Smith v Prain

[2022] NZHC 1964

IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY

I TE KŌTI MATUA O AOTEAROA ŌTAUTAHI ROHE

CIV-2014-409-549

[2022] NZHC 1964

BETWEEN

GREGORY ROBERT SMITH and COLIN PETER STOKES
Plaintiffs

AND

NOBLE INVESTMENTS LIMITED

First Defendant [Removed]

APPLE FIELDS LIMITED
Second Defendant [Removed]

JUSTIN WILLIAM PRAIN
Third Defendant

CARDNO (NZ) LIMITED
Fourth Defendant

GOLD BAND FINANCE LIMITED

Fifth Defendant [Removed]

DELTA UTILITY SERVICES LIMITED

Sixth Defendant [Removed]

Hearing:

(On the papers)

Counsel:

Mr C P Stokes – (Plaintiff) in person

P B McMenamin and J Moss for Third Defendant
G J Dempsey and M R C Wolff for Fourth Defendant

Judgment:

10 August 2022

JUDGMENT OF ASSOCIATE JUDGE LESTER

(Determination of costs following Court of Appeal Judgment)

SMITH v PRAIN [2022] NZHC 1964 [10 August 2022]

Background

[1]                  The background to this costs  determination  is  set  out  in  my  Minute  of  28 April 2022. In summary, Mr Stokes appealed my costs award dated 22 July 20201 with the Court of Appeal releasing its decision on 14 December 2021.2

[2]                  The appeal was dismissed save to the extent adjustments to the quantum of the costs were directed at [54], [55] and [56] of that Judgment which provide:3

[54]     This submission is correct. As Messrs Stokes and Smith submitted, the indicative schedules of costs provided to the Associate Judge include claims for costs in respect of NIL and AFL’s counterclaim against them, to which neither Mr Prain nor Cardno was a party.    Counsel for Mr Prain,    Mr Moss, referred to the fact that the Judge had taken a “broad brush” approach to the items of costs and also that neither Mr Stokes nor Mr Stringer had challenged these items in the High Court. The short answer to this latter submission is that a claim for costs must be confined to costs claimable in the proceeding. Mr Prain and Cardno cannot claim the costs of taking a step (preparing and filing a counterclaim) they did not take. Likewise there should only be one claim for each step unless that step was repeated because of some act or omission on the part of the plaintiffs. For instance, Mr Prain’s schedule of costs includes a claim in respect of a supplementary list of documents. That is a legitimate claim only if the supplementary list was required because of some act or omission on the part of Messrs Stokes and Smith. The costs schedules should be revised accordingly.

[55]      The second issue which arises is whether Mr McMenamin’s representation of NIL, AFL, and Mr Prain combined, at least up until the companies ceased to be involved in the litigation, in itself affects the quantum of the costs to which Mr Prain may be entitled.

[56] Rule 14.2(1)(f) provides that an award of costs should not exceed the costs incurred by the party claiming costs. Mr Prain may not recover a sum greater than the costs he incurred in fact. We have already addressed this issue at [26] above. Subject to those observations, we do not consider there should be any reduction on this account.

[3]                  In the New Year of 2022, the parties filed memoranda identifying how they saw the effect of the above adjustments impacting on the quantum of costs previously awarded.

1      Smith v Noble Investments Ltd [2020] NZHC 1766.

2      Stokes v Prain [2021] NZCA 683.

3      Stokes v Prain, above n 2.

[4]                  Mr Moss, counsel for the third defendant, Mr Prain, produced a schedule of costs, as did Mr Wolff, counsel for the fourth defendant Cardno (NZ) Limited (Cardno).

[5]                  In the interests of clarity I requested that Mr Stokes, by reference to those costs schedules, mark the items in each schedule he challenged and provide a brief explanation as to why that item should be removed, that is, why it falls within the adjustments directed by the Court in  [2]  above.   Mr  Stokes had  previously filed    a memorandum in relation to Cardno’s costs which I considered too general.

[6]                  Mr Moss had already provided a copy of his original costs schedule marking those items he believed should be deleted as a result of the Court of Appeal judgment and I requested Mr Wolff to do the same so that it was clear which items had been deleted by counsel for Mr Prain and for Cardno.

[7]                  I noted in the Minute of 28 April 2022 that Mr Stokes had requested I recuse myself. I declined to do so on the basis I considered the adjustment made to the costs award made by this Court was a matter for this Court.

[8]                  Mr Stokes did not agree the adjustment of the costs should be undertaken by this Court. On 17 May 2022, Mr Stokes filed a memorandum advising he had filed an application in the Court of Appeal on 10 April 2022. Mr Stokes provided a copy of that application. Three orders were sought in that application; the second of which sought that the Court of Appeal adjudicate on the costs adjustment, Mr Stokes maintaining that the adjustments made by counsel for Mr Prain and Cardno did not reflect the outcome of the Court of Appeal decision.

[9]                  On 28 June 2022, the Court of Appeal issued a Minute dismissing Mr Stokes’ application. Accordingly, the impediment Mr Stokes raised to my fixing costs is no longer present.

[10]              I mentioned (in [7] above) that Mr Stokes requested I recuse myself.  I note  in the application to the Court  of Appeal,  Mr  Stokes  suggested:  “the High Court  is aligned with Mr Prain and Cardno’s wrongly claimed and wrongly awarded

costs …”. The Court of Appeal has determined that the award of costs was correct save for the adjustment that it has directed – no question of “alignment” arises.

[11]              I note Mr Stokes did not challenge the quantum of scale costs before me, but as the passages in [2] above confirm, the absence of a challenge to the correctness of the costs schedule before me did not prevent quantum being challenged on appeal.

Mr Prain’s adjustments

[12]              Mr Moss has deleted the claim for a list of documents on supplementary discovery and inspection of documents of the first and second defendant’s counterclaim. The total deductions are $13,145.00.

[13] At Appendix D of the material Mr Stokes filed in the Court of Appeal, he sets out his challenges to Mr Prain’s costs. Most of Mr Stokes’ eight challenges to the scale costs claimed rely on at [56] of the Court of Appeal’s Judgment (set out at [2] above), that is, an award of scale costs cannot exceed the costs actually incurred by the party claiming them. Accordingly, Mr Prain may not recover a sum greater than the costs he in fact incurred.

[14]              Mr Prain was originally represented by Mr McMenamin in this proceeding and at the outset of the proceeding Mr McMenamin also represented two companies which have since been removed from the Companies Office Register, being the first and second defendants.

[15]              Mr Moss has confirmed that the costs award Mr Prain seeks of $68,258.40 for the steps that relate to Mr Prain personally are less than the sum Mr Prain has incurred with his counsel. His solicitor-client costs are almost double that amount.

[16]              The first category of challenged costs by Mr Stokes is that the first, second and third defendants filed a combined statement of defence. Counsel confirms that in respect of the combined steps Mr Prain personally incurred legal costs.  The advice   I have received from counsel meets the concerns raised by the Court of Appeal that Mr Prain cannot recover costs he has not paid and will never have to pay because they were paid by the first and second defendants. Counsel confirms, and I accept counsel’s

advice on this point, that Mr Prain incurred costs for those steps and remains liable for them. As Mr Prain remains liable, the costs have not been paid. Had such costs been paid by either of the first or second defendants then Mr Prain would not remain liable for those costs.

[17]              This point is also an answer to the second, third, fourth (in part), fifth (in part), sixth (in part), seventh (in part) and eighth challenges to the costs claimed by Mr Prain.

[18]              The fourth challenge to costs claimed by Mr Prain is that he cannot claim for costs relating to the counterclaims made by the first and second defendants. Mr Stokes challenges the claim made by Mr Prain for the filing of memoranda for case management  conferences.  The   memoranda   challenged   were   filed   between   16 February 2015 and 20 June 2020. The second defendant, Apple Fields Limited, was removed from the Companies Office Register on 18 July 2018 and so the two memoranda post-dating that date can not have had anything to do with Apple Fields Ltd. The first defendant, Noble Investments Limited, was placed into liquidation on 20 December 2017 and removed from the Register in June 2019. While I have not reviewed each of the memoranda, it would appear unlikely that the memoranda after the liquidation of Noble Investments Ltd had much to do with that entity.

[19]              The fifth disputed category of costs relates to appearances at the case management conferences that followed from the memoranda referred to in the preceding paragraph. I deal with the fourth and fifth categories together.

[20]              In any event, Mr Prain had to file memoranda on his own behalf.   That     Mr McMenamin at the outset of this proceeding filed memoranda on behalf of all parties puts this into the first category.

[21]              The sixth category of costs challenged by Mr Stokes relates to the preparation of lists of documents and the seventh category of disputed costs relates to the inspection of discovered documents.

[22]              Two items relating to lists of documents were claimed. The first is Mr Prain’s original list of documents and the second was a supplementary list of documents. As

noted in [12] above, the claim for the supplementary list of documents has been deleted.

[23]              The challenge to Mr Prain’s primary list of documents is on the same two bases as already discussed, that is, that Mr Prain can not claim for costs paid by the first or second defendants or for costs in respect of the counterclaims. The response to this objection is the same as for the previous items. Mr Prain had his own discovery obligations to satisfy and he is entitled to those costs given counsel’s advice that    Mr Prain has been charged personally for this work and remains liable to meet those costs. Mr Prain did not bring a counterclaim and so that issue does not arise in relation to Mr Prain’s discovery work.

[24]              In relation to the seventh category of challenge, that is, inspection, Mr Prain has deleted the claims for inspecting the documents produced by the counterclaimants. That leaves claims for inspecting the plaintiffs’ and fourth defendant’s documents. Inspection of the plaintiffs’ supplementary list of documents is a cost created by the plaintiffs and is therefore claimable. Costs claims in respect of inspecting the fourth defendant’s documents are outside the scope of costs the Court of Appeal considered could not be claimed and so are not subject to challenge.

[25]              The eighth category of challenge relates to the filing of interlocutory applications for particulars, steps taken in relation to bringing the strike out application and opposing the plaintiffs applying to lift the stay of the proceeding. None of these items are within the categories of costs that can be challenged pursuant to the Court of Appeal Judgment save for the first item which was an application for further particulars made on 29 July 2015.

[26]              I have been through the Register of documents filed with the Court. It does not record Mr Prain filing an interlocutory application  for  further  particulars  on  29 July 2015.

[27]              On 13 April 2015, the second and third defendants filed an application seeking further particulars of the claim. Mr Prain swore an affidavit in support of that application but such would not give him the ability to claim for that application. This

item is provisionally  disallowed.  If Mr Moss  can  provide  me  with  a  copy  of  the application to which this claim relates then this issue will be revisited but in the meantime, as I have said, it is provisionally disallowed.

[28]              Having reviewed Mr Stokes’ schedule of objections, I find that none of the additional deductions identified by Mr Stokes are warranted.

[29]              Accordingly, I confirm that the third defendant, Mr Prain, is entitled to a costs award of $66,824.40 (being $68,258.40 less $1,434.00 provisionally disallowed) and judgment in that sum is entered accordingly against the plaintiffs.

Cardno’s amended claim

[30]              Mr Wolff, as requested, filed a marked-up copy of his original costs schedule showing the items deleted as a result of the Court of Appeal judgment.

[31]              Mr Stokes challenges Cardno’s claim for a supplementary list of documents filed on 23 October 2015. Mr Wolff explains that the supplementary affidavit of documents was completed in response to the plaintiffs’ second amended statement  of claim. The amended list was required because the plaintiffs’ claim against Cardno changed from a claim in contract to a claim in deceit and negligence.

[32]              Accordingly, I accept Mr Wolff’s submission that the supplementary list of documents was not due to any error or oversight by the fourth defendant in completing its initial list but was instead due to a significant change in the plaintiffs’ claim. I do not accept Mr Stokes’ challenge to this claim.

[33]              Mr Stokes then challenges four allowances sought for the inspection of documents. The first two challenges relate to inspection of documents relating to the counterclaim. Mr Wolff, in his marked-up costs schedule, accepts those items can not be claimed.

[34]              The two remaining items  relate  to  the  fourth  defendant’s  inspection  of the third defendant’s discovery. This inspection item does not relate to the

counterclaims. Mr Stokes’ objection to this ground is not one of the directed adjustments that arises from the Court of Appeal Judgment.

[35]              Mr Stokes then says that Cardno was excused from appearing at the telephone conferences as the conferences related to other parties.   As Mr Wolff  points out,   Mr Stokes does not provide any evidence of Cardno being excused or requesting to be excused from the conferences. Cardno, as a party, was entitled to attend the conferences and again an adjustment for these matters is outside the range of deductions directed by the Court of Appeal.

[36]              Accordingly, I do not accept that Mr Stokes has raised any further grounds for objecting to the costs claim of the fourth defendant and I confirm the fourth defendant’s adjusted costs claim of $77,627.20 plus disbursements and I enter judgment for the fourth defendant against the plaintiffs in that sum.

Associate Judge Lester

Solicitors:

K J McMenamin & Sons, Christchurch (for Third Defendant)

Morrison Kent Lawyers, Wellington & Auckland (for Fourth Defendant)

Copy to counsel:
J Moss, Barrister, Christchurch (for Third Defendant)

Copy to:
Mr CP Stokes – Self-represented First Plaintiff