Hunter Grain Limited v J Swap Contractors Limited
[2012] NZHC 755
•26 April 2012
IN THE HIGH COURT OF NEW ZEALAND TAURANGA REGISTRY
CIV-2008-470-837 [2012] NZHC 755
BETWEEN HUNTER GRAIN LIMITED First Plaintiff
ANDHUNTER GRAIN (NZ) LIMITED Second Plaintiff
ANDJ SWAP CONTRACTORS LIMITED Defendant
Hearing: On the Papers (Submissions received 23 February 2012) (Heard at Hamilton)
Counsel: L J Taylor, I W Thorpe and S B Kellett for First and Second Plaintiffs
J A MacGillivray for Defendant
H Fulton for Mr Price
P J Crombie for Staples Rodway and Mr Rogers
Judgment: 26 April 2012
JUDGMENT OF COOPER J ON COSTS
This judgment was delivered by Justice Cooper on
26 April 2012 at 11.00 a.m., pursuant to r 11.5 of the High Court Rules
Registrar/Deputy Registrar
Date:
Solicitors:
Izard Weston, DX SP 27002, Wellington
Tompkins Wake, PO Box 258, Hamilton 3240
Cooney Lees Morgan, PO Box 143, Tauranga 3140
Copy to:L J Taylor, PO Box 5537, Lambton Quay, Wellington 6145
I W Thorpe, PO Box 10048, Wellington
J Burton, PO Box 5348, WellingtonH Fulton, PO Box 5577, Wellesley Street, Auckland 1141
HUNTER GRAIN LIMITED V J SWAP CONTRACTORS LIMITED HC TAU CIV-2008-470-837 [26 April
2012]
Introduction
[1] On 12 September 2011 I gave judgment for the first plaintiff against the defendant in the sum of $4,638,521 together with interest in accordance with the Judicature Act 1908. I held that the defendant was entitled to judgment on the first plaintiff’s claim based on the lease of premises in New Plymouth, but I also held that the second plaintiff was entitled to judgment on its claim on the lease, and I directed an inquiry as to the damages it had sustained.
[2] I held that the plaintiffs were entitled to costs and have received and considered written memoranda from the parties in which:
(a) The plaintiffs seek costs on an indemnity basis, or increased costs based on category 3 band C costs, plus 50 per cent. They exclude some procedural steps for which costs orders have already been fixed on a 2B basis on a number of interlocutory applications; and
(b)The defendant accepts it should pay costs calculated in accordance with category 3 band C; they oppose the claims for indemnity or increased costs.
[3] There are also some issues in respect of non-party costs, the plaintiffs contending that those costs should be met either by Mr Price (against whom an order for non-party discovery was made) or by the defendant.
Category 3 Band C costs
[4] There is no dispute that category 3 should apply unless the plaintiffs can succeed on their claim for increased or indemnity costs.
[5] The plaintiffs contend that in the case of all steps in the proceeding where costs orders have not already been made, band C should apply, on the basis that all of the other steps took a comparatively long time. While not accepting that all steps would have needed the time specified in Schedule 3 for band C, Mr MacGillivray,
for the defendant, adopts a pragmatic approach, accepting that the allowances set out in band C should apply on the basis that some steps would in fact have taken longer than provided for in Schedule 3.
[6] The plaintiffs also claim an allowance for second and third counsel at trial. The defendants accept that this is appropriate.
[7] On the basis set out above, the plaintiffs calculate that costs in accordance with Schedule 3 band C total $547,633. The basis of that calculation was helpfully and fully set out in schedules attached to the memorandum of counsel for the plaintiffs, dated 4 October 2011. The defendant has not challenged any aspect of the plaintiffs’ calculation, focussing rather on its opposition to the claims for indemnity or increased costs.
Disbursements
[8] The plaintiffs seek payment of disbursements in the sum of $543,595.97. Once again, the memorandum of counsel shows clearly how this sum was calculated.
[9] Included in the total is the sum of $80,490.57, referable to expert accounting evidence related not to the present proceeding, but to the separate proceeding commenced by the first plaintiff against Mr Price and Price Commodities Ltd, on
14 March 2008. That proceeding was referred to at [205] – [207] of my judgment of
12 September 2011. Counsel for the plaintiffs sought to justify this part of the claim for disbursements on the basis that the two sets of proceedings were related, and that the damages alleged to arise from the Price proceedings were the same as those arising in the present case. Counsel advised in their memorandum of 4 October 2011 that:
There was no recovery of expert’s fees in the Price proceedings. Therefore, any work conducted by Deloitte in Price is equally applicable to the Swap proceedings and ought to be recovered.
[10] The defendant objects to paying this amount. In his memorandum of
28 October 2011 Mr MacGillivray makes the point that the costs in question were
not incurred in the present proceeding. The point is unanswerable, and I accept that
the plaintiffs’ claim for this alleged disbursement should not be sustained.
[11] For the rest, the defendant does not take issue with the sums claimed as disbursements. Deducting the sum of $80,490.57 from $543,595.97 (the total of the plaintiffs’ claim for disbursements) leaves $463,105.40 as expenses paid or incurred within the definition of “disbursement” in r 14.12 of the High Court Rules. Having considered the sums claimed, I am satisfied that the items claimed are all reasonable and properly able to be claimed. In the absence of opposition from the defendant I will direct that the plaintiffs’ disbursements should be paid by the defendant in the sum of $463,105.40.
Non-party costs
[12] In my judgment of 12 September 2011, I directed that counsel should deal in their costs submissions with the appropriate disposition of the applications for costs made by non-parties, Mr Price and Staples Rodway. Mr Price was the subject of an application for non-party discovery. Mr Brent Rogers of Staples Rodway was subpoenaed in the circumstances that I addressed at [267] – [269] of my judgment. Both Mr Price and Staples Rodway seek costs.
[13] The plaintiffs contend that non-party discovery was necessary against Mr Price, because he failed to discover the documents in question in the proceedings previously brought by the plaintiffs against him personally. They argue that the documents, which concerned payments made by the Richard Price Business Trust to the Richard Price Family Trust and the S.A.S. Trust (which was the family trust of Stephen Swap and his wife, Arlene) were highly relevant to the plaintiffs’ claim against him, as well as being relevant in the present proceeding. The defendant simply submits that it should not be liable for the costs.
[14] Mr Price’s claim for costs was initially propounded by Mr Fulton, in a memorandum filed on 15 March 2011. Costs were sought in the sum of $2,750 plus GST and disbursements. The only disbursement referred to was a sum of $98 for photocopying and transmitting documents to the plaintiffs. In his memorandum,
Mr Fulton referred to the fact that in seeking the order, the plaintiffs had relied on an affidavit of Mr Wynn-Williams in which he said that the first plaintiff would be prepared to pay Mr Price’s reasonable costs of complying with the orders sought.
[15] In response to Mr Fulton’s memorandum, Mr Thorpe responded on 17 March
2011 raising the issue now relied on, namely that Mr Price should have discovered the documents in the proceeding that had been commenced against him, and had he done so, there would have been no need for the plaintiffs to incur the costs now claimed. As to Mr Wynn-Williams’ affidavit, Mr Thorpe, pointed out that at the time the order for non-party discovery was made, the issue of costs was reserved by the Court after the plaintiffs explained that they did not wish to pay costs in the event that the documents produced turned out to be ones that Mr Price should have discovered previously.
[16] Mr Thorpe’s memorandum elicited a further memorandum from Mr Fulton, on 24 March 2011. In that further response Mr Fulton contended that it was wrong to argue that the discovered documents were relevant and discoverable in the action against Mr Price. Mr Fulton contended that the application of Price Commodities Ltd’s profits or dividends were simply not relevant to the other proceeding. There had been no allegation that Mr Price had arranged to share his profits with a director of the defendant.
[17] It is difficult to resolve the issue about what was relevant under the pleadings in the proceeding against Mr Price and Price Commodities Ltd without a close scrutiny of the statement of claim in that case, something which the plaintiffs have not now invited me to do, and in any event I do not think it is necessary to do so.
[18] I note that r 8.22(3) of the High Court Rules provides that, an order may be made that the applicant for non-party discovery pay to the person from whom discovery is sought, that person’s expenses of and incidental to the application, if it is just to do so. In the present case, the costs sought by Mr Price include amounts that reflect the fact that the application was initially opposed, was the subject of apparent attempts by Mr Price to evade service, and when the order made was complied with, documents were only made available in redacted form. When the
documents were made available in unredacted form by Staples Rodway, they formed an important part of the evidence which I was satisfied showed that J Swap was liable as an accessory to Mr Price’s breach of fiduciary duty owed to the plaintiffs.
[19] As I read r 8.22(3), it does not enable the Court to order that the costs of a non-party against whom an order for discovery has been made should be paid directly by a party to the proceeding who was not the applicant for the order. That is not a point taken by Mr MacGillivray, who in his submissions for the defendant simply asserts that the defendant is not liable for the costs payable to Mr Price.
[20] Nevertheless, I consider that in all the circumstances the appropriate course to follow will be to make no order for the payment of costs to Mr Price. The documents which were the subject of the application for non-party discovery were highly relevant to the dishonest conduct which caused the plaintiffs to suffer loss for the reasons explained in my judgment. I do not consider it would be just in the circumstances to require the plaintiffs to meet the costs of obtaining those documents.
[21] In a memorandum dated 1 March 2011, counsel for Staples Rodway sought an order that the plaintiffs pay the costs of those non-parties in the sum of $4,340 together with disbursements and GST, leading to a total claim of $5,212.
[22] Staples Rodway were in a difficult position, since they have provided accountancy services to Mr Price. Mr Crombie maintained it was oppressive and unnecessary for the plaintiffs to have issued a subpoena to Mr Rogers once Mr Price had discovered and provided the documents in redacted form to the plaintiffs. In those circumstances, he submitted that the proper course to follow was to apply for an order setting aside or modifying the claim to confidentiality. While I suppose that course could have been followed, I consider that Mr Crombie’s submission overlooks the reality of the situation, which was that the trial was proceeding and was already into its ninth hearing day when the documents were made available in redacted form. Mr Price had then evidently instructed his counsel, who was in Auckland, to adopt the stance to the Court that the documents in unredacted form contained all the information which was necessary.
[23] It was only when the Court was able to see the documents in unredacted form (thanks to the swift co-operation given by Mr Rogers in response to the subpoena) that the Court was able to see that the assertion made on behalf of Mr Price was plainly incorrect. The process suggested by Mr Crombie, which would have required time to be found to argue the confidentiality point, might not have been as efficacious as the course in fact followed. The Court was grateful for the information that Staples Rodway was able to provide through Mr Rogers, and for the timely basis on which it was provided; this ensured that the trial did not have to be delayed to deal with this issue. In the circumstances, however, I do not consider that the plaintiffs should be criticised for the procedural path they took.
[24] In this case, I consider the appropriate course to follow is to order that the costs sought by Staples Rodway should be paid by the plaintiffs. Those costs should then be recoverable as a disbursement and to the extent necessary I approve that course being followed under r 14.12.
Indemnity or increased costs
[25] The plaintiffs’ claim to indemnity costs is advanced under r 14.6(4)(a) and (b). The former enables the Court to order the payment of indemnity costs by a defendant who has acted vexatiously, frivolously, improperly or unnecessarily in defending a proceeding, or a step in a proceeding. The latter contemplates such an order where a party has ignored or disobeyed orders or directives of the Court.
[26] The plaintiffs submit that given the findings of fact at the trial, the defendant cannot have reasonably held the view that its denials of the plaintiffs’ case were true. Counsel argue that the defendant should never have denied that there was a contract between the defendant and Hunter Grain formed after the August 2004 meeting; that the contract required termination on notice and that it had been breached; that the defendant knew of Mr Price’s wrongful conduct as a director of Hunter Grain and assisted him with that, knowing it was wrong to do so; and that Mr Price had been involved in the defendant’s dealings with Toepfer in the December 2007/January
2008 period. Had those matters not been denied, it would have been plain that the defendant was likely to be liable to the plaintiffs with the only issue being quantum.
[27] As far as quantum is concerned, the plaintiffs submit that the defendant ran its case in a way that unnecessarily added to the time and expense of the trial and which showed a vexatious determination to avoid damages liability. In this respect, counsel rely on the fact that expert accounting witnesses retained by the defendant simply criticised the plaintiffs’ damages calculations without constructing a competing or alternative model of the plaintiffs’ business. It was submitted that the defendant had relied on evidence from Mr Swap which was unreliable and rejected in material particulars, and that the defence had been conducted on a basis which showed the defendant to be simply determined to avoid liability and prepared seriously to mislead the Court to achieve that outcome.
[28] I do not consider that the matters raised by the plaintiffs would justify an order for indemnity costs. I note that the argument for such costs was not advanced in relation to particular steps taken, rather it confronted the whole conduct of the defence. In response to the claim, Mr MacGillivray points out that the defendant succeeded on the cause of action alleging breach of fiduciary duties owed as a result of the alleged “trading partnership”, and submits that the defendant’s denials of various allegations made by the plaintiffs were genuine and reasonable. The fact that the Court found against the defendant in relation to those allegations did not mean that its denials were improper.
[29] I accept the defendants’ principals may have been genuine in their belief that there was no contractual arrangement between the defendant and Hunter Grain. Such a belief may well have coloured actions taken in the course of severing the relationship.
[30] As to issues raised about the conduct of the defence on quantum issues, it is
relevant to recall that in Mr Jordan’s first brief provided for the plaintiffs, in August
2010, the damages alleged stood at $12,916,000 (excluding interest and costs). In Mr Jordan’s second brief, of 23 December 2010, the maximum reach of the claim had been revised downwards to $9,590,000 partly (and avowedly) as a result of issues raised by the defendant’s experts Messrs Cregten and Lane. A third revision of Mr Jordan’s brief provided in March when the trial was well underway and which he gave in evidence saw the maximum claim reduced still further to $9,164,000. In
the result, the damages awarded were $4,638,521 (plus interest). I note Mr Thorpe’s contention, in his Memorandum in reply dated 23 February 2012, that the reduction in the quantum calculation made in Mr Jordan’s second brief could not have been made earlier because of necessary financial information not being made available earlier by the defendant, but overall this is an unconvincing narrative to support a claim for indemnity costs.
[31] Overall, I am satisfied this is not a case for the award of indemnity costs.
[32] In the alternative, the plaintiffs seek increased costs under r 14.6(3), relying on both r 14.6(3)(a) and (b). Once again, counsel for the plaintiffs make a wide- ranging tack on the conduct of the proceeding by the defendant, as well as noting that the time required for some steps was inevitably much greater than allowed for in band C of Schedule 3. This applies in particular to the process of discovery, production for inspection and inspection of documents. Counsel say that the time taken is now conservatively estimated to have been 30 working days for steps which, under the Schedule, would support a claim for 15 days. The claim for increased costs in respect of discovery and inspection is bolstered by a wide-ranging attack on what counsel described as a “campaign to delay discovery”, and counsel for the plaintiffs have gone into some detail about the various interlocutory applications that were made. Mr Thorpe has referred to a minute of 8 July 2009 by Associate Judge Doogue, which included reference to non-compliance with a minute that he had earlier issued, and the observation that the defendant apparently sought to reverse the obligation to define discovery by making that the obligation of the plaintiff rather than that of the defendant. Mr MacGillivray has characterised the defendant’s conduct as having been to attempt to clarify the scope of discovery, and not based on a desire to withhold relevant information from the plaintiffs. Mr Thorpe also referred to the judgment of Asher J delivered on 2 October 2009 when he referred to “unacceptable delay of these proceedings as a consequence of unsuccessful applications by the defendants.”
[33] I do not think it is necessary to go into great detail in resolving the rival allegations of counsel on this matter. I do not understand the defendant to challenge the plaintiffs’ claim about the time that was in fact spent on discovery. It is clear to
me that the discovery and inspection process was very time-consuming, and well in excess of what the Schedule would allow. In the circumstances, it seems that r 14.6(3)(a) would contemplate an order for increased costs being made, and I consider that for those three steps, it will be appropriate to allow for an increment of
50 per cent. I calculate that such an increment would total $17,775.
[34] The plaintiffs are also critical of the substance and motivation of various interlocutory applications made by the defendant. The difficulty with awarding increased costs in respect of the interlocutory applications is that those that were pursued and dismissed resulted in costs awards being made in favour of the plaintiffs at the time (apart from an application to consolidate the present proceedings with those against Mr Price, which was determined in favour of the defendant). Consequently, they must notionally be excluded in accordance with the plaintiffs’ general stance that they do not seek to reopen costs awards already made. This applies, of course, to the strike out application, which the plaintiffs point to as being particularly unmeritorious. Similarly, the plaintiffs succeeded on an application (dated 13 November 2008) made by the defendant for security for costs, but that was another case where they were awarded costs on a 2B basis, and I do not consider that it is possible now to rely on the disposition of that application to build an application for increased costs.
[35] The same applies to the application for security for costs determined on
1 May 2009 by Associate Judge Christiansen, although there was a further issue raised concerning security which was not resolved by the time of the commencement of the trial and eventually not pursued. The difficulty with awarding increased costs on that head, is that the plaintiffs do not make any attempt to quantify how much additional time might have been spent in preparation or indeed, in considering the issues during the trial. Consequently, the Court is unable to quantify an amount that might notionally be awarded as increased costs. The same applies to the issues in respect of document confidentiality referred to in the memorandum of counsel for the plaintiffs.
[36] The plaintiffs also complain about the failure to discover the various documents showing the payments that have been received by the S.A.S. Trust, about
the late amendment of the defence to which I referred in my judgment of
18 February 2011, the failure to call Mr Price as a witness and unsatisfactory aspects of the actual conduct of the trial.[1]
[1] Hunter Grain Ltd v J Swap Contractors Ltd HC Tauranga CIV-2008-470-837, 18 February 2011.
[37] Once again, the issues raised are part of a generalised argument justifying an order of increased costs without any attempt to quantify an appropriate figure other than the overall submission that taking all the matters raised into account would justify an increase in the total costs of 50 per cent to which the plaintiffs would be entitled under the Schedule.
[38] Dealing with these matters in turn, I note that the costs of obtaining the documents relating to the S.A.S. Trust have, of course, been taken into account in the discussion above about the applications made by the non-parties. The issue as to the amended statement of defence was dealt with during the trial and should be notionally provided for as part of the ordinary allowance for appearance at the trial. It cannot be said that there was any duty on the defendant to call Mr Price, notwithstanding the advice given of 1 December 2010 that Mr Price would be appearing under subpoena. I add that, from what I have been able to learn from the facts, it is doubtful that his appearance at the trial would have saved time, or cost.
[39] Turning then to the trial itself, complaint is made about the length of Mr Fisher’s cross-examination of Mr Dossor. I agree that the cross-examination was too long, certainly when measured against the concessions obtained. I accept also the submission that during the cross-examination of Mr David Swap and Mr Stephen Swap, too many unmeritorious objections were made. Once again, however, I am not persuaded that justice requires there to be a further allowance beyond the scale provision for appearance at the trial.
[40] I note that the defendant does not advance a claim for costs against the first plaintiff insofar as its cause of action based on the lease of the New Plymouth premises is concerned. The second plaintiff does not advance a separate claim for
costs in respect of that matter.
Result
[41] Consequently, all costs issues can now be regarded as determined by the orders which I make that:
(a) the defendant is to pay the first plaintiffs’ costs in the sum of
$565,408. (This is the sum of the 3C costs figure of $547,633, plus
$17,775, being the 50 per cent increased allowance for discovery, production and inspection);
(b) the defendant is to pay the first plaintiffs’ disbursements in the sum of
$463,105.40.
(c) the first plaintiff is to pay the costs of Staples Rodway in the sum of
$5,212, but that sum is to be reimbursed to the first plaintiff by the defendant and may be recovered by the first plaintiff accordingly (as a disbursement in addition to the sum mentioned in paragraph (b)).
[42] Mr Price’s application for costs is dismissed.
[43] I note finally that I received a memorandum dated 4 October 2011 from counsel for the plaintiffs on the question of interest. I have not been referred to any response to that memorandum. Counsel for the defendant should indicate forthwith whether there is any aspect of the plaintiffs’ memorandum which is in issue. If no issue is raised within five working days of delivery of this judgment, the first plaintiff will be entitled to judgment for interest in accordance with the memorandum.
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