Memelink v Haines
[2024] NZHC 1093
•6 May 2024
IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY
I TE KŌTI MATUA O AOTEAROA TE WHANGANUI-A-TARA ROHE
CIV-2020-485-497
[2024] NZHC 1093
UNDER section 12 of the Senior Courts Act 2016 IN THE MATTER
of damages for breach of contract
BETWEEN
HARRY MEMELINK and
CISCA FORSTER as trustees of the
LINK TRUST (No.1) (in receivership) PlaintiffsAND
QUENTIN STOBART HAINES
First Defendant
BPE TRUSTEES (No. 1) LIMITED
Second Defendant
QUENTIN HAINES PROPERTIES LIMITED
Third Defendant
Hearing: 6 May 2024 Appearances:
J D Haig for the Plaintiffs/Receivers Q S Haines in person
J D Dallas for the Second and Third Defendants
Judgment:
6 May 2024
JUDGMENT GRICE J
(Costs on quantum judgment)
[1] The plaintiffs seek costs following a quantum decision in which they succeeded in obtaining a judgment for the total sum of $2,387,536.13.1
1 Memelink v Haines [2024] NZHC 588 [the quantum judgment].
MEMELINK v HAINES (COSTS) [2024] NZHC 1093 [6 May 2024]
[2] Previously, judgment on liability was entered against the defendants in relation to various finance company loans assigned to the Link Trust (No. 1) (the plaintiff trust).2 That judgment was entered on an application for summary judgment. At the same time, I dismissed an application for striking out the counterclaim.3 The costs now sought relate to the reserved costs on the liability decision and the quantum judgment.
[3] The finance company loans were initially made to the Haines’ interests and were guaranteed by Mr Memelink and the plaintiff trust. The loan agreements were dated: 22 December 2016 (the first Fico Finance Ltd loan in which the first and third defendants are debtors), 21 February 2017 (the Bright Enterprise Holdings Ltd loan in which the first and second defendants are debtors) and 21 April 2017 (the second Fico loan in which the first, second (as trustee for the QSH Family Trust) and third defendants are debtors). The plaintiff trust paid the finance companies an amount equal to the total amount outstanding under the loans to purchase the loans using money raised from a third party finance company. The plaintiff trust took assignment of the finance company loans and then took recovery action under the loans against the defendants.
[4] These loans were assigned to the plaintiff trust on 7 December 2018. The plaintiffs seek indemnity costs pursuant to the provisions of the loan agreements.
[5] Until the plaintiff trust went into receivership, Mr Memelink was the representative of the Link Trust (No. 1) (the Trust) and the trustees in all relevant dealings. Following the receivership in May 2022, the receivers’ lawyers took over the conduct of this proceeding. Mr Memelink had earlier retained Mr Livingston to act for him. Mr Livingston filed the proceeding and appeared at the quantum hearing.
[6] Mr Haines admits that his interests took the benefit of the finance company loans apart from a relatively small amount advanced and used by Mr Memelink to buy a boat. Mr Haines raised defences relating to the validity of the assignments which I
2 Memelink v Haines [2021] NZHC 1992 [the liability judgment]. I refer to the plaintiffs as the “Memelink interests” and the defendants collectively as the “Haines’ interests” in this judgment.
3 Memelink v Haines [2021] NZHC 2570 [costs on the liability judgment].
dealt with but had already been determined or should have been raised in the liability judgment hearing.
[7] The judgment amount was awarded against the respective defendants as follows:
[111]…
(a)The first and third defendants, in relation to the first Fico loan:
$350,790.35 (including accrued interest of $242,562.20 since the date of assignment of 7 December 2018).
(b)The first second and third defendants, in relation to the second Fico loan: $1,167,217.47 (including accrued interest of $824,425.71 since the date of assignment of 7 December 2018).
(c)The first and second defendants, in relation to Bright loan:
$869,528.31 (including accrued interest of $573,232.72).
[112] Judgment is entered in favour of the Trust against the defendants jointly and severally in relation to the amounts that I have found they owe, as set out above.
The costs claim
[8] The plaintiffs seek indemnity costs on a solicitor/client basis pursuant to the provisions in the loan agreements.
[9] Counsel relies on r 14.2(1)(a) of the High Court Rules 2016 (HCR) which provides: “the party who fails with respect to a proceeding or interlocutory application should pay costs to the party who succeeds.”
[10] The plaintiffs note that r 14.6(4)(e) of the HCR allows a court to order indemnity costs where the party claiming is entitled to those under a contract or deed. The plaintiffs point to the provisions of the two loan agreements in their submissions as follows:
Clause 5.1 of the two Fico loans provided:
The debtor will pay all costs, fees and charges as set out in the disclosure statement (and not otherwise set out in these terms and conditions), including withdrawal fees and monthly administration fees, and any other costs incurred by the creditor in connection with this contract and these fees may be amended from time to time as in 6.3 below.
Clause 15 of the Bright loan set out:
The Borrower hereby indemnifies, and agrees to save harmless, the Lender from and against all losses, claims, demands, liability, payments, charges and expenses which may be made against or incurred by the Lender arising from or relating to this Agreement or any Security Document or the exercise by the Lender of any rights, powers or remedies under such and further from and against any losses, costs or expenses (including without limitation any legal expenses as between solicitor and own client, loss of profits and losses incurred in liquidating deposits or re-employing funds borrowed, contracted for or utilised to fund any part of the Loan) which the Lender sustains or incurs from any reason or cause whatever and as a consequence of, but not limited to:
(a)any amount payable by the Borrower under this Agreement not being paid when due; or
(b)the occurrence of any Event of Default; or
…
Clause 24.2 of the Bright loan provided further:
The Borrower shall from time to time immediately on demand reimburse the lender for all costs, charges and expenses (including without limitation legal fees and disbursements computed on a solicitor and own client basis and including any marketing costs, commissions or withdrawal fees payable to any real estate agent instructed by the Lender) incurred by or in connection with the preservation or enforcement of the Lender’s rights or remedies under this Agreement and the Security Documents or any of them.
[11] The plaintiffs noted that these provisions were assigned to the trust by the deeds of assignment dated 7 December 2018. The plaintiffs submitted that:
The deed of assignment of the Fico loan provided:
D.The Assignees have agreed to purchase the Debt and the rights of the Assignor under Loan No. 1~and Loan No. 2 from the Assignor…
…
1. ASSIGNMENT
In consideration of the Purchase Price paid to the Assignor by the Assignees on the Settlement Date, the Assignor transfers, assigns and sets over to the Assignees free of all securities interests and encumbrances of any nature, all its right, title and interest in and to the Loan Agreement …
The deed of assignment for the Bright loan likewise provided:
D.The Assignees have agreed to purchase the Debt and the rights of the Assignor under the Loan from the Assignor…
…
1. ASSIGNMENT
In consideration of the Purchase Price paid to the Assignor by the Assignees on the Settlement Date, the Assignor transfers, assigns and sets over to the
Assignees free of all securities interests and encumbrances of any nature, all its right, title and interest in and to the Loan Agreement…
Costs claimed
[12] The plaintiffs in their initial claim note that costs incurred by the trust through to the time of the receivers’ appointment on 31 May 2022, including the liability hearing are $30,288.03 (including GST). The plaintiffs further claim the receivers’ solicitor/client costs (from 1 March 2023 to 26 March 2024 totalling 114.4 hours at
$380 plus GST per hour), as set out in counsel’s time records attached to their memorandum. That amounts to $43,472 (plus GST) or $49,992.80 (including GST).
[13] The plaintiffs say to avoid double counting, that costs for attendances from 1 May 2023 – 3 July 2023 are not claimed as those were fixed in favour of the receivers in respect of the interlocutory consolidation and strike out applications by the defendants in August 2023.
Indemnity costs
[14] The right to claim for costs pursuant to a contractual provision is well established. The principles are summarised in McGechan on Procedure4 in its commentary on r 14.6(4)(e) of the HCR which provides for costs under a contract or deed. It notes that the court must nevertheless assess whether the tasks undertaken were reasonably necessary and were contemplated by the contract.
[15] In this case the defendants have taken no direct issue in relation to the claim for indemnity costs under the contract nor have they contested the reasonableness of the claims in general terms. They have however contested whether the claim is appropriate in a number of particular respects. In view of that I allow the indemnity costs claim in general terms. It is available under the loan contracts as assigned and the amounts claimed are reasonable. I deal with the specific issues raised by the defendants and the appropriate adjustments to be made to the claim below.
4 McGechan on Procedure - High Court Rules 2016 (online ed, Westlaw) at [HR14.6.03(e)].
Costs claim
[16]The plaintiffs’ submissions summarise their costs claim as follows:
13.A further four hours of counsel’s time is estimated as reasonably required for reply submissions to the defendants’ costs submissions and for attending to sealing the Court’s judgment. This amounts to a further
$1,520 plus GST, totalling $1,748 (inc GST).
14.The receivers instructed expert accountant Blair Smith charged a total of $11,050.39 including GST. Mr Smith’s invoices are attached to this memorandum following the redacted time sheets.
15.Disbursements claimed are:
(a) Filing fee of $1350.
(b) Application for summary judgment: $500.
(c) Printing bundles for quantum hearing: $188.60 (invoice also attached).
(d) Sealing: $50
16.The total costs and disbursements therefore sought to be fixed are
$95,167.82 comprised of:
(a) Costs: $82,028.83.
(b) Disbursements: $13,138.99.
[17] The defendants make a number of specific points seeking consequential reductions in the quantum claimed as follows:
(a)Some of the costs claimed have been already dealt with in the summary judgment costs order except for a total of 27.5 hours at $159 per hour totalling $4,372.50.
(b)Mr Livingston’s fees should not be allowed as he is a creditor in the receivership for those fees and will only recover a dividend not the full fees.
(c)The discontinued counterclaim costs cannot be allowed under the loan agreements and these should be calculated on a category 2B basis which would total $4,780.
(d)The defendants were partially successful in the counterclaims which were conceded by the plaintiffs and costs should fall where they lie on the counterclaim..
(e)Settlement negotiation time should not be allowed.
(f)The time recorded for the appeal should be properly claimed on the appeal not here.
(g)Costs for the summary judgment are not indemnity costs as they have been dealt with in the earlier costs judgment for summary judgment.
(h)Costs on the costs application should not be allowed.
[18] As a result of the defendants’ submissions, the plaintiffs made a number of adjustments to their claim which I refer to as I deal with the issues raised.
Summary judgment costs
[19] Costs were awarded on the application to strike out but reserved on the summary judgment application. In the costs judgment at that time, I indicated that 20 per cent of the costs of the earlier hearing should be for the strike out application and the balance 80 per cent for the summary judgment. While indicating category 2B would otherwise be appropriate for summary judgment application costs, I made no award and reserved the costs.5 Therefore there is no reason that costs for the summary judgment should not be dealt with in this application for indemnity costs. However, there can be no double counting for the strike out costs which have already been granted. I allow costs on the liability summary judgment but an adjustment must be made to ensure that the costs on the strike out claim are not double counted. Therefore the claim relating to the liability hearing is allowed but limited to 80 per cent of the costs for that hearing.
5 Memelink v Haines [2021] NZHC 2570 at [12].
Costs incurred pre receivership
[20] The fact that Mr Livingston who acted for the plaintiffs pre receivership of the trust is now a creditor in the receivership and may not recover the full amount of his fees is not a bar to recovery of the costs charged by him to the trust. They have actually been incurred by the trust and the fact that the trust is now in receivership does not alter its ability to recover costs it has incurred albeit not paid. The defendants claim that this is a breach of the contractual terms relied upon for costs recovery by the plaintiffs. I do not agree. Those costs are recoverable by the plaintiffs in this application for costs. I allow that part of the claim accordingly.
Counterclaim
[21] The plaintiffs accept the defendants’ submissions on this point and agree the defendants’ were partially successful on the counterclaim. They agree to deduct the time charged for the counterclaim apart from the time for the meeting with Mr Haines (17 units) which the defendants say was to establish the quantum and claim the discussions were for good faith settlement negotiations. The plaintiffs say the time excluding the meeting with Mr Haines amounts to 62 units totalling $2,356 (plus GST).
[22] I agree that the costs of the counterclaim should be deducted from the plaintiffs claim as agreed by them. Costs will lie where they fall in relation to this head of costs. I also consider the costs for the meeting should be deducted. The quantum claim was a matter of contention with concessions being made by the plaintiffs. In relation to one item this was not made until during the trial. Those costs should also lie where they fall.
[23]The costs under this head are not allowed.
Costs relating to the appeal
[24] The plaintiffs agree these should be deducted-both in relation to the substantive appeal and the earlier adjournment/stay appeal. Accordingly those are to be deducted
from the amount claimed. The appeal costs are most appropriately dealt with by the appellate court.
[25]The costs under this head are not allowed.
Costs on costs application
[26] The plaintiffs have agreed to deduct the amount claimed under this head but seek the time cost and disbursements for sealing the judgment. I agreed those are appropriately claimed in the sum claimed of $570 for the sealing fee. The costs under this head are allowed as adjusted.
Disbursements
[27] The disbursements claimed include the fees charge by the expert accounting witness Mr Smith. Those fees appear reasonable for the work involved and no issue is taken with the quantum by the defendants. That claim is allowed.
[28] The remainder of the disbursements relate to the filing fees, printing of bundles and sealing of judgment. They are properly included and are allowed in the sum claimed.
Conclusion
[29] With the indications I have given above the costs claimed require recalculation. Accordingly, I award indemnity costs as claimed with the adjustments as set out in this judgment. Leave is reserved for seven days from the date of this judgment in relation to any issues arising as a result of the recalculation.
Grice J
Solicitors:
Gibson Sheat, Wellington
J D Dallas Lawyer, Wellington
0
3
0