Transport Investments Limited v Petroleum Logistics Limited

[2013] NZHC 2307

IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY

CIV-2011-485-002427 [2013] NZHC 2307

BETWEEN

TRANSPORT INVESTMENTS LIMITED

Plaintiff

AND

PETROLEUM LOGISTICS LIMITED First Defendant

ROBERT JAMES McKAY BOLTON Second Defendant

Judgment:                5 September 2013

JUDGMENT OF COLLINS [As to Costs (No. 2)

[1]      I refer to counsels’ memoranda of 23 July and 9 August 2013 and my costs

judgment of 12 July 2013.

[2]      This proceeding settled on 9 May 2013.  However, the parties were unable to reach agreement on costs.  In my judgment of 12 July 2013 I determined Transport Investments Ltd (TIL) were entitled to costs on a scale 2B basis, as it had substantially succeeded despite settling the proceeding for a substantially lesser sum than it initially claimed.

[3]      I also determined TIL was entitled to be paid disbursements of $6,665.81, which did not include a fee for the valuation of shares carried out by Grant Thornton, which I considered to be unreasonable.  In my judgment I said I would not order Petroleum Logistics Ltd (PLL) to pay that fee unless TIL provided a compelling

reason.

TRANSPORT INVESTMENTS LIMITED v PETROLEUM LOGISTICS LIMITED [2013] NZHC 2307 [5

September 2013]

[4]      TIL now contests the amount of disbursements awarded.   TIL says it  is entitled to its share of Mr Hagen’s fee of $5,031.25, and approximately 60 to 70 per cent of Grant Thornton’s fee of $94,296.82.

Mr Hagen’s fee

[5]      Mr Hagen was appointed by the parties to determine the market value of Petroleum Logistics Pacific Ltd as at 27 July 2011.  The parties agreed he would not be acting as an arbitrator, but as an umpire.

[6]      TIL submits that $5,031.25 is a recoverable disbursement, as both parties accepted an estimate of $10,000 and as the successful party, TIL should recover its share of Mr Hagen’s fee.   PLL disputes that TIL is entitled to claim any part of Mr Hagen’s fee as a disbursement.  PLL submits Mr Hagen’s fee is not a true cost in the litigation as Mr Hagen was appointed by the parties to resolve the dispute outside of the Court process.

[7]      “Disbursement” is defined in r 14.12 as “an expense paid or incurred for the purposes of the proceeding that would ordinarily be charged for separately from legal professional services in a solicitor’s bill of costs”.

[8]      There is no requirement for the expense to be directly linked to litigation or a Court hearing, as opposed to alternative dispute resolution processes, so long as the cost is incurred “for the purposes of the proceeding”.

[9]      I am satisfied Mr Hagen’s fee is a cost that was incurred “for the purposes of the proceeding” so as to provide a mechanism for the settlement of the proceeding.

[10]     I am satisfied therefore that TIL is entitled to its share of Mr Hagen’s fee as a

disbursement, namely $5,031.25.

Grant Thornton’s fee

[11]     This fee relates to valuation evidence that was provided to TIL by Grant

Thornton in the hearing before Mr Hagen.

[12]     The parties had agreed that each parties’ expert would make submissions and reply  submissions  on  the  proper  value  of  Petroleum  Logistics  Pacific  Ltd  to Mr Hagen.  Mr Taylor made submissions on behalf of PLL and Mr Davis from Grant Thornton made submissions on behalf of TIL.  The fees charged by Grant Thornton came to $94,296.82.  Mr Taylor’s fees were $45,161.

[13]     Disbursements can only be included in an award of costs to the extent that they are reasonable.1    In my judgment of 12 July 2013 I determined that the disbursement for Grant Thornton’s fees was unreasonable, as it amounted to more than twice the amount charged by Mr Taylor.

[14]     TIL now says that 60 to 70 per cent of the fee charged by Grant Thornton should be recoverable as a disbursement.  This submission is based on r 14.12(3) of the High Court Rules.

[15]     PLL says TIL has not provided a compelling reason why it is entitled to have any part of Grant Thornton’s fee paid as TIL initially claimed that Petroleum Logistics Pacific Ltd was valued at $1,538,400, almost three times the final value determined by Mr Hagen.  PLL says that the approach taken by TIL prolonged the litigation and made it more costly than it needed to be.

[16]     In  this  proceeding  it  was  necessary  for  both  parties  to  engage  expert witnesses to provide evidence on quantum and participate in the valuation process conducted by Mr Hagen.   It was a complex valuation exercise which required the analysis of financial and statistical data as well as the presentation of submissions before Mr Hagen.  Expert witness fees are generally recoverable as a disbursement if they are reasonably necessary for the conduct of the proceeding and are reasonable.

[17]     Therefore, upon reflection, I am satisfied that TIL is entitled to recover an amount which represents a reasonable figure for its expert witness fee.   In my assessment, a reasonable sum is $47,148.41, being 50 per cent of Grant Thornton’s

fee and slightly more than Mr Taylor’s fee.

1      High Court Rules, r 14.12(2)(d).

Result

[18]     TIL is  entitled  to additional  disbursements  of $5,031.25  and  $47,148.41, being a total of $52,179.66.

D B Collins J

Solicitors:

Reeves Middleton Young, New Plymouth for Plaintiff

Crengle Shreves & Ratner, Wellington for First and Second Defendants