My Virtual Home International Ltd (in rec) and (in liq) v Ngati Tama Custodian Trustee Limited HC Auckland CIV-2009-443-000548

[2011] NZHC 1128

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2009-443-000548

(Incorporating CIV 2010-404-2197)

BETWEEN  MY VIRTUAL HOME INTERNATIONAL LTD (IN RECEIVERSHIP) AND (IN LIQUIDATION)

First Plaintiff

ANDOPEN GROUP LTD Second Plaintiff

ANDDAVID WILLIAM PHILLIPS Third Plaintiff

ANDMVH GROUP LIMITED Fourth Plaintiff

ANDNGATI TAMA CUSTODIAN TRUSTEE LTD

First Defendant

ANDRODNEY IVAN MARTIN Second Defendant

ANDGREGORY LLOYD WHITE Third Defendant

ANDTE RUNANGA O NGATI TAMA Fourth Defendant

ANDTHE CUSTODIANS AND ELDERS AND TRUSTEES OF THE NGATI TAMA IWI Fifth Defendant

ANDHOMESOFT GROUP PTY LTD (PREVIOUSLY CALLED BRISBANE SOFTWARE GROUP PTY LTD)

Sixth Defendant

Hearing:         (on the papers)

Counsel:         E Orlov for First, Third and Fourth Plaintiffs

D W Phillips in Person, Third Plaintiff

D M Hughes and K A van Houtte for First, Third, Fourth, Fifth and

Sixth Defendants

MY VIRTUAL HOME INTERNATIONAL LTD (IN REC) AND (IN LIQN) V NGATI TAMA CUSTODIAN TRUSTEE LTD HC AK CIV-2009-443-000548 16 September 2011

J P Nolen for Second Defendant

Judgment:      16 September 2011 at 5:00 PM

COSTS JUDGMENT OF VENNING J

This judgment was delivered by me on 16 September 2011 at 5.00 pm, pursuant to Rule 11.5 of the

High Court Rules.

Registrar/Deputy Registrar

Date……………

Solicitors:
Equity Law, PO Box 8333, Symonds Street, Auckland 1150
Kensington Swan, Private Bag 92101, Victoria Street West, Auckland 1142

Lowndes Associates, PO Box 7311, Wellesley Street, Auckland 1141 (J P Nolen) Wilson Harle, PO Box 4539, Shortland Street, Auckland 1140

Copy to:

Mr D W Phillips, 219 State Highway 2, Pokeno 2471

[1]      The judgment delivered on 3 August 2011 refers. The judgment recorded that costs should follow the event.   In the event the parties were unable to agree costs were to be fixed following an exchange of memoranda.   The parties have been unable to agree costs and have exchanged memoranda on the issue.  I now propose to fix costs.

Preliminary matters

[2]      Mr Orlov,  counsel  for  the first,  second  and  fourth  plaintiffs, has  filed  a memorandum seeking leave to withdraw as counsel on the basis the first plaintiff is in receivership and liquidation.   That was the position at the hearing of the preliminary questions.  Nothing has changed.  Mr Orlov can appear and seek leave to withdraw as counsel when the matter is next called in Court.

[3]      Mr Phillips, in the course of his 43 page memorandum has indicated that he intends to apply to represent the second and fourth plaintiffs.  However, at present those parties remain represented by Mr Orlov and his instructing solicitors, Via Dunraj of Botany Law.

[4]      All issues of representation for the future conduct of the proceedings will need to be addressed at a hearing in due course.   If Mr Orlov is granted leave to withdraw and Mr Phillips wishes to seek leave of the Court to represent those parties a formal application will be required.  It is not an issue that impacts on the issue of the costs to be awarded for the steps the first, third and fourth plaintiffs have taken to date whilst they were represented by counsel Mr Orlov.

[5]      Next  Mr  Phillips  seeks  an  oral  hearing  on  the  issue  of  costs.    That  is unnecessary.  As noted, Mr Philips has filed a full memorandum in relation to the issue of costs.  I propose to deal with costs in the usual way, namely on the papers.

[6]      Mr Phillips next challenges whether it is appropriate that I deal with the issue of costs.   He obviously does not accept the decision the Court made.   There is, however, no reason for me not to deal with the issue of costs.   That is the usual

course.   It is inevitable following litigation that the unsuccessful party will be aggrieved to a greater or lesser degree by the outcome.  However, it is the duty of the trial Judge who has heard and determined the application to deal with the costs of the application, rather than to pass that burden to another judicial officer:   Bahai v Rashidian & Anor.[1]    This is confirmed by r 14.9 which records that costs may be determined by a Judge other than the one who heard the matter to which the costs relate, if he or she is not available conveniently to make the determination.   The Commentary to the Rules notes that:

[1] Bahai v Rashidian & Anor [1985] 3 All ER 385, 388

Normal practice

Implicit in this rule is the general and desirable practice that the Judge who decides the matter also determines the costs.

[7]      I  also  note  Mr  Phillips  purports  to  seek  a  review  and/or  appeal  of  the decision.   It is not for the Court to give Mr Phillips legal advice but there is no jurisdictional basis for review of the decision.   Whether Mr Phillips or any of the other plaintiffs can pursue an appeal against the decision, given the agreement made before Heath J is a matter Mr Phillips should take proper legal advice on.

The costs submissions

[8]      I  turn  to  the  costs  submissions.    The  first,  third,  fourth,  fifth  and  sixth defendants seek costs on a 2C basis with a 50 per cent uplift.  Mr Nolen seeks costs on a similar 2C basis with an uplift of 50 per cent for the preparation time required by the second defendant.

[9]      In his memorandum on behalf of the first, second and fourth plaintiffs, Mr Orlov submitted there was no point in making an order for costs against the first plaintiff as it was in receivership and liquidation.  Further he submitted there were issues regarding discovery which affected the trial and its conduct and that there are a number of issues which remain unresolved, even despite the resolution of the preliminary questions, so that costs should be reserved pending determination until

full trial.

[10]     As noted, in his submissions Mr Phillips seeks to challenge the decision on a number of grounds.  I put those challenges to one side.  Costs are to be fixed on the basis  of  the  judgment  on  the  preliminary  questions  and  the  conduct  of  the proceedings in relation to those preliminary questions.

[11]     In addition Mr Phillips raises the following points specifically directed at the issue of costs:

(a)      that he did not understand the plaintiffs were at risk of costs in the event they were unsuccessful;

(b)that the plaintiffs should not be jointly liable for any costs award.  It is suggested that the second and fourth plaintiffs played a lesser role and that he, Mr Phillips, was really only making himself available as a witness;

(c)       that the plaintiffs had some partial success on the first question;

(d)that   costs   should   be   reserved   pending   the   outcome   of   the review/appeal  (my  comments  above  refer)  or  alternatively,  the outcome of the substantive proceedings;  and

(e)      the plaintiffs are confident they will ultimately succeed and obtain a substantial judgment against various parties.   Any costs in the defendants’ favour should be reserved pending that outcome as they will ultimately be set-off against the plaintiffs’ successful judgment.

Decision

[12]     Mr Phillips suggestion that he was unaware the plaintiffs would be at risk of costs is unsuccessful is disingenuous.  Mr Phillips has appeared before the Court and represented himself at a number of conferences and hearings.   He has shown a familiarity with the Rules.   Part 14 of the Rules deals with costs, in particular,

14.2(a) confirms that:

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

Mr Phillips should have been well aware of the risk of costs.   Further, orders for costs have been made during the course of the proceeding to date.

[13]     There is no principled reason not to fix costs at this stage on the preliminary questions issue.   I reject the submission that costs should be reserved pending the outcome of determination of the plaintiffs’ amended claims.

[14]     Nor do I accept the submission advanced on behalf of the plaintiffs that there is a distinction to be made between the plaintiffs such that not all should be equally responsible  for  the  costs.     Although  the  first  plaintiff  is  in  liquidation  and receivership, the receiver of the first plaintiff sought and was granted leave to bring the  proceeding  as  agent  of  the  company for  the  limited  purpose  of  having  the questions determined.  The second, third and fourth plaintiffs, by their choice, sought to be joined as plaintiffs to the proceeding and were joined by Heath J by order of 27

October 2010.

[15]     Further, as Mr Hughes submits in his memorandum, in addition to the clear interest of the first plaintiff in the resolution of the questions, the second plaintiff is the largest shareholder and secured creditor of the first plaintiff, the fourth plaintiff asserted an ownership right in assets of the first plaintiff and the third plaintiff is a director of the second plaintiff and has a beneficial interest in the second plaintiff. The third plaintiff, Mr Phillips, chose to fully engage in the hearing.  He took a full and active stance including making submissions and presenting his case to the Court. Costs should lie against all plaintiffs equally.

[16]     I turn to the appropriate quantum.  As noted, counsel for the defendants seek costs on a 2C basis primarily because it is submitted the legal and factual issues were complex.

[17]     However, as rr 14.3 and 14.4 make clear there is a distinction between the fixing of costs on a category 2 or category 3 basis and the time taken in relation to the steps in the proceedings.  Rule 14.3 provides that categorisation as to category 2

is appropriate where the proceedings are of average complexity requiring counsel of skill and experience considered average in the High Court.  Category 3 proceedings are restricted to those cases that, because of their complexity or significance, require counsel to have special skill and experience in the High Court.  The banding as to B or C is determined by the time required for particular steps during the course of the proceeding.   If a normal amount of time is considered reasonable then band B is appropriate.   If a comparatively large amount of time is required then band C is appropriate.

[18]     In  earlier  proceedings  Allan  J  applied  category  2C  to  the  costs  on  the injunction.  Despite counsel for the defendants’ submissions I am not persuaded that the proceedings are of such complexity or significance that category 3 is appropriate. Allan J did not fix costs on a category 3 basis.  Category 2 is the appropriate costs category for these proceedings.

[19]     That leaves the issue of whether time band C is appropriate, as argued for by the defendants.  In relation to that issue the Court must consider whether a normal amount of time was reasonable or whether a comparatively large amount of time for the particular steps taken was considered reasonable.  I remind myself the Court was dealing with the determination of preliminary questions.   That involved various appearances  at  case  management  conferences,  preparation  for  an  admissibility hearing prior to the hearing and then preparation for the fixture and presentation of the case on the preliminary questions.

[20]     I am not satisfied that time band C should apply to any of those particular steps.  To the extent that the matter was convened as a priority fixture and required preparation at short notice that is accounted for by the allowance for second counsel.

[21]     I conclude the appropriate costs order is on a 2B basis.

[22]     It is also submitted for the plaintiffs that the defendants did not succeed entirely on the first question.   However, when the result of the three questions is considered overall it is clear that, in substance, the defendants succeeded and the plaintiffs failed.

[23]     The defendants also seek an uplift or increase to the scale costs.  Rule 14.6 provides for the circumstances where increased costs may be ordered:

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

(a)       the nature of the proceeding or the step in it 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 it by—

(i)        failing to comply with these rules or with 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, 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 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 it or participate in it in the interests of those affected; or

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

[24]     I accept the submissions for counsel for the defendants that in this case the plaintiffs contributed unnecessarily to the time or expense of the proceedings.  The plaintiffs failed to co-operate in relation to the preparation of an agreed bundle.  The parties eventually prepared  two  separate  bundles  of  documents.    The  plaintiffs’ bundle was provided late and after the date directed by the Court.

[25]   Next, the evidence filed by the plaintiffs contained a large amount of objectionable material and required a hearing prior to trial to determine admissibility issues.  Mr Phillips’ brief initially exceeded 100 pages.

[26]     Further, the presentation of the plaintiffs’ case was not well structured.   It caused difficulty for both the Court and the defendants.   The plaintiffs had to continually be reminded to maintain the focus of their case.  In the circumstances an uplift of 33⅓ per cent is appropriate.   In the case of the second defendant, as Mr Nolen properly acknowledges, the larger burden was undertaken by the other defendants so the uplift will apply only to the preparation for trial.

Result

[27]     The first, third, fourth, fifth and sixth defendants are to have costs in the sum of $57,152 calculated in accordance with the schedule together with disbursements as fixed by the Registrar.

[28]     The second defendant is to have costs in the sum of $37,662.66 calculated in accordance with the attached schedule together with disbursements as fixed by the Registrar.

[29]     The costs orders are, in each case, made jointly and severally against all four plaintiffs.

Venning J

SCHEDULE – Ngata Tama Parties’ Costs

Description		Time allocation	Amount (time allocation x daily recover rate of $1,880)
4.11	Appearance at case management conference on 27 October 2010	0.3	$564.00
4.10	Filing   memorandum   for   case   management conference or mentions hearing on 9 February 2011	0.4	$752.00
13	Preparation for case management conference or pretrial conference on 9 February 2011	0.2	$376.00
4.11	Appearance at case management conference on 9 February 2011	0.3	$564.00
4.10	Filing   memorandum   for   case   management conference or mentions hearing on 18 February 2011	0.4	$752.00
4.11	Appearance at case management conference on 18 February 2011	0.3	$564.00
4.14	Preparation  for  hearing  on  admissibility  of evidence on 7 March 2011	1.0	$1,880.00
4.15	Appearance   at   hearing   on   admissibility  of evidence on 7 March 2011	1.0	$1,880.00
8	Preparation for hearing	10.0	$18,800.00
9.1	Appearance in Court	5.0	$9,400.00
9.2	Second and subsequent counsel	2.5	$4,700.00
4.10	Filing   memorandum   for   case   management conference  or  mentions  hearing  on  21  April 2011	0.4	$752.00
4.17	Appearance at mentions hearing or callover on 21 April 2011	0.2	$376.00
4.10	Filing   memorandum   for   case   management conference  or  mentions  hearing  on  28  April 2011	0.4	$752.00
4.17	Appearance at mentions hearing or callover on 28 April 2011	0.2	$376.00
4.18	Sealing order or judgment	0.2	$376.00
TOTAL Plus 1/3 uplift $14,288	18.9	$42,864.00 $57,152.00

SCHEDULE – Mr Martin’s costs

Item	Description	Time allocation	Amount (@ $1,880 per day
4.11	Appearance at case management conference on 27 October 2010	0.3	$564.00
13	Preparation for case management conference or pre-trial conference on 9 February 2011	0.2	$376.00
4.11	Appearance at case management conference on 9 February 2011	0.3	$564.00
4.11	Appearance at case management conference on 18 February 2011	0.3	$564.00
4.17	Appearance at mentions hearing or callover on 25 March 2011	0.2	$376.00
8	Preparation for hearing	10.0	$18,800.00
9.1	Appearance in Court	5.0	$9,400.00
4.17	Appearance at mentions hearing or callover on 21 April 2011	0.2	$376.00
4.17	Appearance at mentions hearing or callover on 28 April 2011	0.2	$376.00
TOTAL Plus  1/3  uplift  on  preparation  $18,800  = $6,266.66	$31,396.00 $37,662.66