Solicitor-General of New Zealand v Bujak

[2013] NZHC 800

IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY

CIV-2007-485-000522 [2013] NZHC 800

IN THE MATTER OF an application under the Proceeds of Crime Act 1991 and Mutual Assistance in Criminal Matters Act 1992

BETWEEN  THE SOLICITOR-GENERAL OF NEW ZEALAND

Applicant

ANDSLAWOMIR RYSZARD BUJAK First Respondent

ANDDANUTA ALEKSANDRA ZALWOWSKA-SPISAK Second Respondent

CIV-2008-409-001901

AND BETWEEN            MARCOS ERIK MONASTERIO AND MARIA JOSE MARCOS MOYA Plaintiffs

ANDSLAWOMIR RYSZARD BUJAK First Defendant

ANDDANUTA ALEKSANDRA ZALWOWSKA-SPISAK Second Defendant

ANDHUGH SHEARER Third Defendant

Hearing:         14 April 2013 (On the papers)

Counsel:         M F Laracy for Solicitor-General

R Johnstone for Dr Monasterio and Mrs Moya
Dr Deliu for self

Judgment:      18 April 2013

THE SOLICITOR-GENERAL OF NEW ZEALAND V BUJAK & Anor HC CHCH CIV-2007-485-000522 [18

April 2013]

JUDGMENT OF FOGARTY J

Introduction

[1]       On 21 December 2012, this Court held in these proceedings that it was open to Dr Deliu to make an application to this Court to recover costs, due to him from Mr Bujak, against a fund held by the Official Assignee.  That fund was the balance of the proceeds of sale of an asset released from a freezing order against Mr Bujak’s assets, made under the civil jurisdiction of this Court in 2008.  There was another order, a foreign restraining order (FRO), obtained by the Solicitor-General under the Mutual Assistance in Criminal Matters Act 1992 (MACMA) and the Proceeds of Crimes Act 1991 (POCA), at the request of the Polish Central Authority for Mutual Assistance.

[2]        The Solicitor-General, pursuing the interests of Poland, was arguing that the FRO  trumped  the  freezing  order,  with  the  consequence  that  there  was  no  fund against which this Court could consider an application by Dr Deliu for his fees.

[3]      Associate Judge Matthews had upheld the argument of the Solicitor-General in his judgment dated 14 May 2012.   Dr Deliu had applied for a review of that judgment.    The  judgment  of  21  September  was  the  judgment  on  review,  and Mr Bujak succeeded effectively.

[4]      Dr Deliu has applied for costs, covering both hearings.  The issue in this case is first whether or not Dr Deliu is entitled to costs.  He is a barrister of this Court and was acting for himself. The second issue is the amount of costs.

Entitlement to costs

[5]      In Deliu v Hong,[1] Winkelmann J held that:

[11]      ...lawyers  who  bring  or  defend  a  proceeding  in  their  own  name,  are generally entitled to the same costs as when acting on behalf of a client. Although this exception may be due for reconsideration, the principle is nevertheless binding on this Court in New Zealand.

[1] Deliu v Hong [2012] NZHC 2468.

[6]       For both propositions, she cited Brownie Wills v Shrimpton.[2]     The High Court of Australia has expressed some doubt as to the validity of the exception, see Cachia v Hanes.[3]

[2] Brownie Wills v Shrimpton [1998] 2 NZLR 320 (CA), at 327 (per Gault and Blanchard JJ).

[3] Cachia v Hanes (1994) 179 CLR 403, at 412.

[7]      In Brownie Wills v Shrimpton, Brownie Wills the law firm was represented in the High Court and in the Court of Appeal by an associate of the firm, Mr Hair.  The doubts cast on the principle that a lawyer litigant may have the same costs as if another lawyer had been instructed did not really engage on these facts, where the principals of the firm were using an associate of the firm to defend their interests.  In that sense, it could be seen that they were directly incurring costs in the provision of legal services.

[8]      The principle, as enunciated by the Court of Appeal in Brownie Wills is not, however, qualified.  There, Gault and Blanchard JJ observed that they had not “been asked to reconsider the question”, “and so we do not depart from the practice of allowing costs to a solicitor/litigant”.

[9]      The question has been asked in this case.   I record that, as the Solicitor- General may wish to take this point to the Court of Appeal.  But in the meantime, I think the appropriate course for this Court is to follow the Court of Appeal in Brownie Wills.

The background context

[10]     Mr  Bujak  was  a  Polish  citizen,  wanted  by Polish  authorities.   While in New Zealand, he had acquired assets, including a house in Christchurch. As well  as being pursued by Polish authorities, he was being sued by Mr Monasterio and his wife for defects in the house.  They had brought the house from him.  They were

alleging it was a leaky home. At the same time as Mr Bujak was fighting extradition

orders,   Mr   Monasterio   and   his   wife   obtained   a   Mareva   injunction,   which subsequently became a domestic civil freezing order.

[11]     Mr Bujak applied to get some relief from this freezing order, in order to raise funds to meet his legal expenses, fighting the extradition and other litigation.  The High  Court,  in  March  and August  2009,  allowed  Mr  Bujak  to  sell  one  of  the properties to meet his legal expenses.  This was done, realising $285,000.  This fund was applied in discharge of the mortgage over the property sold, and in part towards legal costs of a law firm and Mr Orlov.  There was still a surplus left over.  Dr Deliu was another lawyer acting for Mr Bujak.  He did not get payment from the proceeds of the sale of this property.

[12]     On the day the property was sold, the Solicitor-General became aware of the fact that it had been owned by Mr Bujak.  The Solicitor-General, being unaware of the property, had not had an opportunity to put a caveat against it.  The Solicitor- General  then  filed  applications  to  intervene  in  the  leaky  home  proceedings,  to transfer the foreign restraining order to Christchurch, and for Mr Bujak’s assets to be taken into the custody and control of the Official Assignee.

[13]     Dr Deliu applied to the High Court to be joined as a party to either the foreign  restraining  order  proceedings  or  the  leaky  home  proceedings.     His application also asked for funds held by the office assignee under the freezing order to be released from the freezing order to pay his legal fees.  He was claiming about

$18,000 in relation to the extradition proceedings, and $15,000 in relation to the leaky home proceedings.   He argued that the foreign restraining order could not trump the freezing order, and that the solicitors were wrong to pay themselves and Mr Orlov, but not him.

[14]     The Crown applied to claw back the funds that had been paid to the law firm for their work, and for the work done by Mr Orlov.  That application failed in the judgment of this Court of 24 November 2011.   In the meantime, Dr Deliu’s application had neither been allowed nor dismissed.  The High Court held that that application could not be heard in the context of the Solicitor-General’s application. Dr Deliu was invited to file a fresh application by way of originating application

instead.  No such application was filed.  Dr Deliu attempted to appeal that decision. The Court of Appeal rejected the appeal on the basis that Dr Deliu was not a party to the underlying proceedings, and there had been no ruling on his applications.

[15]     Notwithstanding these procedural difficulties, in  the end,  the High  Court (Associate  Judge  Matthews)  dealt  with  the  core  contest  between  the  Solicitor- General and Dr Deliu, namely, whether the foreign restraining order trumped the civil freezing order.   Associate Judge Matthews held it did.   Dr Deliu applied to review that decision, and that was heard before me on 14 September 2012.   As already noted in the introduction, I held that, notwithstanding the presence of an FRO, there was still the ability in the New Zealand jurisdiction to release funds held by the Official Assignee to  meet  legal  costs,  and  I invited  Dr  Deliu  to  do  so. However, because the sum at stake and the sums available were limited, and because there were a number of complainants to the same sum, I suggested in the judgment, to both Dr Deliu and the other parties involved, that they sort the matter out informally.   This has happened.   Dr Deliu reports that he has recovered, by an informal settlement, approximately 80% of what he considered he was entitled.

Dr Deliu’s application for costs

[16]     Dr Deliu seeks now an order for costs to be met by either the Solicitor- General or the Attorney-General, or both.   He argues that the Crown acted unreasonably throughout the relevant proceedings, by taking an untenable position in relation to jurisdiction.  He argued that the very steps he took reflected a complicated and significant matter, warranting a category 3 classification and a comparatively large amount of time for each step.   He notes that costs calculated on this basis would exceed his actual costs.  Accordingly, he asks the Court for an award of his actual costs and disbursements, totalling $63,993.80.

The Solicitor-General’s submissions

[17]     The Solicitor-General argued that this claim was not covered by rr 14.2 to

14.10, and the Court, to entertain the claim, has to fall back on r 14.1, which creates a  general  discretion  for  the  High  Court  to  award  costs  in  relation  to  a  civil

proceeding.  There are a number of reasons advanced by the Crown as to why the particular rules could not apply.  This included the fact that Mr Deliu was not a party to either the civil proceedings (he was applying to become one), or to the FRO proceedings.    His  application  could  not  be  neatly identified  as  an  interlocutory application.  The Solicitor-General and the Attorney-General were not parties to the civil proceedings.  The Attorney-General was not party to the FRO proceedings. The only involvement of the Attorney-General was to decline to cancel the FRO.  That could not be a basis for a costs award.  Dr Deliu was joined as a party to the FRO proceedings, but only on 14 May, and the Crown argued any claim for costs could only be those incurred after that date.

[18]     All of the above is correct as a matter of specific detail.  But none of these details can obscure the fact that there was a contest between the Solicitor-General, acting on behalf of the Polish authorities, and Dr Deliu over financial assets held by the Official Assignee, being the surplus of the funds from the sale of one of Mr Bujak’s properties.

[19]     The pleadings were unorthodox, to the extent they existed at all, but brought the issue to a hearing in the High Court.  Both the Solicitor-General and Dr Deliu submitted to the jurisdiction of the High Court.

[20]     Essentially, the arguments of the Solicitor-General that Dr Deliu was not a party are technical and unmeritorious.  Rule 1.3(1) defines party as meaning:

Any  person  who  is  a  plaintiff  or  a  defendant  or  a  person  added  to  a proceeding.

A literal and narrower application of that definition would mean that rr 14.2 and following do not apply, because they address parties.

[21]     Rule 14.1 is more general, it provides:

14.1   Costs at discretion of court

(1)     All matters are at the discretion of the court if they relate to costs—

(a)     of a proceeding; or

(b)     incidental to a proceeding; or

(c)     of a step in a proceeding.

(2)       Rules 14.2 to 14.10 are subject to subclause (1).

(3)       The provisions of any Act override subclauses (1) and (2).

[22]     The Court of Appeal held in Glaister v Amalgamated Dairies Ltd[4]  that the general discretion is to be exercised in a principled way.  In particular, it said at [24]:

... the discretion exists to enable the unexpected and the unforeseen to be fairly accommodated.

[4] Glaister v Amalgamated Dairies Ltd [2004] 2 NZLR 606, at [21], [22], [24].

[23]     I take into account also r 1.6:

1.6     Cases not provided for

(1)     If any case arises for which no form of procedure is prescribed by any Act or rules or regulations or by these rules, the court must dispose of the case as nearly as may be practicable in accordance with the provisions of these rules affecting any similar case.

(2)     If there are no such rules, it must be disposed of in the manner that the court thinks is best calculated to promote the objective of these rules (see rule 1.2).

[24]     Ms Laracy submitted:

Most of the interlocutory application remains unresolved.  [Later] Mr Deliu was joined as a party to both proceedings in May 2012 without opposition. This, however, was not the focus of the application.  It was simply a means to an end.  In his decision of 21 December 2012, Justice Fogarty found only that there was jurisdiction to consider an application to vary the terms of the foreign restraining order to allow funds to be released for legal expenses. His  Honour  advised  that  the  substantive  question  of  whether  Mr  Deliu should be paid would have to be the subject of a further application and hearing.

[25]     As I have already observed, although I did that, I also encouraged the parties to reach a settlement, rather than bring the matter back to the Court, because there seemed to me to be insufficient funds to justify further litigation in the High Court.

That was done, and it was successful, as far as Dr Deliu is concerned.

[26]     The Crown also argued that even classifying the High Court decision as a success for Dr Deliu is questionable, as I disagreed on all the points put forward by Dr Deliu and agreed with most of the Solicitor-General’s submissions.  That is the way of litigation.   But the fact remains that Dr Deliu succeeded in attaining his goal, by bringing his application to the High Court.

[27]     The Solicitor-General argues costs should be assessed as if the dispute was resolution of an interlocutory application.  Ms Laracy relies upon the fact that:

In discussing the nature of the application, Associate Judge Osborne commented that it appeared, on its face, to have been filed as “an interlocutory application by a non-party”.

[28]   Costs could be analysed as if this were a decision on an interlocutory application, lost before Associate Judge Matthews, but won on review.   I think, however, that that would not be a fair basis for assessing the costs.  Rather, I think a fairer comparison is of a critical issue of law being argued and decided, with the likely consequence that the rest of the case will settle.  A very difficult problem of statutory interpretation divided the Solicitor-General and Dr Deliu.  In that context, the case can be classified as a Banco case.  The time allocations in schedule 3 for trial preparation and appearance are not appropriate.   Closer comparables are the allowances for originating applications before the hearing before Associate Judge Matthews, and on appeal in the hearing before this Court.

[29]     Rule 14.7(e) provides:

(e)      the proceeding concerned a matter of public interest, and the party opposing costs acted reasonably in the conduct of the proceeding; or

[30]     I agree that this application did concern a matter of public interest.   It was entirely appropriate for the Solicitor-General on behalf of the New Zealand Government to pursue the interests of the Polish Government.   The case in that regard was one of public interest.

[31]     There has not been a great deal of litigation on r 14.7.   I do not think this point carries the matter very far for the Solicitor-General in this case.   This is because the argument was essentially a Banco one on an interpretation point.

[32]     I am more impressed with the argument that  the Court should take into account Dr Deliu’s status as a solicitor litigant.   There are some basic difficulties quantifying the “costs” of a solicitor litigant.  They are not actually costs incurred, as in sums of money paid to another.  The High Court schedule is designed to calculate a sum equivalent to two-thirds of the costs that ought to be paid reasonably by a litigant for legal services.   In fact, when a solicitor litigant is acting for himself/herself, the time spent is an opportunity cost.  The opportunity to earn other fees depends on the demand for that person’s services at the material time.  If there is no demand, there is no significant opportunity cost.

[33]     The other problem with this case is that a lot of the work Dr Deliu did in preparation for it was wasted.  The case law allowing solicitor litigants to recover costs dates back to London Scottish Benefit Society v Chorley.[5]    The Master of the Rolls, Brett M R, writing in support of a solicitor litigant recovering costs, said, however:

I should have thought that a person wrongfully brought into litigation ought to be indemnified against expenses to which he is unjustly put; but there cannot be a perfect indemnity, because it is impossible to determine how much of the costs is incurred through his own over-anxiety.

[5] London Scottish Benefit Society v Chorley (1884) 13 Q.B.D. 872.

[34]     The  Court  received  voluminous  material  from  Dr  Deliu,  being,  in  the Crown’s submission, “rather disorganised exhibits, which consisted of photocopies of other legal records.”  As is often the case when persons appear for themselves, usually lay litigants, the Court has to sort through the voluminous material filed, in order to find the “oats”.

[35]     Dr Deliu is correct to record in his submissions that I observed on several occasions that the point was very difficult.  The Court differed, in the end, from the analysis of Associate Judge Matthews, which was itself detailed and thorough.  The Court would not have been surprised if the matter were taken on to the Court of Appeal. The point is now moot, as the FRO has been withdrawn.

[36]     The Crown submitted that treating this as an application for interlocutory relief, and calculated on the basis of a 2B categorisation, an appropriate costs order

would be of the level of approximately $5,000.   That, in turn, should be reduced because of the Solicitor-General’s reasonable conduct.

[37]     This was a Banco issue (ie, a legal point) of considerable complexity.  To be argued, it required a careful understanding of the current litigation and its history.

$5,000 is an inadequate sum.  It is not remotely near what would be two-thirds of the cost of mastering the statutory materials, formulating an argument, and presenting them in Court.

[38]     I think the better approach in this case is to approach the preparation before Associate Judge Matthews as an originating application, and preparation on the review as an appeal, and look at the time allocations in schedule 3 in that context. However, it would be appropriate also to keep in mind Dr Deliu’s favourable status as a solicitor litigant.

[39]     As a preliminary point, I need to examine the contest as to whether these costs should be calculated as a category 2 or category 3 case.  I intend to calculate costs focussing on the immediate preparation for the legal point calculating costs under items 40,  preparation of submissions; item 42, appearance at the hearing before Associate Judge Matthews, on review; item 56, preparation of submissions; and 57, appearance at hearing.

[40]     This is a particularly difficult issue of statutory interpretation, by reason of there being two overlapping statutes which had been amended several times.  It was not a subject easy to get into, nor easy to resolve.   I classify these items as proceedings that, because of their complexity or significance, require counsel to have special skill and experience in the High Court.  The Crown argued to the contrary.  I disagree,  from  my  experiencing  in  grappling  with  the  interpretation  issues. Similarly, I consider that they should be band C under r 14.5(2)(c), as it did require a comparatively large amount of time for such counsel to come to grips with the argument.  Ms Laracy did.  Again, I make my judgment against the difficulties that I had, even with the advantage of the illuminating analysis of Associate Judge Matthews.

[41]     On this basis, in the proceedings before Associate Judge Matthews, I allow for  3  days  for  preparation  and  written  submissions  and  1  day  for  the  hearing. Turning to the review, items 52, 56 and 57 would allow a total of 10 days.  10 days for the review is inappropriate.  The review was category C, in that it called for very experienced counsel, but the argument was the same, but needed to take into account Associate Judge Matthews’ ruling.  On items 52, 56 and 57, I allow a total of 5 days.

[42]     That brings the overall total to 9 days at a category 3 rate, which is $26,460.

[43]     However, I think it is appropriate to take into account two factors, namely, that Dr Deliu’s submissions on the statutory interpretation point did not identify the critical points, and, second, that he was not incurring direct costs.  I also take into account that these rules do not apply directly.  I consider myself justified to fall back on r 4.1(1), having done my best to follow r 1.6.  It is my judgment that the sum of

$20,000 would be a fair order for costs, for appearances of counsel, for appearance by Dr Deliu, arguing his case before Associate Judge Matthews, and then on  a review before me.

[44]   Dr Deliu is awarded the sum of $20,000 in costs plus out of pocket disbursements,  any  filing  fees,  photocopying  costs,  etc.   Any dispute  as  to  the disbursements can be referred to me by both parties exchanging draft submissions of no more than two pages, and filing them at the same time.

Solicitors:

Crown Law, Wellington,  [email protected]

Wynn Williams, Christchurch,  [email protected]

Copy to:

Dr Deliu, Auckland,  [email protected]