Southpac Trust Limited v Reeves

[2016] NZHC 2182

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2016-404-966 [2016] NZHC 2182

BETWEEN

SOUTHPAC TRUST LIMITED

Applicant

AND

SEAN ST LEGER REEVES First Respondent

MELANIE WALSER REEVES Second Respondent

Hearing:	On the papers
Appearances:	S Hood for Applicant J Waugh and C M Webster for First Respondent
Judgment:	15 September 2016

JUDGMENT OF LANG J

[costs on application for search orders]

This judgment was delivered by me on 15 September 2016 at 3.30 pm, pursuant to Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar

Date……………

SOUTHPAC TRUST LTD v REEVES [2016] NZHC 2182 [15 September 2016]

[1]      On 11 May 2016 Woodhouse J granted an interlocutory application by the plaintiff, Southpac Trust  Limited (Southpac), for search orders in respect of the residence occupied by the respondents, Mr and Mrs Reeves.   Southpac’s solicitors executed  those  orders  on  12  May  2016  in  the  presence  of  Mr  Stewart,  an independent solicitor appointed by the Court to oversee that process.  There followed a series  of telephone  conferences  before me in  which  issues  arising out  of the execution of the search orders were discussed and further directions given.

[2]      Southpac now asks that costs be fixed against Mr Reeves in relation to the search orders that it obtained.   It has already discontinued the proceeding against Mrs Reeves on the basis that costs should lie where they fall.

Should costs be awarded at this point?

[3]      Mr Waugh acknowledges on Mr Reeves’ behalf that r 14.2 of the High Court Rules contains a presumption that costs should generally be fixed following the determination of an interlocutory issue.  He submits, however, that it is appropriate in the present case for costs in relation to the search orders to be deferred until discovery issues have been resolved.

[4]      I do not accept this submission.  The search orders aspect of the proceeding has now been finalised, and it is appropriate that costs in relation to that aspect now be fixed.

Indemnity costs

[5]      Southpac seeks an award of indemnity costs in its favour.  Mr Hood submits that Southpac was justified in taking the steps that it did because its concerns were ultimately found to be justified.  He also contends that Mr Reeves’ initial refusal to open the door when the search orders were executed is relevant in this context, and he had earlier destroyed written material relevant to this proceeding.  Southpac also relies on other issues that arose following execution of the orders.

[6]      The Court of Appeal discussed the circumstances in which indemnity costs will be awarded in Bradbury v Westpac Banking Corporation.1    In that case the Court of Appeal confirmed that indemnity costs will generally only be ordered where a party is guilty of flagrant misconduct.2

[7]      I have also considered the other decisions referred to me in support of the application by Mr Hood.3    I do not consider the circumstances in those cases to be remotely comparable with those in the present case.  In his reply memorandum Mr Hood sought to rely on matters that led to the search orders being made, but I consider those issues to be relevant to the substantive proceeding and not to the application for search orders. Furthermore, I consider that, for the most part, Mr

Reeves cooperated with the search process and also in obeying directions made by the Court.  I see no justification in the present case for an award of indemnity costs.

Quantum of costs

[8]      Southpac is clearly entitled to an award of costs in its favour because it was the successful party.4   I award costs as sought at paragraph 11 of the memorandum of counsel for the plaintiff dated 17 August 2016 subject to the following amendments and comments:

(a)      Mr Waugh contends that Southpac should receive an award calculated at no more than .6 of a day in relation to the preparation and filing of the   original   interlocutory   application   and   supporting   affidavits. Having reviewed the file, I am satisfied that the amount of material Southpac  was  required  to  provide  in  support  of  the  application justifies the award that it seeks.   I therefore grant costs on a Category

2C basis for this step under Item 22 in the Third Schedule to Part 14

of the High Court Rules.

1      Bradbury v Westpac Banking Corporation [2009] NZCA 234, [2009] 3 NZLR 400.

2      At [27]-[29].

3      Hoole v Darby HC Auckland CIV-2006-404-5235, 30 March 2007; Hunter Grain Ltd v Price

HC Tauranga CIV-2008-470-192, 22 December 2008; Prebble v Awatere Huata [2005] 1 NZLR

289 (SC).

4      High Court Rules, r 14.02(a).

(b)Similarly, I am satisfied that it was appropriate for counsel for the plaintiff to be present when the search orders were executed.  I allow one day as sought for this item.

(c)      Given the presence of the independent solicitor during the search I do not consider that Mr Reeves should also be required to pay costs in respect of the attendance of second counsel for the plaintiff at that time. That claim is disallowed.

(d)Item 11 in Schedule 3 permits an award calculated at .4 of a day in respect of filing memoranda for case management conferences. Southpac is entitled to recover at that rate in respect of all memoranda filed prior to case management conferences.

(e)      Item 13 in Schedule 3 permits attendances at case management conferences to be recovered at the rate of .3 of a day.  It follows that the plaintiff’s claims in relation to those items are also allowed.

Disbursements

[9]      The issue of claimable disbursements is governed by r 14.12 of the High Court Rules.  In general terms, the successful party to a proceeding will be permitted to claim a disbursement where it is incurred for the purpose of the proceeding and would ordinarily be charged for separately from legal professional services in a solicitor’s bill of costs.5

[10]     Mr Reeves does not contest the amount claimed in respect of the attendances of Mr Stewart, the independent solicitor appointed by the Court to oversee the execution of the search orders.   The claim in respect of Mr Stewart’s costs is accordingly approved.

[11]     Similarly, Mr Reeves does not contest the costs incurred by Southpac in relation to the engagement of Mr Whale, who was Southpac’s forensic computer

expert.  I therefore approve that claim as sought.

5      High Court Rules, r 14.12(1)(a).

[12]     Southpac also seeks to recover the sum of $52,110.42 in respect of costs paid to its private investigator, Mr Toreson.   Mr Toreson assisted the execution of the search orders by uplifting items found at Mr Reeves’ residence and delivering them to Mr Whale for forensic analysis.   He also subsequently uplifted Mrs Reeves’ cellphone and delivered it to Mr Whale for downloading and analysis.

[13]     It appears that Mr Reeves does not contest Southpac’s claim in relation to Mr Toresen’s attendances as a matter of principle, but submits those costs must be necessary and reasonable.   Mr Waugh contends that on the material currently available there is no means of knowing whether that is the case.

[14]     I accept that it was reasonable in the circumstances for Southpac to engage Mr Toreson to carry out background research and to provide practical assistance in relation to the search process.  In particular, he provided the means by which items uplifted from Mr and Mrs Reeves could be kept secure and delivered to and from Mr Whale and other parties.   I therefore approve the claim for reimbursement of Mr Toreson’s costs in principle and to the extent they can be shown to be necessary, reasonable and proportionate.

[15]     I accept Mr Waugh’s submission that it is not possible at this stage to reach an informed decision in relation to those issues because Mr Toreson’s accounts do not provide sufficient detail relating to the attendances in respect of which they were rendered.  I propose to deal with this issue by making a direction that the Registrar is to exercise the powers of the Court under r 14.12(2) and (3) in relation to the claim for Mr Toreson’s costs.  I note that r 14.12(3) permits the Court to reduce the amount payable in respect of a disbursement where the amount claimed is disproportionate in the circumstances of the proceeding.

[16]     Southpac and/or Mr Toreson shall provide Mr Mortimer, the Registrar at Auckland, with further details regarding the amounts claimed in each invoice.  The Registrar shall then determine the extent to which the claim for Mr Toreson’s costs should be allowed.

[17]     I am uncertain what the sum of $468.79 claimed in respect of LawFlow Discovery set up and hosting for June relates to.  I make a direction under r 14.12(4) that the Registrar is to determine whether that expense is properly claimable in terms of r 14.12(2)(b),(c) and (d).

Result

[18] I award Southpac costs on a category 2B basis in accordance with the conclusions set out at [8].

[19]     I approve the claim for disbursements comprising the court filing fees, search fees and the costs paid to Mr Stewart and Mr Whale.

[20]     I approve the claim in respect of Mr Toreson’s costs in principle but make a direction under r 12.14(4) that the Registrar shall determine the extent to which those costs are claimable having regard to the matters referred to in r 14.12(2) and (3).

[21]     I make a further direction under r 14.12(4) that the Registrar shall determine whether the sum of $468.79 is claimable having regard to the matters referred to in r

14.12(2) and (3).

Lang J

Solicitors:

Norris Ward McKinnon, Hamilton
Devonport Law, Auckland