KKDS Limited v S & G Three Kings Limited

[2020] NZHC 1704

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2019-004-002122

[2020] NZHC 1704

UNDER

Clause 5(1)(c) of Schedule 2 of the Abritration Act 1996

IN THE MATTER

of an application for leave to appeal an arbitration award on questions of law

BETWEEN

KKDS LIMITED

Applicnt

AND

S & G THREE KINGS LIMITED

Respondent

Hearing:

(On the papers)

Counsel:

R Zhao and D Zhang for the Applicant

J W A Johnson and G D Simms for the Respondent

Judgment:

15 July 2020

[COSTS] JUDGMENT OF MOORE J

This judgment was delivered by me on 16 July 2020 at 3:00 pm pursuant to Rule 11.5 of the High Court Rules.

Registrar/ Deputy Registrar Date:

KKDS LIMITED v S & G THREE KINGS LIMITED [2020] NZHC 1704 [15 July 2020]

Introduction

[1]    On 23 December 2019, I gave judgment dismissing KKDS Limited’s (“KKDS”)  application  for  leave  to   appeal   against   the   partial   award   of   Hon Robert Fisher QC in the arbitration between KKDS and S & G Three Kings Limited (“S&G”).1

[2]    I ordered that S&G was entitled to costs and encouraged the parties to consult with a view to reaching agreement on costs. They were not able to do so and so I requested costs submissions not exceeding three pages. S&G filed costs submissions and an accompanying affidavit on 5 March 2020, after which KKDS filed submissions requesting directions for filing further costs submissions. Both parties have now filed lengthier submissions.

[3]S&G seeks costs on an indemnity basis, on the basis that:

(a)they are entitled to indemnity costs under a contract or deed (under r 14.6(4)(e) of High Court Rules 2016); or

(b)KKDS acted vexatiously, frivolously, improperly, or unnecessarily in commencing, continuing, or defending a proceeding or a step in a proceeding (under r 14.6(4)(a)).

Costs entitlement under the lease

[4]S&G relies on cl 6.1 from the lease (in standard ADLS form):

“… THE Tenant shall pay … the Landlord’s legal costs (as between solicitor and client) of and incidental to the enforcement or attempted enforcement of the Landlord’s rights remedies and powers under this lease.”

Legal principles

[5]    Rule 14.6(4)(e) of High Court Rules 2016 provides that the Court may order a party to pay indemnity costs if the party claiming costs is entitled to indemnity costs

1      KKDS Limited v S & G Three Kings Limited [2019] NZHC 3456.

under a contract. An entitlement to indemnity costs under a contract or deed must be plainly and unambiguously expressed.2

[6]    Under r 14.6(1), the costs must be “reasonably incurred”, but it is an established principle that a party can contractually bind itself to pay the other party’s full solicitor/client costs.3 Assessing whether the indemnity costs claimed under a contract are reasonable involves the Court making an objective assessment as to:

(a)whether the tasks undertaken were reasonably necessary and were covered by the contract;

(b)whether the charge rate was reasonable having regard to the principles normally applicable to solicitor/client costs; and

(c)whether any other general contract law principles deny the claimant its prima facie right to judgment.4

[7]    The time and other pressures on Judges leave room for robust judgment as to the costs considered reasonable in all the circumstances.5

Was the proceeding covered by cl 6.1?

[8]    I first consider whether opposition of the leave application attracts a costs indemnity on a proper construction of the clause.

[9]    KKDS disputes having to pay indemnity costs under cl 6.1 as this action is a procedural matter that does not fall under the categorisation of “incidental to the enforcement or attempted enforcement of the Landlord's rights remedies and powers under this lease”. It submits that a proceeding seeking leave to appeal an Arbitrator’s decision falls outside the true construction of cl 6.1 of the lease.

2      Re Adelphi Hotel (Brighton) Ltd [1953] 2 All ER 498 (Ch).

3      Black v ASB Bank Ltd [2012] NZCA 384 at [77].

4 At [80].

5      Frater Williams & Co Ltd v Australian Guarantee Corp (NZ) Ltd (1994) 2 NZ ConvC 191,873 (CA) at 191,887.

[10]   KKDS makes a comparison to Body Corporate v Keene, where costs incurred for the recovery of debts under the Construction Contracts Act 2002 were distinguished from costs incurred in the judicial review of adjudicator’s decisions.6 This is not a helpful comparison; the wording of the lease must be the focus.

[11]   The issue for arbitration was KKDS disputing that the lease was terminated validly by S&G. Plainly, opposing the leave application was incidental to S&G’s enforcement of its rights under the lease. It is not relevant that KKDS took the step to apply for leave to appeal.7 Accordingly, it is correct that S&G’s costs should be granted in terms of cl 6.1.

Quantum

[12]   I must next assess whether the steps undertaken were reasonably necessary and whether the rate at which the steps were charged was reasonable.

[13]   S&G claims costs, on a solicitor and client basis, of $24,305.17 (excluding GST), together with disbursements of $110 (including GST). It has provided an affidavit of Jordan Halligan, a solicitor from Wynn Williams, as evidence of the reasonableness of their costs claim. The attached invoices set out what steps were taken, and Mr Halligan has specified the charge rates and the hours involved:

(a)46.1 hours worked by a solicitor, at the rate of $280 per hour;

(b)19.1 hours worked by a senior associate, at the rate of $450 per hour;

(c)2 hours worked by a partner, at the rate of $625 per hour;

(d)1.7 hours worked by a solicitor, at the rate of $235 per hour; and

(e)office expenses charges totalling $1,152.67 (excluding GST).

6      Body Corporate v Keene [2018] NZHC 814.

7      See Patel v Macleod [2017] NZHC 990 at [41]: “[b]y opposing the [tenant’s] application, the [landlords] were simply standing on their contractual right to forfeit. Standing on that right is, in my view incidental to the enforcement of it.”

[14]   KKDS submits that if this is a matter where indemnity is payable, then either time records or a detailed breakdown of the time spent should be provided and KKDS given further time to provide a considered response.

[15]   As noted at [2], KKDS has had access to the S&G affidavit for some time. There is no reason why KKDS could not have contested the quantum sought by S&G in detail by this point had it wished to do so.

[16]   It is not necessary for me to view the steps taken by S&G’s counsel or review whether the hourly rate charged was unreasonable.

[17]   On this basis, I award S&G costs as claimed in accordance with cl 6.1 of the lease. It follows it is not necessary to consider whether S&G is entitled to indemnity costs or increased costs because KKDS advanced a hopeless case, or increased costs.

Orders

[18]I direct that KKDS pay S&G costs of $24,305.17 and disbursements of $110.

Moore J

Solicitors:

Mr Zhao, Auckland Mr Zhang, Auckland

Wynn Williams, Auckland