LJ Group New Zealand Limited v New Zealand Capital Management Limited
[2025] NZHC 1740
•30 June 2025
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2023-404-2048
[2025] NZHC 1740
UNDER Section 97 of the Property Law Act 2007 BETWEEN
LJ GROUP NEW ZEALAND LIMITED
Plaintiff
AND
NEW ZEALAND CAPITAL MANAGEMENT LIMITED and
BRIDGING FINANCE GROUP LIMITED
Defendants
Hearing: On the papers Appearances:
S Moore and G I Q Credo for Plaintiff S R G Judd for Defendants
Judgment:
30 June 2025
Reissued:
7 July 2025
JUDGMENT OF ASSOCIATE JUDGE PAULSEN (COSTS)
This judgment was delivered by me on 30 June 2025 at 11.00 am pursuant to Rule 11.5 of the High Court Rules.
Registrar/Deputy Registrar Date:
LJ GROUP NEW ZEALAND LIMITED v NEW ZEALAND CAPITAL MANAGEMENT LIMITED [2025] NZHC 1740 [30 June 2025]
[1] The defendants held a mortgage over the plaintiff’s property and exercised their power of sale as mortgagees. The plaintiff sued the defendants, alleging that they had breached their duty under s 176 of the Property Law Act 2007 and exercised their power of sale in an oppressive manner in breach of the Credit Contracts and Consumer Finance Act 2003.
[2] In a judgment of 6 May 2025, I granted the defendants’ application for summary judgment.1 I held the defendants were entitled to costs and directed memoranda to be filed if agreement could not be reached on costs. Memoranda have now been filed.
[3] The defendants are seeking indemnity costs along with an amount for management time it is said was wasted in dealing with this proceeding. The plaintiff says the defendants are only entitled to 2B scale costs (possibly with an uplift) and nothing for management time.
[4] There is a previous costs judgment in this proceeding.2 The plaintiff had originally sought an injunction to prevent registration of the transfer of title of its property in the exercise of the defendants’ power of sale. That application was ultimately unsuccessful. The defendants sought indemnity costs and to enforce the plaintiff’s undertaking as to damages by way of an order that the plaintiff compensate them for wasted management time.
[5] Venning J awarded the defendants indemnity costs because of the failure by the plaintiff to provide material information to the Court when applying for the injunction. He also found the defendants were entitled to indemnity costs under the loan agreements between the parties, the relevant terms of which were:
Clause 7(f): Costs of default are payable: All sums expended by the lender in the exercise of the lender’s rights and powers following a default or in exercising or enforcing or attempting to enforce any power, right or remedy contained or implied in this contract are payable by you to the lender upon demand. This clause does not limit any other term of this contract relating to costs; nor is it limited by any other such term.
…
1 LJ Group New Zealand Ltd v New Zealand Capital Management Ltd [2025] NZHC 1071.
2 LJ Group New Zealand Ltd v New Zealand Capital Management Ltd [2024] NZHC 1564.
Clause 12(a): Costs payable by you: You must pay to the lender upon demand, the lender’s legal costs (as between solicitor and client) for:
…
iicosts on default: legal services arising from or related to any default under this contract or the enforcement or exercise or attempted enforcement or exercise of any of the lender’s rights, remedies and powers under this contract …
iiicosts of variation, waiver or change demand …
ivlegal costs of lender: legal services relating to the protection of the lender’s security interest taken in conjunction with this contract …
[6] Venning J did not award the defendants’ compensation for management time, saying:
[30] In my judgment it is not appropriate for the Court to try and determine the issue of damages in relation to the undertaking on the papers. NZ Capital’s claim for damages in reliance on the undertaking should properly be pursued by way of counterclaim in the proceedings brought by LJ Group in response to the amended claim. Mr Smith can give evidence to support the claim and be cross-examined on the issue. It is appropriate that issue be left to be canvassed at the substantive hearing.
The defendants’ submissions
[7] The defendants seek costs since the dismissal of the plaintiff’s injunction application. The steps taken have been summarised in counsel’s memorandum and fee accounts rendered to the defendants by their lawyers and counsel have been attached. There are some arithmetical errors, but I calculate the claimed amount is
$76,365.28 (incl GST) broken down as follows:
(a)solicitors’ costs $2,993.13
(b)counsel’s costs $69,862.50
(c)disbursements
(i) court filing fees ($650 included in invoice 2237) $793.00
(ii) copying/binding fees (included in invoice 2259) $681.65
(iii) expert witness (Joanna Pidgeon) $2,035.00
[8] The defendants argue they are entitled to indemnity costs under all of rr 14.6(4)(a), (e) and (f) of the High Court Rules 2016. However, as far as the terms of the loan agreements are concerned, the defendants rely particularly on cl 12(a)(ii) saying that their legal costs were incurred for “legal services arising from or relating to any default under this contract or the enforcement or exercise ... of any of the lender’s rights, remedies and powers under this contract ...”. They say the plaintiff’s claim was a challenge to the exercise of their rights, remedies and powers under the loan agreements and the legal costs incurred arose from and were related to the exercise of those rights, remedies and powers.
[9] The defendants also seek compensation for management time. The director, Mr Smith, had sworn an affidavit, that was before Venning J when he made his costs decision, in which Mr Smith valued his time at $25,665. He values his time since then as a further $16,887.50, making a total of $42,542.50.
[10] It is said this management time is payable under cl 22 of the term loan agreement, which provides:
22............ If a notice is issued pursuant to section 119 of the Property Law
Act 2007 [sic] issued, then we may charge you reasonable compensation for our time spent in managing the default, instructing land agents, sale of the security property, and recovery of all money owing. ...
[11] The defendants note there is an amount of $176,899.71 being held in Aspiring Law’s trust account following the sale of the plaintiff’s property and they seek an order for payment from those funds.
The plaintiff’s submissions
[12] The plaintiff opposes the defendants’ claims for costs and management time and says:
(a)the defendants failed to comply with the Court’s direction to confer with the plaintiff to attempt to reach agreement on costs as required in my judgment;3
(b)the claim for indemnity costs is not reasonable or proportionate;
(c)the defendants have waived the right to recover indemnity costs;
(d)indemnity costs should not be awarded until all issues between the parties are finally determined;
(e)there has been a duplication of costs claimed;
(f)generally 2B costs are considered to be two-thirds of actual costs, so the defendants ought not recover greater than 2B scale costs with no management time; and
(g)there is no legal basis for the claim for management time.
My analysis
[13] The defendants’ counsel did not fail to comply with the direction that counsel confer on costs. Details of the defendants’ claims were sent to the plaintiff’s lawyers on 14 May 2025 and no response was received. The most that could be said is that counsel might have followed up on that matter before applying to the Court, but there can be no suggestion that costs would have been agreed had he done so.
[14] The plaintiff accepts that under r 14.4(e) the Court may order a party to pay indemnity costs if the party claiming costs is entitled to those under a contract or deed. It says, however, indemnity costs must be objectively reasonable and given the “half- day nature of the hearing” and the lack of complexity typically associated with summary judgment proceedings, the amount claimed is unreasonable.
3 LJ Group New Zealand Limited v Zealand Capital Management Limited, above n 1, at [161].
[15] Venning J considered the terms of the loan agreements entitled the defendants to recover indemnity costs. I agree with that assessment.
[16] I accept that indemnity costs must be reasonably incurred. While I have not been provided with time records and details of hourly charge out rates, as is sometimes required to justify awards of indemnity costs, I have details in counsel’s memorandum of the work undertaken, the bills of cost with narrations of the work performed in each billing period, my now detailed knowledge of the case, as well as an appreciation of what is commonly charged by law firms and counsel for work of this kind. As has been noted in other cases, in relation to the assessment of costs there is room for robust judgement as to the costs considered reasonable in all the circumstances.4 I also do not accept the plaintiff’s assessment that this case should be regarded as simple or lacking in complexity. It raised difficult issues and there were voluminous materials to deal with.
[17] I am satisfied the legal costs claimed by the defendants are fair and reasonable given the nature of the case and the work undertaken.
[18] The plaintiff argues that by filing submissions on costs the defendants have waived the right to indemnity costs under the term loan agreements. That position is untenable. The authority relied on was Jeffries v Ernst & Young Nominees, where a claim for indemnity costs was made after costs had been awarded and judgment sealed.5 That is not what has occurred here.
[19] Next, the plaintiff says it would be inappropriate and procedurally unfair to allow indemnity costs on a contractual basis before the issues between the parties have been finally determined. I presume this refers to the plaintiff’s appeal from the judgment of 6 May 2025. The defendants have been successful and are entitled to payment of their costs now. If the plaintiff is successful on appeal, the issue of costs will be revisited.
4 Black v ASB Bank Ltd [2012] NZCA 384 at [81], referring to Frater Williams & Co Ltd v Australian Guarantee Corporation (NZ) Ltd (1994) 2 NZ ConvC 191,873 (CA) at 191,887.
5 Jefferies v Ernst & Young Nominees (1999) 13 PRNZ 40 (HC).
[20] The plaintiff then says there is some duplication of the costs now claimed and costs previously awarded by Venning J.6 Specifically, the plaintiff takes issue with two invoices being:
(a)Invoice 2219, dated 19 April 2024, in respect of “attendances since February, including emails and discussions with you, Stu Smith and the lawyers for the other parties, reviewing memo for court, and other attendances incidental thereto”.
(b)Invoice 2227, dated 30 June 2024, in respect of “attendances to date including emails and discussions with you and Stu, the court and counsel for the other parties, reviewing costs judgment, drafting statement of defence, memo for court and other attendances incidental thereto”.
[21] I am satisfied there has been no duplication. The defendants filed their costs submissions in respect of the injunction application on 29 February 2024. Any “attendances since February” therefore postdate the costs sought previously. The issue the plaintiff identifies with invoice 2227 is that it includes “reviewing costs judgment”. In my opinion, it is reasonable for counsel to have reviewed the costs judgment and invoiced the defendants accordingly.
[22]I find the defendants are entitled to legal costs on an indemnity basis of
$72,855.63 and reasonable disbursements of $3,509.65.
[23] In relation to the claim for management time, the position is different. Venning J considered this was a damages claim which it was inappropriate for the Court to determine in a costs context. He said it should be pursued as a counterclaim in the proceeding where Mr Smith could give evidence to support the claim and be cross-examined. I agree that was the correct course. The defendants chose not to proceed in that manner without explanation.
6 LJ Group New Zealand Ltd v New Zealand Capital Management Ltd, above n 2.
[24] Even if I was not of that view, I have real doubts the claim could be resolved in this context. First, there is an issue of interpretation of cl 22, and whether it allows for the management costs to be recovered.
[25] Second, the defendants say Mr Smith has spent 122 hours on the proceeding, comprised of 73.30 hours for the interim injunction application and a further
48.25 hours for the following attendances. Mr Smith says he should be compensated at the rate of $350 an hour. He says this is a “typical salary rate for a General Manager of a business unit in a Trading Bank”, a role which he says he would qualify for given his 30 years of finance and valuation experience. There is no independent evidence about these matters and they are clearly ones that the plaintiff would challenge.
[26] Third, the time that Mr Smith has spent on various tasks is unsupported by time records and appears excessive. For example, Mr Smith claims to have spent
28.5 hours on preparation of the statement of defence. I cannot see how that could be justified.
[27] Fourth, a significant amount of the claim relates to the preparation of affidavits and, as I pointed out in my earlier judgment, Mr Smith’s evidence contained inadmissible hearsay and opinion evidence which I had to disregard.7
[28] The claim for management time is not allowed. The defendants should pursue that in other proceedings if they wish.
[29] The defendants have sought an order that the costs and disbursements awarded be paid from funds held by Aspiring Law. That was the order made by Venning J and nothing has been raised to suggest it is not appropriate to make such an order again. I would expect if there was any legal impediment to the making of the order, counsel would have advised the Court.
7 LJ Group New Zealand Ltd v New Zealand Capital Management Ltd, above n 1, at [65].
Result
[30]The defendants are awarded costs of $72,855.63 and disbursements of
$3,509.65.
[31] The costs and disbursements are to be paid from the sum held as security by the stakeholder Aspiring Law.
O G Paulsen Associate Judge
Solicitors:
Ewart & Ewart, Auckland Aspiring Law, Wanaka
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