Robert Jones Holdings Limited v McCullagh

[2017] NZHC 70

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2013-404-003475 [2017] NZHC 70

UNDER

Sections 292, 294 and 295 of the

Companies Act 1993

IN THE MATTER

of the liquidation of Northern Crest
Investments Limited (in liquidation)

BETWEEN

ROBERT JONES HOLDINGS LIMITED Applicant

AND

ANTHONY JOHN MCCULLAGH AND STEPHEN MARK LAWRENCE Respondents

Hearing:	On the papers
Counsel:	D G Chesterman for Applicant B P Keene QC and L Van for Respondents
Judgment:	3 February 2017

COSTS JUDGMENT OF DOWNS J

This judgment was delivered by me on Friday, 3 February 2017 at 11 am pursuant to r 11.5 of the High Court Rules.

Registrar/Deputy Registrar

Solicitors/Counsel:

Anthony Harper, Auckland.

B P Keene QC, Auckland.

D G Chesterman, Auckland.

ROBERT JONES HOLDINGS LTD v MCCULLAGH [2017] NZHC 70 [3 February 2017]

[1]      On 26 June 2015 Associate Judge Bell dismissed a suite of discovery applications and an application to set aside privilege brought by Robert Jones Holdings  Ltd,  or  RJH,  in  relation  to  documents  held  by  the  liquidators.    The Associate Judge ordered costs against RJH on an increased basis.  RJH applied for a review of those determinations.  I heard that application on 17 October 2016.  I gave

judgment on 21 October 2016.1   I upheld the Associate Judge’s conclusions in all but

one area, set aside His Honour’s costs order and made no costs order of my own.  I encouraged agreement in relation to costs.  The parties, however, have been unable to agree.  Hence this judgment.

[2]      The  liquidators  seek  costs  of  $20,099:  $13,651.40  in  relation  to  the applications before Associate Judge Bell, and $6,447.60 in relation to the review application.  Their proposed figure acknowledges RJH’s partial success in relation to one area (waiver of privilege) by discounting:

(a)       The Associate Judge’s costs order (of $17,064.25) by 20 percent.

(b)      2B costs in relation to the review application by 10 percent.

[3]      RJH resists the application.  It contends costs should lie where they fall on the basis each party enjoyed a broadly similar measure of success.2

[4]      Costs normally follow the event.  So too in this case for five reasons.  First, the liquidators were successful in relation to all of the interlocutory applications before the Associate Judge.   Second, the liquidators succeeded on RJH’s review application, save for one matter dealt with shortly.  More particularly, the liquidators succeeded in resisting discovery of seven categories of documentation and the associated inspection of a High Court file.   Third, RJH’s success on review was confined to one issue: waiver of privilege.  I held the liquidators’ use of otherwise privileged material operated to constitute a waiver of privilege in respect of a small number of communications.    Fourth,  that  victory was  modest.   The ruling was

confined to the communications of two correspondents in relation to three discrete

1      Robert Jones Holdings Ltd v McCullagh [2016] NZHC 2529.

2      Packing in Ltd (in liquidation) v Chilcott (2003) 16 PRNZ 958.

topics.   Context also assumes importance.   RJH contended waiver attracted to all otherwise privileged material.  That argument failed.   So too RJH’s arguments the Associate Judge’s approach to the discovery applications constituted issue estoppel or would otherwise hinder its defence of the substantive action.  Fifth, as the points above reveal, unlike Packing in Ltd (in liquidation) v Chilcott3—an authority relied upon by RJH—this is not a case in which each party enjoyed a broadly similar measure of success.

[5]      The modest success enjoyed by RJH in relation to the waiver of privilege is properly reflected in a reduction of the costs otherwise payable by it.  Plainly, that reduction should attach to both the hearing before Associate Judge Bell and the review hearing. The liquidators did not contend otherwise.

[6]      The Associate Judge adopted a 2C costs categorisation given the number of documents in issue and the associated need for a greater than normal level of preparation: a figure of $12,188.75.  His Honour uplifted that amount by 40 percent on the basis RJH’s discovery application was a stalling tactic, noting only “Quintus

Fabius Maximus Verrocosus Cunctator would be delighted” with RJH’s approach.4

For the uninitiated, Quintus Cunctator was a Roman general (and Consul) who used both stalling and guerrilla tactics against the Carthaginians during the Punic Wars (at a time when the Republic was especially vulnerable to attack).

[7]      To return to the High Court Rules, the Judge concluded RJH’s approach involved the taking or pursuing of an unnecessary step, or an argument that lacked merit.5    His Honour concluded the material sought was clearly irrelevant and the substantive action had been needlessly delayed.

[8]      I too consider 2C the appropriate categorisation for the proceeding before the Associate Judge—and for the reasons His Honour gave.   I am also persuaded the award should be uplifted, even though I do not see RJH’s pursuit of discovery as

quite as striking as His Honour did.  It is sufficient to observe the sought material

3      Packing in Ltd (in liquidation) v Chilcott, above n 2.

4      McCullagh v Robt Jones Holdings Ltd HC Auckland CIV-2013-404-3475, 29 October 2015 (Costs Minute) at [24].

5      High Court Rules, r 14.6(b)(ii).

was   irrelevant   and   the   discovery   application   caused   delay.      So,   like   the Associate Judge, I conclude this step was unnecessary, without merit or both.  But an uplift of 30 percent is sufficient.

[9]      The parties agree the review application should attract a 2B categorisation. However, the liquidators contend costs in connection with this application should be ameliorated by only 10 percent in recognition of the privilege reversal.   I see no reason to draw a distinction between the respective hearings.  Moreover, a 20 percent deduction is reasonable.   This level recognises RJH had only modest success on review but still some success.  And success sufficient to justify this aspect of the review application.

[10]     Relying  on  Singh  v  Rutherford,  RJH  also  opposed  costs  on  the  basis  it achieved “a respectable outcome”.6   That may be so.  However, Singh v Rutherford does not exhort the achievement of a respectable outcome as a principled basis to avoid costs. In that case, Duffy J used the expression to note there was no material difference between the amount of damages sought and awarded, and hence there was no basis for that factor to affect costs; see [15].

[11]     The liquidators are awarded:

(a)       $12,676.30 costs in relation to the applications before Associate Judge

Bell ($15,845.38 discounted by 20 percent).

(b)      $5,731.20  costs  for  the  review  application  ($7,164  discounted  by

20 percent).

……………………………..

Downs J

6      Singh v Rutherford [2014] NZHC 399 at [22].