O'Brien v Parkinson

[2021] NZHC 2130

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2019-404-002814

[2021] NZHC 2130

UNDER

The Companies Act 1993

BETWEEN

LOUISA JANE O’BRIEN, on behalf of GENERAL DYNAMICS CORPORATION LIMITED

First Plaintiff

LOUISA JANE O’BRIEN
Second Plaintiff

AND

KEVIN PARKINSON

First Defendant

KEVIN PARKINSON, as trustee of KEVIN PARKINSON FAMILY TRUST
Second Defendant

ANNA VALEREINA KEDRINSKAIA and LISTON TRUSTEE SERVICES LIMITED,
as trustees of ANNA KEDRINSKAIA TRUST

Third Defendants

CIV-2020-404-002351

UNDER

The Property (Relationships) Act 1976

BETWEEN

KEVIN JAMES PARKINSON

Plaintiff

AND

LOUISA JANE O’BRIEN

First Defendant

GENERAL DYNAMICS LIMITED

Second Defendant

KEA GNSS LIMITED

Third Defendant

O’BRIEN v PARKINSON & ORS [2021] NZHC 2130 [17 August 2021]

KEVIN JAMES PARKINSON, as trustee of the KEVIN PARKINSON FAMILY TRUST

Fourth Defendant

LOUISA JANE O’BRIEN, as trustee of the LOUISA PARKINSON FAMILY TRUST
Fifth Defendant

ANNA VALEREINA KEDRINSKAIA and LISTON TRUSTEE SERVICES LIMITED,
as trustees of the ANNA KEDRINSKAIA TRUST

Sixth Defendant

Hearing:

On the papers

Final submissions filed 9 July 2021

Appearances:

J McCartney for Plaintiff (CIV-2019-404-2814) and Defendants (CIV-2020-404-2351)

S Morris and S A Finnigan for Defendants (CIV-2019-404-2814) and Plaintiffs (CIV-2020-404-2351)

Judgment:

17 August 2021

COSTS JUDGMENT OF ASSOCIATE JUDGE P J ANDREW

This judgment was delivered by Associate Judge Andrew on 17 August 2021 at 3.00 pm

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

Date………………………….

Introduction

[1]                 In my judgment of 27 May 2021, I concluded that Ms O’Brien had succeeded with all four of her applications (discovery, non-party discovery, joinder and strike- out) and was entitled to costs.1

[2]                 This judgment contains my decision on costs. It is being determined on the papers after receipt of submissions from the parties.

Relevant legal principles

[3]                 In accordance with Part 14 of the High Court Rules 2016, the party who fails with respect to a proceeding should pay costs to the party who succeeds.2 An award of costs should reflect the complexity and significance of the proceeding,3 and costs should be assessed by applying the appropriate daily recovery rate to the time considered reasonable for each step reasonably required in relation to the proceeding.4

[4]                 An award of costs is not to exceed the actual costs incurred by the party claiming costs5 and as far as possible, the determination of costs should be predictable and expeditious (r 14.2(1)(g)).

[5]                 The Court of Appeal summarised the approach to standard scale costs, increased costs and indemnity costs in Bradbury v Westpac Banking Corporation:6

(a)standard scale applies by default where cause is not shown to depart from it;

(b)increased costs may be ordered where there is a failure by the paying party to act reasonably; and

(c)indemnity costs may be ordered where that party has behaved either badly or very unreasonably.

[6]                 A Court may award increased costs if the party opposing costs has contributed unnecessarily to the time or expense of the proceeding by taking or pursuing an unnecessary step or an argument that lacks merit.7

1      O’Brien v Parkinson & Ors [2021] NZHC 1193 at [87].

2      High Court Rules 2016, r 14.2(1)(a).

3      High Court Rules 2016, r 14.2.(1)(b).

4      High Court Rules 2016, r 14.2(a)(c).

5      High Court Rules 2016, r 14.2(1)(f).

6      Bradbury v Westpac Banking Corporation [2009] NZCA 234 at [27].

7      High Court Rules, r 14.6(3)(b).

Analysis and decision

[7]                 Ms O’Brien has incurred actual costs of $44,275.00 (including GST) plus disbursements of $3,345.57.

[8]                 Ms O’Brien contends that almost every one of the factors supporting an order for increased costs as set out in r 14.63 of the High Court Rules has been met. She contends that overall there has been a failure to comply with the rules by Mr Parkinson, that he pursued arguments lacking merit, failed to accept her arguments and was in substantial breach of court orders for discovery.

[9]                 I agree with those contentions and they are supported by the findings I made in my judgment of 27 May 2021.8 In that judgment I also made an “unless order”, directing that unless Mr Parkinson complied with the orders and directions contained in the judgment (including the order that he meet the reasonable costs of the non- parties) and filed and served a consolidated affidavit of documents, then his Property (Relationships) Act (PRA) proceedings would be struck out and he would be debarred from defending the derivative Companies Act proceedings.9 That order was based on findings about Mr Parkinson’s repeated failure to comply with his discovery obligations.

[10]              Ms McCartney has attached to her submissions two schedules setting out costs claimed on a 2B basis (which include some band C allocations) for both proceedings, namely the PRA proceedings and the Companies Act proceedings. Altogether, with the costs claimed in both schedules plus disbursements, a total sum of $44,931.57 is sought.

[11]              The two schedules provided by Ms McCartney provide the starting point for a determination of an overall costs award. In approaching this exercise, I accept the submissions of Ms McCartney that substantial time was spent in the preparation of submissions, including reply submissions, and that the preparation time was increased because of  the  late  filing  of  two  further  documents  from  Mr  Parkinson  and  Ms Kedrinskaia requiring further analysis.

8      O’Brien v Parkinson & Ors, above n 1, at [42]–[44] and [48]–[49].

9      O’Brien v Parkinson & Ors, above n 1, at [95].

Costs category 2B for PRA proceedings10

[12]              In addressing the issues of steps taken in the PRA proceedings, I find that in the circumstances here, where the matter has been transferred to the High Court from the Family Court, the whole proceeding should be regarded as a High Court proceeding for costs purposes.11

[13]              I reject the claim for band C in relation to step 22 (23 March 2020) and instead find that band B should be applied, namely 0.6 days.

[14]              I reject the defendants’ submission that Ms O’Brien is not entitled to costs in respect of the joint memoranda. As Ms McCartney submitted, those memoranda required input and substantial engagement by Ms O’Brien.

[15]              I also reject the defendants’ submissions that they were successful in their opposition to join Ms Kedrinskaia to the PRA proceedings in her personal capacity. Ms O’Brien did not pursue joinder of Ms Kedrinskaia in her personal capacity and I addressed the application for joinder as one relating to her trustee capacity only.

[16]              I accept the defendants were successful in opposing the plaintiffs’ application to strike out, but in the overall scheme that is of little consequence. It was a very minor issue.

[17]              I find that in relation to the PRA proceedings, the defendants should pay to Ms O’Brien costs in the total sum of $18,881.00, being 7.9 days at a daily rate of

$2,390.

Companies Act proceedings 2B costs category12

[18]              I accept that band C should be applied to step 23 (the filing of the interlocutory application). The discovery issues were undoubtedly complex and extensive affidavits were filed to address the issues.

10 Schedule ‘C’ to Ms McCartney’s submissions of 17 June 2021.

11 See Johnson v Johnson [2016] NZHC 1606 at [44]–[45]; and s 38A(4) of the Property (Relationships) Act 1976 which provides that any proceedings transferred to the High Court by an order under s 38A continue in the High Court as if they had been properly commenced there.

12 Schedule ‘C’ to Ms McCartney’s submissions of 17 June 2021.

[19]              In relation to the claim for costs associated with preparing the costs memorandum (i.e. costs on costs), namely at step 11, it is unusual for the Court to make such an award and the Court is reluctant to do so.13 However, in the circumstances, where Ms McCartney was compelled to file a reply to the defendant’s costs submissions because of the numerous objections taken by the defendants, I find that some award should be made for preparation of the costs memorandum. However, I consider that this award should be granted on a band B basis of 0.4 days instead of the one day claimed.

[20]              That then leaves 7.5 days for the Companies Act proceedings and a total costs award of $17,925.00 (7.5 days at a daily rate of $2,390).

Disbursements

[21]              I accept the submission of Ms O’Brien that the costs for the preparation of the bundles (used also in the security for costs hearing and the derivative shareholder hearing) were actual costs incurred and are recoverable.

Conclusion

[22]I find that the defendants should pay costs to Ms O’Brien in the total sum of

$36,806.00 together with disbursements, as sought, in the sum of $3,345.57. That represents $18,881.00 for the PRA proceedings and $17,925.00 for the Companies Act proceedings.

[23]              I accept that the total sum awarded is significant, but in my view it fairly and reasonably reflects the circumstances of this case, including the considerable time and expense incurred by Ms O’Brien in addressing the numerous, and often repeated, objections from Mr Parkinson. The overall costs award does, of course, represent a figure in excess of two-thirds of Ms O’Brien’s actual costs. I see no basis for an increase in costs beyond that figure.

[24]              In their submissions the defendants contend that the numerous costs award made against them in this litigation are “financially ruinous for them”. They say that

13     Khurana Trustee Ltd v Castle Backpacker K Road Ltd [2021] NZHC 1315 at [61]; citing Jeffreys v Morgenstern [2013] NZHC 1361 at [40]; Epsom Woods Ltd v Waitakere Farms Ltd [2020] NZHC 3137 at [4]; and Combined Property Maintenance Ltd v Singh [2021] NZHC 621 at [19].

their ability to access justice is now being jeopardised because of the pursuit of claims on a “no stone unturned” basis that is disproportionate to even Ms O’Brien’s assessment of her loss.

[25]              I accept that the defendants have now produced a substantial number of documents by way of discovery. However, as detailed in my judgment of 27 May 2021, the actions of the defendants have contributed significantly to the costs incurred and a more constructive approach, with timely compliance of court orders, may well have produced a different outcome. The defendants ought to reflect carefully on the approach taken to date and whether that more constructive approach going forward might reduce their costs in future.14

[26]              The defendants’ concerns might also suggest that the upcoming judicial settlement conference should be used as a significant opportunity to try and resolve all outstanding issues without the need for yet more expensive litigation.

Result

[27]I order that the defendants are to pay costs to Ms O’Brien in the total sum of

$36,806.00, plus disbursements of $3,345.57.

Associate Judge P J Andrew

14     See also the observation of the Court of Appeal in Parkinson v O’Brien [2021] NZCA 309 at [85].