Simpson v Hubbard
[2012] NZHC 3020
•7 November 2012
ORDERS FOR SUPPRESSION UNTIL FURTHER ORDER OF THE COURT IN TERMS OF PARAGRAPHS [9] AND [10] OF THIS JUDGMENT.
IN THE HIGH COURT OF NEW ZEALAND TIMARU REGISTRY
CIV-2012-476-000144 [2012] NZHC 3020
IN THE MATTER OF THE CORPORATIONS (INVESTIGATION & MANAGEMENT) ACT 1989
AND IN THE MATTER OF AN APPLICATION BROUGHT BY RICHARD GRANT SIMPSON, TREVOR FRANCIS THORNTON AND GRAEME CARSON MCGLINN AS STATUTORY MANAGERS OF AORANGI
SECURITIES LIMITED (IN STATUTORY MANAGMENT) (A DULY INCORPORATED COMPANY)
Applicants
ANDMARGARET JANE HUBBARD (RELEASED FROM STATUTORY MANAGEMENT) AS EXECUTRIX AND TRUSTEE OF THE ESTATE OF THE LATE ALLAN JAMES HUBBARD
First Respondent
ANDMARGARET JANE HUBBARD Second Respondent
ANDMARGARET JANE HUBBARD (RELEASED FROM STATUTORY MANAGEMENT) AS EXECUTRIX AND TRUSTEE OF THE ESTATE OF THE LATE ALLAN JAMES HUBBARD
AND AS TRUSTEE OF THE TE TUA CHARITABLE TRUST (IN STATUTORY MANAGEMENT)
Third Respondent
ANDANDREW JAMES MORRIS AND EDGAR GEORGE BRADLEY TRUSTEES OF THE TEMPLE BAR TRUST (IN STATUTORY MANAGEMENT)
Fourth Respondent
SIMPSON V HUBBARD HC TIM CIV-2012-476-000144 [7 November 2012]
ANDFORRESTERS NOMINEE COMPANY LIMITED (IN STATUTORY MANAGEMENT) (A DULY INCORPORATED COMPANY)
Fifth Respondent
Hearing: 7 November 2012
Appearances: F B Barton, G A Cooper and A M Cunninghame for Applicants
Dr A S Butler and O C Gascoigne for First and Second Respondents
O G Paulsen for Third, Fourth and Fifth Respondents
Judgment: 7 November 2012
ORAL INTERIM JUDGMENT OF CHISHOLM J
[1] It was necessary to abort the hearing of this proceeding which was due to commence on 29 October 2012. The following matters now require determination:
(a) an application by Mrs Hubbard for costs on the statutory managers’
adjournment application;
(b) an application for wasted costs as a result of the trial being aborted;
(c) an application for an order allowing Mrs Hubbard to have recourse to the assets in dispute for her future costs arising from this litigation;
(d) suppression issues;
(e) issues as to admissibility of evidence; (f) timetable matters; and
(g) media applications.
Because it is not possible in the time available to resolve all those issues, this will be an interim decision. However, I am resolving as many issues as I can at this stage.
[2] This proceeding essentially involves a contest between Mrs Hubbard/the Hubbard Estate and the statutory managers about the ownership of numerous assets. While the value of those assets fluctuates, indications are that they are worth around
$60 million at the present time.
[3] According to the statutory managers these assets were transferred by Mr and Mrs Hubbard for the benefit of the investors and they are now under the control of the statutory managers and available for distribution to the investors. On the other hand, Mrs Hubbard, for herself and her husband’s estate, challenges whether the transfers were validly implemented.
[4] Originally a one week back-up fixture was allocated for 29 October 2012. It was a backup to another fixture involving the same statutory management. Because the other fixture could not proceed a firm fixture became available for this matter in September 2012.
[5] About two weeks before the hearing was scheduled to begin the statutory managers discovered 72 boxes of documents and some ring binders. Having concluded that some of this documentation would be relevant to this proceeding, they applied to the Court for an adjournment. While many of the interested parties were prepared to abide the decision of the Court on the adjournment application, Mrs Hubbard decided to oppose an adjournment.
[6] Following a telephone conference with counsel on 11 October 2012 I directed the statutory managers to provide counsel with copies of the documents that appeared to be relevant. This turned out to extend to 5000 pages, albeit that there is an element of duplication in that figure. During a further telephone conference on
17 October 2012 I decided to adjourn the fixture to 20 May 2013.
[7] Dr Butler flagged, at least at the second telephone conference and probably at the first, that Mrs Hubbard would be seeking to recover costs in relation to the aborted hearing. Those applications have now eventuated, and a significant
proportion of the hearing today has been devoted to that issue. A number of affidavits are before the Court.
[8] I will now deal with the various matters before the Court, but not necessarily in the order earlier stated.
Suppression orders
[9] This involves an element of tidying up. An application for suppression of information contained in Mrs Hubbard’s affidavit of 10 October 2012 was overlooked in one of the earlier minutes. This information is suppressed until further order of the Court.
[10] The other application for suppression arises from confidential information provided by Mrs Hubbard in her affidavit of 31 October 2012 and the response to that material in Mr Thornton’s affidavit of 2 November 2012. Until further order of the Court all references to Mrs Hubbard’s personal financial situation (including any references in the submissions) will be suppressed.
Media applications
[11] There are applications by TVNZ to film the trial, by Radio Live to record it, and by Radio New Zealand to take photographs and record the proceeding. Although those applications were lodged in relation to the trial that has been aborted. I will treat them as now relating to the trial scheduled for 20 May 2013.
[12] The application by Radio New Zealand to take still photographs is declined. With that exception, the applications are granted subject to the guidelines. I record that witness anonymity can be sought at trial or, if counsel so wish, before trial. The registrar is to advise the media applicants accordingly.
[13] Mrs Hubbard seeks solicitor client costs already incurred of approximately
$140,000 excluding GST. Such an order is strongly opposed by the statutory managers. Without going into detail the basis of the application is that solicitor client costs were incurred as a result of the statutory managers’ “misconduct” of this litigation. This reference to misconduct is, of course, used in a legal sense and there is no suggestion that the statutory managers have acted improperly in any other sense.
[14] In support of that application Dr Butler raised many issues, including: the 72 cartons contained core records relating to Aorangi Securities Limited which is a central player in the litigation; those documents had been uplifted by the statutory managers about two years ago in mid 2010; it should have been obvious to the statutory managers that they were relevant; specific enquiries on behalf of Mrs Hubbard should have alerted the statutory managers to the existence of those documents; it was much too late in the piece that the statutory managers turned their minds to the existence of the documents; prejudice to Mrs Hubbard has resulted; this situation should not have arisen; and the application for adjournment leading to the trial being aborted has put Mrs Hubbard to considerable and unnecessary expense.
[15] Initially the statutory managers’ position was that costs should be reserved. However, following exchanges between the Bench and Mr Barton that position was abandoned. The statutory managers’ do not accept the ‘bleak” picture painted by counsel for Mrs Hubbard. While it is accepted that the need to adjourn the hearing should not have arisen, Mr Barton categorised it as a “regrettable oversight in the context of an extremely complex statutory management and associated litigation”. He emphasised that given the situation that had arisen, the statutory managers were justified in seeking the adjournment. On the other hand, Mrs Hubbard’s opposition to it was not justified.
[16] As already indicated, the High Court Rules require costs on discrete issues like the adjournment application to be addressed at the time. I am perfectly satisfied that in all the circumstances it is appropriate for Mrs Hubbard to receive costs.
[17] The situation leading to the abandonment of the hearing should not have arisen. In all the circumstances Mrs Hubbard’s initial decision to try and cling to the hearing and oppose any adjournment was understandable, especially given that she is an 83 year old widow. However, once all the relevant information had been gathered Mrs Hubbard, like the Court, reluctantly accepted that an adjournment was inevitable.
[18] The real issue in this case is whether Mrs Hubbard should receive indemnity costs or costs on some other basis. In Bradbury v Westpac Banking Corporation[1] the Court of Appeal stated at [28] that indemnity costs which depart from the predictability of the Rules Committee’s regime are “exceptional and require exceptionally bad behaviour”. For that reason, explained the Court, the misconduct must be “flagrant” to justify solicitor client costs.
[1] Bradbury v Westpac Banking Corporation [2009] NZCA 234, [2009] 3 NZLR 400.
[19] The Court of Appeal also listed in its judgment situations in which indemnity costs have been ordered in the past:
[29] ...
(a) The making of allegations of fraud knowing them to be false and 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;
or
(e) Making allegations which ought never to have been made or unduly prolonging a case by groundless contentions, summarised in French J’s “hopeless case” test.
Mrs Hubbard relies on (b). Hence the use of the word “misconduct”.
[20] The situation giving rise to the adjournment in this case should not have occurred and does not reflect well on the statutory managers. Obviously the
statutory managers should have realised that relevant documents were held by them long before this actually dawned on them, and their conduct could be categorised as careless. Even the enquiries on behalf of Mrs Hubbard did not alert them to the existence of the documents which were under their control.
[21] But it is also important to keep the matter in perspective. By any standards this is an extremely difficult statutory management involving a huge number of documents. In my view the errors leading to the adjournment do not come anywhere near the exceptionally bad behaviour required before solicitor client costs will be awarded.
[22] On the other hand, I am satisfied that an order for costs on the 3C scale plus a small uplift is appropriate. Although it might be unusual to use the 3C scale for an adjournment, this takes into account the complex character of this litigation and the very condensed timeframe within which Mrs Hubbard’s lawyers had to respond to the application for an adjournment. Numerous documents had to be considered and there was also an initial indication on behalf of the statutory managers that the whole thrust of their case might change. Senior and experienced counsel had to be involved on behalf of Mrs Hubbard. The timeframe meant that the usual process whereby relevant documents are identified by the party holding the documents did not occur, at least in any complete sense.
[23] I am told that, leaving aside an item I will mention in a moment, costs on the
3C scale would around $16,100. The item in dispute arises from the inspection by a team of Russell McVeagh lawyers who travelled to Christchurch at short notice to inspect samples of the documents in the 72 cartons. The actual cost to Mrs Hubbard of this inspection was close to $40,000.
[24] According to counsel for Mrs Hubbard, if a scale approach is adopted this should result in a further $18,000. While this item is not specifically covered by the scale, that figure is arrived at by way of analogy. Counsel for the statutory managers oppose any addition for this item on the basis that the step taken by the Russell McVeagh team was unnecessary and in any event a figure much lower than $18,000 would be appropriate.
[25] Rather than reserving this aspect for further consideration, I am going to adopt a broad brush approach. I will allow a further $10,000 for the inspection component. That will mean that the 3C costs are, in round figures, $27,000. There will be an uplift of $3000 which will bring the costs up to, in round figures, $30,000. Costs in that sum are to be paid by the statutory managers.
Wasted costs
[26] This claim for $177,000 excluding GST is brought as a separate issue because wasted costs have not been included in the costs that I have just awarded. Again the application is strongly opposed.
[27] I am satisfied that the Court has jurisdiction to make an order for costs that have been truly wasted. Given the complexity of this case it was inevitable that there would be an element of wastage as a result of the adjournment. This reflects, as Dr Butler put it, that the lawyers are not able to approach the matter “in one go”. Mrs Hubbard should not have been put in this position.
[28] The more difficult issue is to determine the amount. To a large extent that can only be a matter of impression and judgment. I am satisfied, however, that the wasted costs are nowhere near the amount claimed. On the information available, and exercising the best judgment that I can, I am prepared to award $7500.
Other matters
[29] Unfortunately, time does not permit me to address the other matters. As I mentioned earlier I have to leave Court now. The issue of whether Mrs Hubbard should have access to the assets in dispute for her future legal fees is complex. I need time to consider the arguments put forward on both sides. At this stage I am not entirely clear whether further information might be required. Hopefully I can arrive at a decision without requiring any further steps to be taken in this regard, but that remains to be seen.
[30] As far as admissibility issues are concerned, it should be possible for those issues to be resolved by way of a telephone conference. The relevant documents have been provided by the statutory managers, and if there are issues as to admissibility they should be apparent. Apart from Mrs Hubbard, no other parties have signaled their intent to contest the admissibility of any documents.
[31] There will be the following orders:
(a) To the extent that Mrs Hubbard wishes to advance any issues as to admissibility she is to do so by way of written synopsis by the end of next week.
(b)The statutory managers will have a further week to respond by way of synopsis.
(c) Any issues that are not been resolved by agreement will be determined by way of a telephone conference hearing.
Counsel will need to notify the registrar if a hearing by way of telephone conference is required so that such a conference can be arranged.
[32] That leaves the timetable order. I am told by counsel that if the admissibility component of the timetable is removed the remainder of the timetable is acceptable. There will be an order accordingly.
[33] Costs in relation to this hearing will be reserved.
Solicitors:
F B Barton, Anderson Lloyd, Dunedin, [email protected]
Anderson Lloyd, Christchurch, [email protected]
Anderson Lloyd, Dunedin, [email protected]
Russell McVeagh, Wellington, [email protected]
Russell McVeagh, Wellington, [email protected]
Cavell Leitch Pringle & Boyle, Christchurch, [email protected]
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