Norrie v Crown Range Holdings Ltd
[2022] NZHC 898
•3 May 2022
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2021-404-1785
[2022] NZHC 898
IN THE MATTER of the Companies Act 1993 BETWEEN
KATIE NORRIE
Applicant
AND
CROWN RANGE HOLDINGS LIMITED
First Respondent
BASSETT RD HOLDINGS LIMITED
Second Respondent
Hearing: On the papers Counsel:
J Nolen and K Puddle for the Applicant
A H Waalkens QC and S A Beattie for the Respondents
Judgment:
3 May 2022
JUDGMENT OF GAULT J
(Costs)
This judgment was delivered by me on 3 May 2022 at 10:30 am pursuant to r 11.5 of the High Court Rules 2016.
Registrar/Deputy Registrar
……………………………………
Solicitors / Counsel:
Mr J Nolen and Mr K Puddle, K3 Legal, Auckland
Mr A H Waalkens QC and Ms S A Beattie, Barristers, AucklandMr L Lamberg (respondents’ instructing solicitor), Lamberg & Co., Auckland
NORRIE v CROWN RANGE HOLDINGS LTD [2022] NZHC 898 [3 May 2022]
[1] Ms Norrie seeks costs following resolution of her originating application seeking orders for disclosure of information from the respondents pursuant to s 178 of the Companies Act 1993 (the Act).
[2] The respondents say that costs should lie where they fall. The costs issue is to be determined on the papers.1 Memoranda and affidavits have been filed.2
Background
[3] Ms Norrie is the Court appointed administrator of the insolvent estate of her father, who died on 4 August 2019.
[4]The estate is the owner of 7.5 per cent of the shares in each of the respondents.
[5] On 16 July 2021, Ms Norrie requested disclosure of information from the respondents. The respondents did not provide the information or their reasons for not doing so within the statutory timeframe in s 178 of 10 working days.
[6] The originating application was filed on 15 September 2021. Following service on 27 September 2021, a joint memorandum dated 30 September 2021 recorded that counsel for the respondents had only recently been instructed, and that the respondents acknowledged that the information needed to be provided but sought further time. The first call of the application was adjourned on the papers on 1 October 2021.
[7] Subsequent memoranda were filed for the adjourned call on 18 October 2021. Gordon J directed the respondents to serve the requested information by 2 November 2021, with the matter to be called again on 4 November 2021, and reserved costs.
[8] A joint memorandum of counsel dated 3 November 2021 updated the Court on progress with service of the requested information and proposed timetable directions for submissions and affidavit evidence on costs. Consent orders were made in terms of the joint memorandum.
1 The matter was referred to me as Duty Judge: minute dated 15 March 2022.
2 Sworn versions of the applicant’s affidavits were filed on 17 February 2022.
Submissions
[9] Ms Norrie submits that costs should follow the event. Section 178(9) of the Act provides that on an application for an order under that section the Court may make such order for the payment of costs as it thinks fit. Ms Norrie submits this is an even broader discretion than that provided for in r 14.1 of the High Court Rules 2016. She submits the Court should take into account the respondents’ failure to engage with the request prior to the proceeding being commenced; the proceeding should not have been required had the respondents behaved reasonably upon receipt of the request. She therefore submits that costs on an indemnity basis are appropriate, seeking
$24,111.93 inclusive of GST and administration fee plus disbursements of $928. She submits she has a statutory duty to realise assets of the estate for the benefit of creditors.
[10] Alternatively, Ms Norrie seeks increased costs – an uplift of 50 per cent on 2B costs – under r 14.6(3)(c). Pursuant to that rule, the Court may order increased costs if 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.
[11] The respondents say they have already been put to significant cost because of the actions of Mr Norrie and that they have not acted obstructively. They say they have never contested that the applicant was entitled to receive the information sought, nor have they refused to provide it. They acknowledge they were remiss in not responding by the statutory deadline but submit this is understandable in the circumstances given their complicated relationship with Mr Norrie. They submit that after engaging counsel they sought a four week adjournment but the applicant only consented to a two week adjournment, which then necessitated Court involvement. The respondents say they met the four week timeframe initially proposed.
[12] Accordingly, the respondents resist any award of indemnity, increased or scale costs.
Discussion
[13] Where costs cannot be agreed, costs memoranda should be brief, especially in a modest case like this where the substantive issue was resolved. Here, between the parties, three affidavits and three memoranda addressed costs. These included debate about dealings before the proceeding was commenced. The time and other pressures on Judges leave room for robust judgment as to the costs considered reasonable in all the circumstances.3
[14]Section 178(9) of the Act provides:
On an application for an order under this section, the court may make such order for the payment of costs as it thinks fit.
[15] This provides for a broad discretion in relation to costs. However, especially in relation to an application for indemnity or increased costs in a High Court proceeding, a principled approach in accordance with Part 14 of the High Court Rules is required.
[16] Ms Norrie’s criticism of the respondents partly relates to their conduct before the proceeding was commenced. Under Part 14, the Court is concerned with the costs of steps in the proceeding. Generally, costs should reflect how parties have acted during litigation, not before it.4 Whether or not Part 14 allows for exceptions to this, I accept that s 178(9) allows for pre-proceeding costs where appropriate. I apply the Part 14 principles by analogy.
Indemnity costs
[17]Rule 14.6(4)(a) relevantly provides:
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
3 Frater Williams & Co Ltd v Australian Guarantee Corp (NZ) Ltd (1994) 2 NZ ConvC 191,873 (CA) at 191,887.
4 Paper Reclaim Ltd v Aotearoa International Ltd [2006] 3 NZLR 188 (CA) at [160]; and Paper Reclaim Ltd v Aotearoa International Ltd [2007] NZSC 26, [2007] 3 NZLR 169 at [40]-[41].
…
(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.
[18] As the Court of Appeal said in Bradbury v Westpac Banking Corporation, indemnity costs may be ordered where a party has behaved either very badly or very unreasonably.5 The Court elaborated on this principle, saying that indemnity costs, which depart from the predictability of the Rules Committee’s regime, are exceptional and require exceptionally bad behaviour. That is why to justify an order for such costs the misconduct must be flagrant.6 A party claiming indemnity costs carries the onus of persuading the Court that such an award is justified.
[19] As they acknowledge, the respondents were remiss in failing to provide the information or satisfactorily respond within the statutory timeframe. But the circumstances were complicated by Mr Norrie’s alleged conduct, related litigation and this was not the first s 178 information request. The respondents felt aggrieved about the processes they had become involved in since Mr Norrie’s death and wrongly allowed this to influence the timeliness of their response. If the accounts were in a poor state, the respondents should have advised that further time was needed to provide the information. They also unhelpfully declined to authorise their solicitors to accept service of the proceeding. But their behaviour does not constitute flagrant misconduct.
[20] Once the proceeding was served, the further delay was modest, and the parties share responsibility for requiring the Duty Judge call on 18 October 2021.
[21] For these reasons, I do not consider that an award of indemnity costs is justified.
Increased costs
[22] Where increased costs are warranted, they are approached by way of an uplift from scale costs. Here, even scale costs are disputed, but given the respondents’
5 Bradbury v Westpac Banking Corporation [2009] NZCA 234, [2009] 3 NZLR 400 at [27]-[28].
6 At [28].
approach referred to above, I do not accept that costs should lie where they fall. Ms Norrie is entitled to costs on a 2B basis.
[23] As the Court of Appeal also said in Bradbury v Westpac Banking Corporation, increased costs may be ordered where there is failure by the paying party to act reasonably.7 But instead of seeking costs on that basis, Ms Norrie relies on r 14.6(3)(c), which as indicated provides that the Court may order increased costs if:
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;
[24] This limb applies where the proceeding is in the public interest or to determine an issue of public importance. I do not consider the fact that costs are being borne by an insolvent estate of itself justifies an award of increased costs under r 14.6(3)(c).
[25] Nor do I consider that increased costs are appropriate for all steps in the proceeding on the basis that the respondents acted unreasonably. However, in the context of this case given the respondents’ conduct and the scope of s 178(9) referred to above, I consider an uplift is appropriate for filing the originating application / affidavit and interlocutory application / memorandum on 15 September 2021.
[26] I do not consider a 50 per cent uplift on 2B costs is justified for those steps. A 50 per cent uplift reflects the fact that scale costs are designed to deliver to the successful party approximately two-thirds of the daily rate considered reasonable once the proceeding has been placed in its appropriate category for complexity and significance and then in the appropriate band for time. Thus, as the Court of Appeal observed in Holdfast NZ Ltd v Selleys Pty Ltd:8
An increase of 50 percent on scale costs should grant the costs-claiming party a fair recovery for the step unnecessarily forced on it, assuming that the time allocated to the step has been reasonably calculated… Any greater recovery than that would mean that the party paying costs is contributing to the other party’s choice of special counsel.
7 Bradbury v Westpac Banking Corp [2009] NZCA 234, [2009] 3 NZLR 400 at [27].
8 Holdfast NZ Ltd v Selleys Pty Ltd (2005) 17 PRNZ 897 (CA) at [47]-[48].
[27] In the circumstances outlined above, I consider an uplift on 2B costs of 25 per cent is appropriate for the originating application / affidavit and interlocutory application / memorandum filed on 15 September 2021, totalling 3.1 days and
$9,261.25.9
Costs on costs
[28] The costs sought include costs on costs, that is the costs of preparing costs memoranda and affidavits. While the Court has power to award costs in relation to costs matters, costs are often dealt with by way of exchange of memoranda and the Court is reluctant to award costs on costs.10
[29] Here, the parties share responsibility for not resolving the costs issue. The respondents should have accepted that scale costs were payable. But Ms Norrie has not made out her claim for indemnity costs (nor increased costs for all steps). I decline to order costs on costs.
Conclusion
[30] In addition to the costs for the 15 September 2021 steps already addressed, Ms Norrie is entitled to 2B costs for further attendances totalling 1.1 days and
$2,629,11 plus disbursements of $928.
Result
[31]The respondents are to pay the applicant costs and disbursements of
$12,818.25.
Gault J
9 The first three items in the table attached to Mr Nolen’s memorandum dated 24 November 2021.
10 Jeffreys v Morgenstern [2013] NZHC 1361 at [40]; Barry Park Investments Ltd v Body Corporate Number 95388 [2016] NZHC 1527 at [25]; and Epsom Woods Ltd v Waitakere Farms Ltd [2020] NZHC 3137 at [4].
11 The remaining items in the table attached to Mr Nolen’s memorandum dated 24 November 2021, excluding costs on costs.
10
6
1