Stonehill Trustee Limited v New Zealand Industrial Park Limited

[2019] NZHC 2406

IN THE HIGH COURT OF NEW ZEALAND HAMILTON REGISTRY

I TE KŌTI MATUA O AOTEAROA KIRIKIRIROA ROHE

CIV-2018-419-000166

[2019] NZHC 2406

IN THE MATTER

of ss 316 and 317 Property Law Act 2007

BETWEEN

STONEHILL TRUSTEE LIMITED

Applicant

AND

NEW ZEALAND INDUSTRIAL PARK LIMITED

First Respondent

YE QING

Second Respondent

Hearing:

On the papers

Appearances:

S L Robertson QC for the Applicant

D T Broadmore and HCMS Snell for the Respondents

Judgment:

23 September 2019

JUDGMENT OF WOOLFORD J

[As to costs]

This judgment was delivered by me on Monday, 23 September 2019 at 4:30 pm pursuant to r 11.5 of the High Court Rules.

Registrar/Deputy Registrar

Solicitors:           Buddle Findlay, Auckland

Bay Law Office, Auckland

Counsel:            S Robertson QC, Auckland

STONEHILL TRUSTEE LIMITED v NEW ZEALAND INDUSTRIAL PARK LIMITED [2019] NZHC 2406

[23 September 2019]

Introduction

[1]                 On 20 December 2018, I gave judgment ordering Stonehill Trustee Limited (Stonehill) to pay New Zealand Industrial Park Limited’s (NZIPL) costs which were reasonably incurred and reasonable in amount.1 NZIPL is entitled to indemnity costs under cl 7 of sch 3 of the two land covenants affecting the parties:

The Covenantor shall pay … the Covenantee’s and/or Quarry occupiers and operators’ solicitors’ legal costs and disbursements directly or indirectly attributable to the enforcement of this deed and its covenants.

[2]The issue to be determined here is the quantum of these costs.

NZIPL’s submissions

[3]NZIPL seeks indemnity costs of $141,419 and disbursements of $19,964.91:

Step	Hours worked	Fees billed (excluding GST)
Costs for first judgment:
Reviewing Stonehill’s application and preparing initial advice	21.2	$6,986.21
Drafting notice of opposition and affidavit in support	23.4	$7,727.51
Reviewing evidence and considering experts	20.5	$6,401.23
Considering further evidence and research of legal and factual issues	12.4	$5,455.30
Drafting legal submissions, researching case law, engaging experts, discussing issues with experts	188.2	$68,515.84
Preparing for and attending hearing on 29 and 31 October 2018	61.4	$21,878.16
Post-hearing attendances (but prior to judgment), including considering issues raised by Stonehill’s memorandum dated 1 November 2018 and drafting memorandum in response dated 2 November 2018	14	$5,009.54
TOTAL:	341.1	$121,973.79

1      Stonehill Trustee Ltd v New Zealand Industrial Park Ltd [2018] NZHC 3436 at [14].

Costs for second judgment on compensation and costs
Research and drafting submissions on compensation and costs, preparing bundle of authorities	12.7	$3,848.09
Reviewing and finalising submissions on compensation and costs dated 10 December 2018 and updating memorandum 14 December 2018	13.6	$4,055.35
TOTAL:	26.3	$7,903.44
Costs for stay application
Drafting and filing application for a stay dated 14 November 2018 and memoranda in support	16.7	$7,247.99
Preparing for and attending hearings of the stay application	7.9	$4,293.78
TOTAL:	24.6	$11,541.77

Disbursements
Filing fee - notice of opposition	$95.65
Land Information search fees	$356.70
Mid-Town Agency fees (for performing the Land Information searches)	$750.00
Two nights’ accommodation for two counsel – Novotel Hamilton Tainui	$753.04
Sir William Francis Birch – preparing evidence and attending hearing	$8,486.47
Richard Matthews – preparing evidence and attending hearing	$9,349.14
Filing fee – application for stay	$173.91
TOTAL:	$19,964.91

Counsel for NZIPL relies on the principles set out by the Court of Appeal in Black v ASB Bank Ltd.2 For indemnity costs claimed under a contract the Court must objectively assess:3

(a)Whether the tasks undertaken were contemplated by the contract and reasonably necessary in pursuance of those tasks;

(b)Whether the charge rates were reasonable;

(c)Whether any other general contract law principle would deny the prima facie right to judgment.

Further, counsel refers to the Court of Appeal in Beecher v Mills:4

… anything less than a full indemnity for costs properly incurred must leave the indemnitee with part of the liability for which the indemnifier is prima facie responsible. In the absence of a contrary indication it is not to be assumed that the parties intended such a result.

[4]                 NZIPL incurred costs of $141,419 for Buddle Finlay’s legal work, in three categories:

(a)Costs of $121,973.79 incurred in relation to the first judgment dated 13 November 2018. This amounted to 341.1 hours of work.

(b)Costs of $7903.44 incurred after the first judgment in relation to the second judgment on 20 December 2019. This amounted to 26.3 hours of work.

(c)Costs of $11,541.77 incurred after 13 November 2018 in relation to the application for a stay of the first judgment. This amounted to 24.6 hours of work.

2      Black v ASB Bank Ltd [2012] NZCA 384 at [78]-[99].

3      Black v ASB Bank Ltd [2012] NZCA 384 at [80], citing Watson & Son Ltd v Active Manuka Honey Association [2009] NZCA 595 at [20].

4      Beecher v Mills [1993] MCLR 19 (CA) (citations omitted), cited in Black v ASB Bank Ltd [2012] NZCA 384 at [78].

[5]                 Counsel has provided invoices issued to NZIPL by Buddle Finlay and included schedules in its submissions which details the substance of these costs. Counsel submits that all the steps taken were reasonably necessary to oppose Stonehill’s application thoroughly and comprehensively.

[6]                 Counsel notes that NZIPL is not claiming costs for advice from Buddle Finlay regarding an injunction that was not pursued; costs incurred in dealing with Havelock Bluff Limited in relation to issues of standing; costs incurred in the same period that are subject to a separate claim in the Court of Appeal or costs incurred in obtaining an opinion from Chapman Tripp on litigation strategy.

[7]                 Buddle Finlay charged NZIPL its usual hourly rate, which counsel submits is reasonable for a large Auckland law firm. Associate Judge Bell in the High Court in Black v ASB stated that parties can choose which law firm to retain, and that it is not necessary to scrutinise the reasonableness of a firm’s rates if the party had no assurance that it would be able to recover costs.5 The work for NZIPL was undertaken by a litigation solicitor, a litigation partner, a resource management solicitor, a resource management partner, and five other lawyers for a small period of time.

[8]                 Counsel submits the disbursements claimed were all reasonably necessary and are reasonable in amount. They are recorded on the invoices issued by Buddle Finlay.

Respondent’s submissions

[9]                 Counsel for Stonehill disputes the reasonableness of the costs incurred by NZIPL. Counsel relies on Bradbury v Westpac Banking Corp as authority for the principle that although a party is entitled to incur whatever level of legal costs it considers appropriate, the Court has discretion to only award the costs that were reasonably incurred.6 Counsel states that indemnity costs ought to be consistent with the fees an objective observer would have expected for this litigation.7 Therefore, counsel submits that Stonehill is not required to pay for Buddle Finlay’s “Rolls Royce level of service”. Although costs are not awarded according to the costs schedules in

5      See Black v ASB Bank Ltd (2011) 20 PRNZ 850 at [9] and [14].

6      Bradbury v Westpac Banking Corp (2008) 18 PRNZ 859 (HC) at [205].

7 At [205].

the High Court Rules 2016, counsel advises that they are useful for estimating the appropriate costs.

[10]              Further, counsel says that the respondent has failed to clearly identify the costs of each step in the proceedings. Counsel submits that actual legal costs, reasonably incurred for the proceeding should be no more than $75,000.

Discussion

[11]              The court may order a party to pay indemnity costs in a number of situations under r 14.6(4) of the High Court Rules 2016. Here, NZIPL is entitled to indemnity costs under a contract or deed pursuant to r 14.6(4)(e). Bradbury v Westpac Banking Corp cannot be relied on in this matter, as that case relates to indemnity costs awarded when a party has acted improperly, which are approached in a “distinctly different” way.8 The Court’s approach to calculating r 14.6(4)(e) costs have been summarised in Fernyhough v The Freight People Ltd:9

Such an entitlement is not subject to the Court's usual discretion as to costs but rather involves an assessment as to whether the steps taken were within the ambit of the clause, whether it was reasonable to take those steps, and whether the rates at which the work was charged were reasonable.

It is a firmly established principle that a party may contractually bind itself to pay another’s full legal costs.10

[12]              In my view, the only issue is that the schedules provided by NZIPL which set out the hours worked and fees billed by Buddle Finlay are not able to be easily reconciled with the Buddle Finlay invoices enclosed with the submissions.

[13]              The Court of Appeal noted that it is not always feasible to make a detailed assessment of the reasonableness of indemnity costs claimed under a contract. Accordingly, it suggested three options for liable parties who want the reasonableness of costs to be carefully checked:11

8      Black v ASB Bank Ltd [2012] NZCA 384 at [79], citing Bradbury v Westpac Banking Corp (2008) 18 PRNZ 859 (HC).

9      Fernyhough v The Freight People Ltd [2012] NZHC 2638 at [53].

10     ANZ Banking Group (NZ) Ltd v Gibson [1986] 1 NZLR 556 (CA).

11     Black v ASB Bank Ltd [2012] NZCA 384 at [79].

(a)Asking the Judge to order indemnity costs subject to taxation by the Registrar in accordance with rr 14.18 - 14.21 of the High Court Rules 2016;12

(b)Agreeing to be bound by the decision of a suitably qualified practitioner who vets the reasonableness of the costs;

(c)Referring the fee notes for revision to the New Zealand Law Society.

[14]              Although I am not in a position to make a detailed assessment of the reasonableness of the claimed indemnity costs, I am not satisfied that there is any basis for doubting that the invoiced costs were reasonably incurred. The costs relate to over 392 hours of work by senior lawyers in a large commercial law firm. The case involved complexities of evidence and law. It was prepared and argued under some time pressure. The stakes were high. All issues were keenly contested. A “Rolls Royce level of service” was warranted.

[15]              In those circumstances, I order that Stonehill pay costs of $141,419 and disbursements of $19,964.91 to NZIPL as indemnity costs.

Woolford J

12 This was ordered in Fernyhough v The Freight People Ltd [2012] NZHC 2638 at [56] when the Court was not able to able to determine whether the entire sum claimed was covered by the contract.