Shawyer v Thow HC Invercargill CIV-2010-425-000116
[2011] NZHC 1616
•31 August 2011
IN THE HIGH COURT OF NEW ZEALAND INVERCARGILL REGISTRY
CIV-2010-425-000116
BETWEEN JOHN COBDEN SHAWYER Judgment Creditor
AND BRENDAN SHANE THOW Judgment Debtor
Hearing: (Determined on the papers) Appearances: M J Tingey for Judgment Creditor
R A A Weir for Judgment Debtor (but subsequently withdrawing) Judgment: 31 August 2011
JUDGMENT OF ASSOCIATE JUDGE OSBORNE
as to costs
[1] This judgment concerns costs in relation to steps taken in the proceeding by the judgment creditor after judgment. The judgment creditor had obtained by summary judgment on 3 July 2009 a decree of specific performance in relation to a sale of shares to the judgment debtor. Judgment was also given in relation to interest on the purchase price of $400,000.00 and for costs on a 2B basis together with disbursements.
[2] The application before me applies to costs particularly in relation to the examination of Mr Thow as to his financial means following an application made in that regard by the judgment creditor on 3 March 2010. The examination of Mr Thow, which proceeded through adjournment and part-hearings, has yet to be completed.
[3] In the meantime the judgment creditor has applied for orders in relation to the alleged contempt of the judgment debtor in relation to his examination. Nothing in
SHAWYER V THOW HC INV CIV-2010-425-000116 31 August 2011
this judgment deals with the costs of the contempt proceeding which is to be determined following a separate hearing in this Court (before French J).
The judgment creditor’s application for costs
[4] The judgment creditor has made application for indemnity costs in relation to the examination process. The application was made informally in the sense that it was contained in a memorandum of counsel filed as to costs and dated 28 September
2010. (Mr Weir on behalf of the judgment debtor expressly accepted that it was appropriate that the matter of costs be dealt with in this informal way, by exchange of submissions through memoranda).
[5] The submissions filed by Mr Tingey, for the judgment creditor, read as follows –
Indemnity Costs
6. The applicant seeks an order that the respondent pay his legal costs and disbursements to date in respect of the examination process on an indemnity basis.
7. All matters are at the discretion of the Court if they relate to costs in a step in proceeding: r 14.1(1) of the High Court Rules. The applicant submits that the respondent’s conduct in the present case justifies departing from awarding costs on the standard basis.
8. Rule 14.6 of the High Court Rules provides that the Court can order that a party pay increased or indemnity costs in appropriate circumstances. The Court may make an order under r 14.6 of the High Court Rules at any stage of a proceeding and in relation to any steps in it: r 14.6(2) of the High Court Rules.
9. Rule 14.6(4) of the High Court Rules provides, as relevant, that the
Court may order a party to pay indemnity costs if –
(a) the party has acted vexatiously, frivolously, improperly or unnecessarily in commencing, continuing, or defending a proceeding or a step in a proceeding;
(b) the party has ignored or disobeyed an order or direction of the court or breached an undertaking given to the court or another party;
...
(f) some other reason exists which justifies the court making an order for indemnity costs despite the principle that the determination of costs should be predictable and expeditious.
10. The applicant seeks indemnity costs on the basis that persistent non- compliance with the orders of the Court have needlessly prolonged this proceeding and put the applicant to significant expense.
11. The respondent’s conduct has amounted to more than a failure to act reasonably. The respondent has disobeyed the following orders of the Court:
(a) the order of examination dated 19 March 2010;
(b) the order to file and serve an affidavit setting out the matters referred to at paragraph 4 of the Minute issued by Associate Judge Osborne on 24 April 2010;
(c) the order to file and serve a comprehensive affidavit taking into account all directions previously issued by the Court by
12 July 2010, as required by Your Honour’s minute dated 1
June 2010; and
(d) the order to provide the documents referred to in the
Additional Information Minute.
12. As noted in the affidavit of John Cobden Shawyer, sworn 27
September 2010, counsel for the applicant wrote to the respondent
and his counsel (for the time being) after each failure to comply with a relevant order (other than the Additional Information Minute), and set out the shortcomings in his response.
13. The respondent’s persistent non-compliance with orders of the Court has significantly, and needlessly, prolonged this proceeding. The applicant filed obtained the order for examination on 17 March
2010. The applicant still does not have, however, an accurate and comprehensive picture of the respondent’s financial position despite
the respondent affirming two affidavits and having been twice examined.
14. The respondent’s conduct has caused the applicant to incur legal fees and disbursements during the examination process of $33,150.56 (GST inclusive), being:
(a) legal fees ($28,934.02);
(b) disbursements ($2,337.84); and
(c) the applicant’s attendance at the examination ($1,878.70)
(Affidavit of John Cobden Shawyer, sworn 27 September
2010, paragraph 32).
15. The applicant’s attendance at the examinations in Invercargill and Christchurch were necessary, given the complexity of the respondent’s commercial arrangements. The applicant flew to the examinations from Sydney, Australia, where he now lives with his wife. The amounts claimed represent his airfare and accommodation in respect of the examination (as set out in the affidavit of John Cobden Shawyer, sworn 27 September 2010, paragraphs 29 to 31).
[6] The judgment creditor’s application was supported by his own affidavit which tabulated his costs in relation to the examination of the judgment debtor and exhibited the invoice evidence.
Submissions for judgment debtor
[7] Mr Weir by memorandum dated 14 October 2010 made submissions as to the application for indemnity costs. Those submissions read –
1. It has been directed that submissions in respect of a costs application (for indemnity costs) be filed and served by 13 October 2010. This memorandum constitutes such submissions.
2. It is noted that the applicant at paragraph 2(b) of the memorandum dated 28 September 2010 expresses as its purpose to apply for an order that the respondent pay his legal costs and disbursements to date in respect of the examination process. No issue is taken with the fact that the application has not been made formally.
3. The memorandum on behalf of the plaintiff (applicant) dated 28
September 2010 deals with costs at paragraphs (6) – (15).
4. No issue is taken with the basis for costs being at the Court’s discretion (rule 14.1(1)) and that there is the power to award indemnity costs in appropriate circumstances at any stage of a proceeding (Rule 14.6, High Court Rules).
5. The fundamental issue in this case is whether the respondent has persistently not complied with orders of the Court, such that the proceedings have been needlessly prolonged, putting the plaintiff/applicant to significant expense (paragraph 10, applicant’s memorandum).
6. The applicant has chosen to put his case on the basis that it is the (alleged) persistent non-compliance with orders that have put the applicant/plaintiff to significant expense. This ignores the fact that whether or not there has been non-compliance, the applicant would regardless incur significant expense given his decision to examine. That decision was made in the face of advice from the respondent’s accountants that the respondent was impecunious.
7. The plaintiff/applicant particularises the alleged disobedience by the respondent at paragraph 11 (c) to (d) of the memorandum filed on his behalf. Given that his case is that it is persistent non-compliance each alleged act of disobedience must be proved.
8. The alleged acts of disobedience have not been finally determined, and will not be until the contempt allegations are heard. It is important to note that the affidavit of John Shawyer dated 27
September 2010 does not address the respondent’s case that he did not receive proper notice of the first examination and given that service is the applicant’s responsibility, the respondent is not responsible for not having all requested material at that hearing and any wasted costs are not due to the respondent’s breach.
9. Further, any attendances required to particularise what was required were in the context of the respondent not having received the required notice in respect of the first hearing (the required period being a minimum, the plaintiff having been in a position to effect service from the date the order for specific performance was sealed,
19 March 2010. In those circumstances, the respondent cannot be criticised for being in wilful disobedience nor for not being in a
position to provide meaningful answers on relevant questions.
10. Any delay in providing the materials cannot be reasonably attributed to adding to costs that would have been incurred in any event, to such an extent that costs should be awarded on an indemnity basis: the only extra attendances that might possibly have been required are the telephone conferences set to monitor the position.
11. There is no satisfactory evidence in support of why the applicant was required to assist his counsel. The travel dates in respect of both visits to New Zealand are revealing: In respect of the 15 April 2010 examination the plaintiff arrived in Queenstown on 14 April 2010 and departed on 21 April 2010 (from Queenstown). In respect of the
3 September 2010 examination (in Christchurch) the plaintiff arrived in Christchurch on 2 September 2010 and departed on 7 September
2010 from Queenstown. The fact that the plaintiff travelled with his
wife, departed from Queenstown and stayed in New Zealand for longer than the required examination, readily allows the inference
that while the attendance at each examination might be stated to be to assist counsel (with no particulars of why nor any evidence of the plaintiff ’s expertise beyond that of his counsel’s) the bulk of the travel costs were incurred for the plaintiff and his wife to spend recreational time in Queenstown. The respondent through counsel asks the Court to take judicial notice of the fact that Queenstown is a year round holiday/tourist destination.
12. The legal fees claimed are not particularised. There is accordingly no way of assessing what time was spent by who, on what dates, and at what rates. Consequently, it is impossible to assess what cost is the direct result of what the plaintiff ’s claims is the defendant’s (denied) needlessly prolonging the proceedings through persistent non-compliance. Accordingly, the plaintiff/applicant’s application for indemnity costs should fail for, among other reasons, lack of proof.
Reply submissions for judgment creditor
[8] Mr Tingey’s reply submissions read –
2. The Court has jurisdiction to award indemnity costs against the respondent in respect of the examination process to date, notwithstanding that the contempt application has not been heard.
3. Rule 14.6(4)(b) of the High Court Rules permits the Court to order indemnity costs if a party has ignored or disobeyed an order or direction of the Court. A party is not required to have wilfully disobeyed an order of the Court before an order for indemnity costs can be made under r 14.6(4)(b) of the High Court Rules.
4. In any event, the Court ought to infer from the respondent’s persistent non-compliance with the orders of the Court that his non- compliance was wilful.
5. The respondent has plainly not complied with the following orders of the Court:
(a) the order for examination dated 19 March 2010 (the Order for Examination);
(b) the order to file and serve an affidavit setting out the matters referred to at paragraph 4 of the minute issued by Your Honour, dated 20 April 2010 (the First Minute);
(c) the order to file and serve a comprehensive affidavit taking into account all directions previously issued by the Court by
12 July 2010, as required by Your Honour’s minute, dated 1
June 2010 (the Second Minute); and
(d) the order to serve the applicant with the additional materials
referred to in Your Honour’s minute, dated 8 September
2010, by 24 September 2010 (the Additional MaterialsMinute).
6. The respondent has not adduced credible evidence explaining his failures to comply with the orders of the Court set out above. As noted in the affidavit of John Cobden Shawyer, sworn 27 September
2010. Counsel for the applicant wrote to the respondent and his counsel (for the time being) after each failure to comply, and set out the shortcomings in his response.
7. The respondent was represented by Mr Brett Cooper at the telephone conference giving rise to the Second Minute, and by Mr Weir at the examination, which gave rise to the Additional Materials Minute. By way of a letter to counsel for the applicant, dated 12 October
2010, counsel for the respondent (Mr Weir) took responsibility for
the respondent’s failure to serve the additional materials by 24
September 2010, as required.
Notice of the examination
8. The respondent cannot escape responsibility for his persistent failures to comply with orders of the Court by reference to the period of notice given in respect of the examination. The respondent was served with the order for examination on 30 March 2010, seven working days prior to the hearing. The respondent waived his entitlement to the full notice period of 10 working days by not objecting to his attendance at the examination on 15 April 2010, and subsequently answering the questions put by counsel for the applicant.
9. In any event, any prejudice that the respondent may have suffered as a result of the short notice period is limited to the first examination. It does not justify his subsequent non-compliance with orders of the Court. Accordingly, the applicant is entitled to indemnity costs at least in respect of his costs after the first examination.
Causation
10. The applicant commenced the examination process because the respondent failed to properly complete a statement of financial means on Form E2 of the High Court Rules. The statement that the respondent initially prepared on 10 August 2009 was incomplete (and the examination process has illustrated that it was inaccurate). On 11 November 2009, counsel for the applicant wrote to the respondent requesting that he properly complete a statement of financial means, but he failed to do so.
11. The respondent’s submission that the applicant is not entitled to indemnity costs because he would have incurred some of the costs in any event is misconceived. The Court awards indemnity costs instead of, rather than in addition to, scale costs. Accordingly, an award for indemnity includes costs that a party would have incurred notwithstanding the poor conduct of the other party. As set out below, however, the respondent’s conduct put the respondent to significant costs, which he would not otherwise have incurred.
Legal fees
12. The respondent’s non-compliance with orders of the Court significantly increasing the legal costs, which the applicant incurred. In addition to the extra attendances required at telephone conferences and the examination on 3 September 2010, counsel for the applicant:
(a) reviewed the affidavits of the respondent, affirmed by 10
May 2010 and 11 August 2010 for compliance with orders of the Court;
(b) drafted letters to the respondent and memoranda to the Court regarding the shortcomings in the respondent’s compliance with the orders of the Court.
13. The respondent’s conduct has caused the applicant to incur legal fees and disbursements during the examination process of $33,150.56 (GST inclusive at 12.5%), being:
(a) legal fees ($28,934.02);
(b) disbursements ($2,337.84); and
(c) the applicant’s attendance at the examination ($1,878.70)
(Affidavit of John Cobden Shawyer, sworn 27 September
2010, paragraph 32).
14. Particulars of the applicant’s legal costs are set out in the affidavit of
Anita Jane Smith, which will be filed and served in draft on Tuesday,
26 October 2010. The original affidavit will be filed shortly
thereafter in the Invercargill High Court.
15. Given the respondent’s conduct to date, the applicant respectfully requests the Court to order that the respondent pay the applicant’s costs and disbursements on an indemnity basis.
Discussion
[9] I accept Mr Tingey’s submission that the mere fact that the examination of
Mr Thow may not be at an end is not a bar to the fixing of costs. In terms of rule
14.1 High Court Rules, all matters as to costs are at the discretion of the Court. Rule
14.2(g) contains the principle that so far as possible the determination of costs should be expeditious.
[10] Mr Thow became a judgment debtor because he failed to honour contractual obligations. When Mr Thow still failed to specifically perform the contract, his judgment creditor was entitled to have him examined so as to establish whether and how Mr Thow might meet his obligations. Given that Mr Thow remained in default, as a matter of general principle the creditor should be able to recover the reasonable costs of the examination, together with disbursements. Those costs will often be ordered on a 2B basis but the issue arises in a case such as this whether there is a case for increased or indemnity costs.
[11] Mr Tingey submits that on the record of the judgment debtor’s performance in his examination, and his persistent failure to adequately deal with proper enquiries, the Court ought to infer that non-compliance with orders made by the Court has been wilful. Alternatively, Mr Tingey suggests that in terms of r 14.6(4)
(which deals with indemnity costs) this is a case where the judgment debtor has ignored or disobeyed orders of the Court.
[12] An alternative formulation is that in terms of r 14.6(4)(f) some other reason exists which justifies the Court making an order for indemnity costs despite the principle that the determination of costs should be predictable and expeditious.
[13] As the Judge who supervised the examination of the debtor, the most apt adjective I can bring to Mr Thow’s performance through the course of the examination process is egregious in the sense of “remarkably bad, gross, flagrant, outrageous”. As this Court will be separately reaching a determination in relation to the contempt application, it is unnecessary and in fact undesirable that I embark on an analysis of the sort of the issues that arise in relation to conduct which is alleged to be contemptuous. In my judgment it is sufficient in relation to a request for indemnity costs that the conduct can be appropriately regarded as egregious.
[14] The legal costs and disbursements which the judgment creditor has incurred have undoubtedly been well beyond those which might have been anticipated at the start and well beyond the usual experience of such a process. It is entirely probable that the judgment debtor would have been required to meet only a 2B award of costs had he provided all the appropriate information at his initial hearing. But he either chose not to or failed to make sufficient time to put himself into a position to comprehensively meet the requirements of examination in a case such as this. The judgment creditor was entitled to pursue the satisfactory completion of the examination process. This Court, against the background of Mr Thow’s egregious failures, should seek to avoid an outcome whereby (leaving aside the difficulty that the judgment creditor may face in enforcing even this costs judgment) the judgment creditor suffers a further loss as between the legal fees and disbursements he has properly incurred and the costs and disbursements which this Court orders.
[15] In the circumstances of this case, I would not consider it just that the judgment creditor receive anything other than indemnity costs in relation to reasonably incurred fees and disbursements.
[16] The fees incurred have been large indeed but the issues and the material which Mr Tingey and Mr Shawyer had to deal with were voluminous. Mr Thow’s answers in examination and the documents which he provided fell so short of a logical and coherent presentation that he brought on himself the extent of work and attendances which Mr Tingey and his client had to undertake.
Quantum
[17] The quantum claimed by the judgment creditor is that set out in paragraph 13
of the first of Mr Tingey’s first memorandum (above [8]).
Orders
[18] I order, in relation to the examination process, that the judgment debtor pay costs and disbursements in the total sum of $33,150.56.
[19] Nothing in this order limits the judgment creditor’s entitlement to apply for
costs in relation to any process in this proceeding which has not been completed.
Associate Judge Osborne
Solicitors:
M J Tingey, Bell Gully, Auckland (email – [email protected]) R A A Weir, PO Box 46281, Herne Bay, Auckland 1147
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