Station Properties Limited (in rec) v Kumar HC Auckland CIV 2009-404-000354

[2011] NZHC 595

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV 2009-404-000354

BETWEEN  STATION PROPERTIES LIMITED (IN RECEIVERSHIP)

Plaintiff

ANDVIKRAM KUMAR NIRUPAMA KUMAR Fourth Defendants

ANDROBERT JAMES SELWYN Fifth Defendant

AND  MICHAEL DONALDSON

PATRICIA BRONWYN DONALDSON Sixth Defendants

Hearing:         Telephone Conference - 17 June 2011

Appearances: J S Cooper and S East for the Plaintiff

R Kelly and Ms Jarvis for the Fourth, Fifth and Sixth Defendants
M J Tingey for BOS International (Australia) Limited

Judgment:      21 June 2011 at 11:30 AM

COSTS JUDGMENT OF WYLIE J

This judgment was delivered by Justice Wylie on 21 June 2011 at 11.30 am

Pursuant to r 11.5 of the High Court Rules

Registrar/Deputy Registrar

Distribution:
J S Cooper: [email protected]

R Kelley: [email protected]

M J Tingey: [email protected]

STATION PROPERTIES LIMITED (IN RECEIVERSHIP) V V KUMAR & ORS HC AK CIV 2009-404-

000354 21 June 2011

[1]      I convened a telephone conference on 17 June 2011 to deal with costs and other matters which have arisen in relation to these proceedings.   I deal with the various matters in turn.

Security

[2]      In my minute of 13 June 2011, I required that the defendants pay into Court as security interest at the Judicature Act rates on the full amount of each claim for the period of the adjournment.  I left it to the parties to agree on those sums.

[3]      It transpired that Ms Cooper’s calculations contained in her memorandum dated  10  June  2011  were  incorrect.    The  correct  amounts,  calculated  at  the applicable Judicature Act interest rates for the period of the adjournment are as follows:

(a)       Fourth defendants, $12,824.95; (b)      Fifth defendant, $11,580.25;

(c)       Sixth defendants, $10, 085.28.

Ms Kelly for the defendants has confirmed that these figures are accurate.

[4]      In my minute, I required that these amounts should be paid to the Registrar on or before 5.00 pm on Friday, 17 June 2011.  Ms Kelly has advised me that the defendants have sent their respective cheques to the Registry.  She has also advised that airmail from the South Island to the North Island has been delayed, because of the recent ash clouds from the volcanic eruption in Chile.  I have indicated to her that I would not consider her clients to be in breach if the cheques do not reach the Court before 5.00 pm on Friday, 17 June 2011.  Ms Cooper accepted this position. I have directed the Registrar to make enquiry on Wednesday, 22 June 2011 to ensure that the payments have been received.  If they have not been received, then I reserve leave to the parties to come back to me in this regard.

Amended Pleadings

[5]      Prior to its change of stance on Friday, 10 June 2011, the plaintiff had been pushing hard for the hearing to commence on 20 June 2011.   I was therefore surprised to receive a third amended consolidated statement of claim dated 17 June

2011,  as  well  as  an  amended  reply to  the  statements  of  defence  filed  by  the defendants.

[6]      I pointed out to Ms Cooper that the matter has been set down, and that amended pleadings can only be filed with the leave of the Court.1     Ms Cooper responded by asserting that the amended pleadings simply update matters, and that they  do  not  introduce  any  substantive  changes.    Ms  Kelly  had  not  had  an opportunity to consider fully the amended pleadings.   Her preliminary view was that Ms Cooper’s assertions may not be altogether accurate.

[7]      I have quickly perused the amended pleading.   They make a significant number of changes.  Some may go beyond updating.

[8]      Ms  Kelly  advised  that  she  was  prepared  to  consent  to  the  amended statement of claim, as long as she could file an amended statement of defence. Ms Cooper resisted that suggestion, and proposed that any amended statement of defence should be limited to any amendments necessitated as a result of her amended pleading.

[9]      I cannot see that  the restriction  suggested  by Ms Cooper is  fair in the circumstances, particularly if the plaintiff’s amended statement goes beyond updating.

[10]     I direct as follows:

(a)       The defendants are to advise the plaintiff if they oppose the amended pleadings by 5.00 pm on Friday, 24 June 2011.

1      High Court Rules, r 7.18.

(b)If the defendants oppose the amended pleadings and the plaintiff wishes to persist with the same, then it is to file and serve an application for leave by 5.00 pm on 1 July 2011.

(c)      Any amended pleadings which the defendants wish to file are to be filed and served by 5.00 pm on 1 July 2011.

(d)Any notice of opposition by the defendants to such application as shall be made by the plaintiff, is to be filed and served by 5.00 pm on

8 July 2011.

(e)      The plaintiff is to advise the defendants if it opposes any amended pleadings the defendants have filed by 5.00 pm on 8 July 2011.

(f)      If  the  plaintiff  opposes  any  amended  pleadings  filed  by  the defendants, and the defendants wish to persist with the same, then the defendants are to file an application for leave by 5.00 pm on

15 July 2011.

(g)Any notice of opposition which the plaintiff wishes to file is to be filed and served by 5.00 pm on 22 July 2011.

[11]     Any argument about amendments to the pleadings can be dealt with by the trial Judge when the trial commences on Monday, 12 September 2011.

Timetable

[12]     I  gave  the  parties  the  opportunity  to  try  and  reach  an  agreement  on timetabling issues.  Regrettably, they were unable to do so.  I have considered their respective submissions.  Both refer to the delays which have occurred and both note the fact that Associate Judge Abbott’s decision only became available on 27 May

2011.  I acknowledge that this was not of the parties’ making.

[13]     I direct as follows:

(a)      The defendants’ briefs, and an index of documents, are to be filed and served by 5.00 pm on 1 July 2011.

(b)The plaintiff’s briefs in response to the affirmative defences, and in reply, and any further index of documents are to be filed and served by 5.00 pm on 1 August 2011.

(c)       The  defendants’  briefs  of  evidence  in  reply  on  the  affirmative

defences,  are  to  be  filed  and  served  on  or  before  5.00  pm  on

17 August 2011.

(d)A common bundle of documents is to be filed and served by the plaintiff on or before 5.00 pm on 2 September 2011.

(e)      The plaintiff ’s synopsis of its opening, and a chronology, are to be filed and served on or before 5.00 pm on 6 September 2011.

[14]     The plaintiff has sought unless orders.  The defendants resist unless orders, or in the alternative, suggest that unless orders should be made in respect of both parties’ obligations.

[15]     The reality is that both parties have breached the default rules.

[16]     The plaintiff argues that it could not be expected to comply with the default rules, because of the then pending hearing on the interlocutory applications which was  scheduled  for  18 March  2011.    It  then  says  that  it  did  not  file  its  briefs promptly because there was uncertainty about whether Bell Gully could act until Associate Judge Abbott’s decision was released on 27 May 2011.  It notes that it did make application to the Court for directions about the content of its briefs. Unfortunately, that issue was not dealt with by the Court promptly.  The plaintiff did file briefs of evidence dealing with its claim on 20 May.  The briefs did not deal with the affirmative defences.

[17]     The defendants did not file their briefs in accordance with the default rules either.  They say that they did not have the plaintiff’s briefs until 20 May 2011.  On

1 June 2011, Associate Judge Abbott made an order that the defendants file their briefs of evidence by 7 June 2011.  The defendants note that they submitted at the time that that timeframe was impossible.  Associate Judge Abbott considered that they should have been ready to file their briefs, and that they should have been preparing under the default rules.  I agree with him.

[18]     Whatever the rights and wrongs of the matter, it seems to me that this is a situation where both parties have failed to comply with the Rules.  The loss of the fixture date arises from the fact that neither party was ready for trial.

[19]     In the circumstances, it is in my view appropriate to make unless orders, and in respect of both parties.  I direct that in the event that any of the parties fails to comply with the timetable directions set out above, then its pleading is to be struck out, and the other party/parties may proceed to judgment accordingly.

Costs

Costs to BOS International (Australia) Limited

[20]     BOSI seeks indemnity costs to cover its actual expenses.   It refers to the relevant rules and argues that the defendants’ application:

(a)       was unnecessarily broad;

(b)      was not supported by appropriate affidavit evidence;

(c)       was  not  withdrawn  after  BOSI  voluntarily  made  the  specific documents sought available;

(d)      had to be dealt with urgently.

[21]     Mr  Tingey  for  BOSI  outlined  the  steps  taken  by  BOSI  to  inspect  the documents held by it and to oppose the application. An affidavit has been filed by a Mr Ward annexing a copy of Bell Gully’s invoice to BOSI.  He records that 15.24 hours of partner time was charged out at $600 per hour, and that 22 hours of

solicitors’ time was charged at $250 per hour.  The total amount claimed for legal costs incurred by BOSI is $18,082.03.  In addition, BOSI seeks reimbursement in the sum of $1,750, for the seven hours its employee, a Jennifer Gratton, spent on the matter.  Her time has been calculated on the basis of $250 per hour.

[22]     Ms Kelly for the defendants does not oppose the payment of BOSI’s actual and reasonable costs.  She submits however, that the costs sought are excessive.  In particular, she queries how a senior BOSI staff member could spend seven hours locating two documents.  She also notes that the claim for legal costs is based on time totalling 37 hours and 24 minutes, and that the rates charged are high.  She suggests that a reasonable order would require that the defendants pay BOSI no more than $4,000.

[23]     BOSI is not a party to these proceedings, and I accept that BOSI’s actual and reasonable costs in attending to discovery at the defendants’ request should be reimbursed to it.2    I am however concerned at both the time taken, and the hourly rate claimed  in  these particular  proceedings.    I accept  that  some  urgency was required by BOSI and its legal advisors, given the timeframe that BOSI had to work within.   Moreover,  I accept that the defendants  could and should have sought

non-party discovery from BOSI much earlier.  However, the matter was relatively straightforward, and it should not have required any detailed research or analysis. In my judgment, both the time allowance sought and the hourly rates claimed are high for a matter of this kind.  In my judgment, a reasonable allowance for BOSI’s legal fees in this proceeding is $10,000.   In addition, the defendants should pay BOSI’s actual costs for its staff time.   There is no reason to question the time claimed for Ms Gratton or the basis of the cost’s calculation.  While BOSI has only discovered two documents, her involvement would have extended well beyond simply locating those two documents.

[24]     Accordingly, I direct that the defendants are to pay costs to BOSI in the sum of   $11,750.      In   addition,   the   defendants   are   to   pay   BOSI’s   reasonable

2      Berryman Properties Ltd v Colonial Mutual General Insurance Co Ltd (1987) 1 PRNZ 196 (HC); Clear Communications Ltd v Telecom Corp of New Zealand Ltd (1994) 8 PRNZ 200 (HC); Carlin Enterprises Ltd v Fright Aubrey Ltd HC Christchurch CIV-2007-409-2030, 13

December 2010.

disbursements.   They are listed on the invoice as $383.50.   They have not been challenged.   The total amount required to be paid by the defendants to BOSI is therefore $12,133.50.

[25]     The defendants are jointly and severally liable for that sum.

Plaintiff ’s costs

[26]     In a memorandum dated 10 June 2011, Ms Cooper sought increased and/or indemnity costs  on  the  applications  determined  by me  in  my oral  decision  of

13 June  2011.    Having  received  my  oral  judgment,  the  plaintiff  now  seeks indemnity costs.  It also seeks indemnity costs on the defendants’ application for an adjournment, notwithstanding that the plaintiff withdrew its opposition to the adjournment following the hearing on 9 June 2011.

Submissions

[27]     Ms Cooper refers me to r 14.6, and to the decision of the Court of Appeal in Bradbury v Westpac Banking Corporation.3   She submits that indemnity costs may be ordered where a party has acted either badly or very unreasonably, and that they are appropriate where:

(a)       allegations of fraud are made, knowing them to be false, or there are irrelevant allegations of fraud;

(b)there is particular misconduct that causes loss of time to the Court and to other parties;

(c)       proceedings are commenced for some ulterior motive;

(d)proceedings are commenced in wilful disregard of known facts or clearly established law, or

3      Bradbury v Westpac Banking Corp [2009] 3 NZLR 400.

(e)       allegations are made which ought never to have been made, or

(f)       a case is prolonged unduly by groundless contentions.

[28]     Ms Cooper then took me through each of the applications.  In regard to the application for review, she submitted that the defendants acted vexatiously and improperly.  She asserted that the allegation that Mr Galbraith QC and/or Bell Gully had misled the Court was serious, and that the application was misconceived and in disregard of clearly established law.  She also submitted the application was made for an ulterior motive.  In regard to the application for an extension of time, she submitted that the application was lacking in  merit, and would not have been required had the defendants made their application for review within time.   In regard to the application for non-party discovery, she submitted that the defendants acted improperly and unnecessarily, by failing to specify what documents were sought  or  why  discovery  was  necessary,  in  making  the  application  only  two working days after a request was first made by the defendants for the plaintiff to request specific discovery from BOSI and in circumstances where the plaintiff had made a “without prejudice except as to costs” offer to allow the documents to be provided, in pursuing the application despite BOSI agreeing to provide the specific documents sought, and in making the application when there was inordinate and inexcusable delay.  Further, she submitted the application was calculated to divert the resources of the plaintiff away from preparation of the trial and increase the likelihood of a delay to the trial of the proceedings.  In regard to the application for an adjournment, she submitted that an award of costs was appropriate, because the application  was  unnecessary,  except  as  a  consequence  of  the  defendants’ own disobedience  of  timetabling  orders,  and  its  failure  to  prepare  for  trial.    She submitted that had the defendants complied with previous timetabling orders, and served their briefs on 7 June 2011, the plaintiff would not have been forced to concede the issue, and an adjournment would not have been necessary.   She submitted that the defendants were not placed under unreasonable or unforeseeable time pressure to complete their briefs, and that it was the defendants’ failure to do so that necessitated an adjournment of the trial.   Ms Cooper also sought costs in regard to the unless orders.

[29]     Indemnity costs were sought in the sum of $46,113.93.  An affidavit was filed by a Ms Kennedy detailing how costs in this sum were calculated.  Ms Cooper submitted that the costs, although significant, were reasonably incurred, and that the plaintiff was forced to respond to the applications under extreme urgency, less than two weeks before trial, and without the opportunity to instruct counsel of its choice.

[30]     In the event that I do not consider it necessary to order indemnity costs, Ms Cooper submitted that costs should be ordered on a 3B basis, in view of the complexity, urgency and seriousness of the applications, with a 50 per cent uplift to reflect the fact that the defendants’ actions have contributed unnecessarily, and without justification to those costs.

[31]   Ms Kelly submitted that the plaintiff’s claim for indemnity costs is misconceived.  She argued that the time pressures that both parties had faced since Associate  Judge Abbott’s  decision  was  delivered  on  27  May  2011  have  been immense, and that neither party had adhered to the default directions.  She noted that the defendants did not complain of the plaintiff’s departures from the default directions.  She submitted that the time pressure within which the defendants had to make the various applications was extremely tight, and that it was the very tight timeframe which is the principle cause of any inadequacies in the defendants’ papers.   She further argued that the defendants explored avenues for cost containment, and sought consent to the disclosure of documents and admissions. She submitted that actions taken in regard to the alleged misleading statements made by senior counsel for Bell Gully were courteous and respectful, and that there was no assertion of misconduct or impropriety by anyone.  She submitted that the defendants had not made a scurrilous attack on either Mr Galbraith, or Bell Gully, which warranted sanction.  She also denied that the defendants’ application was “in disregard of clearly established law”.   She refuted any suggestion that the defendants’ applications had been made for an ulterior motive.  She suggested that the Bradbray principles did not apply in the circumstances, and that the plaintiff had not met the onus on it of proving that indemnity or increased costs are justified. She also noted that the plaintiff had previously accepted that costs should be calculated on a 2B basis, and that its claim that costs should now be calculated, in

the alternative, on a 3B basis was inconsistent with those previous assertions.  She submitted that an appropriate order was scale costs on a 2B basis.

Analysis

[32]     Costs are, of course, at the discretion of the Court.   There are, however, general principles applicable to their determination.  Those principles are set out in r 14.2.

[33]     Here, it is appropriate to require the defendants to pay costs, because they failed with respect to their various interlocutory applications.   Further, it is appropriate that any award of costs should reflect the complexity and significance of the proceedings.

[34]     Increased and/or indemnity costs can be ordered pursuant to r 14.6 where the appropriate circumstances are made out.

[35]     Against this background, I deal with each application in turn:

[36]     I held that the application to review Associate Judge Abbott’s decision was filed out of time, and I declined to allow an extension of time.  I cannot however accept  Ms  Cooper’s  submission  that  the  defendants  acted  vexatiously  and improperly in seeking to review the decision.

[37]     The application raised two issues – first, whether or not counsel for the plaintiff,  before  Associate  Judge  Abbott  had  misled  the  Court,  and  secondly, whether or not Associate Judge Abbott had jurisdiction to deal with Bell Gully’s role in the proceedings.

[38]     The first matter involved a serious allegation.  However, I accept Ms Kelly’s submission that the defendants proceeded appropriately, and in a way which was consistent with professional etiquette and courtesy.  Ms Kelly was careful to note that there was no assertion of misconduct or impropriety.  I did not consider that Ms Kelly’s contentions could be made out.   It does not however follow that they

ought never to have been made.  The argument was open to the defendants on the documents.   I have found that the arguments advanced were wrong and that the Associate Judge  was  not  misled.   There is  no  basis  for  the assertion  that  the defendants acted vexatiously or improperly.  Nor can it be said that the application was misconceived or that it was made in disregard of clearly established law.  There were a number of decisions where Associate Judges had dealt with applications seeking directions that counsel should not appear in particular sets of proceedings. Ms Kelly quite properly referred me to one of those decisions of which she was aware.   None of the earlier decisions dealt expressly with the point raised by Ms Kelly.   It was novel, and in the event, I have not accepted her submissions. Nevertheless, the argument cannot be said to have been in disregard of clearly established law, or misconceived.  Rather, it was wrong.  Nor can it properly be said that the application was brought for an ulterior motive.  There is no evidential basis for that submission.  It is unfortunate that the outstanding interlocutory applications had to be dealt with so late in the day, but that was not altogether the fault of either party.

[39]     Equally, the application for an extension of time cannot be said to be lacking in merit.  I declined it, for the reasons which I have set out.  The defendants failed to file their application for review within time, and in the event, I held that time was critical in the context of the proceedings as they then stood.  Given my decision in relation to the time requirements contained in the rules, the defendants had no option but to apply for an extension of time, and they advanced the best arguments which were open to them.

[40]     In my view, the only factor which could be said to justify departing from the cost rules contained in the High Court Rules is the fact that the plaintiff had to prepare to deal with the application as a matter of some urgency.  I note however, that urgency was not confined to the plaintiff.  The defendants also had to act in considerable haste.  Further, the need for urgency was not occasioned by either of the parties.   Rather, it was caused by the fact that there was little time available between the release of the Associate Judge’s decision and the scheduled hearing date.  In my view, it would be unfair to visit that fact on the parties.

[41]     Accordingly, I direct that costs in relation to the application to review, and the application to extend time, should be fixed on a 2B basis.  I would invite the parties to endeavour to reach agreement on the steps which have been taken, and to apply the appropriate scale.  If there is disagreement, then the same is to be referred to me within 10 working days of the date of release of this judgment.  The costs are payable by the defendants on a joint and several basis.

[42]     I take a rather less sympathetic view from the defendants’ perspective in relation to the application for non-party discovery.  In my judgment, the application was poorly drafted.  It was not backed up by the appropriate affidavit evidence.  It could never have succeeded.  Further, for the reasons which I have set out in my judgment, the application should have been made at a very much earlier stage.

[43]     In my view, it is appropriate to award increased costs under r 14.6(3)(d). The appropriate costs category is 2B.   The plaintiff was required to take steps urgently to resist the defendants’ application.   Given that the application should have been made very much earlier in the proceedings, it is entitled to additional costs for that urgency.   In my view, it is appropriate to increase the costs which would have otherwise have been awarded on a 2B basis by 50 per cent to recognise the onerous time obligations imposed on the plaintiff. Accordingly, I direct that the plaintiff is entitled to costs from the defendants on a 2B basis in relation to the application for non-party discovery and that in addition, the costs should be increased by 50 per cent from the costs which would otherwise be payable on a 2B basis.  Again, I invite the parties to reach agreement in relation to these matters.  If they are unable to do so, then I direct that the dispute should be referred to me.  The costs are payable by the defendants on a joint and several basis.

[44]     I have already dealt with the applications for an adjournment and for unless orders.  Both parties breached the default rules.  Further, the defendants breached specific orders made by the Court.  As a result, I have imposed unless orders on both parties.

[45]     In my judgment, costs in relation to the application for an adjournment, which was ultimately consented to by the plaintiff, should lie where they fall, and

there should be no costs order in relation to the application for unless orders, given

that it has been made against both parties.

Wylie J