Marshall Profiling Limited v Tautari

[2015] NZHC 1059

IN THE HIGH COURT OF NEW ZEALAND HAMILTON REGISTRY

CIV-2015-419-000049 [2015] NZHC 1059

UNDER	the Judicature Act 1908
IN THE MATTER OF	an appeal against a costs order
BETWEEN	MARSHALL PROFILING LIMITED Appellant
AND	RYAN DOUGLAS TAUTARI Respondent

Hearing:	19 May 2015
Appearances:	E R Locke for the Appellant No appearance by or on behalf of the Respondent
Judgment:	19 May 2015

JUDGMENT OF WOOLFORD J

Solicitors/Counsel:           Whitfield Braun Limited, Hamilton

Copy to:  Respondent

MARSHALL PROFILING LIMITED v TAUTARI [2015] NZHC 1059 [19 May 2015]

[1]      Marshall Profiling Limited appeals against the decision of Judge Spear dated

19 December 2014 awarding it costs of $750 and disbursements of $732.49, when he gave summary judgment against Ryan Douglas Tautari for the sum of $2,625. Marshall Profiling does not appeal against the award of $2,625, but says it should have been awarded costs of $4,623 and disbursements of $817.49.

Factual background

[2]      Mr Tautari was a director of Elite Innovation Ltd.  On 9 August 2013, Elite Innovation made a credit application to Marshall Profiling.   The application was signed by Mr Tautari on behalf of the company.  Marshall Profiling agreed to extend credit to Elite Innovation on terms and conditions which included the following:

(a)      Mr Tautari agreed to jointly and severally accept liability for credit extended to Elite Innovation and undertook to pay for all goods or services from Marshall Profiling if the company failed to meet its obligations under the application.

(b)Interest was to be charged on any amount owing after the due date at the rate of 2.5% per month.

(c)      Elite Innovation would pay all costs, expenses and disbursements, including legal costs on a solicitor/client basis, incurred by Marshall Profiling in relation to obtaining payment of any amount outstanding.

[3]      In the months of March and April 2014, Marshall Profiling supplied goods to Elite Innovation totalling $2,267.81.   One invoice dated 31 March 2014 and two invoices dated 30 April 2014 were sent to Elite Innovation.  They were not paid.  A statutory demand dated 19 June 2014 was prepared and served on Elite Innovation claiming  the  invoiced  amount  plus  interest  and  costs  totalling  $2,687.98.    In addition, by letter dated 18 June 2014, the claimed amount was demanded from Mr Tautari under the guarantee he had signed.  No response was received from either Elite  Innovation  or  Mr Tautari.    Elite  Innovation  was  subsequently placed  into liquidation and Mr Tautari failed to make any payment of the claimed amount.

[4]      On 14 October 2014, Marshall Profiling commenced proceedings against Mr Tautari  in  the  Hamilton  District  Court  by  way  of  statement  of  claim  and interlocutory application for summary judgment.  Mr Tautari took no steps to defend the proceedings and, accordingly, the matter proceeded to a hearing on 19 December

2014, at which Marshall Profiling was represented by counsel, but there was no appearance by or on behalf of Mr Tautari.

[5]      After hearing from counsel, Judge Spear gave summary judgment in favour of Marshall Profiling in the sum of $2,625 (inclusive of interest per contract) and costs of $750 plus disbursements of $732.49, a total judgment sum of $4,107.49. Judge Spear gave no reasons for only awarding costs of $750 and disbursements of

$732.49, when costs of $4,623 and disbursements of $817.49 had been claimed.

[6]      In the absence of reasons, I am, on appeal, therefore able to approach the matter afresh.  Mr Tautari has been served with this appeal, but has again taken no steps to defend it.

[7]      As to the costs of $750 awarded by Judge Spear, I presume the Judge saw that sum as being more proportionate to the sum of $2,625 he awarded on the summary  judgment  application.    That  sum  is,  however,  less  than  half  of  the calculated scale costs on a 1A basis and less that one fifth of the calculated scale costs of a 2B basis.   There needs to a degree of predictability in the awarding of costs.  In the usual course of events the proper process is for costs to be determined on a scale basis.

[8]      Rule 14.2 of the District Court Rules sets out the general principles applying to the determination of costs.  It provides:

14.2     Principles applying to determination of costs

The following general principles apply to the determination of costs:

(a)      the party who fails with respect to a proceeding or an interlocutory application should pay costs to the party who succeeds:

(b)       an  award  of  costs  should  reflect  the  complexity  and significance of the proceeding:

(c)       costs should be assessed by applying the appropriate daily recovery rate to the time considered reasonable for each step reasonably required in relation to the proceeding or interlocutory application:

(d)       an appropriate daily recovery rate should normally be two- thirds of the daily rate considered reasonable in relation to the proceeding or interlocutory application:

(e)       what is an appropriate daily recovery rate and what is a reasonable time should not depend on the skill or experience of the solicitor or counsel involved or on the time actually spent by the solicitor or counsel involved or on the costs actually incurred by the party claiming costs:

(f)       an award of costs should not exceed the costs incurred by the party claiming costs:

(g)      so far as possible the determination of costs should be predictable and expeditious.

[9]      Scale costs are, however, able to be departed from in certain circumstances. Rule 14.6 of the District Court Rules provides:

14.6 Increased costs and indemnity costs

(1)      Despite rules 14.2 to 14.5, the court may make an order—

(a)      increasing   costs   otherwise   payable   under   those   rules

(increased costs); or

(b)       that the costs payable are the actual costs, disbursements, and   witness   expenses   reasonably  incurred   by  a  party

(indemnity costs).

(2)      The  court  may  make  the  order  at  any  stage  of  a  proceeding  in relation to any step in the proceeding.

(3)      The court may order a party to pay increased costs if—

(a)       the nature of the proceeding or the step in the proceeding is such that the time required by the party claiming costs would substantially exceed the time allocated under band C; or

(b)       the party opposing costs has contributed unnecessarily to the time or expense of the proceeding or step in the proceeding by—

(i)        failing to comply with these rules or a direction of the court; or

(ii)       taking  or  pursuing  an  unnecessary  step  or  an argument that lacks merit; or

(iii)      failing,  without  reasonable  justification,  to  admit facts, evidence, or documents or accept a legal argument; or

(iv)      failing, without reasonable justification, to comply with an order for discovery, a notice for further particulars, a notice for interrogatories, or any other similar requirement under these rules; or

(v)       failing, without reasonable justification, to accept an offer of settlement, whether in the form of an offer under  rule  14.10  or some  other  offer  to settle  or dispose of the proceeding; or

(c)        the proceeding is of general importance to persons other than just the parties and it was reasonably necessary for the party claiming costs to bring the proceeding or participate in the proceeding in the interests of those affected; or

(d)       some other reason exists that justifies the court making an order for increased costs despite the principle that the determination  of  costs  should  be  predictable  and expeditious.

(4)       The court may order a party to pay indemnity costs if—

(a)       the party has acted vexatiously, frivolously, improperly, or unnecessarily in  commencing,  continuing,  or  defending a proceeding or a step in a proceeding; or

(b)        the party has ignored or disobeyed an order or a direction of the court or breached an undertaking given to the court or another party to the proceeding; or

(c)       costs are payable from a fund, the party claiming costs is a necessary party to the proceeding affecting the fund, and the party claiming costs has acted reasonably in the proceeding; or

(d)       the person in whose favour the order of costs is made was not a party to the proceeding and has acted reasonably in relation to the proceeding; or

(e)       the party claiming costs is entitled to indemnity costs under a contract or deed; or

(f)       some other reason exists that justifies the court making an order for indemnity costs despite the principle that the determination  of  costs  should  be  predictable  and expeditious.

[10]     Of particular relevance in this case is r 14.6(4)(e) - a contractual entitlement to solicitor client costs.  The contractual basis for claiming indemnity costs needs to properly pleaded and the costs properly incurred.  In the present case, the contractual basis for indemnity costs was pleaded and there is no suggestion that the costs were not properly incurred.   I am of the view that a contractual entitlement to solicitor client costs should generally be upheld.  The fees charged appear to be reasonable as they are only approximately $500 more than 2B scale costs.  I am also of the view that there are no public policy reasons why an indemnity costs award should not be made in this instance.

[11]     As   for   the   disbursements,   I   note   that   the   difference   between   the disbursements claimed and the disbursements awarded is $85, which appears to be a process server fee for the service of the statutory demand on Elite Innovations.  I am of the view that this is also properly recoverable as the credit agreement of 9 August

2013 specifically provided that Marshall Profiling could recover all costs, expenses and disbursements from Elite Innovations incurred in relation to obtaining payment of any amount outstanding and that Mr Tautari undertook to pay if the company failed to meet its obligations under the agreement.

[12]     In all the circumstances, the appeal is allowed.  The costs and disbursements order made by Judge Spear is quashed.  Judgment is given for sum of $2,625 plus costs of $4,623 and disbursements of $817.49.   Marshall Profiling is also to have costs on this appeal on a Category 1 basis as previously fixed by Faire J.

………………………………….

Woolford J