McClean & Co Limited v Malloch McClean Limited

[2016] NZHC 1115

IN THE HIGH COURT OF NEW ZEALAND INVERCARGILL REGISTRY

CIV-2016-425-000054 [2016] NZHC 1115

BETWEEN

MCCLEAN & CO LIMITED

Plaintiff

AND

MALLOCH MCCLEAN LIMITED Defendant

Hearing:	Dealt with on the papers
Counsel:	D M Lester for Plaintiff G L Wilkin for Defendant
Judgment:	26 May 2016

JUDGMENT OF GENDALL J (As to Costs)

[1]      The plaintiff’s application for an interim injunction against the defendant was heard  as  a  matter  of  urgency  on  2  May  2016.    The  application  sought  orders regarding what was alleged to be the defendant’s wrongful cutting of IT access to the plaintiff following the sale and purchase of part of an accountancy practice business. Following the hearing, I gave my ruling refusing the plaintiff’s application for an interim injunction and the application was dismissed.  My detailed reasons for that decision were given the next day, 3 May 2016.

[2]      At para [32] of those reasons I indicated that costs on the application were reserved.   I went on to indicate that if counsel were unable to agree between themselves on the issue of costs they could file memoranda sequentially which were to be referred to me and, in the absence of either party indicating they wished to be heard on the matter, I would decide the question of costs based on the material then

before the Court.

MCCLEAN & CO LIMITED v MALLOCH MCCLEAN LIMITED [2016] NZHC 1115 [26 May 2016]

[3]      It seems that counsel have been unable to agree on costs.   Counsel for the defendant, Mr Wilkin, has filed his memorandum on costs dated 17 May 2016. Mr Lester, counsel for the plaintiff, has filed his costs memorandum in reply dated

24 May 2016.  Neither party has indicated they wish to be heard on the issue.  I now give my decision on costs relating to this matter.

[4]      The defendant here has been successful in opposing the plaintiff’s application for an injunction.  On the basis that costs should generally follow the event (unless there  are  special  circumstances  making  it  fair  to  depart  from  that  principle) Mr Wilkin, for the defendant, seeks an award of costs totalling $7190.50 plus GST. He says this amount is calculated on the basis of the actual time involved in this matter (19.7 hours)  at  the  existing charge out  rate for counsel  and  the solicitor assisting of $365 per hour.

[5]      Although Mr Wilkin suggests that, in the circumstances of this case, an uplift from this figure would be justified, for the purposes of the present costs application, this $7190.50 is the amount sought.

[6]      In response, Mr Lester, for the plaintiff, accepts in his memorandum that the defendant does not dispute that costs here should follow the event in the ordinary way.    He  maintains,  however,  that  a  costs  figure  of  no  more  than  $2000  is appropriate.

[7]      Mr Lester suggests that indemnity costs are not appropriate in this case.  He says the plaintiff signalled to the defendant at an early stage its intention to seek an injunction, that it properly sought this on a Pickwick basis, that it sought to resolve matters  (unsuccessfully)  on  a  without  prejudice  basis,  but  indeed  it  pursued  a response to those discussions right up to the time of the hearing of its application. As a result, Mr Lester contends that nothing in the plaintiff’s conduct here warrants an award of indemnity costs in favour of the defendant.  And he notes, too, that a final counter-proposal offer from the defendant, he says, was only received just over an hour before the commencement of the hearing in this matter.

[8]      Further, Mr Lester makes two additional claims. The first is that this is not an appropriate case whereby a claim for costs for two counsel for two full days is justified.  The second is that, in any event, costs incurred by the defendant only as part of the pre-proceedings dispute and negotiations between the parties should not be claimable as litigation costs in this proceeding.

[9]      So far as scale costs for this proceeding under the High Court Rules are concerned,  to  an  extent  this  is  an  unusual  matter.    It  was  dealt  with  under considerable urgency and a number of the standard time allowances in the rules do not appear to apply.  Mr Wilkin, for the defendant, has noted in his submissions that even at a category 3 rate under the rules of $3300 per day, the scale costs which might be awarded here would likely amount  only to something in the order of

$1237.50.

[10]     In relation to indemnity costs under the High Court Rules, r 14.6(4) addresses this and states:

14.6     Increased costs and indemnity costs

…

(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 direction of the court or breached an undertaking given to the court or another party; 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 it; or

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

(f)       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.

[11]     In my view, none of the categories set out in r 14.6(4), strictly speaking, apply here.  Sadly, it seems this matter developed as a result of a significant impasse between parties who had previously been work colleagues and partners in an accountancy  practice.    The  proceeding,  as  I  understand  it,  concluded  with  a resolution achieved which, although not without difficulties, is able to work.

[12]     At one level, therefore, it might be said it was not unreasonable for the plaintiff to bring matters to a head by issuing and pursuing its injunction application on an urgent basis.

[13]     But  there  can  be  no  doubt  that  the plaintiff was  unsuccessful  overall  in achieving the orders it sought in the application.  For this, in my view, and for what I see as  the positive way in  which  the defendant  suggested  this  matter  could  be pragmatically resolved, the plaintiff is required to meet a fair contribution towards the defendant’s overall legal costs here.

[14]     The schedule costs in the rules, as I see the position, do not reflect the actual time taken by counsel for the defendant to properly prepare for argument regarding the injunction application.  I accept, too, that what turned out to be a reasonable offer from the defendant had been rejected by the plaintiff and this was on an open basis. As I have said above, this is an unusual case which from a pragmatic view point involved considerable urgency to meet the commercial needs of the parties.   The issues were important and required immediate attention by counsel for the defendant in particular.

[15]     Taking a broad brush approach in all the circumstances prevailing in this case, I am of the view that an appropriate award of costs in favour of the defendant for one counsel totalling a little over 10 hours and amounting to $4000 should be made here.

[16]     Costs are therefore awarded to the defendant against the plaintiff with respect to this matter totalling $4000.

...................................................

Gendall J

Solicitors:

Dale Lester, Christchurch

AWS Legal, Invercargill