Reid v Cottle HC Palmerston North CIV-2010-454-582

[2011] NZHC 1555

IN THE HIGH COURT OF NEW ZEALAND PALMERSTON NORTH REGISTRY

CIV-2010-454-582

UNDER  the Judicature Act 1908, the Judicature Amendment Act 1972, the Declaratory Judgments Act 1908, the Real Estate Agents Act 1976, the Real Estate Agents Act 2008, the Land Transfer Act 1952 and the New Zealand Bill of Rights Act 1990

IN THE MATTER OF     of applications for declarations, account of profits and disgorgement arising from an illegal land transaction

BETWEEN  JAMES ROBERT REID

ANDCHRISTINE ELIZABETH BARBER Plaintiffs

ANDSUZANNE LYNNE COTTLE First Respondent

ANDCOOPER RAPLEY LAWYERS Second Respondent

Counsel:         J R Reid in person

G A Paine and P J Reardon for Respondents

Judgment:      13 June 2011

JUDGMENT OF WILLIAMS J (COSTS)

In accordance with r 11.5, I direct the Registrar to endorse this judgment with the delivery time of 4:30pm on the 13th June 2011.

Solicitors:

J R Reid, 2 Vogel St, Woodville

Cooper Rapley Lawyers, Palmerston North

JAMES ROBERT REID V SUZANNE LYNNE COTTLE HC PMN CIV-2010-454-582 13 June 2011

Facts

[1]      In my judgment dated 17 May 2011, the respondents succeeded in striking out the plaintiffs’ claim as res judicata and an abuse of process.  Costs were reserved for further argument.  Memoranda have now been received from both sides.

[2]      The  respondents  seek  indemnity  costs  from  both  plaintiffs  jointly  and severally, on the basis that the plaintiffs acted vexatiously, frivolously, improperly or unnecessarily in bringing the proceedings.   The claimed costs are $25,300.00 (including GST) plus disbursements of $292.00.

[3]      The plaintiffs deny that indemnity costs are justified and, in the alternative, say that the amount claimed is unreasonable.  The plaintiffs also raise two additional issues, not addressed by the respondents:  the personal costs liability of Mr Reid, as a trustee of the Marangairoa Trust; and the costs entitlement of Cooper Rapley, as a party to the proceedings.

Indemnity costs

[4]      Rule 14.6 of the High Court Rules provides that, despite the general rule in favour of scale costs, the court may order that the actual costs, disbursements, and witness expenses reasonably incurred by a party (indemnity costs) are payable.  The grounds for such an award are set out in r 14.6(4), and include that:

(a)       the   party   has   acted   vexatiously,   frivolously,   improperly,   or unnecessarily in commencing, continuing, or defending a proceeding or a step in a proceeding ...

[5]      The respondents say that indemnity costs are justified because the claim was commenced in “blatant disregard of the Court of Appeal’s ruling” that Mrs Barber’s claim could not be recast to include the account of profits.  The new proceeding was clearly res judicata and an abuse of process, and that finding, in itself, places the proceeding within r 14.6(4)(a).

[6]      The plaintiffs, on the other hand, say that the finding that it would be an abuse of process to allow the proceeding to continue does not, itself, mean that the

commencement   of   the   proceeding   was   vexatious,   frivolous,   improper,   or unnecessary.  The plaintiffs say that the Court of Appeal decision did not expressly rule out the institution of a new claim.  In the alternative, the plaintiffs say that the amount claimed is unreasonable.

[7]      I am not satisfied that indemnity costs are appropriate in this case.  Both of the Court of Appeal judgments recognised merit in a claim for account of profits, and while the majority did not allow the claim before it to be recast, to include that alternative remedy, the new proceedings are not simply that.  The application of the doctrine of res judicata was not entirely straightforward, as at least one issue was cast differently, and the parties did not overlap.  Accordingly, I am not satisfied that the commencement of the new proceeding was vexatious, frivolous, improper, or unnecessary.

[8]      The plaintiffs accept liability for costs on the 2B scale. That is appropriate.

Other issues

[9]      There are two additional issues: (a)      Mr Reid’s liability; and

The plaintiffs sought to clarify the personal liability of Mr Reid.   I accepted,  for  the  purpose  of  the  application  for  strike  out,  that Mr Reid had standing as a trustee of the Marangairoa Trust, which appeared to contribute a sum to Mrs Barber’s original purchase of the land in question.

(b)      Cooper Rapley’s entitlement to costs.

The plaintiffs say that, as a party to the claim, Cooper Rapley is not entitled to its costs in defending itself.

[10]     The respondents did not respond to either issue.

[11]     As to Mr Reid’s liability, I note that s 38 of the Trustee Act 1956 provides that  a  Trustee  may  reimburse  himself  out  of  the  trust  property  all  expenses reasonably incurred in or about the execution of the trusts or powers.   In Dark v Weenink, Winkelmann J observed that s 38 extended to costs awarded against defendant trustees in litigation.[1]    As I did not find that the plaintiffs - including Mr Reid as trustee - acted unreasonably or improperly, s 38 applies.

[1] HC Auckland CIV-2003-404-5846, 5 February 2007.

[12]     As  to  Cooper  Rapley’s  costs,  I  note  Brownie  Wills  v  Shrimpton.[2]      The appellant, Brownie Wills, was a firm of barristers and solicitors practising in Christchurch.  The respondent, Mr Shrimpton, was one of six directors of Duracrete Holdings Ltd.   Mr Wills, of Brownie Wills, acted for Duracrete in arranging an overdraft secured by a guarantee by directors of Duracrete, including Mr Shrimpton. Subsequently Duracrete went into liquidation and demand was made on the guarantors.  Mr Shrimpton sought to recover his share of liability under a guarantee from Brownie Wills, alleging negligence and breach of fiduciary duty.  The Court of Appeal overturned the High Court decision in favour of Mr Shrimpton, and held, in

[2] [1998] 2 NZLR 320 (CA).

relation to costs, that:[3]

[3] At 327 per Gault and Blanchard JJ. Tipping J wrote separately but agreed with the result and its consequences.

Brownie Wills was represented in the High Court and in this Court by an associate of the firm, Mr Hair.   The long-established rule is that, as an exception  to  the  general  rule  denying  costs  to  a  litigant  in  person,  a practising  barrister  and  solicitor  who  brings  or  defends  a  proceeding  in person or by a partner or employee of the firm is entitled to the same costs as when acting on behalf of a client.  So the lawyer litigant may have the same costs as if another lawyer had been instructed but cannot, of course, charge for consulting, instructing, or attending upon him or herself: London Scottish Benefit  Society  v  Chorley  (1884) 13 QBD 872. In New Zealand the exception is discussed or referred to in Hanna v Ranger (1912) 31 NZLR

159, Lysnar v National Bank of New Zealand Limited (No.2) [1935] NZLR

557 and Re Collier (A Bankrupt) [1996] 2 NZLR 438.

The High Court of Australia has cast some doubt on this exception (Cachia v Haynes (1994) 179 CLR 403, 412) but, not having been asked to reconsider the question, we do not depart from the practice of allowing costs to a solicitor/litigant.

[13]     Accordingly, Cooper Rapley is entitled to costs.

J Williams J