Page v Hendra HC Palmerston North CIV-2009-454-772

[2010] NZHC 2371

IN THE HIGH COURT OF NEW ZEALAND PALMERSTON NORTH REGISTRY

CIV-2009-454-772

BETWEEN  PAUL PAGE Plaintiff

ANDPAUL HENDRA Defendant

Judgment:      6 December 2010 at 3.30 pm

JUDGMENT OF ASSOCIATE JUDGE D.I. GENDALL

This judgment is delivered by Associate Judge D.I. Gendall on 6 December 2010 at

3.30 pm under r 11.5 of the High Court Rules.

Solicitors:           Davis O’Sullivan, Solicitors, PO Box 192, Wellington

McIntosh & Signal, Solicitors, PO Box 11, Feilding

Fitzherbert Rowe, Solicitors, Private Bag 11016, Palmerston North

P PAGE V P HENDRA HC PMN CIV-2009-454-772  6 December 2010

[1]      In a judgment I gave in this proceeding on 21 September 2010 concerning entitlements and distributions from a failed aircraft parts and hangar construction joint venture arrangement between the plaintiff and the defendant I noted at paras [78] and [79]:

[78]     One final matter needs to be addressed.  This relates to a tax invoice for legal expenses on the sale of the hangar totalling $25,097.22 which have been claimed by Fitzherbert Rowe, Solicitors, Palmerston North.   As I understand the position, Fitzherbert Rowe acted on the sale of the hangar presumably for Aviation Property.  These legal expenses are disputed by Mr Page and his interests who claim first, that Fitzherbert Rowe were not instructed by him and secondly, that in any event the invoice is excessive. As  I  understand  the  position,  Mr  Hendra  takes  a  different  view  and contends that these legal expenses are appropriate and properly payable. The parties to the matters presently before this Court (Mr Page and Mr Hendra) have requested that I make a ruling regarding this claim for legal expenses by Fitzherbert Rowe.   Whilst I am happy to do so, before completing this, obviously I need to hear submissions from all affected parties, including Fitzherbert Rowe.  At the hearing of this matter little was advanced to me by way of submissions on these expenses on behalf of Mr Page or Mr Hendra. In addition, I did not hear from Fitzherbert Rowe.

[79]     That said, obviously I am in no position to make a ruling now regarding these legal expenses. Therefore, I make the following directions:

(a)       The amount for these claimed legal expenses of $25,097.22 is to continue to be retained in the solicitor’s trust account in question until the issue is fully resolved.

(b)       In the meantime Fitzherbert Rowe are to have a period of fifteen (15) working days from the date of this judgment to file and serve in this Court any Memorandum of Submissions they may wish regarding  the  $25,097.22  invoice  and  the  matters  to  which  it relates.

(c)       Mr  Hendra  and  his  interests are  then  to  have  a  period  of  10 working days from that date to file and serve any Memorandum they may wish regarding this costs question.

(d)       Mr Page and his interests are then to have a period of a further 10 working days from that date to file and serve any Memorandum they may wish regarding this costs issue.

(e)        Fitzherbert Rowe are then to have a further period of 5 working

days from that date to file and serve any Memorandum they may wish which is strictly in reply.

(f)        Those  Memoranda  are  then  to  be  referred  to  me  and,  in  the absence of  any party indicating they  wish to  be  heard on the matter,  I  will  decide  the  issue  concerning those  claimed  legal expenses at that point.

[2]      Memoranda have now been filed pursuant to the directions made at para [79]

of my judgment as follows:

(a)       Memorandum from Maurice Bathurst Rowe (“Mr Rowe”) dated 22

October 2010.

(b)       Memorandum from counsel for the defendant dated 27 October 2010. (c)           Memorandum from the plaintiff dated 17 November 2010.

(d)       Reply memorandum from Mr Rowe dated 26 November 2010.

[3]      These memoranda have now been referred to me.   As I have noted, they relate to the tax invoice from Mr Rowe’s firm for legal expenses on the sale of the hangar  at  Palmerston  North  airport,  which  expenses  are  noted  above  in  my 21

September 2010 judgment as totalling $25,097.22.

[4]      From a certain Deed of Arrangement dated 30 and 31 August 2009 made between the plaintiff, the defendant and Aviation Property Developments Limited (“Aviation Property”) which is before the Court, and a number of subsequent memoranda filed in this Court by counsel for the parties including Mr Rowe, it is clear that agreement has been reached for this Fitzherbert Rowe tax invoice issue to be referred to me for determination.   That said, I now give my decision on this question.

[5]      The costs invoice here from Fitzherbert Rowe for $25,097.22 relates to the services  of  that  firm  in  relation  to  the  sale  of  the  hangar  here  presumably for Aviation property.  In addition to these costs, Mr Rowe has indicated that Fitzherbert Rowe seek compounding interest thereon at the rate of 16% p.a. in accordance with Fitzherbert Rowe’s Terms of Engagement which were provided to Davis O’Sullivan, the solicitors to Mr Page, on 7 July 2009.

[6]      Mr  Allan,  counsel  for  the  defendant  throughout  has  confirmed  that  Mr Hendra, accepts that the costs of Fitzherbert Rowe were properly incurred here, are reasonable and should be paid.

[7]      The plaintiff, Mr Page, however, takes a different view.  First, he contends that he did not contract with Fitzherbert Rowe for their services here and in fact in his words “I hired Mr Geoffrey O’Sullivan of Davis O’Sullivan, Solicitors, Wellington, to handle the lease issues surrounding Paulair and my relationship with

Mr Hendra.”  In addition Mr Page maintains that in any event the fees charged by

Fitzherbert Rowe are excessive.

[8]      Turning to address the first point of objection from the plaintiff, Mr Page, in my view this is quickly disposed of.   Mr Page has confirmed that he engaged Mr O’Sullivan of Davis O’Sullivan, Solicitors, Wellington to act on his behalf in this matter.  There is no doubt that subsequently, Mr O’Sullivan on behalf of Mr Page instructed Fitzherbert Rowe to act for Aviation Property the vendor company on the sale of the hangar.  It is clear also that this matter was of some urgency and had a reasonable degree of complexity.

[9]      For  Mr  Page  to  now  suggest  that  Fitzherbert  Rowe  were  not  properly instructed to act on the hangar sale is simply wrong.  That sale was undertaken by Aviation Property and in my view Fitzherbert Rowe were entitled to act having received an instruction from Davis O’Sullivan on behalf of Mr Page as one of the directors of the company and confirming this instruction with Mr Hendra the other director.

[10]     It is interesting also to note r 10.7 of the Lawyers and Conveyancers Act

(Lawyers:Conduct and Client Care) rules 2008 which states in part:

Fees of Other Lawyers

10.7A lawyer who, acting in a professional capacity, instructs another lawyer, must pay the other lawyer’s account promptly and in full unless agreement to the contrary is reached, or the fee is promptly disputed through proper professional channels. ....

[11]     In the present case, Fitzherbert Rowe having obtained their instruction to act from Davis O’Sullivan would be entitled to look to that firm for payment of their tax invoice on the hangar sale if payment was not received from Aviation Property. Given that Aviation Property was the vendor of the hangar and itself obtained benefit from the sale, I have no doubt that it is responsible for the reasonable fee of Fitzherbert Rowe on this sale.

[12]     Accordingly, this aspect of Mr Page’s objection to the Fitzherbert Rowe claim must fall away.

[13]     Turning to the second objection raised by Mr Page relating to the quantum of the tax invoice in question, Mr Rowe in his 22 October 2010 memorandum has detailed at length the work involved in this reasonably complex transaction on behalf of Aviation Property.  In addition he has provided a print out of the Fitzherbert Rowe time recording records for this matter from 6 July 2009 to 12 October 2010.  These show a charge out rate for Mr Rowe who is the senior partner of Fitzherbert Rowe and an experienced commercial solicitor at $455.00 per hour for all but the last entry in the time record.

[14]     I have now had an opportunity to consider in detail this material provided by Mr Rowe, and I am satisfied that under all the circumstances here and given the urgency of this matter and the complexity which clearly developed regarding the sale, the total invoice costs of $25,097.22 are reasonable and properly payable by Aviation Property.   The plaintiff Mr Page has put nothing of substance before the Court to justify his dispute as to the level of fees charged by Fitzherbert Rowe and made no comment of any type as to the fee breakdown or time records provided by Mr Rowe.

[15]     As  to  the  question  of  compounding  interest  at  16%  p.a.  claimed  by

Fitzherbert Rowe on this account, there is no doubt that when engaged in early July

2009 by Davis O’Sullivan on behalf of Mr Page to undertake this work, Fitzherbert Rowe confirmed their Terms of Engagement in their letter dated 7 July 2009.  This letter clearly stated at para 2.5:

Payment

2.5       Invoices are payable within 14 days of the date of the invoice, unless alternative arrangements have been made with us.  We may require interest to be paid on any amount which is more than 7 days overdue.  Interest will be calculated at the rate of 16% p.a. on the outstanding amount compounding monthly.

[16]     It is clear that Fitzherbert Rowe’s costs in this matter have been outstanding for more than a year now.  Total accrued interest at this compounding 16% p.a. rate amounting to $5,124.67 up to 26 November 2010 is sought.

[17]     Indeed, as a concession, earlier correspondence between the parties from Fitzherbert  Rowe  confirmed  that  this 16%  interest  would  not  be  sought  on  the outstanding costs account if it was paid by the end of December 2009.  This did not occur.  Instead, Fitzherbert Rowe have been waiting for almost a further one year to have their account settled.

[18]     That said, it is clear to me that the parties here including Mr Page and his instructed solicitors, Davis O’Sullivan in particular were warned that unless this outstanding account was settled in full by December 2009, then interest would be sought in terms of Fitzherbert Rowe’s letter of engagement.

[19]     There is no doubt that Fitzherbert Rowe have been drawn into the protracted dispute and proceedings between Mr Page and Mr Hendra through no fault of their own.  Their tax invoice for work properly carried out on the successful sale of the Aviation  Property  hangar  has  been  outstanding  for  a  considerable  time.    I  am satisfied therefore that they are entitled to interest in terms of their advised terms of engagement at 16% p.a. compounding.  That was the basis upon which they accepted instructions from Mr Page’s solicitor to act for Aviation Property on the hangar sale, and no objection was ever raised to this.

[20]     A direction is now made that Fitzherbert Rowe are entitled to $25,097.22 for legal expenses on the hangar sale together with compounding interest at 16% p.a. thereon (which, as I understand it amounts to $5,124.67 up to 26 November 2010) and an order is made that this amount is to be paid forthwith to Fitzherbert Rowe from  the  Aviation  Property  funds  noted  at  para  [84](a)  of  my judgment  of  21

September 2010.

[21]     In so far as para [84](a)(iii) of my 21 September 2010 judgment is concerned, Mr  Rowe  in  his  22  October  2010  memorandum  has  suggested  that  a  sum  of

$5,000.00 plus GST should be set aside for completion of the final settlement of the sale of the hangar in 2012.  No objection has been taken by either the plaintiff or the defendant to this specific suggestion and it seems to me to be reasonable under all the circumstances here.

[22]     Accordingly, I order that the sum of $5,000.00 plus GST as a reasonable estimate for the future legal costs on the ultimate 2012 settlement of the sale of the hangar is to be retained in the trust account of the solicitors in question to meet the fees when due.  This amount is to be placed on interest bearing deposit.

‘Associate Judge D.I. Gendall’