Monocrane (2010) Limited v Cooper & Co Real Estate Limited
[2020] NZHC 1319
•12 June 2020
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2019-404-001699
[2020] NZHC 1319
BETWEEN MONOCRANE (2010) LIMITED
Applicant
AND
COOPER & CO REAL ESTATE LIMITED
Respondent
Hearing: 27 May 2020 Appearances:
W McCartney for the Applicant J D Turner for the Respondent
Judgment:
12 June 2020
COSTS JUDGMENT OF ASSOCIATE JUDGE SARGISSON
This judgment was delivered by me on 12 June 2020 at 3.00 p.m. pursuant to Rule 11.5 of the High Court Rules.
Registrar/Deputy Registrar Date.......................................
Solicitors:
McVeagh Fleming, Auckland Duncan King Law, Auckland
MONOCRANE (2010) LTD v COOPER & CO REAL ESTATE LTD [2020] NZHC 1319 [12 June 2020]
Introduction
[1] This judgment deals with outstanding costs issues on Monocrane’s application to set aside a statutory demand issued by Cooper & Co. To recap, in my substantive judgment I upheld Cooper & Co’s statutory demand as to part of the quantum claimed, but found that there was a substantial dispute as to the claimed balance.1 Accordingly, both parties partially succeeded, so the preliminary view I expressed was that no costs should be awarded.2 I nevertheless left it open to counsel to file costs memoranda if that view was not accepted.
Indemnity costs
[2] Cooper & Co has filed a memorandum seeking costs principally on an indemnity basis, on the grounds that it has a contractual entitlement to costs. Clause 20 of the Agency Agreement, which it relies on for indemnity costs, provides:
20. Indemnity
The client … indemnifies the Agent, licensees, Harcourts Group Limited, and any of their respective employees, agents, contractors and advisors against all costs, expenses, losses, damages, claims or other liability arising from breach of this Agreement by the Client …
[3] Simply put, Cooper & Co’s case for indemnity costs is as follows. Monocrane had an obligation under the Agency Agreement to pay commission to Cooper & Co
— indeed, in the substantive judgment, I observed that “commission was payable under the terms of the agency agreement”.3 Monocrane failed to pay any commission, in breach of the Agency Agreement. Accordingly, Cooper & Co issued a statutory demand. It incurred costs in doing so, and it says Monocrane has indemnified those costs in cl 20, being costs incurred as a result of Monocrane’s breach of the Agreement.
Legal framework
[4] Rule 14.6(1)(b) of the High Court Rules 2016 provides that the Court may make an order that “the costs payable are actual costs, disbursement, and witness
1 Monocrane (2010) Ltd v Cooper & Co Real Estate Ltd [2020] NZHC 441.
2 At [49].
3 At [34].
expenses reasonably incurred by a party (indemnity costs)”. The Court’s power to award indemnity costs therefore involves a discretion that may be applied regardless of r 14.2, which provides that costs ordinarily follow the event — noting that both parties were partially successful in this case. But as in all costs matters, a principled approach is called for.
[5] Rule 14.6(4)(e) provides that the Court may order a party to pay indemnity costs if the party claiming costs is entitled to indemnity costs under a contract. The principles relevant to making such an order are summarised in Black v ASB Bank Ltd.4 Rule 14.6(1)(b) is clear that the costs and expenses claimed on an indemnity basis must be “reasonably incurred”. Assessing whether the indemnity costs claimed under a contract are reasonable involves the Court making an objective assessment as to:5
(a)what tasks attract a costs indemnity on a proper construction of the contract;
(b)whether the tasks undertaken were those contemplated in the contract;
(c)whether the steps undertaken were reasonably necessary in pursuance of those tasks;
(d)whether the rate at which the steps were charged was reasonable having regard to the principles normally applicable to solicitor/client costs; and
(e)whether any other principles drawn from the general law of contract would in whole or in part deny the claimant its prima facie right to judgment.
Analysis
[6] Applying those principles to the present case, Cooper & Co faces three hurdles in relation to its claim for indemnity costs.
[7] First, it is unclear whether the indemnity as to “costs” under cl 20 of the Agency Agreement extends to solicitor/client costs. In Newfoundworld Site 2 (Hotel) Ltd v Air New Zealand Ltd, the Court of Appeal was “not persuaded that a general right to
4 Black v ASB Bank Ltd [2012] NZCA 384 at [77]–[99].
5 At [80].
be indemnified for ‘costs’ associated with a breach of contract extends to solicitor/client costs”.6 In that case, the contractual indemnity clause provided:7
[Novotel] shall indemnify [Air New Zealand] from and against all losses, damage and costs incurred by [Air New Zealand] (excluding any consequential or indirect losses, damages or costs) arising out of or related to a breach by [Novotel] of any of the warranties or any undertaking given by [Novotel] or breach by [Novotel] of any term or condition of this Agreement.
[8] The Court reasoned that the clause referred only to costs, not legal costs, and therefore the indemnity did not extend to solicitor/client costs. This point was notable because in New Zealand legal costs are, as a rule, recoverable on a party/party basis, calculated by reference to the High Court Rules 2016. While r 14.6(4)(e) provides that the Court may order a party to pay indemnity costs if “the party claiming costs is entitled to indemnity costs under a contract”, such an entitlement must be plainly and unambiguously expressed.8
[9] In the present case, like in Newfoundworld, cl 20 indemnifies Cooper & Co “against all costs … arising from breach of this Agreement”. Clause 20 does not specifically mention legal costs or solicitor/client costs.
[10] By contrast, in Watson & Son Ltd v Active Manuka Honey Assoc, the Court of Appeal held that the use of the term “actions and damages” in the indemnity clause plainly contemplated the possibility of court proceedings which might result in the indemnified party incurring legal costs.9 The indemnity clause provided that, “The Licensee indemnifies AMHA against all actions and damages that may result from the Licensee’s operations in relation to the Products.”10 Accordingly, there the Court was satisfied that, as a matter of construction, the recovery of solicitor/client costs was necessarily implied.11
[11] In the present case, cl 20 refers to “damages, claims or other liability arising from breach of this Agreement”. Arguably then, the possibility of court proceedings
6 Newfoundworld Site 2 (Hotel) Ltd v Air New Zealand Ltd [2018] NZCA 261 at [84].
7 At [73].
8 Re Adelphi Hotel (Brighton) Ltd [1953] 1 WLR 955 (Ch) at 961 as cited in Newfoundworld Site 2 (Hotel) Ltd v Air New Zealand Ltd, above n 6, at [84].
9 Watson & Son Ltd v Active Manuka Honey Assoc [2009] NZCA 595 at [22].
10 At [10].
11 At [25].
was contemplated, and by necessary implication, solicitor/client costs are covered under the clause. However, Cooper & Co did not make any submissions on this point. In any event, there are further hurdles to Cooper & Co’s claim for indemnity costs.
[12] Turning to the second hurdle, even if cl 20 extends to solicitor/client costs, it is unclear whether the steps taken by Cooper & Co — namely the issuing of a statutory demand in an incorrect amount and opposing the application to set aside that demand
— fall within the scope of the indemnity clause. The relevant principles are as set out at [5] above.
[13] Clause 20 covers “all costs, expenses, losses, damages, claims or other liability arising from breach of this Agreement by the Client”. It is clear that Monocrane, the Client, has breached the Agreement by failing to pay any commission to Cooper & Co. And the statutory demand was issued in response to this breach. The critical issue in this case, however, is that the statutory demand claimed an amount ($127,000 plus GST that more than marginally exceeded the genuinely incontestable figure) — I found the incontestable amount was $79,500 plus GST. For that reason, Cooper & Co was only partially successful. There is uncertainty as to whether cl 20 contemplates full indemnity costs in such a case. Again, however, no submissions were made in relation to this issue.
[14] Thirdly, and most fatally, the Court is unable to assess whether the indemnity costs claimed by Cooper & Co were “reasonably incurred”, as required under r 14.6. Cooper & Co claims $21,670.48 in indemnity costs. The legal fees and disbursements are dated in blocks: 26 July 2019, 29 August 2019 and 27 September 2019 (plus current work in progress). However, Cooper & Co has not provided invoices in support or itemised the steps taken and the costs associated with those steps.
[15] Generally, the Judge who had the conduct of the case throughout is best placed to assess costs.12 The Court, in assessing costs, should not attempt to dissect the steps taken or examine them in microscopic detail. Rather, the Court should make an assessment of the case in the round. However, even so, without any documentary evidence as to the actual costs incurred it is difficult — indeed impossible — for the
12 Bradbury v Westpac Banking Corp [2009] NZCA 234 at [88].
Court to determine whether the indemnity costs claimed were actually and reasonably incurred, including “whether the rate at which they were then charged was reasonable having regard to the principles normally applicable to solicitor-client costs”.
[16] Cooper & Co had ample opportunity to provide such material but has failed to do so. Given the principle that determination of costs should be expeditious, I am not inclined to allow Cooper & Co further opportunity at this stage. That being said, I consider that it is fair for Cooper & Co to be awarded some costs because it was partially successful in opposing Monocrane’s application to set aside (though wholly successful on the question of liability, it more than marginally overreached on the issue of quantum).
Scale costs (2B)
[17] Cooper & Co’s alternative position is that it is entitled to scale costs on a 2B basis plus disbursements. For the purposes of costs, where a party has succeeded only partially, it is not helpful to focus too closely on the question of which party has failed and which has succeeded.13 Rather, success or failure in this context is better assessed by a realistic appraisal of the end result rather than by focussing on who initiated what step, and the extent to which that step succeeded or failed.14
Analysis
[18] Despite my preliminary view that no costs should be awarded as both parties were partially successful, on a realistic appraisal of the end result, I award Cooper & Co costs on a 2B basis in accordance with the principles in r 14.2.
[19] Cooper & Co’s statutory demand was ultimately upheld. While I found there was a substantial dispute as to the amount claimed in the demand, and accordingly reduced the amount claimed in the demand, it is important to note that Monocrane’s principal ground for setting aside was that no commission was payable to Cooper & Co (in any amount). I wholly rejected Monocrane’s submissions to that
13 Packing In Ltd (in liq) v Chilcott (2003) 16 PRNZ 869 (CA) at [5]; and McGechan on Procedure
(online ed, Thomson Reuters) at [HR14.7.01(b)].
14 At [6].
effect. I only found in Monocrane’s favour on the narrow(er) issue of quantum. It is also notable that I did not accept Monocrane’s submission that the actual commission payable was, at most, $47,700 plus GST (being 7.95 per cent of $600,000, which Monocrane argued was the purchase price on which commission was to be calculated). Instead I determined, on the evidence before, that the commission payable was
$79,500 plus GST (being 7.95 per cent of the actual purchase price of $1 million).
[20] However, some reduction in Cooper & Co’s costs is warranted under r 14.7(g) as some costs could have been avoided had the statutory demand been for the correct amount. In July 2019, prior to service of the statutory demand, Cooper & Co sought to settle the matter with Monocrane. Cooper & Co offered to accept $102,788.39 plus GST in satisfaction of the demand, which was originally claimed in the sum of
$127,000 plus GST. Monocrane declined the offer and proposed to pay a sum of
$30,000 plus GST, and later $47,700 plus GST. Cooper & Co says that if Monocrane had offered to pay $79,500 plus GST (the amount which I determined was the correct amount payable as commission) in settlement, it would not have issued a statutory demand or incurred the associated costs currently claimed. However, that point cuts both ways: if Cooper & Co had only claimed $79,500, Monocrane may have settled, in which case the instant proceeding would never have eventuated.
[21] Accordingly, the overall amount claimed by Cooper & Co for scale costs should be reduced by 20 per cent.
Result
[22] For the above reasons, I make an order for scale costs on a 2B basis and disbursements in favour of Cooper & Co as set out in the attached schedule.
Associate Judge Sargisson
SCHEDULE
Scale costs
Step Description Category 2 Band B Sum 20 per cent reduction 48 Issuing statutory demand
and affidavit of service (14 August 2019)
$2,390 0.2 $478 $382.40 38 Filing notice of opposition to application to set aside statutory demand and supporting affidavits (9 September
2019)
$2,390 2 $4,780 $3,824 39 Case management and preparing memorandum with timetable orders (11 September 2019) $2,390 0.4 $956 $764.80 40 Preparation of written submissions (7 February
2020)
$2,390 1.5 $3,585 $2,868 42 Appearance at hearing for principal counsel (11 February 2020) $2,390 0.75 $1,792.50 $1,434 $11,591.50 $9,273.20
Disbursements
Description Sum Filing notice of opposition (9 September 2019) $110 Service on Monocrane (2010) Ltd
(16 August 2019)
$150 Couriers (27 September 2019) $16.32 $276.32
Total awarded: $9,549.52
0
5
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