Patel v Patel

[2020] NZHC 875

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV 2018-404-000601

[2020] NZHC 875

BETWEEN

PARESHKUMAR PATEL

Plaintiff

AND

PRAKASHKUMAR PATEL

Defendant

Hearing:

In Chambers (on the papers)

Counsel:

P Cogswell for the Plaintiff

A Kashyap and S C R Raju for the Defendant

Judgment:

1 May 2020

JUDGMENT OF GWYN J

(No.3 - Costs)

This judgment was delivered by me on 1 May 2020 at 10.00pm Pursuant to Rule 11.5 of the High Court Rules

…………………………

Registrar/Deputy Registrar

Solicitors/Counsel:

Duggan & Murphy, Auckland Cogswell Law, Auckland

A Kashyap, Barrister, Auckland

PATEL v PATEL [2020] NZHC 875 [1 May 2020]

Introduction

[1]        This case concerned a dispute over the distribution of the proceeds of a development project undertaken between the plaintiff and the defendant.

[2]        On 22 October 2019 I gave judgment for the plaintiff.1 I found that there was an oral partnership between the parties, giving rise to fiduciary obligations as between them, and that the defendant had acted in breach of those obligations and the requirements of the Partnership Act 1908.

[3]        In my second judgment dated 13 December 2019 I finalised the quantum of the judgment and sought memoranda as to costs.2

Submissions as to costs

[4]        The plaintiff has filed a memorandum dated 31 January 2020, in which he seeks payment of his costs on an indemnity basis or, alternatively, increased costs. The plaintiff says that indemnity costs are justified because the Court found that the defendant acted in breach of the fiduciary duties imposed on him by the partnership between the defendant and the plaintiff by failing or refusing to account to the plaintiff for his financial contribution to the development project between the two, his half share of the profit derived from the development and interest on those monies.3 The plaintiff says that as a defaulting fiduciary the defendant may not benefit from his wrongdoing and should therefore meet all the plaintiff’s costs.

[5]        The Court allocated Category 2 for costs. Category 2 costs are $2,390.00 per day. The plaintiff submits that Band B is considered appropriate for the steps taken. On that basis the plaintiff has calculated scale costs at $51,624.00. His actual costs are $52,649.83. In addition, the plaintiff seeks $17,350.00 for court filing and other fees and $5,037.00 for expert witness fees. The latter relates to the plaintiff’s expert accountant who gave evidence during the course of the hearing. The total amount sought by the plaintiff is $75,899.33.

1      Patel v Patel [2019] NZHC 2705 (Judgment No. 1).

2      Patel v Patel [2019] NZHC 3306.

3      Judgment No. 1 at [72].

[6]        In his memorandum of 22 February 2020, the defendant accepts the accuracy of the plaintiff’s scale costs calculations but submits that each party should bear his own costs of the proceedings. The basis for the submission is that the defendant defended the claim in good faith and, while he is taking all necessary steps to clear the amounts owing to the plaintiff under the judgment, he is facing considerable financial hardship in doing so.

Discussion

[7]        I am satisfied that the 2B scale costs and disbursements calculated by the plaintiff are reasonable. The further question for consideration is whether the plaintiff is entitled to either of increased or indemnity costs.

[8]        The High Court Rules provide that, so far as possible, the determination of costs should be predictable and expeditious and, to achieve that, normally an award of 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 However r 14.6 allows the Court to order a party to pay increased or indemnity costs in certain circumstances.

[9]       In Bradbury v Westpac Banking Corp the Court of Appeal explained the three categories:5

The distinction among our three broad approaches – standard scale costs; increased costs; and indemnity costs – may be summarised broadly:

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

(b)increased costs may be ordered where there is 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.

[10]      Here, none of the specific circumstances set out in rr 14.6(4)(a) to (e) are applicable. The plaintiff relies on r 14.6(4)(f) which provides that indemnity costs

4      High Court Rules 2016, rr 14.2(g) and (c).

5      Bradbury v Westpac Banking Corp [2009] 3 NZLR 400 (CA) at [27].

may be ordered where “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.” 6 Rule 14.6(3)(d) which provides for increased costs is framed in identical terms. These are broadly worded exceptions and, as Dunningham J noted in Willburn Furniture and Restorations Ltd (in liq) v Gledhill the Courts have been reluctant to categorise particular types of cases as attracting increased or indemnity costs.7 Rather the provision is “reserved for specific circumstances occurring in the particular proceedings”.8

[11]      In Madsen-Ries v Petera Lang J observed that “the Courts have been careful to restrict the right to claim indemnity damages to situations where the party against whom such damages are awarded has acted in an egregious manner”.9 This case does not meet that threshold.

[12]      Nor do I think it is on a par with the situation in the Willburn case where Dunningham J was prepared to make an award of increased, although not indemnity, costs. That case involved a company going into liquidation “as the result of a deliberate course of action by the first defendant to knowingly strip the company of its assets, or to put the assets of the company beyond the reach of the creditors.”10 An award in this instance would cut against the principle that, generally, the purpose of a costs award is not to reward or punish the behaviour which was the subject matter of the substantive claim.11

[13]      Regarding the defendant’s submissions, I consider there is no basis for a reduction in the costs awarded in terms of the High Court Rules and note that financial hardship is not a shield against a costs award.12

6      High Court Rules 2016, r 14.6(3)(d) and 14.6(4)(d).

7      Willburn Furniture and Restorations Ltd (in liq) v Gledhill [2016] NZHC 549 at [7].

8      At [7]; citing Tamahere v Mediaworks Radio Ltd [2015] NZHC 268 at [6].

9      Madsen-Ries v Petera [2015] NZHC 538 at [120]–[121].

10     Willburn Furniture and Restorations Ltd (in liq) v Gledhill, above n 7, at [13].

11     Taylor v Roper [2019] NZHC 16 at [19].

12     Teitiota v Chief Executive of the Ministry of Business, Innovation and Employment [2013] NZHC 3401 at [6].

Outcome

[14]The plaintiff is entitled to costs as follows:

(a)2B costs and disbursements totalling $51,624.00;

(b)Court filing and other fees $17,350.00; and

(c)Expert witness costs $5,037.00.

Gwyn J