Sharrock v Wedd
[2016] NZHC 3121
•19 December 2016
IN THE HIGH COURT OF NEW ZEALAND NAPIER REGISTRY
CIV-2015-441-132 [2016] NZHC 3121
BETWEEN GERALD ERRINGTON SHARROCK
First plaintiff
JUST STEEL FRAMING LIMITED Second plaintiff
AND
STEPHEN CHARLES WEDD Defendant
Judgment
(On the papers)
19 December 2016
JUDGMENT (NO. 3) OF ASSOCIATE JUDGE SMITH - (COSTS)
Introduction
[1] On 1 July 2016 I gave judgment on the plaintiff’s application for summary judgment against Mr Wedd.1 I made declarations relating to the directorship and shareholdings of the second plaintiff, Just Steel Framing Ltd (Just Steel), and I set aside a notice of discontinuance purportedly filed by Mr Wedd on behalf of the second plaintiff (Just Steel).
[2] The plaintiffs’ filed a memorandum on 18 July 2016 relating to costs. They seek costs on a 2B basis with an uplift of 50 per cent.
[3] Mr Wedd applied on 13 July 2016 for a recall of my 1 July 2016 judgment. The application for recall was opposed: on 20 July the plaintiffs filed a memorandum
1 Sharrock v Wedd [2016] NZHC 1477.
opposing the application, and seeking further costs on the recall application on a 2B
basis, again with an uplift of 50 per cent.
[4] On 5 August 2016 I declined to recall the judgment.2
[5] Mr Wedd filed a memorandum on costs on 21 September 2016. In the memorandum he referred to other litigation that is ongoing, and an outstanding complaint he has made to the Law Society relating to the first plaintiff. He requested that costs be reserved until the conclusion of these other matters.
[6] I now determine the plaintiffs’ application for costs.
The principles to be applied
[7] Rule 14.1 of the High Court Rules confers on the Court an overriding discretion as to the appropriate costs order. Rule 14.2 sets out general principles to be applied in determining costs:
(a) the party who fails with respect to a proceeding or an interlocutory application should pay costs to the party who succeeds:
(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:
(f) an award of costs should not exceed the costs incurred by the party claiming costs:
(g) so far as possible the determination of costs should be predictable and expeditious.
2 Sharrock v Wedd (No 2) [2016] NZHC 1802.
[8] Rule 14.6 provides in relevant part:
14.6 Increased costs and indemnity costs
(1) Despite rules 14.2 to 14.5, the court may make an order—
(a) increasing costs otherwise payable under those rules
(increased 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—
(i) failing to comply with these rules or with a direction of the court; or
(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
…
Submissions
(iv) failing, without reasonable justification, to comply with an order for discovery, a notice for further particulars, a notice for interrogatories, or other similar requirement under these rules; or
[9] The plaintiffs say that they were successful in obtaining declarations as to the first plaintiff’s status as director and shareholder of Just Steel, and an order setting aside the notice of discontinuance Mr Wedd purported to file. They say that it follows that they should be awarded costs, consistent with the principle in r 14.2(a).
[10] Counsel for the plaintiffs submits that increased costs may be ordered generally where there is a failure by the paying party to act reasonably,3 and that
Mr Wedd has acted unreasonably in this case.
3 Citing Bradbury v Westpac Banking Corp [2009] NZCA 234, [2009] 3 NZLR 400 at [27].
[11] The plaintiffs say that Mr Wedd repeatedly breached his service obligations, causing significant prejudice to them. He filed a notice of discontinuance but did not serve it on the plaintiffs, who were notified of the step by the Court, and he failed to serve on the plaintiffs his notice of opposition (as required by the Rules and a minute of the Court dated 12 February 2016). These documents were not in fact served until the morning of 18 March 2016, a few days before the scheduled hearing date. Additional affidavits in reply and supplementary submissions had to be prepared on short notice. The plaintiffs observe that Mr Wedd did serve all other documents he was required to serve, and suggest that the above defaults were deliberate attempts to prejudice the plaintiffs’ position.
[12] The plaintiffs submit that at the re-scheduled hearing on 26 May Mr Wedd abandoned a significant contention which he had advanced in his notice of opposition, belatedly acknowledging that the documents signed by the parties on
28 February did result in the first plaintiff becoming a shareholder in, and director of, Just Steel. They submit that there was no merit in Mr Wedd’s earlier denials on the point.
[13] The plaintiffs also rely on Mr Wedd’s action in purporting to file the notice of discontinuance of Just Steel’s claims against him. Mr Wedd did not have the authority to file documents on behalf of any company, and specifically had no standing to act on behalf of Just Steel.
[14] As regards the application for recall, the plaintiffs’ counsel submits that there were no grounds to justify recall. Mr Wedd used the application for recall to make further allegations against the plaintiffs, which allegations lacked any substance or evidential basis. The matters Mr Wedd attempted to raise in the recall application went beyond the scope of the judgment for which recall was sought, and Mr Wedd misused the recall procedure in an attempt to make what was in substance an appeal.
[15] The plaintiffs accept that the proceeding and the recall application are properly categorised as being in Category 2, Band B, for costs purposes. With a 50 per cent uplift, they seek costs on the summary judgment application of $28,599.75
plus disbursements. The plaintiffs did not make any separate costs submission directed to the recall application.
[16] Mr Wedd’s submissions were largely directed to the merits of the substantive outcome, and what he sees as improper conduct by the first plaintiff in bringing other proceedings. Mr Wedd submits that orders of the Court have been deliberately misinterpreted to effect changes to the Companies Office records, which no longer record him as a director of, or shareholder in, the second plaintiff.
[17] Mr Wedd submits that, owing to the numerous and interconnected and interrelated court matters that are in various states of progress, any costs in relation to this matter should be reserved, until the outcome of at least some other matters have been resolved. He further submits that the claimed costs clearly do not reflect the amount of work carried out, as they are higher than the minimum wage for a year’s work. He submits that the costs sought are designed to be intimidatory.
[18] Finally, Mr Wedd says that the plaintiffs have seriously misled the Court, and that recently filed proceedings are an abuse of process.
Discussion
[19] Having succeeded in the substantive application for summary judgment, the plaintiffs are entitled to costs. That is the ordinary principle which the courts routinely apply, and I see no reason to depart from it in this case. If a party chooses to engage in litigation and is unsuccessful, there is almost always a price to pay in the form of a liability to contribute to the successful party’s costs. The amount of that contribution is not fixed arbitrarily by the Court, but in accordance with the principles set out in r 14 of the High Court Rules.
[20] If a case is deemed to be a “Category 2, Band B” case (as most civil cases coming before the Court tend to be, and this case clearly is), the Court’s starting point in deciding an appropriate award of costs to the successful party is Schedules 2 and 3 to the High Court Rules. In combination, those schedules set out specific sums of money to be awarded for the taking of specific steps in the litigation.
[21] That is the starting point. But it is subject to the Court’s overriding discretion, and there are specific provisions in the Rules which expressly empower the court to award costs at a higher level if that is warranted in the circumstances of the particular case. 4 The circumstances in which increased costs may be awarded are those set out in r 14.6(3).
[22] There is no basis for me to decline to award the plaintiffs costs in this case, or to defer the fixing of costs to some later stage. The plaintiffs have been wholly successful on all the matters which were in issue on the summary judgment application, and the rules (including r 14.8, which generally requires that costs on an interlocutory application should be fixed when the application is determined) reflect the fact that the merits of particular applications and those of the substantive
proceeding are different matters.5
[23] The issue that remains is whether the plaintiffs should be awarded increased costs.
[24] The Court of Appeal has identified the following circumstances as ones where indemnity costs have been ordered:6
(a) The making of allegations of fraud knowing them to be false, or the making of irrelevant allegations of fraud;
(b) Particular misconduct that causes loss of time to the court and to other parties;
(c) Commencing or continuing proceedings for some ulterior motive;
(d) Doing so in wilful disregard of known facts or clearly established law;
(e) Making allegations which ought never to have been made, or unduly prolonging a case by groundless contentions.
[25] The following matters are in my view relevant to determining whether to make an order for increased costs in this case. For many months Mr Wedd persisted
with the contention that the first plaintiff had not become a shareholder in, or
4 See r 14.6, set out at [7] above.
5 Chapman v Badon Ltd [2010] NZCA 613, (2010) 20 PRNZ 83 at [12].
director of, Just Steel. But at the hearing he frankly acknowledged that that was not so: his argument at the hearing was that, while the first plaintiff had become a director and shareholder as a result of the February 2013 Deed and related documents and the payments subsequently made, the first plaintiff ceased to be a shareholder and director when he (Mr Wedd) filed documents with the registrar of companies in December 2015 which purported to show that the first plaintiff was no longer a shareholder in Just Steel, and that he had been removed as a director.
[26] Secondly, Mr Wedd had no justification for filing the purported notice of discontinuance on behalf of Just Steel.
[27] Thirdly, I accept also that Mr Wedd did not comply with the time requirements for service prescribed by the rules and ordered by the Court.
[28] Fourthly, the recall application was clearly without merit, and I accept the plaintiffs’ submission that it was really little more than an attempt to revisit matters which had already been determined by the summary judgment decision. That is not an appropriate use of the recall procedure.
[29] In his submissions, Mr Wedd makes no attempt to explain or excuse these defaults, notwithstanding that he must have been aware from the outset that the plaintiffs were intent on seeking an award of costs.
[30] Quite properly in my view, the plaintiffs have not sought indemnity costs. Mr Wedd’s conduct of the proceedings does not meet the relatively high threshold for indemnity costs, which requires that a party must have “behaved very badly or unreasonably.”7 On certain matters, Mr Wedd plainly feels aggrieved about the conduct of the plaintiffs, and it appears that that feeling of grievance has led him to take certain steps which should not have been taken (eg filing the notice of
discontinuance, and failing to promptly concede that the first plaintiff had become a director and shareholder). But the summary judgment application was only concerned with the limited matters of the first plaintiff’s standing as a director of Just Steel and his status as a shareholder in Just Steel. The hearing was never
concerned with the propriety or otherwise of any actions the first plaintiff may have taken as a director of Just Steel, and Mr Wedd was misguided in his attempts to bring material of this sort into the argument.
[31] I accept that Mr Wedd does not appear to have had the benefit of legal advice, but to the extent that his conduct in opposing the summary judgment application has unreasonably increased the plaintiffs’ costs (as I am satisfied has occurred), I consider that some increase on scale 2B costs is appropriate.
[32] I note that in the recent decision of Tao v Strata Title Administration Ltd Thomas J awarded increased costs of 25% above scale against a lay litigant, in circumstances where the lay litigant’s behaviour had been time consuming, and most of her claims had lacked merit. Her impecuniosity was held not to warrant any
reduction in those costs.8
[33] It may be that Mr Wedd’s conduct of his case in this proceeding has not been quite as egregious or unreasonable as that of Ms Tao, but the cases are not dissimilar, in the respects that both unsuccessful litigants ran cases which lacked merit and unnecessarily added to the unsuccessful costs of the proceeding, and both chose to engage in attempts to succeed in achieving their ends by means that were inappropriate (in Ms Tao’s case, by making unjustified fraud allegations; in Mr Wedd’s case, by running an argument that he knew to be wrong (that Mr Sharrock had not validly become a director of, and shareholder in, Just Steel) until the date of the hearing, and by wrongly purporting to file a notice of discontinuance on behalf of Just Steel in an attempt to prejudice or obstruct the plaintiffs’ claims).
[34] Weighing the matter as best I can, the appropriate award to the plaintiffs is an award of costs on a 2B basis, increased by 20 per cent, plus disbursements as fixed by the Registrar. The plaintiffs are also entitled to their costs on that basis for the memorandum they filed in opposition to Mr Wedd’s unsuccessful application to
recall the judgment. I make orders accordingly.
Associate Judge Smith
Solicitor:
Hucker & Associates, Auckland for the plaintiffs
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