Just Kids Limited v Pumpkin Patch Limited
[2013] NZHC 334
•27 February 2013
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV2010-404-003804 [2013] NZHC 334
IN THE MATTER OF AMP Capital Property Portfolio Ltd's
Application for Indemnity Costs
BETWEEN JUST KIDS LIMITED Plaintiff
ANDPUMPKIN PATCH LIMITED Defendant
Hearing: On the papers
Counsel: D S McGill and A Malone for Just Kids Ltd
J McBride for AMP Capital Property Portfolio Ltd (non-party) Judgment: 27 February 2013
JUDGMENT OF WOOLFORD J
[As to costs relating to non-party discovery orders)
This judgment was delivered by me on Wednesday, 27 February 2013 at 3:30 pm pursuant to r 11.5 of the High Court Rules.
Registrar/Deputy Registrar
Solicitors:
Blank Singh & Associates, PO Box 5644, Wellesley Street, Auckland
Duncan Cotterill, PO Box 5326, Auckland
Counsel:
J McBride, PO Box 5643, Wellesley Street, Auckland
JUST KIDS LIMITED V PUMPKIN PATCH LIMITED HC AK CIV 2010-404-003804 [27 February 2013]
Background
[1] The central dispute in this case arose between Just Kids Limited (Just Kids) and Pumpkin Patch Limited (Pumpkin Patch). The substance of that dispute is recorded in a judgment of Heath J resolving costs between the parties:[1]
[1] Just Kids Ltd v Pumpkin Patch Ltd HC Auckland CIV-2010-404-3804, 1 September 2010.
[3] Just Kids and Pumpkin Patch are engaged in the sale of children’s clothing and related products, in New Zealand and overseas. They are competitors. However, when Just Kids considered selling its business, during
2008, it identified Pumpkin Patch as a prospective purchaser. To enable due diligence to be undertaken, Just Kids and Pumpkin Patch executed a
confidentiality agreement.
[4] On 13 and 21 April 2010, information of a commercially sensitive nature was released to Pumpkin Patch. Some of the information provided on 13
April 2010 disclosed detail about retail premises, commercial offices and
lease payment arrangements. Premises situated at the Manukau SupaCenta (the Manukau premises) was one of those in respect of which disclosure was made.
[2] AMP Capital Property Portfolio Ltd (AMP) was the landlord of those premises within the SupaCenta:
[6] As at 26 April 2010, Just Kids occupied, with consent of its landlord
[AMP Capital Property Portfolio Ltd], the Manukau premises pursuant to a
“holding over” of a lease that had expired on 31 December 2009.
[7] On 9 June 2010, AMP informed Just Kids that it had secured a “new
retailer” for the premises and that a notice to quit would be served. At that
time, Just Kids was in negotiations for an extended lease. Pumpkin Patch
was the “new retailer”. Just Kids took the view that Pumpkin Patch, in order
to secure the lease, had misused confidential information supplied during the
due diligence period.
[8] Following an exchange of correspondence (to which I shall return), Just
Kids filed a without notice application for interim injunction, on 18 June
2010...
[3] Non-party discovery orders were made against AMP. AMP had consented to these in a memorandum dated 7 July 2010. Draft orders were attached to that memorandum. Harrison J made an order giving effect to the consent memorandum
on that day. Those orders included the following:
The Plaintiff is ordered to pay AMP its expenses (including but not limited [sic] its solicitor client costs) incurred in anticipation of the making of the above orders and incurred in compliance with above [sic] orders.
[4] Following the conclusion of the proceeding and the determination of costs as between the parties to the proceeding, AMP now seeks non-party costs on an indemnity basis against Just Kids.
Steps taken by AMP
[5] On 23 June 2010, an email appears to have been sent by Duncan Cotterill, the lawyers for Just Kids, advising AMP of the interim injunction granted on 18 June
2010. On 29 June 2010, Duncan Cotterill filed a memorandum for the list hearing on 30 June 2010, advising that the plaintiff might need to seek non-party discovery from AMP and noted how that might be done. The matter came before Allan J on
30 June 2010 and he made directions abridging the timetable for the making of the application.
[6] Duncan Cotterill emailed AMP on 1 July 2010 reminding them that the injunction had been granted and advising that they intended to seek disclosure of documents from AMP by way of an application on 2 July 2010.
[7] Notice of the application for non-party discovery was given on 2 July 2010 noting that Just Kids would apply to the Court on 7 July 2010 for the orders that:
(a) AMP, within 2 working days of the order, would provide an affidavit of documents of all communications between it and Pumpkin Patch relating to the leasing of the SupaCenta premises; and
(b)AMP would disclose whether those documents were still within its control and make them available for inspection.
[8] A notice of opposition to the non-party discovery order was filed by AMP on
6 July 2010. A consent memorandum between Just Kids and AMP was presented to the Court on 7 July 2010. An affidavit of documents was sworn by Mr Gareth Evans, an employee of AMP, and filed in Court on 12 July 2010. That affidavit
separates relevant documents into four categories and makes various claims as to privilege and confidentiality. From the numbering system adopted there appear to have been some 712 documents spread across the four categories though the affidavit gives no indication as to the length, importance or substance of these documents.
Costs sought
[9] AMP was represented by Blank, Singh & Associates (BSA) who also instructed a barrister Mr Ian Bassett. The costs claimed are the following:
(a) Professional fees of BSA (excluding GST) of $12,021; (b) GST on [9(a)] of $1,502.63;
(c) Travel expenses of $25 (including GST);
(d) Professional fees of Mr Bassett totalling $5,246; and
(e) GST on [9(d)] of $655.75
[10] Altogether the sum sought is $19,450.38 together with the costs of preparation of the costs application.
Issues
[11] Just Kids accepts that it should pay AMP’s indemnity costs but disputes the reasonableness of those costs as a whole and suggests that the bill of costs is inflated. Duncan Cotterill’s correspondence notes this by reference to the 2B scale that would otherwise be appropriate in this case as a point of comparison. Costs on that scale would be some $7,144.00. Duncan Cotterill accepts that full recovery is not anticipated under the scale costs but that they provide for recovery of roughly two- thirds of costs and notes the severe disparity. Duncan Cotterill also questions the necessity of having two partners of BSA and a barrister engaged on the file.
Principles
[12] The application is essentially under the former rule 8.27 which provides:
8.27 Expenses
If an order is made under rule 8.25(2) or 8.26(2), the Judge may, if the Judge thinks it just, order the applicant to pay to the person from whom discovery is sought the person's expenses (including solicitor and client costs) of and incidental to the application and in complying with any order made on the application.
[13] The parties referred to Clear Communications v Telecom Corporation[2] which suggests a two stage inquiry in the allowance of non-party costs. The first step is to consider whether costs were reasonably incurred in resisting the application and the second is to consider whether the costs claimed in complying with the order were in themselves reasonable.
[2] Clear Communications v Telecom Corporation (1994) 8 PRNZ 200 (HC).
[14] The Court of Appeal has recently commented on the proper approach to a party’s claim that the amount sought under a right to indemnity costs is unreasonable.[3] As the Court noted:[4]
indemnity costs are determined with reference to actual costs, but may be less than the actual costs if the Court considers the actual costs were not reasonably incurred.
[3] Black v ASB [2012] NZCA 384.
[4] At [77].
[15] While that statement was made in the context of a contractual right to indemnity costs, it is clear both from Clear Communications and the above that where the Court accepts that a party has a right to its indemnity costs, it may still enquire as to whether those costs were properly and reasonably chargeable.
[16] The Court of Appeal went on to comment:
[81] Normally, for example in the course of a typically busy summary judgment list, it will not be feasible for the Court to make a detailed assessment of the reasonableness of the indemnity costs claimed under a contract. That is the reason for this Court’s observation in Frater Williams that the Court’s assessment of the fee note(s) leaves “room for robust
judgment as to the costs considered reasonable in all the circumstances”. If the party liable to pay the indemnity costs is not content with that “robust judgment”, but indicates to the Court that it seeks a detailed vetting of the reasonableness of the costs, then we consider three avenues are open to the Court. We do not set these out in any general order of preference, save that we have deliberately put the third last, for the reasons we explain in [86]– [100].
[82] The first avenue is that the liable party can ask the Judge to make the order for indemnity costs subject to taxation, which then engages rr 14.18–
14.21 and 14.23 of the High Court Rules. While these rules have been little used of recent years, our inquiries confirm that the capacity to tax costs still exists.
[83] The second avenue is that the parties could agree to be bound by the decision of a suitably qualified practitioner who vets the reasonableness of the costs. That agreement could provide for the practitioner’s decision to be referred to the Court for formalising in an order.
[84] The third avenue involves referring the fee note(s) to the New Zealand
Law Society.
[17] The parties have not chosen any of the three avenues set out by the Court of Appeal and consequently, I will endeavour to give a “robust judgment as to the costs considered reasonable in all the circumstances” in reliance on the Court’s overall jurisdiction as to costs.
Discussion
[18] Although the parties referred to the two stage inquiry proposed in Clear Communications v Telecom Corporation, in the circumstances of the case, I do not believe that it will assist in the determination of what is reasonable. Counsel for Just Kids has sought to argue that the stage one costs of the application should be limited because the agreed order did not provide for AMP’s costs in opposing the application and expenses incidental to AMP’s opposition. However, AMP was entitled to receive advice about the extent of it’s obligations and it’s options. In addition, I accept that AMP was also entitled to the benefit of a comprehensive notice of opposition and draft affidavit in the event that agreement could not be reached on the appropriate terms of an order.
[19] In relation to the stage two costs of compliance, counsel for Just Kids is unable to point to any particular matter except to submit that the costs are excessive
and not a fair reflection of the overall costs of compliance. He submits that it was not a complex case involving a significant volume of documents.
[20] In relation to both stages, counsel for Just Kids submits that scale costs are a useful pointer in assessing reasonableness and suggests that scale costs would have totalled $6,169 (although in earlier correspondence he had calculated scale costs as
$7,144). Working from the assumption that scale costs represent approximately two thirds of actual costs, counsel therefore submits that reasonable indemnity costs total
$9,253.50 (scale costs are of course GST neutral whereas the sum of $19,450.38, which is sought by AMP is inclusive of GST).
[21] In my view, AMP was entitled to engage a solicitor and counsel of the level of skill and experience that it did. Nonetheless, I think that there is some merit in the submission made by counsel for Just Kids that the costs sought cover attendances unrelated to the provision of third party discovery and also that they involve an excessive amount of time by senior counsel.
[22] As an example of the attendances unrelated to the provision of non-party discovery, AMP claim 0.8 hours by partner Philip Blank at $370 per hour on 25 June
2010. The narration relating to the time spent by Mr Blank on that day states:
Email from client attaching notice of injunction; advising
Telephone call with client attaching request for further lease by tenant;
advising
[23] At that stage, there is no evidence that an application for non-party discovery against AMP was even envisaged.
[24] There also appears to be some duplication of effort between Mr Blank and Ms Vanessa Dew, the partner who appears to have had carriage of the matter at BSA. As an example, on 5 July 2010, Ms Dew spent time receiving an “email from barrister re discovery obligations and responding” and sending an “email to client in- house advising”, while Mr Blank spent time receiving “a letter from barrister re discovery obligations, forwarding to client and advising.”
[25] On that day, 5 July 2010, Ms Dew is recorded as spending 4.0 hours at $330 per hour ($1,320); Mr Blank is recorded as spending 1.9 hours at $370 per hour ($703); while the barrister they instructed, Mr Ian Bassett, spent 7.3 hours at $430 per hour ($3,139).
[26] Having chosen to instruct a commercial barrister of considerable experience, there was, in my view, no need for two of the partners of BSA to act as a liaison with the barrister and with the client.
[27] Accordingly, both because some of Mr Blank’s attendances were unrelated to the provision of non-party discovery and other attendances of his duplicated those of Ms Dew, I have taken the robust view that it is not reasonable for Just Kids to pay for his time and attendances on the file.
[28] Accordingly, I deduct the sum of $3,621.38 ($3,219.00 (8.7 hours at $370 per hour) plus GST) from the indemnity costs sought by AMP.
[29] Just Kids is therefore ordered to pay $15,829.00 to AMP by way of indemnity costs in relation to the application for and compliance with the non-party discovery order against it. Neither party has been wholly successful in this application and accordingly the costs of this application are to lie where they fall.
……………………………..
Woolford J
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