Houghton v Saunders
[2013] NZHC 312
•26 February 2013
IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY
CIV2008-409-348 [2013] NZHC 312
BETWEEN ERIC MESERVE HOUGHTON Plaintiff
ANDTIMOTHY ERNEST CORBETT SAUNDERS, SAMUEL JOHN MAGILL, JOHN MICHAEL FEENEY, CRAIG EDGEWORTH HORROCKS, PETER DAVID HUNTER, PETER THOMAS, JOHN WITHERS
First Defendants
ANDCREDIT SUISSE PRIVATE EQUITY INC (FORMERLY CREDIT SUISSE FIRST BOSTON PRIVATE EQUITY INC)
Second Defendant
ANDCREDIT SUISSE FIRST BOSTON ASIAN MERCHANT PARTNERS LP Third Defendant
ANDFIRST NZ CAPITAL SECURITIES LIMITED
Fourth Defendant
ANDFORSYTH BARR LIMITED Fifth Defendant
Counsel: A Forbes QC and Ms Mills for the Plaintiff
D Cooper for the First Defendants
A Olney and C Curran for the Second and Third Defendants
D McLellan for the Fourth Defendant
A Challis for the Fifth Defendant
Judgment: 26 February 2013 (On The Papers)
JUDGMENT OF HON. JUSTICE FRENCH
RE PLAINTIFF’S APPLICATION TO RECALL COSTS ORDER
MADE IN JUDGMENT OF 1 AUGUST 2012 (SPLIT TRIAL - DETERMINATION OF PRELIMINARY QUESTIONS)
ERIC MESERVE HOUGHTON V TIMOTHY ERNEST CORBETT SAUNDERS, SAMUEL JOHN MAGILL, JOHN MICHAEL FEENEY, CRAIG EDGEWORTH HORROCKS, PETER DAVID HUNTER, PETER THOMAS, JOHN WITHERS HC CHCH CIV2008-409-348 [26 February 2013]
[1] On 1 August 2012, I delivered a judgment concerning the plaintiff’s
application for a split trial/determination of preliminary questions.1
[2] At the end of the judgment, I held that the defendants were entitled to costs on a 2B basis and so ordered.
[3] On 7 December 2012, counsel for the plaintiff, Mr Forbes, QC filed a memorandum seeking clarification/recall of my costs decision and also querying the disbursements claimed by Credit Suisse.
Background history
[4] In order to be able to understand the arguments that have arisen, it is necessary to set out the background history of the application in some detail.
[5] The plaintiff, Mr Houghton, is a former shareholder of the failed company Feltex Carpets Limited. He has issued representative proceedings on behalf of himself and approximately 3,000 other shareholders against the Feltex directors and others associated with a public float share issue that took place in May/June 2004.
[6] The claim centres primarily on the prospectus, which Mr Houghton claims contained untrue and misleading statements.
[7] In September 2011, Mr Forbes filed an application seeking an order for a split trial under r 10.15 of the High Court Rules. The specific order sought was an order directing that all issues as to liability in respect of all claimants be heard and determined separately before any issues as to loss and individual reliance.
[8] The defendants opposed the application and also filed an application of their own to amend the representative order.
[9] The defendants wanted to have the two applications heard at the same time. However, the fixture for the split trial application had already been allocated and in
my assessment there was insufficient time available to hear both. I therefore directed that the two day hearing which had been set down for 7 and 8 December 2011 was to be restricted to the split trial application.2
[10] The hearing duly took place on 7 and 8 December 2011.
[11] At the hearing, it was common ground that the only effective and manageable way to progress litigation of this scale was to hear the claim in two stages. A consensus developed that instead of stages 1 and 2 being a liability/loss split as sought by the plaintiff, the more appropriate course of action was to have Mr Houghton’s own claim heard in its entirety (i.e. liability, loss and reliance). That of necessity would involve resolution of all issues that were common to Mr Houghton and the other claimants as well as issues that were unique to Mr Houghton. In the second stage, the individual aspects of all the other claimant shareholders would be considered.
[12] It was further agreed that a list of common issues (meaning issues common to Mr Houghton and all other claimants), to be traversed at the stage 1 hearing, should be compiled in advance. The list would be compiled on the basis that findings on the listed issues would be binding as between the defendants and all members of the represented class.
[13] The defendants were opposed to any non-common issues being considered at stage 1, other than those pertaining specifically to Mr Houghton.
[14] While agreeing that Mr Houghton’s claim should be heard in its entirety at stage 1 and that stage 2 should be devoted to consideration of individual aspects for the other claimants, Mr Forbes also wanted stage 1 to include consideration of some additional issues which did not arise out of Mr Houghton’s claim. He accepted at the December hearing that insofar as any of these additional issues were not common as between Mr Houghton and all other claimants, the findings would not bind the parties. However, he argued that a useful purpose would still be served by having
these additional questions considered at stage 1, because although not binding, the answers would provide significant guidance to the parties and promote settlement.
[15] At the December hearing, Mr Forbes presented a list of these proposed additional questions. The defendants had not seen the list before and Mr Forbes accepted the formulation of the questions needed re-working.
[16] The hearing was then adjourned, orders being made that counsel for the first defendants, Mr Cooper, would compile a list of what the defendants regarded as the common issues and Mr Forbes would provide a revised list of his proposed additional non-common issues.
[17] At a subsequent conference call, Mr Forbes confirmed he did not dispute the list of common issues prepared by Mr Cooper.
[18] As directed, Mr Forbes also filed a memorandum detailing the additional questions which the plaintiff sought to be determined at stage 1.
[19] The defendants maintained their opposition to any of the proposed additional guidance questions being part of stage 1 and accordingly a further hearing was held on 27 March 2012.3
[20] In the course of reply submissions at the March hearing, Mr Forbes sought to overcome the possible limitations of r 10.15 by invoking the inherent jurisdiction. He also contended (contrary to the position taken in December) that four of his proposed additional questions could result in binding determination.
[21] Both points were new and having only raised them in reply, he accepted that the defendants should be given a further opportunity to be heard.
[22] That resulted in a further hearing which was held on 30 May 2012.
3 The judgment incorrectly describes the date of this hearing as 21 March 2012.
[23] In my subsequent judgment of 1 August 2012, I dismissed the application to include the additional questions, reserving leave to the plaintiff to apply for directions establishing a sub-group or sub-groups within the class and also reserving leave to any party to apply for orders varying the scope of the stage 1 hearing.
[24] As to costs, I had this to say:-
[45] The absence of class action rules is creating difficulties for the parties in this case and, in particular, for the plaintiff, who bears the carriage of the litigation. The way in which the current application morphed over time reflects those difficulties.
[46] However, while taking that into account, I consider that the defendants are nevertheless entitled to costs on a 2B basis and I so award.
Application for clarification/recall
[25] Since my judgment was delivered, a dispute has arisen between the parties as to whether the costs award covers all four hearing days, or whether it is or should be limited to the March and May hearings, with the costs relating to the December hearing lying where they fall.
[26] In contending that the 7 and 8 December 2011 hearing should be excluded from any costs award, Mr Forbes advances the following arguments.
(a) At the conclusion of the December hearing, the defendants had not succeeded in their application.
(b)The plaintiff’s application was successful to the extent that there was a consensus reached that the substantive hearing should be in two stages.
(c) Part of the December hearing was taken up with discussion of other issues.
(d) The costs award was made without the plaintiff being given an
opportunity to be heard. The plaintiff’s expectation was that costs
would only be dealt with once the judgment had been delivered and the outcome known.
[27] In addition, Mr Forbes queries the amount of the disbursements claimed by Credit Suisse and also contends that any costs payable to the fourth and fifth defendants should be discounted.
Discussion
Does or should the costs award cover all four hearing days?
[28] As currently expressed, the order is not limited to only two days of the hearing, but covers all four days. That was my intention.
[29] It is therefore necessary to treat Mr Forbes’ application as one for recall of
my judgment, rather than clarification.
[30] In hindsight, it would have been preferable for me to have deferred any costs decision and called for further memoranda on costs. However, it was an interlocutory application and because I considered I was doing no more than applying the rule that costs should follow the event, I considered further submissions would only subject the parties to further delay and unnecessary expense.
[31] Whether this amounts to a breach of natural justice warranting recall is debatable, having regard to r 14.8(1)(a) and the fact that counsel had the opportunity to raise the issue of costs at the hearing.
[32] However, regardless of whether there are grounds for recall, there is power to revisit the costs award under r 14.8(2). Rule 14.8(2) provides that the Court may reverse, discharge or vary an order for costs on an interlocutory application if satisfied subsequently that the original order should not have been made.
[33] I have carefully considered the submissions made by Mr Forbes.
[34] However, I am not persuaded costs should be limited to the March and May hearings.
[35] The defendants have never opposed there being a two stage trial process. What they opposed was a split between liability and loss. What they advocated at the December hearing, and what they eventually achieved, was that stage 1 should be devoted to determining Mr Houghton’s claim in its entirety. My 1 August 2012 judgment describes the parties as reaching a “consensus” at the December hearing. The consensus was that Mr Forbes after hearing the defendants’ arguments responsibly agreed with the defendants’ position on that key point.
[36] In those circumstances, I see no reason why the defendants should not be entitled to costs for all four days. The plaintiff was not successful in obtaining a trial split between liability and loss issues and did not succeed in obtaining orders for the preliminary determination of his non-common additional issues.
[37] I also do not accept that the defendants’ application for an amendment to the representative order can properly be regarded as unsuccessful in circumstances where it was not the subject of the December hearing and has never been formally determined. The defendants agreed to put it on hold, but that was only because the plaintiff conceded Mr Houghton’s claim should be heard in its entirety at stage 1 and abandoned his previous insistence on a liability/loss split. Mr Forbes relies on the fact that the defendants sought amendment of the representative order in their notice of opposition to the plaintiff’s split trial application and the fact that the amendment of the representative order was mentioned in submissions presented at the hearing. However, some of the defendants’ written material would have been prepared before I directed that the application for the amendment of the representative order would not be heard in December. Insofar as the representative order and the associated doctrine of res judicata formed part of the reasons for the defendants’ opposition to the liability/loss split, then issues about the representative order were properly traversed in December. The fact that they were traversed is not in my view a reason for denying costs.
[38] Nor do I consider that because issues relating to discovery and recusal were discussed at the December hearing, that should alter the imposition or calculation of costs. The time spent on those matters was insignificant. They were essentially housekeeping issues raised by me at the end of the hearing in order to take advantage of the fact that all counsel were gathered in the one place.
Should the costs of the fourth and fifth defendants be discounted?
[39] Mr Forbes contends that the costs of the fourth and fifth defendants should be reduced by fifty per cent to reflect their limited participation in the hearing.
[40] However, as submitted by Mr McLellan, the fact counsel for the fourth and fifth defendants made only relatively brief submissions at the hearing is simply a consequence of the order in which counsel address the Court. It is not reflective of the amount of preparation required, nor the time spent in Court. I accept too as submitted by Mr McLellan that given their separate interests both defendants had the right to appear and be heard. It is correct that at the 30 May 2012 hearing, Mr McLellan represented both defendants, but only one set of costs is being sought in respect of that hearing.
[41] I am not prepared to discount the costs of the fourth and fifth defendants.
Disbursements claimed by Credit Suisse
[42] Mr Forbes queries the level of disbursements claimed by Credit Suisse. In particular, he submits that the costs of flights and accommodation incurred by Credit Suisse are at a much higher level compared with those incurred by the other defendants and require some explanation.
[43] Mr Olney for Credit Suisse however points out that its disbursements for flights relating to March and May, and its May accommodation, were actually less on a per person basis than those claimed by the first defendant. The higher March accommodation is attributable to the fact that although the hearing finished a day earlier than scheduled, he was not able to cancel the second night’s accommodation.
In the circumstances, I consider the disbursements are reasonable and properly claimable.
Outcome
[44] The plaintiff’s application for recall/variation of my judgment of
1 August 2012 is dismissed.
[45] The plaintiff is ordered to pay costs as follows:
(a) $19,900.00 together with disbursements of $3,144.35 to the first defendant.
(b)$25,074.00 together with disbursements of $5,967.50 to the second and third defendants.
(c) $15,721.00 together with disbursements of $3,172.90 to the fourth defendant.
(d)$13,134.00 together with disbursements of $3,043.28 to the fifth defendant.
[46] There will be no costs on this application. Only one defendant sought costs and the matter has been dealt with by relatively brief memoranda.
Solicitors:
Wilson McKay, Remuera, Auckland for the Plaintiff
Bell Gully, Auckland for First DefendantsClendons, Auckland for the Fourth-Named First Defendant
Russell McVeagh, Wellington for Second and Third Defendants
Jones Fee, Auckland for the Fourth DefendantMcElroys, Auckland for the Fifth Defendant
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