Paper Reclaim Ltd v Aotearoa International Ltd HC Auckland Civ-2004-404-4728

[2005] NZHC 1727

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2004-404-004728

BETWEEN  PAPER RECLAIM LTD

Plaintiff

AND  AOTEAROA INTERNATIONAL LTD

Defendant

Judgment:      22 April 2005

COSTS JUDGMENT OF HARRISON J

SOLICITORS

Wells & Co (Auckland) for Plaintiff Morrison Kent (Auckland) for Defendant

COUNSEL

Gary Judd QC; Anthony Grant

PAPER RECLAIM LTD V AOTEAROA INTERNATIONAL LTD HC AK CIV-2004-404-004728 [22 April 2005]

[1]    On 14 February 2005 I struck out Paper Reclaim Ltd’s (PRL) statement of claim in this proceeding on the ground that it disclosed no reasonable cause of action and was also an abuse of the process of this Court. The judgment concluded with these words:

[33] Costs must follow the event; Aotearoa is entitled to costs on its successful application to strike out. I would consider favourably an application by Aotearoa for indemnity costs on a reasonable solicitor/client basis. I have in mind the figure of $15,000. Both Randerson J and I have recorded our views that PRL’s proceeding was fundamentally misconceived from its inception, and that Aotearoa has been put to unnecessary expense and inconvenience as a result. However, if counsel are unable to agree, I request Aotearoa to file its memorandum within 14 days and PRL to file its memorandum in answer within a further 14 days. I will not require a memorandum in reply.

[2]    By way of brief summary, PRL applied for an order setting aside two previous judgments delivered in Aotearoa’s favour by Nicholson J. On 19 March 2004 the Judge found for Aotearoa on liability; on 30 August 2004 he awarded the company costs and disbursements on an indemnity basis of $532,115. PRL’s claim alleged that Aotearoa obtained the first judgment by fraud.

[3]    I struck out PRL’s claim on three alternative grounds, namely that (1) PRL had failed to provide an arguable evidentiary foundation for its claim, which was never adequately particularised, and that additional evidence provided by Aotearoa’s managing director, Mr Patrick Cash, proved that the claim was unsustainable; (2)  Mr Cash’s allegedly fraudulent evidence given at trial before Nicholson J was not materially decisive, even if it is proven to be false (which it was not); and (3) if the evidence in question was material, PRL had ample opportunity to obtain it well in advance of trial.

[4]    PRL filed this claim on 2 September 2004. Aotearoa responded by filing a statement of defence and a request for further particulars. In the manner that characterised their previous litigation, the parties soon embarked upon interlocutory warfare. On 8 November Randerson J interceded and convened a conference between counsel. I infer from his minute that the Judge suggested Aotearoa might apply to strike out. On 15 November Aotearoa took that course by filing a formal application together with a supporting affidavit. PRL responded with a notice of

opposition. Affidavits were then filed in support and opposition but they were of limited value except for those sworn by Mr Cash on 25 November and 22 December.

[5]    With respect, the fundamental defects in PRL’s original statement of claim, which Randerson J and I identified in judgments, were obvious from the start and were incurable by amendment. Only the documents on the Court record were required to provide the evidential foundation for the second and third successful grounds for striking out. They were Nicholson J’s first judgment, extracts from the notes of evidence and extracts from documents and written synopses of counsels’ submissions at trial. His solicitors and counsel were familiar with this material. However, Mr Cash’s affidavits, particularly the second, were independently decisive in proving that PRL could never satisfy its evidential onus of proving fraud, to constitute a first or stand alone ground for striking out.

[6]    The legal principles on an application to strike out a claim alleging fraud are orthodox. Preparation for hearing required counsel to summarise the authorities and apply them to the relevant facts. It was not an unduly complex exercise. I based my original estimate of reasonable solicitor/client costs of $15,000 according to the steps which I have outlined.

[7]    Counsel have been unable to agree on costs. Mr Anthony Grant for Aotearoa has submitted a comprehensive memorandum to support a claim for an award of

$80,167 being Aotearoa’s actual fees and disbursements incurred since PRL filed this proceeding. The claim excludes fees and disbursements. Aotearoa seeks an award of costs on an indemnity basis. In opposition Mr Gary Judd QC for PRL submits that an award of costs to Aotearoa should be fixed according to category 2B at $10,730, but confirms that PRL has in fact offered to pay $15,000.

[8]    I am satisfied that Aotearoa is entitled to indemnity costs (R48C(1)(b)). I need only repeat my conclusion that PRL’s claim alleging fraud without any or a proper evidential foundation was an abuse of the process of this Court, and that the company acted frivolously or vexatiously in commencing the proceeding (R48C(4)). However, my conclusion is subject to two related qualifications. One is that they are

confined to the application to strike out. The other is that they must be “reasonably incurred” (R48C(1)(b)).

[9]    Mr Grant has provided copies of detailed invoices and time recording sheets submitted by Morrison Kent and himself. It is apparent that both the solicitors and Mr Grant have done a great deal of work on Aotearoa’s behalf since 2 September 2004. Mr Grant’s time alone exceeds 114 hours; I assume that the same applies to Morrison Kent. However, as noted, I must restrict any award to the application to strike out, and on the basis that the amount ultimately fixed is reasonable.

[10]   I do not mean any criticism of Aotearoa’s legal advisors by repeating that the incurable defects in PRL’s statement of claim were obvious from the start, and that the company was unlikely to survive an application to strike out on the second and third grounds which I accepted. All the necessary core evidential material was available on 2 September, although Mr Cash’s affidavits prepared subsequently provided invaluable supplementary support. I would have expected Aotearoa to respond immediately to PRL’s proceeding by applying to strike out before undertaking a great deal of work which may ultimately have proven unnecessary. The various accounts include many attendances relating to the application, but in my judgment the exercise should have been relatively straightforward.

[11]   The lawyers’ fees are not broken down between those attributable to the application to strike out and those attributable to Aotearoa’s wider defence. By applying my judgment to the material available, I remain of the view that reasonable solicitor/client costs incurred for and strictly attributable to the application to strike out are $15,000. However, I am prepared to allow an extra $5000 for the costs associated with preparation of Mr Cash’s second affidavit. Accordingly, I order PRL to pay Aotearoa costs of $20,000 together with disbursements.

[12]   Mr Grant’s memorandum identifies a number of miscellaneous issues outstanding between the parties in associated proceedings, particularly appeals to the Court of Appeal against Nicholson J’s judgments. I am prepared to convene a conference of counsel to resolve any outstanding questions, if required. Counsel should arrange a conference date through the registry.

Rhys Harrison J