Knight v Cochrane HC Auckland CIV 2003-488-000013
[2008] NZHC 2311
•12 May 2008
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV 2003-488-000013
BETWEEN TANIA CAROL KNIGHT OF AWANUI, PRACTICE MANAGER, AS TRUSTEE AND EXECUTRIX OF THE ESTATE OF THE LATE ERIC CLIFFORD CLARK AND NAOMI ELIZABETH CLARK OF KAITAIA, WIDOW
Applicants
ANDSUSAN MAREE COCHRANE OF KUMI ROAD, R.D., KAITAIA, FARMER Respondent
Hearing: 12 May 2008
Appearances: C R Pidgeon QC for the applicants
G P Denholm for the respondent
Judgment: 12 May 2008
ORAL JUDGMENT OF PRIESTLEY J
Counsel/Solicitors:
C R Pidgeon QC, P O Box 105924, Auckland
G P Denholm,P O Box 5080, Wellesley Street, Auckland. I Reeves, Henderson Reeves, P O Box 11, Whangarei
Foy & Halse, P O Box 26 218, Epsom, Auckland
KNIGHT & CLARK V COCHRANE HC AK CIV 2003-488-000013 12 May 2008
Status of the respondent
[1] I raise this issue at the outset of my judgment. The current status of the respondent, both now and indeed throughout this litigation, is problematic. Given the nature of enforcement orders I shall make, I make no final finding in respect of her status. Why her status is problematic largely arises out of the fact that she is an undischarged bankrupt. She was adjudicated in the High Court at Whangarei on
14 August 2007.
[2] The adjudication came as a result of a creditor’s petition lodged by the applicant in respect of an unpaid sum of $43,220. That sum represented unpaid costs awarded against the respondents in this litigation in both the High Court and the Court of Appeal.
[3] Mr Pidgeon QC informs me, and Mr Denholm accepts, that there have been discussions between him and Meredith Connell for the Official Assignee, in respect of Ms Cochrane’s bankruptcy estate. The Official Assignee has no objection to Mr Denholm acting for the respondent at this hearing nor, it would seem, has the Official Assignee any objection to this Court embarking on a hearing and, if appropriate, awarding costs against the respondent.
[4] Why I have raised this issue is because the precise status of the respondent; whether or not she was involved in the litigation on her own behalf or as an agent for a trust or both; and, importantly, whether she has a right of indemnity against a trust, are critical matters in respect of which no immediate answer is apparent.
[5] I note that when this proceeding was first filed in the High Court at Whangarei (it was subsequently transferred to Auckland) in 2002 Ms Cochrane, who was then the plaintiff, was described as “agent for Mengha Trust”. Mr Pidgeon has helpfully referred me to a passage in the notes of evidence in the High Court trial before Miller J where Ms Cochrane was asked what the Mengha Trust was. She replied that it was the name “the Dargaville farm is under”. She was then asked whether she was the purchaser under the relevant agreement for sale and purchase and accepted responsibility, to which she replied in the affirmative.
[6] Miller J then intervened and asked whether the Mengha Trust had any interest in the farm. He was told that it had “taken over the legal titleship to it” and that this had occurred on settlement. This, Ms Cochrane told His Honour, was why she was described as the Trust’s agent in the statement of claim. The only trustee, however, so she said on oath, was her. Her husband was a principal beneficiary.
[7] Mr Pidgeon has some confidence, and Mr Denholm does not argue to the contrary, that the Mengha Trust is still asset rich and is (indeed Ms Cochrane was acting as its agent) in a position to pay a costs award. It apparently owns rural land of over 13 hectares subject, however, to a 2002 mortgage and various caveats lodged.
[8] Whether or not Ms Cochrane properly brought the proceeding in the first place on the Trust’s behalf; whether she is entitled to an indemnity from the Trust; whether, as Mr Denholm suggests, the Trust was at all stages the puppet master; whether she was acting on instructions from other people; and whether her removal as trustee and her intervening insolvency affect a right of indemnity, are matters on which I have no view, there being no evidence.
The litigation
[9] It is unnecessary to traverse this in significant detail. The applicants’ problems arose in October 2001 when they sold a dairy farm at Awanui to Ms Cochrane. Ms Cochrane took proceedings in the High Court alleging misrepresentation and breach of contract. The agreement apparently included a provision obliging Ms Cochrane to subdivide the property and transfer back a smaller portion of land to the applicants, which they hoped to use as a home for their retirement. Unfortunately, Mr Clark died before the litigation nightmare came to an end. His widow, Mrs Clark, and Tania Carol Knight, a daughter of the couple as executors of the estate are now the applicants.
[10] In March 2004 Miller J ordered specific performance against Ms Cochrane in respect of the subdivision. He also found negligence against the Clarks and awarded Ms Cochrane $15,000 by way of general damages. On appeal to the Court of Appeal
this negligence finding and the damages award were quashed. The specific performance decree, however, remained in full force.
[11] Ms Cochrane then took elaborate steps, which Mr Denholm does not contest, to avoid her legal obligations. These included a sham transfer to a Mr Morris. There were a number of other regrettable actions taken, which included interference with waterflows, the felling of trees and running cattle across the Clarks’ land.
[12] Over the last twelve months there have been frequent judicial conferences. There is an extant application for the committal of Ms Cochrane for contempt. By Mr Pidgeon’s calculations, this application has been handled, with varying degrees of input and judicial time, by no fewer than eight High Court Judges. One conference, conducted before Winkelmann J, resulted in indemnity costs being ordered against Ms Cochrane but these were not fixed.
Contempt
[13] To a large extent the applicants’ strategy has been to use the contempt application as a sword of Damocles to ensure that Ms Cochrane was pushed towards complying with her obligations. For many months Mr Denholm has acted for her. He has assisted her to comply particularly by resurrecting a subdivision application where the consent had lapsed. There have been negotiations with the Official Assignee (the entire process being bedevilled by Ms Cochrane’s intervening bankruptcy). There were various obligations relating to a fenceline. Mr Pidgeon, responsibly, acknowledges Mr Denholm’s assistance in these areas.
[14] As I understand the applicants’ current stance, they do not seek a formal contempt finding. To do so would, of course, require an appearance on the part of Ms Cochrane, contempt proceedings being quasi criminal. In the event of a finding of contempt, what would be an appropriate penalty is normally the imposition of a monetary fine or imprisonment. A monetary fine might be of little assistance to anyone given Ms Cochrane’s bankruptcy. (For the imposition of a fine, see Taylor Bros Limited v Taylors Group Limited [1991] 1 NZLR 91 (CA).)
[15] Instead what is sought by Mr Pidgeon are full indemnity costs in respect of the legal costs incurred by the applicants during the period of time Ms Cochrane has been in clear breach of her obligations as an unsuccessful litigant. There is clear authority that this Court has the power to award indemnity costs not only under the High Court Rules but also pursuant to its inherent and contempt jurisdiction. (Taylor Bros Limited v Taylors Group Limited [1990] 1 NZLR 19 (CA). See also Arlidge
Eady & Smith on Contempt (3rd ed) 14-135 and 14-136)).
[16] It is an award of indemnity costs which is the applicants’ preferred outcome here for obvious, understandable and, indeed, legitimate reasons.
Quantum of indemnity costs
[17] These have been helpfully subdivided. The total indemnity costs claimed amount to $97,620.72. These are costs incurred by the applicants’ two solicitors (Clive Patterson and Henderson Reeves Connell Rishworth) and counsel’s costs (Mr CR Pidgeon QC) between 9 February 2006 and 9 April 2008. Of that figure, approximately $55,000 represent the costs of Henderson Reeves. The bulk of the balance are counsel’s fees.
[18] Mr Denholm has no quarrel with Mr Pidgeon’s fees, understandably so, given his status as senior counsel and also the clear narration from Mr Pidgeon’s fee notes. His involvement has been limited, in the main, to the contempt litigation and giving advice thereon. The application for contempt and a supporting affidavit was filed in mid-May 2007.
[19] Mr Denholm, however, submits that so far as the Henderson Reeves’ costs are concerned, these are somewhat excessive and extend far beyond what would be required for the contempt application itself. He points out that a considerable portion of the work related to negotiations with the Official Assignee and generally dealing with matters unrelated to the litigation itself. Nonetheless, it does seem to me that much of the work performed by Henderson Reeves was legitimately connected with ensuring that the subdivision proceeded and that the Clarks ended up with the land
which, in terms of the 2001 agreement for sale and purchase, was to be transferred back to them.
[20] I have not subjected all of Henderson Reeves’ bills to overall scrutiny. But I
have isolated three fee notes for particular scrutiny. These were a bill of 31 May
2007 for just over $5,800, a bill of 13 September 2007 for $2,840 and a bill just before Christmas 2007 for $2,375. I stress that I have not been conducting a costs revision. Rather, I have been looking at items to assess overall reasonableness in the context of what is clearly a claim for full indemnity costs. As Mr Pidgeon has reminded me, there has been no challenge to quantum so far as the Clark family are concerned. Moreover, all the bills have been paid by them.
[21] The 31 May 2007 bill identifies a significant amount of work carried out in respect of the preparation of an affidavit sworn by Mrs N E Clark on 9 May 2007. That affidavit is short. It comprises but three pages and two lines. It has exhibited to it helpful essential documents. However, the affidavit, particularly under the guidance of senior counsel, would not have been difficult to compile. Without in any way being critical of the staff solicitor involved, it seems to me that considerably more time was spent and charged for in respect of affidavit preparation than can reasonably be on-charged to the respondent in the context of a costs claim.
[22] I have no information about how many fee earners were involved in the period concerned, nor am I endeavouring to assess whether their charge-out rates were reasonable or whether the amount of time spent was acceptable or excessive.
[23] However, in the context of this claim for indemnity costs, I am of the view that an appropriate charge for the Henderson Reeves’ component would be $25,000. Mr Denholm, for his part, submitted that he considered a range of $15,000 to
$18,000 would be fair and reasonable. I consider that assessment, with respect, to be somewhat on the light side, particularly given that a significant component of the Henderson Reeves’ work was work which was necessary to ensure that the Clark family received their litigation entitlement.
[24] That said, however, even if there had been no delays, strategies, and obstacles attributable to Ms Cochrane which made the work more difficult to perform, the Clark family would inevitably have to have paid some legal fees for work legitimately performed on their behalf to ensure that they took title to the subdivided land. In other words, in an ideal world, legal costs would have been incurred by them with no claim for recompense. So too, the decision to bankrupt Ms Cochrane has added to the complexity of the work involved. A considerable amount of time for instance has had to be spent in sorting out strategies and corresponding with both the Official Assignee and the Far North District Council.
Result
[25] Accordingly, I am satisfied that an appropriate costs award to make against Ms Cochrane is one of $67,620.72. There is an order that the respondent is to pay that sum to the applicants by way of costs accordingly.
[26] To the extent that Ms Cochrane appears throughout to have been acting as the agent of the Mengha Trust, and given that I have been informed (and the title is consistent with this) that 13.1688 hectares of land is currently vested in the Official Assignee as registered proprietor, being all the land described in the title Identify Number 140417, I order that the land I have just mentioned is to be charged for the sum I have ordered in favour of the applicants. A further charging order is made accordingly.
[27] Leave is reserved to all parties and the Official Assignee in respect of this charging order.
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Priestley J
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