Tandem Group Ltd v ASB Bank Ltd
[2021] NZHC 1135
•20 May 2021
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2020-004-43
[2021] NZHC 1135
BETWEEN TANDEM GROUP LIMITED
Plaintiff
AND
ASB BANK LIMITED
Defendant
Hearing: On the papers Counsel:
J W Turner and J C Waugh for plaintiff
Z G Kennedy and H M Jaques for defendant
Judgment:
20 May 2021
JUDGMENT OF KATZ J
[Costs]
This judgment was delivered by me on 20 May 2021 at 3:30 pm Pursuant to Rule 11.5 High Court Rules
Registrar/Deputy Registrar
Solicitors: Devonport Law Limited
MinterEllisonRuddWatts, Auckland
Counsel: J Turner, Chancery Chambers, Auckland
Z G Kennedy, Barrister, Auckland
TANDEM GROUP LIMITED v ASB BANK LIMITED [2021] NZHC 1135 [20 May 2021]
Introduction
[1] Joe and Zena Clark are longstanding clients of Tandem Group Limited (“Tandem”), an accounting firm. An employee of Tandem, Shaun Quigley, defrauded the Clarks of $200,000. Tragically, when his fraud was discovered, Mr Quigley took his own life.
[2] Mr Quigley’s estate was insolvent, so Tandem repaid the $200,000 owing to the Clarks. In exchange, the Clarks assigned Tandem their interest in any claims against ASB Bank Limited (“ASB”), who had processed the fraudulent cheque. Tandem has since issued this proceeding against ASB. In response, ASB filed an interlocutory application seeking an order for defendant’s summary judgment or, in the alternative, an order striking out one or more of Tandem's causes of action.
[3] On 2 February 2021, I dismissed ASB’s summary judgment/strike out application.1 While Tandem’s case did not appear strong, ASB had failed to establish that Tandem’s causes of action were untenable or unarguable.2
[4] I reserved leave to file memoranda if costs could not be agreed.3 Costs have not been agreed. Tandem seeks costs and disbursements of $24,227.50. ASB contends that the appropriate costs award is $8,173.80. The key issues requiring determination are:
(a)Should costs be fixed and payable, fixed but not payable pending the outcome of the trial, or reserved?
(b)Is Tandem entitled to claim for legal costs incurred in the preparation of the affidavits it filed in opposition to ASB’s application?
(c)Should costs be awarded for second counsel?
(d)Should a disbursement be awarded for the fees of Tandem’s expert banking witness?
1 Tandem Group Ltd v ASB Bank Ltd [2021] NZHC 51.
2 At [66].
3 At [68].
Should costs be fixed and payable, fixed but not payable pending the outcome of the trial, or reserved?
[5] Tandem submitted that costs should be fixed and payable at this stage in respect of ASB’s application on the following basis:
(a)In respect of the strike out aspect of the application, Tandem submitted costs should be fixed and payable at this stage in accordance with r 14.8 of the High Court Rules 2016 (the “Rules”).
(b)In respect of the summary judgment aspect of the application, Tandem submitted costs should be fixed and payable, utilising the Court’s discretion to override the r 14.8(3) exception for summary judgment applications, because:
(i)the general rule is that it is typically appropriate to fix costs at the time of the judgment;
(ii)the applications were inappropriate as there was no clear legal impediment to liability nor a complete and incontrovertible answer on the facts;4 and
(iii)counsel for Tandem sent ASB a letter dated 27 May 2020 expressing the view that the application was unlikely to succeed and attaching a settlement offer (for the whole claim). ASB failed to accept that settlement offer or withdraw its application.
[6] ASB, on the other hand, submitted that the Court should exercise its discretion to reserve costs or alternatively to fix costs but not require payment at this stage as:
(a)ASB was not aware of the existence of disputed facts prior to filing its application. It provided Tandem’s lawyers with the relevant ASB file note logging the phone call. Any disagreement with the existence of the phone call was not apparent from the correspondence between the parties nor Tandem’s statement of claim; and
4 Suharnan v Brookfields [2013] NZHC 586, (2013) 22 PRNZ 790 (HC) at [13].
(b)ASB succeeded in the interlocutory proceeding insofar as the Court accepted (for the purposes of the strike out/summary judgment applications) that ASB’s terms and conditions applied so as to exclude liability for anything but wilful negligence or dishonest assistance.
[7] The general rule is that the party who fails with respect to a proceeding or an interlocutory application should pay costs to the party who succeeds.5 Rule 14.8 further provides that unless there are special reasons to the contrary, costs on an opposed interlocutory application must be fixed when the application is determined and become payable when they are fixed.6 However, r 14.8(3) specifically excepts applications for summary judgment. This is subject to the overriding rule that costs are at the discretion of the court.7
[8] Best practice following a plaintiff’s unsuccessful summary judgment application will typically be to reserve costs rather than make them costs in the proceedings.8 The courts have recognised, however, that there are differences between applications for plaintiff’s and defendant’s summary judgment that may warrant a different costs approach.9 There is no settled practice in respect of costs following unsuccessful defendants’ summary judgment applications.10 Each case will turn on its own facts.11
[9] Tandem submitted that ASB’s application was inappropriate as there are disputed facts. Specifically, Tandem referred to the issue of whether the alleged phone call on 8 April 2016 between Mrs Clark and Ms Counsell took place at all and, if it
5 High Court Rules 2016, r 14.2(1)(a).
6 Rule 14.8(1).
7 Rule 14.1.
8 NZI Bank Ltd v Philpott [1990] 2 NZLR 403 (CA) at 406.
9 Suharnan v Brookfields [2013] NZHC 586, (2013) 22 PRNZ 790 (HC) at [13].
10 Miah v National Mutual Life Association of Australasia Ltd [2016] NZCA 590, [2017] 2 NZLR 241 (CA) at [61], n 39.
11 See Schmidt v Registrar-General of Land [2015] NZHC 2438, (2015) 22 PRNZ 794 (HC) (costs reserved); EBS v CAS [2014] NZHC 2929 (costs reserved); Miah v National Mutual Life Association of Australasia Ltd [2016] NZCA 590, [2017] 2 NZLR 241 (CA) (costs fixed but not payable); Surhanan v Brookfields [2013] NZHC 586, (2013) 22 PRNZ 790 (HC) (costs awarded to plaintiff where the unsuccessful strike out and summary judgment applications covered essentially the same ground); and Judge v Dempsey [2014] NZHC 2864 (costs awarded to plaintiff in respect of unsuccessful defendant’s summary judgment application).
did, whether the identity of the payee of the cheque (Mr Quigley) was verified during the phone call, as claimed by Ms Counsell.
[10] There do not appear to be any documents that would have alerted ASB to the fact that these matters were in dispute prior to ASB filing its strike out/summary judgment application on 21 April 2020. However, in Ms Clark’s affidavit in opposition of 22 May 2020 she deposed that she did not “recall” the relevant telephone conversation and challenged that she could have been told that Mr Quigley was the payee of the cheque, as she said she only discovered that fact later. The existence of the call was also expressly disputed in Tandem’s notice of opposition and was addressed in Tandem’s submissions. ASB was therefore on notice of this factual dispute prior to the interlocutory hearing (although not at the time that it filed its application). This factor weighs in favour of costs being fixed and payable now, rather than later.
[11] A further relevant factor is that the strike out application (in respect of which Tandem is entitled to costs following the event) and the summary judgment application cover essentially the same ground. It would be artificial, in my view, to attempt to allocate costs between the two applications, with the strike out costs payable now and the summary judgment costs reserved until later.
[12] Taking these factors into account, it is my view that the costs for both applications should be fixed and payable now.
Should costs be awarded to Tandem for the preparation of its affidavit evidence?
[13] Tandem submitted that it should receive an award of costs in respect of the preparation of its affidavit evidence in opposition to ASB’s application.
[14] ASB, on the other hand, submitted that the Rules do not provide for costs to be awarded for preparing affidavit evidence in relation to an interlocutory application. Rather, ASB submitted, the costs associated with preparing affidavit evidence are covered by the time allocations in steps 22 and 23 of sch 3 to the Rules. The affidavit evidence in this case, however, is not so extensive as to warrant a departure from that default position. Further, Tandem’s factual evidence was of limited scope and any
legal costs associated with “assembling” the expert evidence of Mr Anderson were likely to be relatively modest.
[15] Item 30 of sch 3 of the Rules originally appeared under the hearing “Trial preparation and appearance” and provided for a cost allocation to be made for “Plaintiff’s or defendant’s preparation of briefs or affidavits”. The relevant rules were amended in August 2019 to separate out the cost allocations that could be claimed for affidavit hearings and witness hearings. Item 30 now appears under the heading “Preparation for affidavit hearing” and allows for a cost allocation for the preparation of affidavits for such hearings. Item 33, on the other hand, relates to the preparation of briefs for a witness hearing. It is clear, however, that the recent amendments to the Rules were not intended to expand the ambit of the previous rule and allow parties to claim for the preparation of affidavits for interlocutory hearings as of right.12 Rather, the preparation of interlocutory affidavits is covered by item 22 (filing interlocutory application) and item 23 (filing opposition to interlocutory application). (I note in this context that rules 7.20 and 7.25 respectively provide that supporting affidavits must be filed contemporaneously with an interlocutory application or notice of opposition.)
[16] In some cases, however, particularly where affidavit evidence is complex and comprehensive, an additional award of costs may be justified. As Cooke J observed in Re Miah the most natural way to address this would be to allow a party to make a claim under time band C for item 22 or 23, rather than time band B (if that is the appropriate band for other steps).13 In Miah, however, his Honour was satisfied that much of the affidavit preparation was covered by the disbursement and the allowance provided for the other steps and to make a further cost allocation for the preparation of affidavits would involve double counting.
[17] Here, Mr Turner did not attempt to rely on item 30 of sch 3 to justify a costs allocation for the affidavits filed in opposition. Instead, he submitted that rules 14.2(1)(c) and (d) justify such an outcome. Rule 14.2(1)(c) provides that costs should be assessed by applying the appropriate daily recovery rate to the time considered
12 See the minutes of the Rules Committee’s meetings of 2 October 2017, 27 August 2018 and 26 November 2018.
13 Re Miah [2019] NZHC 1836 at [8]. See also Prasad v Prasad [2016] NZHC 474.
reasonable for each step reasonably required in relation to the proceeding or interlocutory application. Rule 14.2(1)(d) provides that an appropriate daily recovery rate should normally be two-thirds of the daily rate considered reasonable in relation to the proceeding or interlocutory application.
[18] In my view, rules 14.2(1)(c) and (d) are not directed to the present circumstances and do not assist Tandem. The relevant “steps” for the purposes of r 14.2(1)(c) are generally those set out in sch 3. If there is a lacuna in sch 3, and a particular step is not covered, then r 14.5 provides for an analogy to be drawn with the steps in sch 3. Here, however, there is no lacuna. Tandem’s affidavits in opposition to ASB’s interlocutory hearings are included within the scope of item 23 (filing opposition to interlocutory application).
[19] In the alternative, Tandem submitted that it should be awarded increased costs for the preparation of its affidavit evidence (but not the other steps claimed) on the basis that ASB had contributed unnecessarily to the time or expense of the proceeding or a step in it by taking or pursuing an unnecessary step or an argument that lacks merit, or failing without reasonable excuse to accept Tandem’s legal arguments (as set out in a lawyer’s letter sent prior to the hearing).14 In particular, Tandem submitted that ASB contributed unnecessarily to the time or expense of the proceeding by failing to recognise the existence of a factual dispute concerning the alleged phone call between Mrs Clark and Ms Counsell.
[20] As I have noted above, however, the existence of this factual dispute did not come to ASB’s attention until after Tandem’s notice of opposition and supporting affidavits had been filed (and the associated costs incurred). There was nothing prior to that date that would have reasonably alerted ASB to this potential factual dispute. If ASB had discontinued its application after the notice of opposition and affidavits had been filed, it would have saved only the costs of writing submissions and attending the hearing. Similarly, Tandem’s “settlement offer” of 27 May 2020 post-dated the filing of its affidavits. Tandem’s costs of preparing its affidavits could not therefore
14 Rules 14.6(3)(b)(ii) and (iii).
have been reasonably avoided. In my view there is nothing in ASB’s conduct prior to the filing of Tandem’s affidavits that could justify an award of increased costs.
[21] Increased costs are not sought for hearing preparation and attendance. In any event, I would not have been persuaded to grant such costs. Although the affidavits raised a potential factual dispute, it was not clear cut. Mrs Clark could not specifically remember the relevant conversation and ASB had a contemporaneous file note supporting its version of events. It was not unreasonable in such circumstances for ASB to proceed on the basis that the Court may well be persuaded to take a robust approach to the apparent factual dispute.
[22] I further note that Tandem’s evidence will not be “wasted”. It is squarely directed to issues that are likely to be a key focus of the substantive hearing. Tandem’s affidavit evidence will likely form the basis for its briefs of evidence for the substantive hearing.
[23] In conclusion, the costs of preparing affidavits in opposition to ASB’s application is covered by item 23 of sch 3. There is no basis for awarding a separate costs allocation for this item or making an order for increased costs in respect of the preparation of Tandem’s affidavits.
Should costs be awarded for second counsel?
[24] Tandem claimed costs for second counsel. Both parties were represented at the hearing by two counsel.
[25] ASB submitted that costs should not be awarded for second counsel as none have been certified and second counsel’s support was unnecessary.
[26] The default position in sch 3 of the Rules is that provision is made for one counsel in a proceeding.15 Generally, a category 2 case must have some exceptional
15 See Prattley Enterprises Ltd v Vero Insurance New Zealand Ltd [2017] NZHC 1599, (2017) 23 PRNZ 484 (HC) at [44].
feature to justify a second counsel allowance.16 In Nomoi Holdings Ltd v Elders Pastoral Holdings Ltd, Chambers J considered that:17
The approach is always objective and is focused on the nature of the proceeding, not the actual counsel involved and how he or she or they choose to conduct the litigation. Elders may well have received considerable value from having Mr Crossland as second counsel. That is irrelevant, however, to the question I have to determine, namely whether the nature of this proceeding, given the way the trial was conducted, was such as to justify requiring the losing party to contribute to the winning party’s cost in having a junior counsel present.
[27] In my view this case did not have any exceptional feature justifying a costs allowance for second counsel.
Should a disbursement be awarded for the banking expert’s fees?
[28] Tandem seeks to be reimbursed $6,900 in respect of the fees billed by its banking expert, Mr Anderson, who filed an affidavit on Tandem’s behalf. Mr Turner submitted that Mr Anderson’s expert evidence was required in order to address various aspects of Ms Counsell’s evidence, including the extent to which ASB’s High Value Cheque protocol was complied with and the unusual features of the forged cheque.
[29] ASB submitted that Mr Anderson’s evidence will inevitably be called at trial and that costs associated with the preparation of that evidence should therefore be dealt with after trial, once the substantive merits have been determined.
[30] This case bears some similarities to Little v Warwick, where Associate Judge Smith rejected a claim for disbursements relating to expert evidence prepared and utilised in a plaintiff’s opposition to a summary judgment application.18 His Honour considered:19
… that the expert witness expenses claimed should be deferred for consideration after trial. The summary judgment application did not fail because one or other party clearly prevailed on the issues addressed in the expert evidence, and I think the overall justice of the situation will be sufficiently met if a costs award at this stage is limited to reflect only the defendants’ failure on the issues concerned with the Drybuild Report
16 At [44].
17 Nomoi Holdings Ltd v Elders Pastoral Holdings Ltd (2001) 15 PRNZ 155 (HC) at [21].
18 Little v Warwick [2019] NZHC 1622, (2019) 24 PRNZ 614 (HC) at [1] and [3].
19 At [37].
(and my view that the case was never suitable for determination once those issues were appreciated). The work of the expert witnesses will be required for the trial in any event, and in my view the question of witness expenses for that work is better left for consideration after trial.
[31] Here, Mr Anderson’s expert evidence is likely to form a cornerstone of Tandem’s evidence at trial. It is therefore appropriate that the costs of his evidence be reserved until the outcome of the substantive hearing.
[32] I further note that the key reason why ASB’s application failed was due to the existence of an apparent factual dispute between Mrs Clark and Ms Counsel. Mr Anderson’s evidence was not addressed to this issue and was accordingly somewhat peripheral to the Court’s decision to dismiss ASB’s application. At trial, however, Mr Anderson’s evidence may well assume much greater significance.
[33] In all the circumstances the appropriate course is for costs issues relating to Mr Anderson’s evidence to be resolved post trial.
Result
[34]Tandem is awarded costs on a 2B basis in the sum of $8,173.80.
Katz J
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