Krishnayya v Forest Owner Marketing Services Limited HC Napier CIV-2011-441-17

[2011] NZHC 1508

IN THE HIGH COURT OF NEW ZEALAND NAPIER REGISTRY

CIV-2011-441-17

IN THE MATTER OF     the Companies Act 1993

BETWEEN  GORNOORI RAMA KRISHNAYYA Plaintiff

ANDFOREST OWNER MARKETING SERVICES LIMITED

Defendant

Judgment:      5 October 2011 at 4:00 PM

JUDGMENT AS TO COSTS OF ASSOCIATE JUDGE D.I. GENDALL

This judgment was delivered by Associate Judge Gendall on 5 October 2011 at 4.00 pm under r 11.5 of the High Court Rules.

Solicitors:           Langley Twigg, Solicitors, PO Box 446, Napier

Treadwell Gordon, Solicitors, PO Box 4048, Wanganui

GR KRISHNAYYA V FOREST OWNER MARKETING SERVICES LIMITED HC NAP CIV-2011-441-17 5

October 2011

[1]      On 17 August 2011 I gave judgment in this proceeding in favour of the defendant against the plaintiff on an application by the defendant for security for costs.   Security was ordered in the total sum of $40,000.00.  A further order was made staying this proceeding until such time as the security for costs had been properly given by the plaintiff.

[2]      In  that  17 August  2011  judgment,  I  reserved  the  issue  of  costs  on  the application itself and indicated that the parties could file memoranda on the question.

[3]      Counsel for the defendant has now filed a memorandum on costs dated 31

August 2011 and counsel for the plaintiff has replied in a memorandum dated 22

September 2011.  I have had an opportunity to consider those memoranda and now give my decision on the issue of costs.

[4]      The defendant has been successful here in its application for security for costs and in the usual way is entitled to an order for costs.  This is not disputed by Mr Krebs counsel for the plaintiff.

[5]      Two issues arise here.  First, Mr Krebs suggests that Category 2B costs under the scale are appropriate in this case.   Mr Castle for the plaintiff, however, seeks increased costs by way of a $940.00 uplift for a further one-half days preparation.

[6]      As to the second issue, this concerns a claim by Mr Castle for a disbursement of   $1,200.00   representing   “research   and   preparation   of   security   for   costs submissions” by junior counsel in this proceeding.  This disbursement is opposed by Mr Krebs for the plaintiff.

[7]      In the present case it is agreed between the parties that category 2B costs would total some $3,478.00.  I now turn to address the question whether an award of increased costs pursuant to r 14.6 is appropriate.

[8]      Rule 14.6(3) provides:

14.6      Increased Costs and Indemnity Costs

..............

(3)       The court may order a party to pay increased costs if—

(a)       the nature of the proceeding or the step in it is such that the time required by the party claiming costs would substantially exceed the time allocated under band C; or

(b)       the party opposing costs has contributed unnecessarily to the time or expense of the proceeding or step in it by—

(i)        failing to comply with these rules or with a direction of the court; or

(ii)       taking or pursuing an unnecessary step or an argument that lacks merit; or

(iii)      failing, without reasonable justification, to admit facts, evidence, documents, or accept a legal argument; or

(iv)      failing, without reasonable justification, to comply with an order for discovery, a notice for further particulars, a notice for interrogatories, or other similar requirement under these rules; or

(v)       failing,  without  reasonable  justification,  to  accept  an offer of settlement whether in the form of an offer under rule 14.10 or some other offer to settle or dispose of the proceeding; or

(c)       the proceeding is of general importance to persons other than just the parties and it was reasonably necessary for the party claiming costs  to  bring  it  or  participate  in  it  in  the  interests  of  those affected; or

(d)       some other reason exists which justifies the court making an order for increased costs despite the principle that the determination of costs should be predictable and expeditious.

[9]      As McGechan on Procedure at para HR14.6.02(1) notes, the proper approach in considering any award of increased costs is as follows:

HR14.6.02         Increased costs

(1)        The correct approach

The court uplifts from scale, it is not a question of awarding a percentage of actual costs. In Holdfast New Zealand Ltd v Selleys Pty Ltd (2005) 17

PRNZ 897 the Court of Appeal provided this guidance on the correct approach to an award of increased costs:

•        Step 1: categorise the proceeding under r 14.3.

•Step 2: work out a reasonable time for each step in the proceeding under r 14.5.

•Step 3: as part of the step 2 exercise a party can, under r 14.6(3)(a), apply for extra time for a particular step.

•Step 4: the applicant for costs should step back and look at the costs award it could be entitled to at this point. If it considers it can argue for  additional costs  under r  14.6(3)(b) it  should do  so,  but  any increase above 50% on the  costs produced by steps 1  and 2  is unlikely, given that the daily recovery rate is two-thirds of the daily rate considered reasonable for the particular proceeding.

[10]     In the present case the defendant’s complaint is that, following filing of the

defendant’s security for costs application on 12 May 2011 and affidavit in support on

30 May 2011, the plaintiff filed only what was described as a “pro forma” Notice of Opposition  to  the application  on  19  May 2011.    It  is  clear that  this  Notice of Opposition  contained  no  information  as  to  the  precise  nature  of  the  plaintiff’s position  or  as  to  his  opposition  to  the  application.    The  Notice  of  Opposition signalled however that an affidavit from the plaintiff with verification of relevant information would be provided “in a timely manner” once the defendant’s affidavit in support was received, which occurred on 30 May 2011.

[11]     On 20 May 2011, the security for costs application was set down for hearing in Napier on 11 August 2011 and a direction made under r 7.39 for provision of synopses of submission for this hearing.   Counsel for both parties were aware of these directions at the time.

[12]     On 8 August 2011 counsel for the defendant filed a synopsis of submissions in accordance with r 7.39 High Court Rules.

[13]     On 9 August 2011, only 2 days prior to the hearing and subsequent to the filing of the defendant’s submissions, the plaintiff filed an affidavit in support of his opposition to the application.

[14]     That affidavit appeared to contain a substantial amount of new information regarding the plaintiff ’s  financial position and other matters,  none of which the defendant states, in any event, was complete or independently verified.

[15]     As a consequence, counsel for the defendant claims that a significant portion of the earlier submissions  filed became redundant  and  it  was  necessary for the defendant to file further submissions in advance of the hearing in response to the material contained in the plaintiff’s affidavit.

[16]     On this, counsel for the defendant contends that r 14.6(3)(a) is activated here, in that a step in the proceeding as a result of the actions of the plaintiff was such that

the time required by the defendant and thus the costs incurred substantially exceeded the time allocated under band c.

[17]     In addition, the defendant contends that r 14.6(3)(b)(i) is also activated here, in the sense that the plaintiff has contributed unnecessarily to the time or expense of the proceeding by failing to comply with the High Court Rules and directions of this Court by the last-minute filing of the plaintiff ’s affidavit in support of his opposition.

[18]     As a result, the defendant seeks an uplift of costs in the exercise of the Court’s discretion.  These are sought in relation to an extra one-half day preparation time required by the defendant, and are said to be due to the plaintiff’s conduct relating to this application.

[19]     Under all the circumstances prevailing here, I agree that the defendant is entitled to an award of increased costs.

[20]     If the plaintiff intended to file affidavit evidence in support of his notice of opposition to the security for costs application then, pursuant to r 7.25 High Court Rules, that supporting affidavit ought to have been filed 10 working days after he had been served with the application itself and the defendant’s supporting affidavit. Given that the defendant’s affidavit in support was filed and served on 30 May 2011, the relevant filing deadline was about 13 June 2011.   The plaintiff ’s affidavit in support of his opposition as I have noted was not filed until nearly 2 months later and only 2 days before the allocated hearing date of the application.  In addition, this was  after  the  defendant’s  synopsis  of  submissions  had  been  filed  promptly  as required in my r 7.39 direction of 20 May 2011.

[21]     I have no doubt in this case that significant costs on the part of the defendant could have been saved had the plaintiff’s affidavit been filed within the required time frame, which it was not.

[22]     Under all these circumstances I am satisfied that the additional half-day costs uplift  sought  by the  defendant  here  under  r  14.6(3)(a)  is  justified.    This  totals

$940.00.

[23]     The amount therefore to be awarded by way of category 2B costs with this uplift amounts to $4,418.00.

[24]     I  now  turn  to  the  second  issue  relating  to  the  disbursement  charge  of

$1,200.00.   This is said by Mr Castle to be for junior counsel’s research in this

matter.

[25]     Mr Krebs for the plaintiff opposes this disbursement on the basis that total counsel’s fees are included in the scale 2B costs award and this is simply an attempt to obtain a higher level of costs order when preparation costs are already taken into account.  I agree.  Costs on this interlocutory application are covered by the scale 2B amounts set out in the rules, and therefore I disallow this disbursement of $1,200.00.

[26]     So far as the other disbursements are concerned, in my view, they are in order.  The final objection by Mr Krebs to a rental car disbursement of $121.90 for travel  between  the  Napier  Airport  and  Napier  Court  is  dismissed.    First,  the additional charge here over and above what would have been a return taxi fare in my view is not significant in the overall scheme of things, and secondly, the ability for counsel to have flexible transport arrangements on the day to conduct any other possible travel which may have been required to meet instructing solicitors and the like, are relevant factors here.

[27]     For all these reasons costs totalling $4,418.00 and disbursements totalling

$1,394.63  are  awarded  to  the  defendant  on  its  successful  security  for  costs application against the plaintiff.

‘Associate Judge D.I. Gendall’