Leeds v Richards

[2022] NZHC 1389

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2016-404-140

[2022] NZHC 1389

UNDER

the Insolvency (Cross-Border) Act 2006

IN THE MATTER

of request for assistance to facilitate the enforcement of an order dated 19 December 2014 of the High Court of Justice of England and Wales

BETWEEN

MICHAEL THOMAS LEEDS and NICHOLAS STEWART WOOD as joint

trustees in bankruptcy of the estate of MURRAY RICHARDS

Applicants

AND

MURRAY RICHARDS (DECEASED)

First Respondent

STEINDLE WILLIAMS LEGAL LIMITED

Second Respondent

Hearing:	On the papers
Counsel:	S M Bisley and LWD Kibblewhite for the Applicants P Davey for the Second Respondent
Judgment:	14 June 2022

JUDGMENT OF GAULT J

(Costs)

This judgment was delivered by me on 14 June 2022 at 3:00 pm pursuant to r 11.5 of the High Court Rules 2016.

Registrar/Deputy Registrar

……………………………………

LEEDS and WOOD v RICHARDS [2022] NZHC 1389 [14 June 2022]

[1]    Following the applicants’ notice of discontinuance, the second respondent Steindle Williams Legal Limited (SWL) seeks costs on a solicitor/client basis totalling

$28,009.40 (including GST).

[2]    The applicants say that SWL is entitled at most to $5,545.25 (plus GST if any), being the sum of its actual costs for steps it was required to take in order to assist with Mr Richards’ bankruptcy and scale costs for other steps that it took reasonably.

Factual background

[3]    The applicants were appointed joint trustees in bankruptcy of the estate of the first respondent, Mr Richards. Mr Richards was a former client of SWL.

[4]    In February 2015, the applicants requested SWL to provide information relating to Mr Richards who had been adjudicated bankrupt in England. SWL responded that it was bound by confidentiality and could not provide the information without Mr Richards’ consent or an appropriate order of the Court.

[5]    The applicants filed an originating application dated 29 January 2016 seeking orders in accordance with a letter of request from the County Court at Croydon to permit the applicants to use the Official Assignee’s powers to obtain information. SWL filed a notice of appearance advising that it neither opposed nor consented to the orders.

[6]    Mr Richards then applied for a stay of the proceeding. On 3 June 2016, Associate Judge Bell dismissed that application and made an order requiring SWL to prepare an affidavit setting out the matters where it acted for Mr Richards or any “entities associated with Mr Richards”.1 An order was made that the applicants pay SWL’s actual and reasonable legal costs in preparing, filing and serving that affidavit.

[7]    Mr Richards then filed an application out of time to review that judgment.  On 1 August 2016 Associate Judge  Bell  directed  SWL  to  file  the  affidavit  by  19 August 2016. SWL instructed counsel and sought further directions as to what was

1      Leeds v Richards [2016] NZHC 1191 at [44].

meant by “entities associated with Mr Richards” together with a request that SWL be allowed further time to file and serve the affidavit following those directions.

[8]    On 3 August 2016, Mr Richards filed an application seeking to review and stay the orders made on 1 August 2016.

[9]    Justice Hinton heard the application  for  review  on  1  September  2016.  She amended the orders made on 3 June 2016 to require SWL to file two affidavits – one listing matters where it acted for Mr Richards, and a second affidavit to be filed in a sealed envelope listing matters  where  it  acted  for  entities  associated  with  Mr Richards.2 SWL filed those two affidavits.

[10]   The substantive hearing took place on 22 September 2016. SWL agreed to abide the decision of the Court and was excused from the hearing. In relation to the issue of Mr Richards’ ability to waive privilege for entities where there was the possibility of joint privilege, Heath J appointed Mr Whale as independent counsel to review all files held by SWL and provide a short report. Mr Steindle of SWL was required to confer with Mr Whale and arrange for the files and other paper-based or electronic documents to be delivered to his office. Justice Heath reserved the issue of costs in relation to SWL’s attendances.3

[11]   Mr Steindle assisted Mr Whale who provided a report to the Court, following which there was a further telephone conference as to how the documents should be provided.   SWL  agreed  to  abide.   Justice  Heath  then  issued  a  judgment  on    13 December 2016 making orders for documents to be disclosed to the applicants by the end of January 2017 where no issue of joint privilege arose.4 He also ordered that Mr Steindle provide an affidavit regarding the person(s) from whom instructions were received before that date.

[12]   Mr Richards had sought to appeal against the order annulling his bankruptcy and the orders made were suspended. There were miscellaneous attendances required during that period.

2      Leeds v Richards [2016] NZHC 2118.

3      Leeds v Richards [2016] NZHC 2248, and [2016] NZHC 2314.

4      Leeds v Richards [2016] NZHC 3039.

[13]   Mr Richards died in early 2020. Subsequently, the Court removed the suspension to allow the applicants to review the documents that had already been delivered to their solicitors.

[14]   The applicants decided not to pursue the remaining documents where joint privilege was in issue and discontinued the proceeding.

Submissions

[15]   In support of indemnity costs, Mr Davey, for SWL, relied on r 14.6(4)(f) of the High Court Rules 2016, which provides that the Court may order a party to pay indemnity costs where “some other reason exists which justifies the court making an order for indemnity costs despite the principle that the determination of costs should be predictable and expeditious”.

[16]   Mr Davey submitted that the letter of request sought an order that the applicants may exercise the Official Assignee’s powers to obtain from SWL information relevant to Mr Richards’ bankruptcy “on payment by the joint trustees of [SWL’s] reasonable costs”. Justice Heath also noted in his judgment that the letter of request made it clear that the New Zealand solicitors’ reasonable costs of complying with the obligations on them as a result of the request were to be paid by the applicants.5

[17]   Mr Davey also submitted that the applicants need not have named SWL as a party but chose to do so, which necessarily meant that SWL was obliged to spend additional time attending to matters that arose in the proceeding. Complicated privilege issues arose, and it was reasonable and appropriate for SWL to instruct counsel to act for it on those matters. SWL acted reasonably in response to matters raised in the proceeding. For example, Heath J noted that SWL was rightly concerned that it should not provide information to the applicants where Mr Richards did not hold the benefit of the privilege. Mr Davey also submitted that SWL should not be out of pocket for the time spent and costs incurred. As well as counsel’s costs, SWL

5      Leeds v Richards [2016] NZHC 2314 at [50].

should be entitled to recover its costs at its usual hourly rates under the “lawyer in person exception” in McGuire v Secretary for Justice.6

[18]   Mr Bisley, for the applicants, submitted that the Court’s order, following the letter of request, was that the applicants pay SWL’s reasonable costs of complying with obligations on them as a result of the request. These obligations were to prepare two affidavits from Mr Steindle and to provide the documents listed in those affidavits to Mr Whale.

[19]   Mr Bisley also submitted that SWL’s commercial charge out rates are not actual costs as a profit margin is included, referring to the approach of the Environment Court in Lau v Auckland Council.7 He proposed 50 per cent of the hourly rates.

Discussion

[20]   In relation to SWL’s reasonable costs of complying with its obligations as a result of the letter of request, I consider SWL is entitled to its actual and reasonable costs. Application to the facts raises two issues. First, the scope of SWL’s obligations. Secondly, calculation of SWL’s reasonable costs insofar as they did the work themselves rather than instructed counsel.

[21]   In relation to the first issue, SWL’s costs need to be split between complying with its obligations as a result of the letter of request and other attendances in the proceeding. As Mr Bisley identified from SWL’s invoices, SWL’s time cost for preparing the affidavits and providing the documents appears limited to $4,874.50 plus Mr Davey’s costs of $1,677.

[22]   In relation to the second issue, I accept that SWL’s charge out rates no doubt include a profit margin. But this case is different from Lau v Auckland Council, which involved charging the time of council officers and where the Judge was in a position to estimate the actual cost. In the context of the letter of request which sought information relevant to Mr Richards’ bankruptcy from SWL and specifically provided for “payment by the joint trustees of [SWL’s] reasonable costs”, I do not consider the

6      McGuire v Secretary for Justice [2018] NZSC 116, [2019] 1 NZLR 335 at [55] and [88].

7      Lau v Auckland Council [2016] NZEnvC 211.

reasonable costs should make an arbitrary deduction for SWL’s unknown profit margin.

[23]   The position is different in relation to costs in the proceeding. I consider that SWL has not made out a claim for indemnity costs for other attendances. SWL is entitled to scale costs for other attendances in the proceeding, except that I disallow the costs of three of the memoranda referred to by Mr Bisley, which I consider fairly reflects a degree of unnecessary involvement. I consider 2B costs are appropriate for the allowed steps, rather than 1A as submitted by Mr Bisley. Category 2 costs were ordered by Associate Judge Bell on 3 June 2016.8 For these reasons, I do not accept the applicants’ calculation of scale costs but as SWL did not address scale costs at all I am not in a position to calculate 2B costs for the allowed steps. I leave that to counsel.

[24]   Finally, in these circumstances, I do not consider it appropriate to reduce SWL’s costs on the basis of the without prejudice save as to costs letter.

Gault J

Solicitors / Parties:

Mr S M Bisley and Mr LWD Kibblewhite, Buddle Findlay, Wellington Mr P Davey, Barrister, Auckland

Mr A Steindle (second respondent’s instructing solicitor), Steindle Williams Legal Ltd, Auckland Copy to:

Mr A Peat (for Peter Harrod, the first respondent’s brother), Duncan King Law, Auckland Mr M J Whale (independent solicitor), Lowndes Law, Auckland

8      Leeds v Richards [2016] NZHC 1191.