocutory applications 7,680 Trial preparation and appearance 270,480 Total $418,783
FNZC increased costs (see [155]) Pre-trial $148,303 + 15% $170,548.45 Trial preparation and appearances $270,480 + 50% 405,720.00 Total costs $576,268.45
ForBar – Scale Costs Entitlement
Summary - ForBar scale costs entitlement Pleadings $19,240 Case management 19,443 Discovery, inspection and interrogatories 101,940 Interlocutory applications 7,680 Trial preparation and appearance 264,600 Total $412,903
ForBar increased costs (see [163]) Pre-trial $148,303 + 10% $163,133 Trial preparation and appearances $264,600 + 25% 330,750 Total costs $493,883
Summary of costs ordered in favour of defendants Directors (except Mr Horrocks) $931,972.75 Mr Horrocks 260,279.00 Credit Suisse 803,640.85 FNZC 576,268.45 ForBar 493,883.00 Total $3,066,044.05 Together with disbursements that are to be quantified in accordance with the determinations in respect of each
of the defendants.
17
8
0