L&M Coal Holdings Limited v Bathurst Resources Limited
[2018] NZHC 3121
•29 November 2018
IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY
I TE KŌTI MATUA O AOTEAROA TE WHANGANUI-A-TARA ROHE
CIV-2016-485-1007
[2018] NZHC 3121
BETWEEN L&M COAL HOLDINGS LIMITED
Plaintiff
AND
BATHURST RESOURCES LIMITED
First Defendant
BULLER COAL LIMITED
Second Defendant
On papers Judgment:
29 November 2018
JUDGMENT OF DOBSON J
[Costs]
[1] In my substantive judgment of 17 August 2018, I indicated a provisional view as to the plaintiff’s (L&M) costs entitlement, and invited memoranda if the parties were unable to agree.
[2]No agreement has been reached and memoranda have been filed:
·for L&M dated 28 September 2018;
·for the defendants (Bathurst) in response dated 19 October 2018;
·supplementary memorandum in reply for L&M dated 7 November 2018; and
·for Bathurst in response dated 15 November 2018.
L&M COAL HOLDINGS LTD v BATHURST RESOURCES LTD [2018] NZHC 3121 [29 November 2018]
Defer determination?
[3] Bathurst is pursuing an appeal from my judgment and has indicated that it anticipates a hearing in the Court of Appeal in March or April 2019. In those circumstances, Bathurst opposes a costs determination until the appeal has been resolved.
[4] It is submitted for Bathurst that the work involved in determining costs at this stage is unwarranted. Arguably, the range of potential outcomes following a Court of Appeal determination involves the real likelihood of a need to revisit at least parts of a costs determination that reflects the outcome of my substantive judgment. Bathurst points out that, in addition to its appeal challenging my findings, L&M has filed a notice of intention to support the judgment on other grounds, to enable L&M to argue that I erred in rejecting its final ground for the claim against Bathurst.
[5] Further, Bathurst advises that agreement has been reached that L&M will not take any steps to enforce the terms of my substantive judgment pending a determination of the appeal. Assuming the same arrangement would apply to a costs order, there will therefore be no fiscal consequences for the parties from a costs determination made before the outcome of the appeal is known.
[6] As against those considerations, there is an interest in achieving finality of all aspects of the proceedings, at least at the High Court stage. Further, the differences between the parties on the extent of costs entitlement is such that a challenge to my determination cannot be ruled out. In the event of any appeal on costs, it would be desirable for the parties and the Court of Appeal to have the option of dealing with it at the same time as the appeal from my substantive judgment.
[7] I have accordingly decided to proceed with quantifying the costs consequences of my substantive judgment.
Costs claimed
[8] The parties agreed at the outset of the proceeding that it was a complex one that was to be allocated category 3 for costs purposes. L&M’s claim for costs is largely
according to scale, with most steps allocated band B but some band C, and in one case a 50 per cent uplift on band C is sought. L&M seeks an order of $176,852. This includes an off-set of $6,298 on the scale costs that L&M accepts Bathurst is entitled to for its success on an interlocutory step for which costs have not been settled.
[9]The steps for which 3C costs are sought are as follows:
(a)list of documents on discovery;
(b)inspection of documents (with a 50 per cent uplift);
(c)preparation of briefs and affidavits;
(d)preparation of lists of issues, authorities and common bundle; and
(e)preparation for hearing.
[10] Bathurst disputes that the scale of these tasks justifies anything beyond costs on a 3B basis. Bathurst cites the number of documents listed by L&M as no more than are routinely discovered in cases where 3B costs are accepted as appropriate. In addition, L&M only adduced evidence from six fact witnesses providing a total of 50 pages of witness statements, which could not justify costs on a 3C basis. Further, the preparation of a list of issues, authorities and common bundle did not have complexity that would be required for costs on a 3C basis. The same objection was raised to the extent of costs claimed for preparation for hearing.
[11] On the scale of the task involved in inspecting Bathurst’s documents, it argues that a substantial portion of the documents that L&M demanded Bathurst should discover went to the hypothesis added to L&M’s case that Bathurst was “gaming its assets”, which formed the factual component of L&M’s unsuccessful argument that Bathurst had exercised a unilateral contractual discretion for other than a proper purpose.
[12] I was required to supervise the inspection of discoverable documents through a number of iterations. Bathurst’s conduct in discovery and provision of documents
for inspection meant that L&M’s solicitors were necessarily required to attend to the task in an inefficient manner. I am satisfied that 3C costs plus an uplift of 20 per cent (not the uplift of 50 per cent sought) are warranted for that step in the preparation of the case.
[13] I am also satisfied that the preparation for hearing was sufficiently involved to justify costs for that step on a 3C basis. Although Bathurst correctly characterised the issue as the interpretation of two provisions in a bespoke commercial contract, that rather belies the scope of the factual background that L&M had prudently to traverse and place in appropriate sequence for presentation of its case.
[14] I am not persuaded that 3C costs are appropriate on the remainder of the steps for which they are claimed.
[15] In my substantive judgment, I expressed a provisional view that L&M’s costs entitlement ought to be reduced by 20 per cent to reflect the lack of success on L&M’s final alternative, namely the claim that Bathurst had exercised a unilateral contractual discretion for other than a proper purpose. In urging me not to adopt that stance, L&M has submitted that this alternative basis for its claim was a viable one and, as such, counsel had an obligation to run it. L&M submits it is an evolving area of law. The grounds for distinguishing contracts where a constraint arises on a unilateral contractual discretion from those where a contractual power is unconstrained have not been settled. L&M will challenge my finding on this claim in the Court of Appeal.
[16] Bathurst submits that the case for a reduction is compelling, as provided for in r 14.7(d) of the High Court Rules, which provides for a reduction in costs to which a successful party would otherwise be entitled where:
(d) although the party claiming costs has succeeded overall, that party has failed in relation to a cause of action or issue which significantly increased the costs of the party opposing costs;
[17] To adequately reflect the extent of extra work involved in discovering documents, preparing evidence in opposition and arguing against the application of the proposition L&M relied on, Bathurst submitted that a deduction of 50 per cent reflected the correct proportion.
[18] I remain of the view that the scale of work in addressing this alternative claim and the grounds on which I found it could not succeed do warrant a deduction from what is otherwise L&M’s appropriate costs entitlement. I am, however, not persuaded that the deduction ought to be any greater than my provisional view. I accordingly order that the costs entitlement be reduced by 20 per cent, namely $29,172. That reduces L&M’s cost entitlement to $116,688.
Bathurst’s costs entitlements on interlocutories
[19] Bathurst seeks to offset costs that it would claim for two interlocutory applications. The first is on its application for further and better particulars of L&M’s pleading, which I granted. The items claimed, together with the filing fee, for this interlocutory application total $7,636.
[20] Whilst L&M accepts that there should be an offset for costs on Bathurst’s success on that interlocutory application, the items it has included omitted item 25 from the schedule, namely for preparation of a bundle for hearing. I consider that item is appropriately allowed.
[21] The second of the interlocutories in respect of which Bathurst claims costs is an application made during the hearing for leave to produce a document in evidence. Bathurst’s submission is implicitly critical of L&M for forcing it to make that formal application, presumably on the basis that L&M ought to have conceded the admissibility of the document.
[22] Bathurst’s conduct in its belated disclosure of the document did not reflect well on it, and it was not explained in fulsome terms. I decided to allow the document to be adduced, but reserved consideration of matters including costs consequences.
[23] I am not persuaded that Bathurst should be granted any award of costs for obtaining leave to adduce that document.
[24]Accordingly, the full extent of the offset is $7,636.
Summary of costs entitlements
[25]In summary, my conclusions above result in the following:
L&M costs on substantive proceedings Item Description Scale Days Costs 1 Commencement 3B 3.0 $9,900.00 2 Reply 3B 0.8 2,640.00 10 Preparation, first CMC 3B 0.4 1,320.00 11 Filing memoranda for CMC 3B 1.2 3,960.00 13 Appearance at CMC 3B 0.9 2,970.00 20 List of documents on discovery 3B 2.5 8,250.00 21 Inspection of documents 3C+ 20% 6.0 23,760.00 29 Sealing order or judgment 3B 0.2 660.00 30 Preparation of briefs and affidavits 3B 2.5 8,250.00 31 Preparation of issues, authorities and bundle 3B 2.5 8,250.00 33 Preparation for hearing 3C 5.0 16,500 34 Appearance for first counsel 3B 12.0 39,600.00 35 Appearance for second counsel 3B 6.0 19,800.00 Subtotal $145,860.00 Less 20 per cent for unsuccessful argument -29,172.00 Less Bathurst costs for further particulars 2B -7,636.00 Total $109,052
Disbursements
[26] L&M claims disbursements totalling $303,778.33, with many of the components being challenged by Bathurst. Bathurst’s general complaint is that the level of disbursements incurred reflects conduct of all aspects of L&M’s case to a Rolls-Royce standard, where the losing party ought not to be required to pay for services to that standard.1
[27] Dealing with the disbursements in the sequence in which they were set out in L&M’s schedule, Bathurst opposed recovery of some $194,000 for expert witness fees. The vast majority of these were for Mr Duncan ($186,690) who was an Australian mining expert called to opine on the feasibility of resuming mining at the Escarpment Mine. The quantum was criticised as excessive relative to far lower fees
1 Russell v Taxation Review Authority (2000) 14 PRNZ 515 (HC) at [16].
incurred for the comparable expert retained by Bathurst to respond to Mr Duncan’s evidence.
[28] Bathurst objected to paying these fees, and those for an accountant Mr Fairhall, on the ground that evidence from both of them was only required on L&M’s unsuccessful alternative basis of claim.
[29] Assessing the matter in the round, I am not persuaded that L&M ought to be disentitled to a partial recovery for these expert witnesses’ fees. The basis of claim could not be advanced without at least the evidence of Mr Duncan, and prudent preparation of the argument reasonably projected the need for evidence on the topics they covered. I do not consider it inconsistent on the one hand to reduce the costs to which L&M is entitled on account of the additional work this alternative argument required Bathurst to undertake, and on the other to allow partial recovery of the expert fees to produce the evidence on which the argument relied.
[30] I am, however, persuaded that the extent of Mr Duncan’s fees is beyond that reasonably payable and would cap those fees at $100,000. The fees for Mr Fairhall are recoverable in full.
[31] A sum of $7,529.10 is claimed for disbursements incurred in briefing witnesses, obtaining documents for discovery, and carrying out a site visit at the mine. Bathurst opposes these on the basis that personal attendances by solicitors in Adelaide were unnecessary, when documents could have been obtained electronically and discussed in AVL interviews conducted without that travel being required. Bathurst also disputes the need for a site visit.
[32] It appears from L&M’s schedule that the expenses incurred include three return flights to Adelaide, the costs of which vary by somewhat more than $300. Given the scope of the discovery task, I accept it is reasonable for that part of the case preparation to be attended to by visits in person. I also accept the reasonableness of conducting a site visit at the mine and accordingly allow these disbursements in full.
[33] The next category is witness costs for attending hearings and briefings. The principal representative of L&M, Mr Brogan, is resident in Hong Kong. A substantial portion of the $39,639.26 claimed under this head relates to a claim for 50 per cent of business class air fares for two return visits, plus almost $8,000 for superior quality accommodation during 10 day and two day stays in Wellington. There are other significant accommodation costs claimed for Mr Bohannan of $4,743.50 and a combined claim for travel and accommodation for Mr Gordon of $4,565.70.
[34] Hong Kong to Wellington is at the outer limit of the length of international flights for which a losing party could reasonably expect to pay only economy class fares.2 L&M’s concession of a 50 per cent claim for business class fares for Mr Brogan over that route does not adequately reflect the reduction from business class fares which I consider appropriate. I accordingly limit the claim for Mr Brogan’s travel costs on two trips from Hong Kong to Wellington at 30 per cent of the business class fares incurred by L&M. To the extent that the travel costs claimed for Messrs Bohannan, Gordon and Hogan reflect business class fares, then the same apportionment is to apply.
[35] As to the accommodation costs, L&M’s reply memorandum of 7 November 2018 specifies that the average room rate incurred for Mr Brogan was $632 per night. It is difficult from the detail in the invoices supplied to calculate a nightly room rate incurred for L&M’s other witnesses.
[36] Unsurprisingly, Bathurst protests at the claim for accommodation costs of that standard. Bathurst submits that a reasonable amount for accommodation costs should be, at most, $300 per night. The reality of accommodation costs, particularly where bookings had to be rearranged at short notice because of disruption to the pre-trial projected schedule for witness appearances, renders that niggardly. I accept that the practice of hotels to fluctuate prices to reflect the level of demand would have operated to increase rates where alterations to bookings reasonably had to be made at short notice. However, an appropriate cap is to be set at $425 per night. I direct that rate is
2 National Mini Storage Ltd v National Storage Ltd [2017] NZHC 2295 at [42], involving Brisbane– Auckland travel.
to apply in the case of each of the witnesses for whom disbursements are claimed. Actual accommodation costs per night are recoverable, up to a limit of $425 per night.
[37] The next head of disbursements was hearing costs of $8,559.63. This represents the travel and accommodation costs of Mr Galbraith QC, who appeared throughout as senior counsel for L&M. Objection was taken on the basis that the relative complexity of the case did not require L&M to retain counsel from out of Wellington when adequate representation could have been obtained from the senior bar in Wellington.
[38] Given the range of issues involved and the amount of money at stake, I consider L&M’s retention of senior counsel from Auckland was justified and accordingly Mr Galbraith’s travel and accommodation costs are recoverable. If relevant, I impose a limit on accommodation costs at $425 per night.
[39] Included within hearing costs are amounts for taxis to ferry the bundle of documents from solicitors’ offices to the Court and return on a number of occasions. I consider that cost is recoverable.
GST
[40] On the basis of the Court of Appeal’s decision in New Zealand Venue and Event Management Ltd v Worldwide NZ LLC,3 Bathurst disputed that L&M should be entitled to recover GST incurred on disbursements. The rationale for that ruling was that the party benefiting from an order for payment of costs and disbursements would recover the GST portion, assuming they are registered for GST.
[41] I take the claim for GST in this case to be made on the basis that L&M is not GST registered. If my assumption is correct, then I allow the claim for the GST component of the items of disbursements up to the limits that I have approved. If my assumption is wrong, then the New Zealand Venue decision will apply and the GST component is not recoverable.
3 New Zealand Venue and Event Management Ltd v Worldwide NZ LLC [2016] NZCA 282, (2016) 23 PRNZ 260.
Result
[42]I order as follows:
(a)L&M is entitled to costs of $109,052, being the total of L&M’s entitlement less 20 per cent for its unsuccessful argument and less
$7,636 for Bathurst’s entitlement to costs for further particulars;
(b)GST is applicable, subject to [41] above; and
(c)L&M is entitled to disbursements as set out in [26] to [39] above.
[43] The views of both sides have prevailed to a degree on their disputes over costs and disbursements. There will accordingly be no costs order on preparation of memoranda on costs.
Dobson J
Solicitors:
Chapman Tripp, Wellington for plaintiff
Minter Ellison Rudd Watts, Wellington for defendants
3
0