Kumar Trustee Company Limited v Chawdrapu

[2019] NZHC 1185

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2015-404-3081

[2019] NZHC 1185

BETWEEN

KUMAR TRUSTEE COMPANY LIMITED

Plaintiff

AND

VENUGOPAL CHAWDRAPU

First Defendant

AND

PRASANNA GUMUDAVELLI

Second Defendant

Hearing:

On the papers

Appearances:

P D Sills for Plaintiff

D Purusram & P S Rana for Defendants

Judgment:

28 May 2019

JUDGMENT OF PAUL DAVISON J

[Re: Costs]

This judgment was delivered by me on 28 May 2019 at 3:30 pm Pursuant to r 11.5 of the High Court Rules

Registrar/Deputy Registrar

Solicitors:

Hornabrook MacDonald, Auckland Aurora Law Limited, Auckland

KUMAR TRUSTEE CO LTD v VENUGOPAL CHAWDRAPU [2019] NZHC 1185 [28 May 2019]

Introduction

[1]                This is an application by the defendants, Mr Chawdrapu and Ms Gumudavelli, for costs on their successful defence of a claim brought by the Kumar Trustee Company Ltd (Kumar Trustee), as trustee of the Kumar Family Trust (the Trust), for the payment of the balance of a debt it alleged was outstanding.

[2]                The defendants seek either indemnity or increased costs. As to indemnity costs, they claim to have incurred actual legal costs of $76,458.47. As to increased costs, counsel for the defendants, Mr Rana, calculates scale costs on a 2B basis as

$63,553.50. The 50 per cent uplift he seeks would yield an award of increased costs of $95,330.25, a figure higher than the defendants’ actual costs for the proceeding.

[3]                Mr Rana also includes a claim for costs relating to “direct loss and expenses” incurred by Mr Chawdrapu as a result of these proceedings, totalling $9,656.00. That amount is said to be for approximately 100 hours of Mr Chawdrapu’s time spent attending various meetings with counsel over the past three years, and for his time spent at the hearing.

[4]                On behalf of the Kumar Trustee, Mr Sills says that scale costs on a 2B basis are all that should be awarded. He says, however, that amount should only be

$40,809.00, as the defendants have claimed for a number of steps that either weren’t taken, aren’t provided for in Schedule 3 of the High Court Rules 2016, have already been awarded to Kumar Trustee, or are otherwise inappropriate.

Background

[5]                The factual background is contained in my decision.1 Kumar Trustee’s case concerned the alleged unpaid balance owing pursuant to a sale and purchase agreement entered into between the parties, with Kumar Trustee as vendor and the defendants as purchaser, for a residential property in Sandringham, Auckland (the Property). The defendants denied the existence of the debt, and said that the Property had been held

1      Kumar Trustee Company Ltd v Chawdrapu [2019] NZHC 648.

on either express or constructive trust for them, prior to its transfer to them via the sale and purchase agreement.

[6]                I found for the defendants, holding that they had contributed most, if not all, of the equity to the purchase of the Property through payments they had made against the mortgage over the Property. I held that Kumar Trustee had been holding the property on constructive trust for the defendants, and nothing was owing to it from the defendants arising out of the sale and purchase agreement.

[7]                At the conclusion of my judgment I said that the defendants were entitled to an award of costs and reasonable disbursements, and directed both parties to file memoranda, following which I would determine the matter of costs on the papers.

Analysis

[8]                The defendants say that, pursuant to r 14.6(4)(a) of the High Court Rules 2016 (the Rules), the plaintiff took two unnecessary steps, being:

(a)filing an application for summary judgment, when there was a clear dispute; and

(b)initiating the proceedings at all.

[9]                The defendants also say that the conduct and demeanour of Mr Kumar, the director of Kumar Trustee, and Mr Chawdrapu’s former employer, is relevant to the assessment of costs. They say that it seems that the initiation of the proceedings against the defendants was fuelled by jealousy, revenge and anger, over Mr Chawdrapu’s decision to seek employment with a business competitor of Mr Kumar.

[10]            I do not consider this to be a case for indemnity costs, or a case for increased costs. I do not consider Kumar Trustee to have acted unreasonably by issuing proceedings against the defendants. The manner in which the parties had chosen to document their arrangements concerning the purchase of the property, the rent and mortgage payments in respect of that property, and the subsequent transfer of that property to the defendants, complete with a gifting letter and sale and purchase

agreement, meant that there were considerable factual issues to be determined. I also note that the defendants’ primary submission, that the house was purchased for them by Kumar Trustee and held on express trust was unsuccessful.

[11]            As to the application for summary judgment, Kumar Trustee has provided an outline of the parties’ communications from mid-2015, up until the proceedings were issued and the application for summary judgment was made. Kumar Trustee says that the defendants asserted in their correspondence, prior to the proceedings being issued, that they had a good defence to the claim, and would provide documents to Kumar Trustee by 24 July 2015 to that effect. The defendants thereafter consistently failed to provide the documents to Kumar Trustee that they claimed supported that position. After counsel for Kumar Trustee’s second attempt to follow up with the defendants concerning the provision of those documents on 17 September 2015, the defendants went silent and did not respond or take any further steps until the issuing of proceedings and the application for summary judgment.

[12]            If the defendants had provided documentation in support of their defence to the claim, then perhaps there would be grounds for an increase in costs. However, in light of their failure to do so, it cannot be said to be unreasonable of Kumar Trustee to apply for summary judgment.

[13]            As to Mr Chawdrapu’s claim for loss of income on the days he attended the hearing, and for remuneration in respect of the time spent attending appointments with his counsel, that can be dealt with succinctly. There is no jurisdiction for a Court to order any form of compensation, beyond their actual expenses on the litigation, to a successful party via the mechanism of costs.

[14]            Kumar Trustee says that the defendants are entitled to 2B costs. I agree. The quantification of those costs is the only issue left to be dealt with in this judgment.

[15]As noted at the outset, the defendants claim that scale costs amount to

$63,550.50. They prepared a schedule detailing the steps they claim to have taken and are entitled to, which was attached to their memoranda.

[16]            Kumar Trustee says that scale costs should be no more than $40,809.00. They say that the defendants have claimed for the following steps in their schedule that were not in fact taken by them:

(a)The defendants have claimed for preparation of submissions for summary judgment and for attendance at the hearing. The application for summary judgment was withdrawn by consent, neither party prepared written submissions and there was no hearing.

(b)The defendants have claimed for preparing for the first case management conference and for filing a memorandum in respect of that conference. Kumar Trustee drafted and filed a joint memorandum seeking timetabling orders by consent. As a result there was no conference and the defendants did not file a memorandum.

(c)The defendants have claimed for three appearances at call over, two appearances at issues conferences and an appearance at a pre-trial conference. Time table orders and pre-trial steps were dealt with by way of memoranda, and all but one of the joint memoranda were drafted and filed by Kumar Trustee. As a result, counsel for the defendants did not appear at call overs, issues conferences or pre-trial conferences.

[17]            Kumar Trustee also says that the defendants have claimed in their schedule for the following steps that are not provided for in Schedule 3 to the Rules:

(a)The defendants have claimed for 2.5 days for inspection of documents. Schedule 3 only allows 1.5 days.

(b)The defendants have claimed 1.5 days for the preparation of written submissions in accordance with item 24 of Schedule 3, which applies only to interlocutory applications. At the same time, the defendants have claimed for the preparation of a list of issues, authorities and the common bundle; and preparation for the hearing.

[18]            Kumar Trustee also says that the defendants have claimed for their costs on an appearance at a mention of the summary judgment application on 19 April 2016, which they are not entitled to because the Court had already dealt with the issue. The summary judgment application was set down for an undefended hearing on 19 April 2016, as the defendants did not file and serve a notice of opposition. That hearing was adjourned as an indulgence to the defendants in order to allow them to file and serve documents in opposition, and the plaintiff was awarded its costs for that hearing.

[19]            Finally, Kumar Trustee says that it was not necessary for second counsel to appear for the defendants given the nature of the case. Second counsel did not present any part of the defendants’ case at the three-and-a-half-day trial.

[20]            I agree with the plaintiff’s counsel regarding each of these matters. The defendants have claimed for steps that they did not take, for steps that they are not entitled to, for steps which Kumar Trustee has already been awarded costs on, and for a step that cannot be justified by reference to the complexity of the defendants’ case, nor by the input of second counsel.

[21]            Kumar Trustee was prepared to concede that the defendants, who have claimed for the preparation of their costs application, are entitled to that amount in accordance with item 36 of Schedule 3, being a step in the proceeding not specifically mentioned in the other items but allowed by the Court.

[22]            I have decided not to allow costs for the preparation of the defendants’ costs application. The memorandum erroneously claims increased costs above the amount the defendants say they actually incurred in the proceedings; claims for Mr Chawdrapu’s consequential loss of earnings as a result of attending meetings with counsel and the three-and-a-half-day trial; and claims for a number of steps in the schedule of 2B costs that were not in fact taken, or for which Kumar Trustee has already been awarded costs.

[23]            I note that the schedule prepared by Kumar Trustee omits the item claimed by the defendants for attendances in relation to the interlocutory application for non-party disclosure and preparation of memoranda. Kumar Trustee did not challenge that item

in their memoranda. However, it is unclear from the defendants’ schedule what that claimed item correlates to in Schedule 3 of the Rules, as they have not included a reference to the Rules in their schedule. I therefore disallow it.

[24]            Therefore, in accordance with the schedule prepared by Kumar Trustee, but omitting half a day for the preparation of the cost application, the defendants are entitled to $39,694.00 from Kumar trustee, for their costs in the proceeding.

Result

[25]Kumar Trustee is to pay costs to the defendants of $39,694.00.

[26]Kumar Trustee is to pay disbursements to the defendants of $110.00.

Paul Davison J