Singh v Shetty
[2019] NZHC 1181
•28 May 2019
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2018-404-1684
[2019] NZHC 1181
BETWEEN KAMAN SINGH
First Plaintiff
AND
SURKANDA ENTERPRISES LIMITED
Second Plaintiff
AND
SATISH SHAMBHU SHETTY
First Defendant
AND
SHAMIANA ENTERPRISES LIMITED
Second Defendant
AND
SHAMIANA LIMITED
Third Defendant
Hearing: On the papers Appearances:
T G Aherne for Plaintiffs
L T Meys & P Grant for Defendants
Judgment:
28 May 2019
JUDGMENT OF PAUL DAVISON J
[Re Costs]
This judgment was delivered by me on 28 May 2019 at 1:30 pm Pursuant to r 11.5 of the High Court Rules
Registrar/Deputy Registrar
Solicitors:
Aherne Legal, Auckland Neilsons Lawyers, Auckland
KAMAN SINGH v SURKANDA ENTERPRISES LIMITED [2019] NZHC 1181 [28 May 2019]
Introduction
[1] This is an application by Mr Kaman Singh and Surkanda Enterprises Ltd,1 for indemnity costs of $34,664.62 in respect of the failed application by Mr Satish Shetty, Shamiana Enterprises Ltd and Shamian Ltd,2 for the proceeding to be removed from the District Court to the High Court.
[2] The plaintiffs say that indemnity costs are appropriate as the defendants have acted vexatiously, frivolously, improperly and unnecessarily in commencing and continuing the application for transfer to the High Court.
[3] The defendants oppose indemnity costs being granted, saying that they had arguable grounds for bringing the application for transfer, and had been encouraged to do so by the District Court. As a result, the defendants say that it cannot be said that the application was hopeless or vexatious, and the plaintiffs should therefore receive no more than 2B costs as a result.
Background
[4] The plaintiffs commenced proceedings in the District Court in March 2017. The statement of claim alleged that upon termination of contracts entered into between the parties, the plaintiffs were entitled to the repayment of bonds totalling $330,000.
[5] The defendants responded on 21 June 2017, filing a statement of defence and counterclaim in which they denied liability to repay the bonds to the plaintiffs. The defendants alleged that the plaintiffs were liable to them for unpaid rents, totalling
$2,500 per week from March 2016 until September 2017, plus general damages, interest and costs.
[6] On 16 February 2018 counsel for the plaintiffs and the defendants filed a “Joint Memorandum of Counsel for Second Case Management Conference 22 February 2018”. In the memorandum counsel noted that the matter had not been settled at a Judicial Settlement Conference held on 2 February 2018, and identified the issues in
1 The respondents in the proceeding for transfer, but hereinafter referred to as the plaintiffs.
2 The applicants in the proceeding for transfer, but hereinafter referred to as the defendants.
dispute. The Memorandum noted that the defendants would file and serve an amended counterclaim by 22 February 2018, and the plaintiffs would file a reply to the amended counterclaim by 8 March 2018. The Memorandum stated that the defendants were considering whether to apply for security for costs, and if applying would make the application within seven days of the case management conference. The Joint Memorandum further stated that no further amendment of pleadings was required and no further interlocutory applications were required, other than the defendants’ application for security for costs if it was pursued. Counsel advised that the matter was suitable for a one day fixture
[7] An amended statement of defence was filed on 28 February 2018, alleging that the plaintiffs had repudiated the agreement between the parties, and claimed approximately $1.3 million in damages for unpaid rent and licence fees.
[8] On 2 March 2018 the defendants also applied for security for costs in the District Court, and subsequently filed a supporting affidavit on 9 March 2018. A hearing on that interlocutory matter was set down for 20 July 2018. The day before that hearing was scheduled to take place, the defendants filed written submissions in which they indicated their intention to apply to remove the proceeding to the High Court.
[9] On 3 August 2018, the defendants filed an originating application in this Court seeking an order for transfer.
[10] Because the defendants’ statements of defence and counterclaim had been filed on 21 June 2017 and 28 February 2018, respectively, they were well outside the requirement that an application for transfer be made within five working days after the filing thereof.3 As a result, they required the Court to grant an extension of time.
[11] I declined to grant the defendants an extension of time for filing their application to remove the proceeding into the High Court.4
3 High Court Rules 2016, r 5.69(2)(a).
4 Singh v Shetty [2019] NZHC 438.
[12] I noted that the defendants’ first counterclaim was filed over a year prior to their application for removal, and that the damages sought in that counterclaim already exceeded the District Court threshold. Even taking the most generous position in regard to the defendants, their second statement of defence and counterclaim, filed in February 2018, where the damages sought were approximately $1.3 million, was still filed over five months prior to the filing of the application to remove.
[13] The defendants were unable to provide any satisfactory explanation for the delay.
[14] I also accepted the submission of the plaintiffs, that throughout the course of the proceedings in the District Court, the defendants have conducted themselves in a manner that appears to have been intended to delay the proceeding and frustrate the plaintiffs’ endeavours to progress their claim.
[15] I noted that the application for transfer appeared to be intended to delay the plaintiffs’ proceeding, as an application for transfer was not signalled until the day before the security for costs hearing, resulting in the abandonment of that fixture.
[16] At the conclusion of my judgment, I referred to r 14.6(4)(a) of the High Court Rules 2016, and invited the parties to file costs memoranda, and that if the plaintiffs wished to seek indemnity costs, they were to include particulars of the amount and the composition of those costs.
Indemnity costs
[17]The High Court Rules 2016 provide, in relation to indemnity costs:
14.6 Increased costs and indemnity costs
(1)Despite rules 14.2 to 14.5, the court may make an order—
…
(b) that the costs payable are the actual costs, disbursements, and witness expenses reasonably incurred by a party (indemnity costs).
(2)The court may make the order at any stage of a proceeding and in relation to any step in it.
…
(4)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; or
(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; or
(c)costs are payable from a fund, the party claiming costs is a necessary party to the proceeding affecting the fund, and the party claiming costs has acted reasonably in the proceeding; or
(d)the person in whose favour the order of costs is made was not a party to the proceeding and has acted reasonably in relation to it; or
(e)the party claiming costs is entitled to indemnity costs under a contract or deed; or
(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.
[18] In Bradbury v Westpac Banking Corp, the Court of Appeal said that indemnity costs may be awarded where a party has acted badly or very unreasonably.5 The Court of Appeal also listed a number of circumstances in which indemnity costs have been ordered, which includes:6
(a)the making of allegations of fraud knowing them to be false and the making of irrelevant allegations of fraud;
(b)particular conduct which 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;
5 Bradbury v Westpac Banking Corp [2009] NZCA 234, [2009] 3 NZLR 400.
6 At [29].
(e)making allegations which ought never to have been made or unduly prolonging a case by groundless contentions, such as where the party is bringing a “hopeless case”.
[19] Where the threshold is met, the party will be entitled to costs incurred that are reasonable in the circumstances.
Analysis
[20] The plaintiffs argue that costs are to reflect how a party acted during litigation, or in the present circumstances, during a particular step in the proceeding, not how they acted before that step. In support they cite Paper Reclaim Ltd v Aotearoa International Ltd, where the Supreme Court overturned the costs awarded in the High Court, partially on the basis that the Judge had taken into account conduct of the losing party prior to the commencement of the proceedings.7
[21] Here the defendants’ conduct which is criticised by the plaintiffs, has predominantly occurred in relation to the District Court phase of the proceeding. I nevertheless consider that the Court is entitled to have regard to the parties’ conduct during the entirety of the proceeding, including during the course of the proceeding in the District Court before the application for transfer was filed in this Court, where it informs or explains the nature of their actions in connection with that part of the proceeding undertaken before this Court and which is alleged to have been vexatious, frivolous or improper.
[22] In my judgment I commented that the defendants have engaged in a course of conduct that appears to have been intended to delay the proceeding and frustrate the plaintiffs’ endeavours to progress their claim. For instance, in February 2018, although the parties had agreed six months earlier that they would proceed to a judicial settlement conference, on the day of the settlement conference the defendants attended solely to inform the Judge and the plaintiffs that they would not take part in the conference. The defendants say however that they did attend the conference and they did engage with it, and in support of their contention refer to a Minute of Judge
7 Paper Reclaim Ltd v Aotearoa International Ltd [2006] 3 NZLR 188 (CA) at [160].
Harrison dated 20 July 2018. That Minute does not however provide any support for the defendants’ submission. To the contrary, it confirms the plaintiffs’ submission that the conference did not proceed as scheduled.
[23] I also noted in my judgment that the defendants’ security for costs application was made at a very late stage in the proceedings, not being filed until 2 March 2018, with the supporting affidavit not being filed until a week later. That was one year after the proceeding had commenced, and three years after the defendant first became aware of the plaintiffs’ precarious financial position.
[24] The District Court hearing of the defendants’ application for security for costs did not proceed following the defendants filing of their submissions on that matter, indicating that they intended to apply for transfer of the proceedings into the High Court. The defendants did not notify the District Court or the plaintiffs that they intended to apply to transfer the proceeding until the filing of those submissions the day before the hearing. Their submissions were by then 10 days overdue. Similarly, the submissions for the hearing before me on the application to transfer were also filed late.
[25] Ms Aherne, for the plaintiffs, attached to her submissions seeking costs a chronology of the delays caused by the defendants throughout the proceeding including the District Court phase. Counsel’s chronology notes that:
(a)On 11 August 2017, Judge Harrison directed the defendants to file an amended counterclaim and allowed 15 working days for this to be done. The counterclaim was not filed until 28 February 2018.
(b)In a Minute dated 22 February 2018, Judge Jelas directed the defendants to make disclosure of set up costs by 8 March 2018. The defendants have to date failed to comply with the direction.
(c)The defendants failed to file the bundle of documents in the application for transfer to the High Court, and therefore the plaintiffs had to file the bundle themselves.
[26] The defendants’ conduct as appears in Ms Aherne’s chronology shows a consistent history of failing to comply with time limits and the late filing of applications, the effect of which would inevitably delay and frustrate the plaintiffs’ attempts to progress the proceeding. The defendants’ conduct has resulted in fixtures and the Judicial Settlement Conference not proceeding as scheduled; submissions, amended pleadings and other Court directions failing to be filed or not met by the stipulated date for compliance; and applications being brought at very late stages and after significant prior delays. The inevitable inference to be drawn from that conduct and its timing, is that the defendants have conducted their defence to the plaintiffs’ claim in a manner calculated to frustrate the plaintiffs’ ability to progress and obtain an adjudication of the claim.
[27] I further consider that the defendants have continued to employ the same sort of conduct in relation to making the present application for transfer of the proceeding.
[28] The defendants’ initial and amended counterclaims both breached the District Court’s statutory jurisdiction to award damages. The present application was made five months after the amended counterclaim was filed, and over a year after the original. Mr Meys was unable to satisfactorily explain the significant delay.
[29] In support of the application counsel submitted that the proceeding was complex, with multiple witnesses, including expert witnesses, and would be likely to take a week to complete. This submission was made notwithstanding a joint memorandum previously filed by the parties in the District Court, stating that the proceeding was not complex, that only Mr Singh and Mr Shetty would be called as witnesses, and that the fixture should require no longer than a single day.
[30] The defendants also argued that the District Court had encouraged an application being made to remove the proceedings to the High Court. They rely on the Minute issued by Judge Harrison on 20 July 2018, where the Judge said:
Notwithstanding that the counterclaim exceeds $1 million. Mr Bowler wishes to transfer the proceeding to the High Court. I direct that the defendants must apply pursuant to S91 of the DC Act to transfer the proceeding within 10 working days. This is an unless order.
[31] There is however, nothing in the Judge’s comments amounting to encouragement of the defendants to apply for transfer of the proceedings. By making an “unless” order the Judge was clearly signalling to the defendants that unless the proposed application was made within the 10 working days stipulated, the District Court proceedings could be discontinued. The making of an unless order was a clear indication that any further delay by the defendants was not going to be tolerated by the District Court.
[32] Having earlier advised the District Court by the joint memorandum filed on 16 February 2018 that the proceeding was not complex and would require a hearing of no more than a day, by subsequently making another “last minute” application on 3 August 2018 for transfer of the proceeding from the District Court to the High Court with the inevitable effect of further delaying progress of the proceeding, the defendants adopted a similar strategy to that which is evident from their previous conduct, and which resulted in the proceedings being delayed.
[33] I find that the defendants’ belated application to seek transfer of the proceeding from the District Court to the High Court was undertaken on clearly insufficient grounds for the ulterior purpose of causing further delay to the plaintiffs’ claim and as a consequence also requiring the plaintiffs to incur legal costs to oppose their application.
[34] I am satisfied that the defendants have acted frivolously, vexatiously and improperly by the belated timing of their the application for transfer which was already well out of time, and made without any sufficient explanation for the delay. In my view the defendants’ conduct is an example of a party using the interlocutory process in order to frustrate and impede the efficient progression of the plaintiffs’ claim through the courts, and their conduct has caused loss of time to both the Courts and the plaintiffs.8
8 Bradbury v Westpac Banking Corp [2009] NZCA 234, [2009] 3 NZLR 400 at [29].
Quantum
[35] The plaintiffs seek $34,664.62 as indemnity costs from the defendants. Ms Aherne has attached a schedule to her costs memorandum, but did not make submissions in her memorandum justifying the time and attendances which comprise the basis of her firm’s fee account.
[36] The defendants note that the plaintiffs’ schedule includes $1,955 for reviewing the defendants’ submissions on the security for costs application and for attendances at that hearing. They say that those costs are not recoverable in this proceeding. I agree. Although the security for costs hearing was aborted and the discussion was directed towards the transfer application, those costs relate to the District Court phase of the proceeding, and I leave them to be determined by the District Court.
[37] The defendants further say that a total of $34,664.62 ($32,709.62 after the attendances on the file in relation to the security for costs hearing are deducted) for a half day interlocutory hearing would surprise an objective observer. They submit that as a useful yardstick, scale costs should generally be approximately half to two-thirds of a parties’ actual costs. The defendants note that scale costs here would be approximately $8,474.
[38] I agree with the defendants that $32,709.62 for a half-day hearing on an interlocutory matter would surprise an objective observer.
[39] I also note that an amount of $3,421.25 is sought in relation to attendances that were required after the hearing, and substantially relate to the preparation of the plaintiffs’ costs memorandum. The defendants also challenge that amount as being unreasonable and disproportionate in the circumstances.
[40] From Ms Aherne’s costs schedule, it appears that around five hours was spent preparing her costs memorandum, which includes time engaged in conferring with the plaintiffs.
[41] In arriving at an assessment of the reasonableness of the costs actually incurred by the plaintiffs, the Court will have regard to the amount of time required, the significance and complexity of the work and the reasonable hourly rate applicable.
[42] The plaintiffs’ schedules refer to a significant number of attendances relating to the preparation of submissions. Those attendances total $10,200. When the plaintiffs filed their first set of submissions on 24 August 2018, the defendants were yet to file their submissions, which had been due on 22 August 2018. Lang J subsequently granted the plaintiffs the opportunity to file further submissions in reply after the defendants’ submissions were filed. The plaintiffs’ reply submissions were necessary because of the late filing of the defendants’ submissions and the further time involved added to the plaintiffs’ costs.
[43] I also note that the plaintiffs filed the bundle of documents for the application to transfer, which the defendants themselves were obliged to file.
[44] In my view the plaintiffs’ costs are high for an interlocutory matter that occupied a half-day hearing. While I have found that the plaintiffs are entitled to an award of indemnity costs, I also consider that the amount claimed by the plaintiffs is disproportionately high having regard to the matters in dispute, the degree of complexity of the issues and the amount of time reasonably necessary for preparation for the hearing. For those reasons I shall reduce the amount the award of costs from that claimed by the plaintiffs, somewhat. I think that in all the circumstances $20,000, would be an appropriate amount.
Result
[45] The plaintiffs are entitled to an uplift of costs totalling $20,000. That figure also captures the time spent after the hearing in relation to the memorandum for costs.
Paul Davison J
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