Mailley v Shaw
[2021] NZHC 841
•21 April 2021
ORDER PROHIBITING PUBLICATION OF THE JUDGMENT AND ANY PART OF THE PROCEEDINGS (INCLUDING THE RESULT) IN NEWS MEDIA OR ON THE INTERNET OR OTHER PUBLICLY AVAILABLE DATABASE UNTIL DETERMINATION OF THE REVIEW PROCEEDINGS CIV-2015-404-001185 OR FURTHER ORDER OF THE COURT. IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2015-404-001185
[2021] NZHC 841
BETWEEN MARTIN JAMES MAILLEY
First Plaintiff
SABRINA NUTARELLI
Second PlaintiffAND
ANTONY SHAW
First Defendant
NEW ZEALAND LAW SOCIETY
Third Defendant
Hearing: On the papers Counsel:
First Plaintiff in Person Second Plaintiff in Person
J Long and J E G San-Diego for First Defendant
T P Mullins and D A C Bullock for Third DefendantJudgment:
21 April 2021
COSTS JUDGMENT OF ASSOCIATE JUDGE P J ANDREW
This judgment was delivered by Associate Judge Andrew on 21 April 2021 at 2.00 pm
pursuant to r 11.5 of the High Court Rules Registrar / Deputy Registrar Date…………………………
MAILLEY & OR v SHAW & OR [2021] NZHC 841 [21 April 2021]
Introduction
[1] In my judgment of 24 November 2020, I struck out the plaintiffs’ proceedings against the first and third defendants.1
[2]This judgment is my decision on costs.
[3] Before addressing the question of costs, I deal with an application by Mr Mailley dated 11 February 2021, seeking that I recuse myself from determining costs on the grounds of apparent bias or judicial misconduct in relation to my substantive judgment of 24 November 2020.
Recusal
[4] In accordance with s 171 of the Senior Courts Act 2016, the Chief High Court Judge has published recusal guidelines for the High Court. The New Zealand High Court Recusal Guidelines (the Guidelines)2 outline the general principles, which guide whether a Judge should recuse himself or herself. The principles incorporate the two- stage test established by the Supreme Court in Saxmere Company Ltd v Wool Board Disestablishment Company Ltd.3
[5]The relevant parts of the Guidelines provide:4
1.1A judge has an obligation to sit on any case allocated to him or her unless grounds for recusal exist.
1.2A judge should recuse him or herself if, in the circumstances, a fair- minded, fully informed observer would have a reasonable apprehension that the judge might not bring an impartial mind to the resolution of the question the judge is required to decide.
1.3The standard for recusal is one of “real and not remote possibility”, rather than probability.
1.4The test is two-stage one. The judge must consider:
1 Mailley & Or v Shaw & Or [2020] NZHC 3102.
2 New Zealand High Court Recusal Guidelines (June 2017), available at
< Company Ltd v Wool Board Disestablishment Company Ltd [2010] 1 NZLR 35 (SC) at [3]; citing Ebner v Official Trustee in Bankruptcy [2000] HCA 63, (2000) 205 CLR 337 at [6] per Gleeson CJ, McHugh, Gummow and Hayne JJ.
4 (Citations omitted).
1.4.1First, what it is that might possibly lead to a reasonable apprehension by a fully informed observer that the Judge might decide the case other than on its merits; and
1.4.2Second, whether there is a “logical and sufficient connection” between those circumstances and that apprehension.
[6] The Guidelines also state that the apprehension of bias is case dependent, and a judge should apply these principles “firmly and fairly and not accede too readily to suggestions of bias”.5
[7] For the reasons submitted by the third defendant, the New Zealand Law Society (NZLS), in its memorandum of 25 February 2021, I find that there is no basis for the recusal application and, accordingly, it should be dismissed. In substance, Mr Mailley points to no more than the fact that I have ruled against him previously on two occasions. I also place little weight on the affidavit of Mr Martin Lyttleton, and in any event I disagree with the assertions that he makes.
[8] It is well established that a basis for recusal does not arise merely because a judge has ruled against a particular party in the past, including if a previous decision was adverse to that party.6
[9]Successful recusal applications on the grounds of judicial bias are rare.7
[10] The applicant bears the onus of “firmly” establishing an assertion of judicial bias, and it is not enough to simply identify circumstances that give a “vague sense of unease or disquiet”.8 Mr Mailley has not established the onus in this case. I find that there are no circumstances that might possibly lead to a reasonable apprehension by a fully informed observer that I might decide the case other than on its merits. I also find that the second limb of the apparent bias test is not made out: Mr Mailley has not articulated a logical connection between the matters he complains of and his “feared deviation” from impartiality.9
5 New Zealand High Court Recusal Guidelines, above n 2, at 1.5.1 and 1.7.
6 R v Cullen [1992] 3 NZLR 577.
7 Ilich v Commissioner of Inland Revenue (2009) 24 NZTC 23,556 (HC) at [50].
8 Saxmere Company Ltd v Wool Board Disestablishment Company Ltd, above n 3.
9 Saxmere Company Ltd v Wool Board Disestablishment Company Ltd, above n 3, at [4], [20], [86] and [93].
[11] My decision to dismiss the recusal application does not, of course, obviate my obligation to render a reasoned judgment on costs and one that applies well-established legal principles. Mr Mailley will retain his full review and appeal rights in relation to my decision on costs.
Costs
[12]The first defendant, Mr Shaw, seeks an award of indemnity costs totalling
$84,021.5 (excluding GST). In the alternative, Mr Shaw seeks increased costs of
$62,255.63 (excluding GST) being a 25 per cent uplift on 2B costs. Mr Shaw also seeks disbursements of $2,687.49.
[13] The third defendant, the NZLS, does not seek indemnity costs. The NZLS seeks increased costs for all steps with an uplift of 50 per cent on 2B costs, plus disbursements.
[14] The plaintiffs, Mr Mailley and Ms Nutarelli, oppose any award of costs. They contend that there is no legal or moral basis for any costs award to be made in favour of either defendant.10
Relevant legal principles and the issues
[15] The principles the Court should apply are not in dispute. They are set out at r 14.2 of the High Court Rules 2016 (the Rules) and include the principle that costs follow the event.11 Ultimately, costs are at the discretion of the Court.12
[16] I reject the plaintiffs’ submission that there should be no award of costs in favour of either defendant. Both Mr Shaw and the NZLS have been successful and, in my view, are entitled to costs. Much of the plaintiffs’ opposition is based on a re-
10 The Court has received the following costs submissions from the parties: First defendant’s costs submissions dated 8 December 2020; third defendant (NZLS) costs submissions dated 8 December 2020; plaintiffs’ costs submissions dated 22 February 2021; plaintiffs’ supplementary costs submissions dated 3 February 2021; further supplementary costs submissions of the plaintiffs dated 4 February 2021; first defendant’s memorandum in reply to the plaintiffs’ costs submissions dated 12 February 2021; reply submissions on costs for the third defendant dated 11 February 2021; updating memorandum of counsel for third defendant (NZLS) regarding disbursements dated 25 February 2021; plaintiffs’ memorandum dated 16 February 2021; first plaintiff’s memorandum seeking leave to file additional costs submissions after the due date, dated 1 March 2021.
11 High Court Rules 2016, r 4.2(1)(a).
12 High Court Rules 2016, r 14.1.
litigating of the merits of my decision of 24 November 2020. That is not a basis upon which to oppose an award of costs.
[17] The fact some findings in my substantive judgment may arguably support the plaintiffs’ case – for example, that arguably Mr Shaw made intemperate and inappropriate comments and that the plaintiffs’ concerns about some of the costs were understandable – does not mean that the defendants were not ultimately successful or should be deprived of a costs award.
[18] The critical issue I must address is whether an award of increased or indemnity costs is appropriate. Increased costs can be awarded to a successful party where, amongst other things, the party opposing costs has contributed unnecessarily to the time or expense of the proceedings or step in it, including:13
(a)failing to comply with the Rules or with a direction of the Court; or
(b)taking or pursuing an unnecessary step or an argument that lacks merit; or
(c)failing, without reasonable justification, to admit facts, evidence, documents, or accept a legal argument; or
(d)failing, without reasonable justification, to comply with an order for discovery, and notice for further particulars, and notice for interrogatories, or other similar requirement under the Rules.
Application by Mr Shaw for costs
[19] I reject Mr Shaw’s submission that an award of indemnity costs is warranted. The high threshold for such an award has not been made out. I acknowledge that the claims of the second plaintiff, Ms Nutarelli, were devoid of legal foundation (i.e. she had no legal relationship with Mr Shaw) but her role in the proceedings was a relatively minor one with the focus of the claims relating to the position of Mr Mailley. As a matter of discretion, it would be inappropriate in my view for Ms Nutarelli to shoulder a disproportionate share of the costs.
13 High Court Rules 2016, r 14.6(3)(b).
[20] However, Mr Shaw has established a proper basis for increased costs in the order of a 25 per cent uplift on 2B costs as sought. It is clear that both plaintiffs failed to act reasonably by contributing unnecessarily to the time and expense of the proceedings by pursuing arguments that lacked merit (and following indications from a number of Judges that the pleadings were weak and deficient). This included claims that Mr Shaw had breached his obligations by overcharging but in circumstances where a number of the invoices at issue had never been paid. There were also serious allegations of impropriety by Mr Shaw without sufficient probative evidence.
[21] I also note that the plaintiffs failed to appear on numerous occasions at various fixtures and case management conferences and failed to prosecute their claims overall in a timely fashion. The proceedings were first filed in 2015 and the protracted litigation since that time has given rise to unnecessary costs.
[22] Mr Mailley failed to appear on the following dates: 25 February 2016, stating that he was unable to appear due to “health reasons” (I note these were never substantiated despite a request to do so);19 March 2016; 31 July 2019; 11 February 2020; and 3 March 2020.
[23] Ms Nutarelli failed to appear in at least seven case management conferences; on 25 February 2016, 19 May 2016, 29 June 2018, 11 February 2019, 31 July 2019, 11 February 2020 and 3 March 2020.
[24] I accept, as sought, that Mr Shaw is entitled to claim band C costs in relation to the first statement of defence of 28 July 2015 and also the second statement of defence of 16 September 2020.
[25] Accordingly, the plaintiffs are to pay costs increased by 25 per cent to Mr Shaw in the sum of $63,255.63 (excluding GST), together with disbursements, as sought, of $426.62 (excluding GST) and court disbursements of $2,687.49 (excluding GST) as set out in sch 2 attached to Mr Shaw’s submissions date 8 December 2020.
Application by NZLS for costs
[26]The NZLS seeks a 50 per cent increase on all steps of scale costs calculated at
$36,535, plus disbursements (excluding GST) of $1,447.47. The total costs and disbursements sought (including the 50 per cent uplift) is $58,264.97.
[27] Increased costs may also be ordered where there is a failure by a party to act reasonably.14 The Court of Appeal has held that where the basis for increased costs is that an argument lacked merit and was inherently unlikely to succeed, the increase applies to all steps, rather than a “blow by blow” assessment on the rationale none of the steps ought to have been necessary.15
[28] In this case, I find that the plaintiffs have failed to act reasonably by contributing unnecessarily to the time and expense of the proceedings by pursuing arguments against the NZLS that lacked merit,16 by continuing to pursue their claims after the NZLS had provided them with opportunities to reconsider their position, and by continuing to put the NZLS to further unnecessary costs by not constructively responding to proposals to resolve their claim and costs.
[29] I agree with submissions for the NZLS that these proceedings should never have been brought against it. It was obvious from the inception of the proceedings the plaintiffs had no prospect of success because of the very clear statutory immunity in s 272 of the Lawyers and Conveyancers Act 2006. Furthermore, serious allegations of “bad faith” were made against the NZLS without any foundation. Such allegations should never have been made and the fact that the plaintiffs were and are largely self- represented does not excuse that kind of behaviour.17
[30] The plaintiffs’ contention that the NZLS acted in “bad faith” only arose after the NZLS pointed out the s 272 statutory immunity to them. Despite that, the plaintiffs persisted with their position for more than five years. The NZLS wrote to the plaintiffs on several occasions, both on the record and later in correspondence “without prejudice save as to costs”, regarding this issue and gave them clear and simple notice well in advance of incurring any expense:
(a)First, as early as 2015, the NZLS invited the plaintiffs to reconsider their position in light of the NZLS’ statutory immunity. However, the plaintiffs did not take this opportunity.
14 Bradbury v Westpac Banking Corporation [2009] 3 NZLR 400 (CA) at [27]. Those principles were also applied by the Court of Appeal in Ben Nevis Forestry Ventures Ltd v Commissioner of Inland Revenue [2014] NZCA 348.
15 NR v MR [2014] NZCA 623.
16 High Court Rules 2016, r 14.6(3)(b)(ii).
17 Schmidt v Pepper New Zealand (Custodians) Ltd [2012] NZCA 565 at [8].
(b)Then, in October 2019, the NZLS wrote to the plaintiffs on a without prejudice save as to costs basis pointing out that the statement of claim was not adequately pleaded and that if they continue with their claim the NZLS would be put to further unnecessary cost. The NZLS proposed that the plaintiffs paid scale costs of $28,182.50 and settle the claim.
(c)Again, on 26 August 2020, and after the strike out applications had been set down for hearing, the NZLS offered to accept $29,138.50, being scale costs to that point in the proceedings to date.
[31] However, the plaintiffs did not accept, nor does it appear that they constructively engaged with, these proposals and continued with bringing their proceeding.
[32] In all these circumstances I find that the NZLS has properly established a basis for an uplift of 50 per cent beyond scale, as sought. That is consistent with the approach of the Court of Appeal in Holdfast NZ Ltd v Selleys Pty Ltd.18
[33] In reaching that conclusion, I find that there is no basis for the criticism made by the plaintiffs about the NZLS’ conduct in relation to Mr Martin Lyttleton. As the NZLS pointed out in its submissions, the plaintiffs were on notice from an early stage of the proceedings of the limited scope of Mr Lyttleton’s permissible involvement. There is no basis to the suggestion that the defendants could somehow be responsible for the plaintiffs’ ongoing decision to involve Mr Lyttleton in their proceedings.
[34] In addition to an award of increased costs of 50 per cent, I find that the NZLS is entitled to claim costs on preparing its costs submissions (as sought, $956.00), 2B costs for its Notice of Opposition to Mr Mailley’s application to stay the costs determination, the memorandum and appearance at the mention, plus the filing fee of
$110.00. Those costs and disbursements total $2,018.
[35] I also accept, as sought, that the NZLS is entitled to claim costs on its appearance before Justice Edwards at the review hearing.
18 Holdfast NZ Ltd v Selleys Pty Ltd (2005) 17 PRNZ 897 (CA).
[36] Accordingly, the plaintiffs are to pay the third defendant, the NZLS, total costs and disbursements, of $58,264.97.
Result
[37] The application by the plaintiffs seeking that I recuse myself from determining costs is dismissed.
[38] I order that the plaintiffs are to pay costs to the first defendant, Mr Shaw, and disbursements, in the total sum of $65,943.12 (excluding GST), being 2B costs plus a 25 per cent uplift.
[39] I order that the plaintiffs are to pay costs to the third defendant, the New Zealand Law Society, in the total sum of $58,264.97 (excluding GST), which includes scale 2B costs (on all steps except preparing the statement of defence, which falls into the 2C scale), together with a 50 per cent uplift and costs and disbursements of $2,018.
Associate Judge P J Andrew
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