The Hong Kong and Shanghai Banking Corporation Limited v Howe

[2012] NZHC 2935

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2012-404-0419 [2012] NZHC 2935

BETWEEN  THE HONG KONG AND SHANGHAI BANKING CORPORATION LIMITED Plaintiff

ANDBETSY-ANN HOWE First Defendant

ANDCHRISTOPHER SIMON HOWE Second Defendant

Hearing:         15 May 2012

Appearances: Ms Chamberlain for Plaintiff

Ms Halloran for Defendant

Judgment:      7 November 2012

JUDGMENT OF ASSOCIATE JUDGE DOOGUE [on Costs]

This judgment was delivered by me on

07.11.12 at 4.30 pm, pursuant to

Rule 11.5  of the High Court Rules.

Registrar/Deputy Registrar

Date……………

Counsel:

MinterEllisonRuddWatts, P O Box 3798, Auckland – nikki-

[email protected]

Chris Patterson Barristers, 36 Kitchener Street, Auckland – [email protected]

THE HONG KONG AND SHANGHAI BANKING CORPORATION LIMITED V HOWE HC AK CIV-2012-

404-0419 [7 November 2012]

[1]      In this case the parties are in dispute concerning the extent of indemnity costs which the plaintiff seeks to recover.  The plaintiff recovered $32,994.83 plus interest of $1,345.80.  The plaintiff seeks to recover legal costs on a solicitor/client basis of

$33,945.85.  The plaintiff is entitled to recover the costs charged because its contract with the defendants says so.  But there are limits to what the plaintiff can recover. The costs must be reasonable.  The defendants did not contractually engage to pay legal costs which are unreasonable.

[2]      Traditionally, the approach taken to assessing the fairness and reasonableness of costs includes matters such as what is at stake and the result obtained for the client.  In my view if there was a dispute between the bank and its lawyers over the costs in this case there would be good grounds for the bank to decline to pay costs which represented over 100 percent of the amount at stake and what was recovered. On the other hand, it may be that the bank has happily paid those costs not because it considers them to be reasonable but because it believes that it can recover them from the defendants.   But the bank cannot outflank the limits of reasonableness in the costs that it recovers in this way.

[3]      The Court has to take a robust view of these issues.  The alternative is that it will get mired down in expert opinions about what are reasonable costs in all the circumstances.   In my view what costs represent a reasonable proportion to the amount at stake and the amount recovered must lie somewhere along a continuum. One of the problems is that the bank may take the view that it is not the money that matters but that it must be seen as being the type of organisation which strictly enforces debts owed to it no matter how small they are.  The bank has not however put forward such considerations in this case.   I therefore approach matters on the basis that the amount of what the bank would reasonably spend on pursuing the defendants in this case has to have some economic rationality.  Incurring fees which are over a 100 percent of the amount at stake is not rational or reasonable.  What is rational and reasonable having taken account of the matters that I have been referring to?  A range of figures might fall into the category of a reasonable fee.  In my view that band would extend from 50 percent of the amount at stake up to 66 percent (two

thirds).   In terms of figures that represents a range of approximately $16,500 to

$21,000.  Dealing with matters in the round I would select the figure of $20,000 as the approximate upper limit.  Accordingly I order that the plaintiff is entitled to a judgment   for   solicitor/client   costs   in   the   sum   of   $20,000   together   with disbursements.  I understand that there is no dispute about the disbursements charged but to cover the eventuality of any such dispute, in case the parties are unable to

agree the amount of disbursements they are to be fixed by the Registrar.

J.P. Doogue

Associate Judge