Perrot-Hunt v Johnston
[2019] NZHC 3106
•29 November 2019
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2015-404-2506
[2019] NZHC 3106
BETWEEN MATTHEW NEIL PERROT-HUNT
First Plaintiff
HUNT FT LIMITED and DEBRA CECILIA
HOLTOM as trustees of the Hunt Family Trust
Second Plaintiffs
AND
EDWARD ERROL JOHNSTON
First Defendant
CONTINUED OVERLEAF
On the papers: At Auckland Judgment:
29 November 2019
JUDGMENT (No. 2) OF POWELL J
[Costs]
This judgment was delivered by me on 29 November 2019 at 3.30 pm pursuant to R 11.5 of the High Court Rules
Registrar/Deputy Registrar Date:
PERROT-HUNT v JOHNSTON [2019] NZHC 3106 [29 November 2019]
AND ED JOHNSTON & CO TRUSTEES LTD
Second Defendants
AND RONALD BRUCE JOHNSON, JOHN KAHUKIWA
and LAWRENCE PONNIAH (sued as a firm CORBAN REVELL)
Third Defendants
AND [REMOVED]
Fourth Defendant
ANDROSS JAMES FARRON and JAMES ROBERT ARTHUR NASH
Fifth Defendants
AND ROSS JAMES FARRON
Sixth Defendant
[1] On 26 August 2019 I issued judgment in this matter.1 I dismissed the plaintiffs’ claims against the defendants and gave leave for the defendants to apply for costs. In the event costs and disbursements are sought against the plaintiffs on behalf of the following defendants:
(a)The first and second defendants, Edward Johnston (“Ed Johnston”) and the Ed Johnston Corporate Trustee Limited (“EJ Corporate Trustee”) in the sum of $92,865 made up as follows:
(i)costs on a 2B basis in the sum of $71,350;
(ii)an uplift of 30 per cent pursuant to r 14.6 of the High Court Rules 2016 (because the proceedings against Ed Johnston were flawed and an abuse of process), of $21,405.00;2 and
(iii)disbursements in the sum of $110.
(b)The third defendant, Corban Revell, in the sum of $139,572.73 made up as follows:
(i)costs according to scale (generally on a 2B basis with 2C costs sought in respect of the statements of defence filed) of
$107,709.00;
(ii)an uplift of 50 per cent from 12 February 2019 pursuant to r 14.6 of the High Court Rules (due to the plaintiffs’ unreasonable failure to accept a settlement offer made by Corban Revell), of
$30,997; and
(iii)disbursements in the sum of $866.73.
1 Perrot-Hunt v Johnston [2019] NZHC 2085.
2 In the memorandum filed on behalf of the first and second defendants the sum was $21,408 but this seems to be an error.
[2] No costs have been sought by the fifth and sixth defendants; the second named fifth defendant James Nash was self-represented at the substantive hearing and the first named fifth defendant/sixth defendant, Ross Farron, has taken no steps at all in the proceedings.
[3] The costs claimed by the first, second and third defendants are sought against all plaintiffs notwithstanding that both the first plaintiff, Matthew Perrot-Hunt, and the second named second plaintiff, Debby Holtom, were both legally aided. As Matthew Perrot-Hunt and Debby Holtom were legally aided s 45 of the Legal Services Act 2011 applies, and this relevantly provides:
45 Liability of aided person for costs
(1)If an aided person receives legal aid for civil proceedings, that person’s liability under an order for costs made against him or her with respect to the proceedings must not exceed an amount (if any) that is reasonable for the aided person to pay having regard to all the circumstances, including the means of all the parties and their conduct in connection with the dispute.
(2)No order for costs may be made against an aided person in a civil proceeding unless the court is satisfied that there are exceptional circumstances.
(3)In determining whether there are exceptional circumstances under subsection (2), the court may take account of, but is not limited to, the following conduct by the aided person:
(a)any conduct that causes the other party to incur unnecessary cost:
(b)any failure to comply with the procedural rules and orders of the court:
(c)any misleading or deceitful conduct:
(d)any unreasonable pursuit of 1 or more issues on which the aided person fails:
(e)any unreasonable refusal to negotiate a settlement or participate in alternative dispute resolution:
(f)any other conduct that abuses the processes of the court.
The defendants’ claims for costs
[4] Ed Johnston, the EJ Corporate Trustee and Corban Revell all claim that exceptional circumstances exist for the purposes of s 45(2) of the Legal Services Act. Overall both Ed Johnston, the EJ Corporate Trustee and Corban Revell, submit that the plaintiffs’ claims had no factual foundation, and thereby resulted in the unreasonable pursuit of issues and conduct causing the defendants to incur unnecessary costs. In particular:
(a)In respect of the plaintiffs’ claims against Ed Johnston and the EJ Corporate Trustee, Mr Perese submits the plaintiffs failed to provide any evidence of fraud on the part of Ed Johnston, necessary given Ed Johnston had been bankrupt in the interim and the effect of s 304 of the Insolvency Act 2006 was to release a bankrupt from all debts other than those incurred by fraud.3
(b)In respect of the plaintiffs’ claims against Corban Revell, Ms Challis submits the plaintiffs’ pursued claims without apparent consideration of “the necessary legal elements” in relation to the conspiracy causes of action, and that the allegations against then Corban Revell partner, Bruce Johnson, were otherwise focussed upon negligence rather than breach of fiduciary duty, notwithstanding that no claims in negligence were pleaded. Finally, Corban Revell alleges that the plaintiffs unreasonably refused to engage in settlement negotiations.
The position of the plaintiffs
[5] The costs sought are opposed by the plaintiffs on the grounds that exceptional circumstances do not exist for the purposes of s 45(2) of the Legal Services Act. Instead, the plaintiffs submit that the appropriate course is for the Court to determine whether costs would have been payable to the defendants but for the fact Matthew Perrot-Hunt and Debby Holtom were in receipt of legal aid, and then to apply to the Commissioner of Legal Aid pursuant to s 46(2) of the Legal Services Act for the
3 Perrot-Hunt v Johnston [2019] NZHC 2085 at [130]–[134].
Commissioner to then determine whether those costs should be paid in accordance with s 46(3)–(7).
[6] With regard to the quantum of costs claimed, the plaintiffs generally accept the defendants’ calculation of scale costs, although consider that the calculations should be limited to a 2B basis. The plaintiffs oppose any uplift from scale, arguing that the proceedings were “not without merit” and in particular submit that simply rejecting Corban Revell’s settlement offer does not provide a sufficient basis for increased costs.
Discussion
[7] There is no doubt that s 45(2) of the Legal Services Act represents a formidable hurdle for any party seeking costs from a legally aided litigant. To qualify it is clear that the circumstances must be “quite out of the ordinary”.4
[8] The present case is however one that exceptional circumstances are clearly apparent. Those exceptional circumstances are in fact immediately apparent from the substantive judgment which sets out in detail the lack of any substantive foundation for any aspect of the plaintiffs’ claims, notwithstanding the extremely serious allegations made by the plaintiffs as set out in the third amended statement of claim, and indeed the allegations repeated in the submissions of counsel for the plaintiffs. These wider circumstances, which encompass the specific matters identified by both Ed Johnston/EJ Corporate Trustee and Corban Revell, were not only incapable of proof in terms of the evidence adduced by the plaintiffs, but were manifestly inconsistent with the contemporary documentary evidence available to all parties.
[9] Not only was there no evidential support for any of the allegations made by the plaintiffs against any of the defendants but it should have been apparent to the plaintiffs from the time the evidence was briefed that the positions taken by Debby Holtom and Maurice Hunt were so inconsistent with the contemporary evidence available that their respective assertions could provide absolutely no foundation to support the allegations that had been made. The inevitable result was that the claims made by the plaintiffs were fundamentally misconceived at every level
4 Laverty v Para Franchising Ltd [2006] 1 NZLR 650 (CA) at [31].
and that in consequence all issues were pursued unreasonably resulting in unnecessary costs being incurred by the defendants, with the result the plaintiffs’ refusal to engage in settlement negotiations was also entirely unreasonable.
[10] In those circumstances it is no answer to submit, as Mr Pidgeon does for the plaintiffs, that:
(a)the proceeding was made all the more difficult by Limitation Act issues;
(b)the offer made by Corban Revell showed that there was some merit in the proceedings; and
(c)witnesses did not come up to brief.
[11] It is noted, for example, that the plaintiffs (together with Maurice Hunt) had, through Mr Pidgeon, given notice of claims in negligence against Corban Revell and the EJ Corporate Trustee as early as 24 July 2013, at a time when such causes of action were not precluded by the Limitation Act 2010. No explanation has been given by the plaintiffs as to why proceedings were not commenced in time and it was certainly not due to any steps taken by any of the defendants. In such circumstances any “Limitation Act issues” are entirely irrelevant, noting this application is concerned with the claims that were brought by the plaintiffs, not the claims that they chose not to commence. Instead the position is the plaintiffs elected to bring the proceedings on the basis recorded in the judgment when they lacked any proper basis to do so.
[12] Likewise, and contrary to Mr Pidgeon’s submission, the Calderbank offer provided by the solicitors for Corban Revell in February 2019 does not constitute any recognition of merit in the proceedings. On the contrary, the offer noted that “Corban Revell consider there are numerous legal and evidential barriers preventing your clients from achieving recovery against it at trial”, and that the offer was made “in the interests of settling this matter without incurring the significant costs of continuing preparation for and attending the trial”.
[13] It is equally apparent that the failure to establish the plaintiffs’ claims cannot simply be ascribed to a failure of the witnesses to come up to brief. For example:
(a)The plaintiffs continued to rely on allegations of negligence against both Ed Johnston and Corban Revell (Bruce Johnson) notwithstanding negligence was not and (because of the Limitation Act) could not be pleaded.5
(b)The plaintiffs continued to maintain allegations (no less than four specific causes of action in addition to allegations of conspiracy) against Ed Johnston notwithstanding they were unable to identify any specific allegations of fraud against him despite clearly being aware he had been bankrupt.6 As a result and in the absence of fraud s 304 of the Insolvency Act 2006 applied and no claim could be successful against Ed Johnston.7
(c)The plaintiffs continued to maintain allegations against all defendants notwithstanding a complete absence of any evidence to support those allegations, evidenced by Mr Pidgeon’s statement in his opening submissions that he was intending to prove the allegations of conspiracy through cross-examination of the defendants. Although Mr Pidgeon complained that a number of the defendants did not give evidence (as they were entitled to do), Mr Pidgeon did not cross- examine the one defendant who gave evidence (Bruce Johnson) on his stated denial of any involvement in a conspiracy.8
5 Perrot-Hunt v Johnston [2019] NZHC 2085 at [6] and [136]-[139].
6 This was clear from the letter of demand dated 24 July 2013 which noted the proposed claim “essentially excludes Mr Ed Johnston from the claim given his bankruptcy”.
7 As the substantive judgment identifies, this had already been an issue in the proceedings when Corban Revell was unable to join Maurice Hunt as a third party in the absence of allegations of actual fraud as a result of the effect of s 304 of the Insolvency Act. See in particular Perrot-Hunt v Johnston [2019] NZHC 2085 at [122]-[134].
8 At [107].
(d)The plaintiffs’ reliance upon the evidence of Debby Holtom and Maurice Hunt notwithstanding the allegations made by both could not be reconciled with any of the documentary record.9
[14] Taken together, I am satisfied that the exceptional circumstances threshold has been met. The question now turns to the quantum of costs claimed and how much of that the plaintiffs could be reasonably expected to pay in terms of s 45(1) of the Legal Services Act.
[15] With regard to the quantum, as noted there is no real dispute over the amounts claimed. The only real issue is whether part of the amounts claimed by Corban Revell should be calculated on a 2C basis and/or whether the amounts claimed by the defendants should be uplifted.
[16] Having considered the calculations provided by counsel it is apparent that the matters identified as justifying uplifts form an integral part of the exceptional circumstances and in those circumstances, it is difficult to see on what basis the amounts sought to be uplifted are not able to be justified. Likewise, I am satisfied that in relation to Corban Revell’s claims for costs, a 2C calculation is appropriate with regard to the filing of the statements of defence given the extremely problematic drafting with regard to the allegations made in the various statements of claim, and in respect of which Corban Revell made genuine efforts to come to terms with. Finally, the complexity of the allegations made in the proceedings and the duration of the trial clearly warranted two counsel evidenced by the fact that the plaintiffs themselves utilised two counsel throughout.
[17]I therefore conclude that the amounts sought by the defendants are reasonable.
[18] The final issue can be dealt with relatively quickly. Section 45(1) provides that an order for costs made against a legal aided person:
… must not exceed an amount (if any) that is reasonable for the aided person to pay having regard to all the circumstances, including the means of all the parties and their conduct in connection with the dispute.
9 At [95]-[101].
[19] Considering s 45(1), there is in fact no evidence before the Court that either Debby Holtom or Matthew Perrot-Hunt are unable to pay the costs sought. While Mr Pidgeon has noted that both Debby Holtom and Matthew Perrot-Hunt have a liability to the Legal Services Agency for their own costs incurred, Mr Pidgeon has made it clear in his submissions that impecuniosity is not advanced as a ground for resisting the costs sought. Instead it is clear from Mr Pidgeon’s submissions that not only have the plaintiffs refused to make available information about their financial resources to the defendants, but that even such legal aid decisions as are publicly available make it clear that both Debby Holtom and Matthew Perrot-Hunt were above the eligibility threshold for legal aid, both being employed and with interests in a number of properties, to the point it is not altogether clear on what basis legal aid was granted.
[20] There is likewise no evidence before me with regard to the means of either Ed Johnston or Bruce Johnson that would make it unreasonable for the plaintiffs not to pay the costs sought, nor that the actions of in particular, Ed Johnston or Bruce Johnson “in connection with the dispute”, give rise to any circumstances that would prevent the recovery of costs. In particular, the dispute between the various parties in this case must be limited to the allegations at issue in these proceedings and therefore any issues regarding negligence attributable to either Ed Johnston or Bruce Johnson, including those matters identified in the disciplinary proceedings taken against Bruce Johnson, are irrelevant to the dispute and the costs incurred by the defendants responding to the unfounded claims brought by the plaintiffs.
Decision
[21] The plaintiffs, Matthew Neil Perrot-Hunt, Hunt FT Limited and Debra Cecilia Holtom are accordingly jointly and severally liable to pay:
(a)costs in the sum of $92,755.00 and disbursements of $110.00 to Ed Johnston and the EJ Corporate Trustee; and
(b)costs in the sum of $138,706.00 and disbursements of $866.73 to Corban Revell.
Powell J
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