Robbies Bar and Bistro Limited v Robbies Bar and Bistro Franchising Limited (in liquidation)

[2021] NZHC 211

IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY

I TE KŌTI MATUA O AOTEAROA ŌTAUTAHI ROHE

CIV-2018-409-000245

[2021] NZHC 211

BETWEEN

ROBBIES BAR AND BISTRO LIMITED

First Plaintiff

AND

ALAN JOHN ROBERTS and LOLA NEROLI ROBERTS

Second Plaintiffs

AND

ROBBIES BAR AND BISTRO

FRANCHISING LIMITED (in liquidation) First Defendant

AND

PAUL MARTIN KOFOED and ANN CATHRINE KOFOED

Respondents

Hearing:	On the papers
Counsel:	C R Johnstone for Plaintiffs G A Biggs for Respondents
Judgment:	18 February 2021

COSTS JUDGMENT OF ASSOCIATE JUDGE PAULSEN

This judgment was delivered by me on 18 February 2021 at 3.30 pm pursuant to Rule 11.5 of the High Court Rules

Registrar/Deputy Registrar Date:

ROBBIES BAR AND BISTRO LTD v ROBBIES BAR AND BISTRO FRANCHISING LTD (in liq) Costs

Judgment [2021] NZHC 211 [18 February 2021]

Introduction and issues

[1]                 In a judgment of 21 December 2020, I dismissed the plaintiffs’ application for a non-party costs award against the respondents.1 Counsel were to confer, seek agreement on costs, and file memoranda if they could not agree. They did not agree and memoranda have been filed.

[2]                 The respondents seek costs of $19,000.50 along with disbursements of $172.10 in accordance with the table attached as schedule A to this judgment.

[3]                 The plaintiffs accept that the respondents are entitled to costs on a 2B basis. They submit they should be directed to pay costs of $10,157.50 along with the claimed disbursements of $172.10. They take issue with a few specific amounts claimed by the respondents.

[4]                 The matters upon which the parties disagree and which lead to the divergence in the quantum of costs submitted as appropriate are:

(a)Are the respondents entitled to costs on a 2C basis for filing their opposition to the application and for preparation of written submissions?

(b)Are the respondents entitled to costs for preparing and filing a memorandum in relation to the first defendant’s 2019 financial accounts dated 17 November 2020?

(c)As an alternative argument to (a) above, if the respondents are not awarded costs on a 2C basis, are they entitled to a 50 per cent uplift on 2B costs?

(d)Are the respondents entitled to costs for filing memoranda as to costs?

[5]I discuss and determine these issues in turn below.

1      Robbies Bar and Bistro Ltd v Robbies Bar and Bistro Franchising Ltd (in liq) [2020] NZHC 3484.

Principles

[6]I note the following matters of principle, none of which appear to be in issue.

[7]                 All matters of costs are discretionary. The discretion must be exercised on a principled basis.

[8]                 Costs on an opposed interlocutory application should, unless there are special reasons to the contrary, be fixed when the application is determined.2

[9]                 The party who has lost should pay the costs of the party that has won. The loser pays costs unless there are exceptional reasons to the contrary.3

[10]              The determination of costs, so far as possible, should be both predictable and expeditious.4

[11]              Rule 14.2(1) High Court Rules 2016 contains the following general principles that apply to the determination of costs:

…

(b)an award of costs should reflect the complexity and significance of the proceeding:

(c)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 or interlocutory application:

(d)an appropriate daily recovery rate should normally be two-thirds of the daily rate considered reasonable in relation to the proceeding or interlocutory application:

(e)what is an appropriate daily recovery rate and what is a reasonable time should not depend on the skill or experience of the solicitor or counsel involved or on the time actually spent by the solicitor or counsel involved or on the costs actually incurred by the party claiming costs:

…

2      High Court Rules 2016, r 14.8(1)(a).

3      Rule 14.2(1)(a); Shirley v Wairarapa District Health Board [2006] NZSC 63, [2006] 3 NZLR 523 at [19].

4      Rule 14.2(1)(g).

[12]              The blanket assessment for banding does not accord with the High Court Rules unless it reflects that the case at hand is an average one requiring a normal amount of time for each step.5

[13]              Under r 14.5, a determination of what is a reasonable time for a step in a proceeding must be made by reference to three bands. For present purposes, bands B and C are relevant and are described as:6

(2)A determination of what is a reasonable time for a step under subclause (1) must be made by reference ---

(a)…

(b)to band B, if a normal amount of time is considered reasonable; or

(c)to band C, if a comparatively large amount of time for the particular step is considered reasonable.

[14]              The Court may make an order increasing costs that are otherwise payable under the Rules. It may make such an order at any stage of a proceeding and in relation to any step taken in it.7 As noted, the respondents seek, as an alternative argument, increased costs relying on r 14.6(3)(b)(ii) and (iii) which provide:

14.6     Increased costs and indemnity costs

…

(3)The court may order a party to pay increased costs if ---

….

(b)      the party opposing costs has contributed unnecessarily to the time or expense of the proceeding or step in it by ---

…

(ii)taking or pursuing an unnecessary step or an argument that lacks merit; or

(iii)failing, without reasonable justification, to admit facts, evidence, documents, or accept a legal argument; or

…

5      Commissioner of Inland Revenue v Chesterfields Preschools Ltd [2010] NZCA 400.

6      High Court Rules, r 14.5(2).

7      Rule 14.6(2).

The claim for 2C costs

[15]              The respondents argue that a comparatively large amount of time was required to prepare their opposition and submissions justifying awards of costs on a 2C basis. They consider the application was not straightforward as the making of non-party costs orders is exceptional.

[16]              They submit the application involved an unusually broad range of factual and legal issues and required consideration and the application of previous judicial decisions.

[17]              I was referred to the large number of affidavits filed (seven in number) by the respondents, including affidavits of expert witnesses. Mr Kofoed’s affidavits (three in number) are considered of particular relevance in the present context because of the number and range of issues canvassed in them.

[18]              In relation to the submissions, the respondents argue that counsel needed to consider and refer to all of the evidence as well as the respondents’ submissions and a large bundle of documents. The plaintiffs’ evidence is said to have been of significant length and included evidence in support of the plaintiffs’ abandoned summary judgment application, their formal proof application, as well as the non-party costs application.

[19]I am unable to accept the respondents’ submission.

[20]              In considering whether a comparatively large amount of time for preparing the opposition and submissions is reasonable the focus is upon the complexity of the issues and the time reasonably required in formulating the evidence and arguments. I do not consider that the issues raised in this application were complex.

[21]              While the exercise of the court’s jurisdiction to award non-party costs is exceptional, the relevant principles are well known and were not significantly in dispute.

[22]              Counsel refers to the several factual and legal issues that arose but there are double-ups. As examples, the range of issues are said to include the merits of the first defendants’ defence (which concerned the interpretation of the agreement for sale and purchase between the parties) and the contractual interpretation of the agreement for sale and purchase. Another example is the first defendant’s solvency and expert analysis of the financial accounts.

[23]              Some of the issues identified were raised but not explored in any depth in the evidence, in written submissions or in oral argument at the hearing. The application of Companies Act 1993 provisions is an example. I accept there were a range of issues but not of a number beyond what I would consider normal for a contested interlocutory application.

[24]              It is correct that the respondents filed a greater number of affidavits than would usually be expected, but I do not consider that this should have been necessary as the issues were readily identifiable. In some instances the affidavits were very brief.

[25]                I accept the respondents’ submissions were thorough. I accept, also, that the plaintiffs’ evidence came from a range of sources and there was a large bundle of documents. Overall, however, this was not a difficult matter. Costs on a 2B basis are appropriate.

The costs for filing a memorandum of counsel in relation to the first defendant’s 2019 financial accounts

[26]              At the hearing I directed the respondents to provide a copy of the 2019 annual accounts of the first defendant with leave to the parties to make supplementary submissions. The annual accounts were subsequently provided by the respondents in a memorandum of 17 November 2020 along with further submissions. The plaintiffs filed submissions in reply.

[27]              The respondents submit the memorandum contained necessary submissions as to the relevance and content of the accounts and they should have costs in relation to the preparation of it. I do not agree.

[28]              The 2019 accounts should have always been put in evidence by the respondents. I called for them to be produced because they were plainly relevant to issues quite fairly raised by the plaintiffs. They were also relevant to submissions that were advanced by the respondents. These included, for instance, whether the first defendant was solvent and when the respondents made advances to the first defendant for legal fees and in what amount. The respondents did not provide an explanation for the failure to produce the accounts. Nor, as I noted in my judgment, did they provide any evidence as to when advances were made to the first defendant for legal fees.8 I award no costs for this step.

Increased costs

[29]              In the alternative, the respondents seek a global uplift of 50 per cent on 2B costs on the basis that the plaintiffs pursued arguments that lacked merit and unreasonably failed to admit facts, evidence and accept legal arguments and thereby contributed unnecessarily to the time and expense of the application.

[30]Reliance is placed on rr 14.6(3)(b)(ii) and (iii), which I have set out earlier.

[31]Specifically, in support of this submission the respondents rely on:

(a)the plaintiffs’ assertion the first defendant had pursued a specious defence; and

(b)the assertion the respondents acted badly in the proceeding.

[32]              The respondents argue, had the plaintiffs not pursued these and other unmeritorious arguments, the time taken to deal with the application and cost of doing so would have been greatly reduced.

8      Robbies Bar and Bistro Ltd v Robbies Bar and Bistro Franchising Ltd (in liq), above n 1, at [35].

[33]              Increased costs may be ordered under r 14.6 where there is a failure on the paying party to act reasonably.9 The party seeking the increased costs must persuade the Court that such an order is justified. An uplift from scale can only be justified to the extent to which failure to act reasonably has contributed to the time or expense of the proceeding.10

[34]              Plainly it is not enough to justify an award of increased costs that a paying party has run arguments that were unsuccessful. In this case, the respondents have identified two specific arguments that did not find favour with me but those arguments did not lack merit and it was not unreasonable for the plaintiffs to pursue them.

[35]              To order increased costs in this case is not appropriate on any the grounds contained in r 14.6. It would also be contrary to the important principle that the determination of costs should be predictable and expeditious.

[36]              Standing back and looking at this application in the round, there was nothing about it which takes it outside the ordinary case where standard 2B costs are routinely awarded.

Costs on this application

[37]              The respondents have been unsuccessful in the pursuit of increased costs. They are not awarded costs for filing their memoranda as to costs.

Result

[38] The respondents are awarded costs on the application at [1] above, in the sum of $10,329.60 in accordance with schedule B attached.

9      Bradbury v Westpac Banking Corp [2009] NZCA 234, [2009] 3 NZLR 400 at [27].

10     Holdfast NZ Ltd v Selleys Pty Ltd (2005) 17 PRNZ 897.

[39]              Counsel are in agreement that security for costs paid into Court by the plaintiffs is to be applied towards payment of the amount that I find is owed to the respondents for costs. I direct the Registrar to make payment of the sum held, which I am advised is $10,078.35, to the solicitors for the respondents forthwith.

O G Paulsen Associate Judge

Solicitors:

First Law Limited (J Shingleton), Christchurch Corcoran French, Christchurch

cc: The Director, Robbies Bar & Bistro Franchising Ltd, Christchurch

SCHEDULE A

Step	Step Detail	Time Allocation	Category and Banding	Daily Rate ($)	Cost
23	Filing Opposition to Interlocutory Application dated 17 March 2020	2	2C	2,390	4,780
11	Joint Memorandum of Counsel for List Hearing dated 18 March 2020	0.4	2B	2,390	956
11	Joint Memorandum of Counsel for List Hearing deated 24 June 2020	0.4	2B	2,390	956
11	Joint Memorandum of Counsel for List Hearing dated 20 July 2020	0.4	2B	2,390	956
12	Appearance at List Hearing on 1 October 2020	0.2	2B	2,390	478
24	Preparation of written submissions dated 5 November 2020	3	2C	2,390	7,170
25	Appearance at Hearing on 12 November 2020	0.75	2	2,390	1,792.5
11	Memorandum of Counsel as to First Defendant’s 2019 Financial Accounts dated 17 November 2020	0.4	2B	2,390	956
11	Memorandum of Counsel as to costs	0.4	2B	2,390	956
Total	19,000.50
Disbursements	Cost ($)
Opposition court filing fee	$110.00
Law Library research fee	$62.10
Total	$172.10

SCHEDULE B

Step	Step Detail	Time Allocation	Category and Banding	Daily Rate ($)	Cost
23	Filing Opposition to Interlocutory Application dated 17 March 2020	0.6	2B	2,390	1,434
11	Joint Memorandum of Counsel for List Hearing dated 18 March 2020	0.4	2B	2,390	956
11	Joint Memorandum of Counsel for List Hearing deated 24 June 2020	0.4	2B	2,390	956
11	Joint Memorandum of Counsel for List Hearing dated 20 July 2020	0.4	2B	2,390	956
12	Appearance at List Hearing on 1 October 2020	0.2	2B	2,390	478
24	Preparation of written submissions dated 5 November 2020	1.5	2B	2,390	3,585
25	Appearance at Hearing on 12 November 2020	0.75	2	2,390	1,792.50
Total	10,157.50
Disbursements	Cost ($)
Opposition court filing fee	$110.00
Law Library research fee	$62.10
Total	10,329.60