Morrison v Autumnal Investments Limited

[2021] NZHC 117

IN THE HIGH COURT OF NEW ZEALAND TAURANGA REGISTRY

I TE KŌTI MATUA O AOTEAROA TAURANGA MOANA ROHE

CIV-2017-470-000196

[2021] NZHC 117

BETWEEN

S A MORRISON and THE AUDAINE TRUST TRUSTEES LIMITED

Plaintiffs

AND

AUTUMNAL INVESTMENTS LIMITED

First Defendant

M W and A T O’REILLY

Second Defendants

CIV-2017-470-000190

BETWEEN

AUTUMNAL INVESTMENTS LIMITED
Plaintiff

AND

S A MORRISON

Defendant

Hearing:	On the papers
Judgment:	10 February 2021

JUDGMENT OF WYLIE J

[Costs]

This judgment was delivered by Justice Wylie On 10 February 2021 at 11.00 am

Pursuant to r 11.5 of the High Court Rules Registrar/Deputy Registrar

Date:…………………………

Solicitors/counsel:

Bruce Dell Law/G C Jenkin, Auckland

Jackson Reeves Lawyers/G Brittain QC, Tauranga

S A MORRISON and THE AUDAINE TRUST TRUSTEES LTD v AUTUMNAL INVESTMENTS LTD [2021]

NZHC 117 [10 February 2021]

Introduction

[1]    I refer to my judgment in this matter issued on 3 December 2020.1 I declared that the first defendant in proceedings CIV-2017-470-196 – Autumnal Investments Limited – holds a property as trustee of an institutional constructive trust in favour of the trustees of The Audaine Trust. I ordered that Autumnal was to transfer the property back to the trustees, subject to various conditions, and that Autumnal must account to the trustees for the net sum received from the sale of a section subdivided off the property and the net income received by it over the period of the trusteeship.

[2]    The plaintiffs in proceedings CIV-2017-470-196 were the successful parties. I held that they were entitled to their reasonable costs and disbursements and directed the filing of memoranda.

[3]I have now received those memoranda:

(a)Except in two respects, the plaintiffs accept that category 2 is the appropriate categorisation for costs purposes. They also accept that band B is the appropriate band for most steps taken in the proceedings. They say however that significant time was spent preparing their briefs of evidence and in preparing for trial and they seek that costs should be assessed on a category 3 band B basis for these steps. They also assert that considerable time was required to complete discovery and inspection. They seek costs on a category 2 band C basis for these steps. They seek costs of $132,647, disbursements of $6,971 and the reimbursement of their fees payable to an expert for the preparation of a brief of evidence in the sum of $17,868.13 – in total: $157,486.13.

(b)The defendants, Autumnal, and its principals, Mr and Mrs O’Reilly, accept that costs must follow the event. They assert that the proceeding was of average complexity and that no individual step warrants an increased time allocation. They argue that costs should be assessed on a 2B basis for all steps taken. They dispute some of the steps claimed

1      Morrison v Autumnal Investments Ltd [2020] NZHC 3189.

for by the plaintiffs and calculate costs, on a 2B basis, in the sum of

$82,933. They dispute one disbursement claimed and argue that disbursements properly incurred amount to $5,573.95. They accept the expert witness fees claimed of $17,868.13. They note that one of the plaintiff’s causes of action – that there was an express written trust – was abandoned and they argue that the plaintiffs’ costs award should be reduced as a consequence. They suggest that the costs award should be reduced  by  20  per  cent  for  this  factor,  resulting  in  an  award  of

$66,376.40 for costs, disbursements of $5,573.95, and expert witness costs – $17,868.13 – in total: $89,818.48.

Analysis

[4]    Part 14 of the High Court Rules governs costs awards. Costs are in the discretion of the Court – r 14.1. The discretion is however “…qualified by the specific costs rules and is exercisable only in situations not contemplated or not fairly recognised by them”.2

[5]    Normally costs are awarded in favour of the successful party and against the unsuccessful party by reference to the significance and complexity of the proceeding

–   r 14.2. This is accepted by the parties, although the defendants do seek that costs should be reduced under r 14.7(d) and/or (f)(ii) because the plaintiffs failed on one of their causes of action. I return to this below.

[6]    It is common ground that, in large part, the proceedings should be categorised as category 2 proceedings under r 14.3. This recognises that the proceedings were of average complexity, requiring counsel of skill and experience considered average in the High Court. The plaintiffs seek to recover costs on a category 3 basis for the work they undertook in preparing their briefs of evidence, preparing the chronology, agreeing the common bundle and preparing for the hearing. I can see no justification for this recategorisation. The plaintiffs called eight witnesses, but the evidence was not complex. Some of the witnesses had themselves earlier prepared briefs which had

2      Bradbury v Westpac Banking Corporation [2009] NZCA 234, [2009] 3 NZLR 400 at [6], citing

Glaister v Amalgamated Dairies Ltd [2004] 2 NZLR 606 (CA).

been filed in Court. Some elaboration/clarification would have been required but this does not compel recategorisation. The forensic accountant who gave evidence would have largely prepared his own brief of evidence. Similarly, the chronology was straightforward and the common bundle was not particularly extensive. I accept that time would have been required in preparing for the hearing but the hearing was essentially into disputes of fact – not of law. There was no great complexity in the factual disputes. I am not persuaded that there is any justification for departing from category 2 for all steps taken in the hearing.

[7]    The next step in calculating costs is to determine the appropriate time allocation for each step in the proceeding.

[8]    Time is classified into three bands, bands A, B and C, depending on whether a comparatively small, a normal or a comparatively large amount of time was reasonable for the particular step taken. As already noted, the plaintiffs seek some steps on a band 3 basis and other steps on a band C basis. The bands can differ at each step. A blanket assessment does not accord with the rules unless it reflects that the case is an average one requiring a normal amount of time for each step.3

[9]    The proceedings were commenced in November 2017, when Autumnal sought an order for possession of the property. Mr Morrison filed a statement of defence. He acted for himself at this stage. Likewise, he and the trustees of The Audaine Trust also acted for themselves when, on 11 December 2017, they filed a statement of claim against Autumnal as first defendant, and Mr and Mrs O’Reilly as second defendants, seeking orders in respect of the property. The proceedings were consolidated March 2018. Shortly thereafter, counsel was briefed. He concluded that the matter had to be repleaded and an amended statement of claim was filed in May 2018. The costs claim made by the plaintiffs only seeks costs for preparing and filing the amended statement of claim and for subsequent steps. This is clearly appropriate.

[10]   The majority of the steps claimed by the plaintiffs and the amounts claimed are accepted by the defendants. They do however have some specific reservations.

3      Commissioner of Inland Revenue v Chesterfields Preschools Ltd [2010] NZCA 400, (2010) 24 NZTC 24,500 at [161].

(a)The plaintiffs claim, on a band B basis, .4 of a day for preparing for the first case management conference, and an additional .4 of a day for preparing, filing and serving the memorandum for that conference.

The defendants say that the memorandum was prepared by their counsel, and note that the resulting orders were made by the Court on the papers.

In a memorandum in reply, counsel for the plaintiffs accepts that the memorandum was prepared by counsel for the defendants albeit, he says, with input from him. He also accepts that resulting orders were made on the papers.

Those matters notwithstanding, in my view, it is appropriate to allow the allocated time to the plaintiffs for preparing for the first case management conference. Counsel would have been required to consider and form a view on the various matters referred to in the Rules, and then to liaise with counsel for the defendants in the preparation of a joint memorandum. I do not consider that there is anything inappropriate in the claim for .4 of a day in respect of preparation and the additional claim for .4 of a day for preparing the memorandum. Accordingly, I allow the plaintiffs’ claims in this regard.

(b)The plaintiffs claim on a band B basis 2.8 days in total for preparing, filing and serving a reply to the statement of defence, and for preparing, filing and serving a statement of defence to the counterclaim for possession brought by the defendants following the filing of the amended statement of claim.

The defendants argue that the counterclaim was a formality, and that it was only filed to formally seek an order for possession if the plaintiffs’ claims in proceedings CIV-2017-470-196 were rejected. They assert that it did not introduce any new factual basis for the cause of action. They accept that it is appropriate to allow .8 of a day for filing the reply

to the statement of defence, but note that this document included not only the reply, but also the defence to the counterclaim, which ran into only two paragraphs. They argue that .8 of a day is sufficient for the whole document.

The plaintiffs in a memorandum in reply accept that 2.8 days overstates the time spent.

I am grateful for the concession made by counsel for the plaintiffs. In my view 2.8 days is excessive. The rules allow .8 of a day for a reply and a further two days for commencing a defence. There is force in the defendants’ arguments. The counterclaim was a formality – it was the reverse of the plaintiffs’ claim and added nothing fresh. The defence to the counterclaim was equally a formality. Preparation and commencement of the defence would not have required two days. I allow one day in total.

(c)The plaintiffs claim one day for receiving and perusing answers provided by the defendants to interrogatories administered by the plaintiffs.

The defendants assert that they did not answer the interrogatories, and that there should be no allowance.

The plaintiffs respond that answers to interrogatories were provided informally by letter from counsel for the defendants dated 27 November 2017.

I have seen the letter. In my view, it is appropriate to allow the one day claimed. The formality or otherwise of the response is irrelevant. Time would reasonably have been spent in receiving and perusing the answers provided by the defendants, albeit that they were provided informally.

(d)The plaintiffs have claimed an increased time allocation for preparing their affidavit of documents and receiving and inspecting the defendants’ documents. They seek costs for these steps on a 2C basis. The plaintiffs claim seven days for preparing their affidavit of documents and six days for receiving and inspecting the defendants’ documents.

The defendants say that there is no justification for the change to band C.

The rules allow 2.5 days on a band B basis for preparing, filing and serving an affidavit of documents and 1.5 days for receiving the defendants’ affidavit of documents and inspecting the documents disclosed. On a band C basis the allocations are 7 and 6 days respectively.

The plaintiffs argue that discovery and inspection were required from various non-parties. They detail those entities. I accept that it was necessary to obtain files from other parties, so that the documents could be listed by the plaintiffs and that this would have involved additional time, notwithstanding that discovery itself was otherwise relatively routine. I allow four days for preparing, filing and serving the plaintiffs’ affidavit of documents.

I allow an additional four days for receiving the defendants’ affidavit of documents and for inspecting the same. The plaintiffs had to consider documents produced by Countrywide Real Estate – trading as Century 21, Sharp Tudhope and First Mortgage Trust – as well as financial statements and other financial documentation discovered for Autumnal and the SAMZ trading companies. They also had to inspect and consider other financial statements and Mr O’Reilly’s files. I accept that additional time would have been required. In my view, four days is a reasonable time allocation.

The defendants also claim for the inspection of documents as a result of the forensic analysis of Mr O’Reilly’s computer. They claim an additional 1.5 days. The forensic examination was undertaken in an attempt to prove that there was an express written trust, on the assumption  that  there  might  be  a  document  to  this  effect   on   Mr O’Reilly’s computer. That proved not to be the case. The forensic examination did however result in further documents being discovered.

In my view it is appropriate to allow for inspection of the documents disclosed in the defendants’ supplementary affidavit. Inspection was necessary in order to be satisfied that there was nothing to support the express written trust argument. I allow the additional 1.5 day claim.

(e)The plaintiffs claim .2 of a day for an appearance at a judicial telephone conference on 24 October 2018. The defendants point out that that conference was adjourned. The plaintiffs properly accept this and that they cannot make a claim in that regard. I disallow this claim.

(f)The plaintiffs claim 6.5 days, assessed on a 3B basis, for preparing briefs, authorities, chronology and agreeing the common bundle.

The defendants object and say that the calculation should be on the same basis as all other costs – namely 2B.

As I have already noted, recategorisation is in my view inappropriate. As to the appropriate band, the rules allow one day for days 1 to 5 of a hearing and 75 for days 6 and 7. The hearing lasted seven days. The banding allows 6.5 days, and I allow this claim, but on a category 2 basis.

(g)The plaintiffs also claim 6.5 days, again assessed on a 3B basis, for their time spent in preparing for the hearing. Again the defendants object and say that the calculation should be on a 2B basis. As I have already noted, I agree with the defendants in this regard. Again the rules allow

one day for days 1 to 5 of a hearing and .75 of a day for days 6 and 7. Here, it is appropriate to allow 6.5 days, on a category 2 basis.

[11]   The defendants argue that the plaintiffs’ costs should be reduced by 20 percent, because inter alia they alleged an express written trust. They assert that that allegation was not abandoned until the close of the evidence. They seek that costs should be reduced under either rr 14.7(d) and/or 14.7(f)(ii). They say that the cause of action had its origin in false testimony given by Mr Rendall and false allegations made against Sharp Tudhope by Mr Morrison regarding the preparation of a written trust document and Sharp Tudhope’s role in the transaction. They submit that the allegation led to significant expense for them and that it added complexity and cost both in the interlocutory steps taken and at the trial.

[12]   The plaintiffs accept that the cause of action alleging an express trust was included because of an allegation concerning the existence of a document in the possession of either Mr O’Reilly or Sharp Tudhope. Counsel however points out that, in his opening, he conceded that no such document had been discovered. He argued that the plaintiffs, on the available evidence, had no real choice but to pursue the issue, but that it was abandoned – or at least its abandonment was signalled – at the opening of the hearing.

[13]   In my view, the issue did result in some increased costs. Mr Morrison  and  Mr Rendall both gave evidence that there was a document created evidencing the trust. I did not accept their evidence in this regard. The plaintiffs properly accepted at the outset that no relevant document had been discovered, but their counsel did not then abandon the pleading. He reserved the right to challenge the claim for privilege made in respect of one of the documents discovered by the defendants. Ultimately he did not pursue that claim in a timely fashion. Further, evidence relevant to the allegation was given and, as a result, there was extensive cross-examination on it. The issue of whether or not there was an express written trust did not occupy any significant time in the respective legal submissions, but it did result in additional evidence that was otherwise unnecessary, and it took additional time to deal with that evidence. I am satisfied that it is appropriate to reduce the costs otherwise payable to the plaintiffs. In my view, the appropriate reduction is 10 per cent. Such reduction recognises the

additional hearing time taken to deal with this issue. I am not persuaded that additional time was taken in dealing with interlocutories in relation to the allegation. Those steps seem to me to have been required in any event. I make the reduction under r 14.7(d).

Result

[14]   For the reasons I have set out, I have revised the plaintiffs’ costs claim. I allow the plaintiffs costs on a 2B basis reduced by 10 per cent.

[15]   By my calculation, the total time that can be claimed by the plaintiffs is 42.3 days. At all relevant times, the appropriate daily recovery rate under Schedule 2 of the rules was $2,390. It follows that the appropriate costs award would be $101,097, but for the reduction. When this sum is reduced by 10 per cent the appropriate award becomes $90,987.30.

[16]   I allow the disbursements claimed by the plaintiffs – $6,971 – and notwithstanding the defendants’ objection to one of the disbursements claimed. That disbursement related to the costs of the forensic inspection of Mr O’Reilly’s computer

–   $1,397.25. For the reasons I have set out, I consider that that inspection was not inappropriate. It resulted in the discovery of additional documents.

[17]   There is no dispute about the expert witness costs – $17,868.13. The defendants are entitled to be reimbursed for this sum.

[18]   Accordingly, I award costs and disbursements in favour of the plaintiffs and against the defendants, in the sum of $115,826.43.

Wylie J