Trustees Executors Ltd v Fund Managers Canterbury Limited

[2015] NZHC 41

IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY

CIV-2014-485-4040 [2015] NZHC 41

BETWEEN

TRUSTEES EXECUTORS LTD Plaintiff

AND

FUND MANAGERS CANTERBURY LTD

First Defendant

DELOITTE Second Defendant

DELOITTE LTD Third Defendant

GRAEME MAIN Fourth Defendant

ALEXANDER DONALD MCBETH, PAUL ERNEST MCEWAN, ALAN WILLIAM PRESCOTT, GEOFFREY READ THOMAS, ANDREW HENDRA YOUNG and OLIVER RODERICK MATSON

Fifth Defendants

YOGESH MODY First Third Party

AIG NEW ZEALAND LTD Second Third Party

On thepapers:	2 December 2014
Counsel:	C M Stevens, A L Holloway and I Tokmadzic for Plaintiff D R Weatherley for First and Fifth Defendants D J Cooper and J E Standage for Second and Third Defendants H D P van Schreven for Fourth Defendant P R Jagose and J W Upson for First Third Party P L McKinnon for Second Third Party
Judgment:	29 January 2015

TRUSTEES EXECUTORS LTD v FUND MANAGERS CANTERBURY LTD & ORS (COSTS) [2015] NZHC 41 [29 January 2015]

JUDGMENT OF WILLIAMS J (COSTS)

[1]      On  6  October  2014,  I  struck  out  Deloitte’s  third  party  notice  against Mr Mody as an abuse of process.  There were two live issues at that interlocutory hearing:

(a)       whether the liability of Deloitte and Mr Mody arose “in respect of the same

damage” in terms of s 17(1)(c) of the Law Reform Act 1936; and

(b)       whether  Deloitte’s  claim  was  an  abuse  of  process  because  Mr  Mody’s liability in contribution was co-extensive with Trustees Executors Ltd (TEL)’s contributory negligence.

[2]      On each issue respectively, I found:

(a)       Deloitte and Mr Mody were responsible “in respect of the same damage” under the Law Reform Act – the damage being $46 million in unitholder investments; and

(b)       the  doctrine  of  identification  applied  as  Mr  Mody’s  responsibility  as employee of TEL could not “on any view of the pleadings” be anything other than co-extensive with that of TEL.

Issues with costs

[3]      Both Mr Mody and TEL seek costs on a 2B scale basis with an uplift of

50 per cent, in accordance with r 14.6(3)(b) of the High Court Rules.   That rule relevantly provides that the Court may order a party to pay increased costs if–

(b)the party opposing costs has contributed unnecessarily to the time or expense of the proceeding or step in it by–

…

(ii)       taking or pursuing an unnecessary step or an argument that lacks merit; or

(iii)      failing, without reasonable justification, to admit facts, evidence, documents, or accept a legal argument …

[4]      Deloitte acknowledges it must pay costs, but says they are payable only to Mr Mody and then only on a strict 2B scale basis.  It denies it is liable to pay TEL’s costs at all.  It denies that an uplift under r 14.6(3) is justifiable in either Mr Mody or TEL’s case.

[5]      I assess Mr Mody and TEL’s claims separately.

Mr Mody

[6]      Mr Mody’s 2B scale costs came to $8,792.74 including disbursements.

[7]      He says a further 50 per cent uplift is justified because Deloitte did not accept that Mr Mody and TEL’s liability were co-extensive when the issue was raised in correspondence prior to hearing.  In light of my finding that the liability of Mr Mody and TEL were inevitably co-extensive, Mr Mody now says Deloitte failed without reasonable justification to accept a legal argument when it was put to them, per r 14.6(3)(b)(ii).  As such, Mr Mody says his joinder as a party was unnecessary in terms of r 4.1(a), which limits parties to those “necessary” to determine the issues raised.

[8]      In  response,  Deloitte  says  that  should  Mr  Mody’s  stance  in  relation  to increased costs be accepted by the Court then every unsuccessful party would be considered to have acted unreasonably and thus liable to increased costs.   Legal arguments, Deloitte argued, are almost invariably exchanged in correspondence between litigation in civil proceedings.  Deloitte says the “principal issue” Mr Mody raised in pre-hearing correspondence was that he was not liable “in respect of the same damage”.  The Court found in favour of Deloitte on that issue, and that should weigh against any uplift the Court might be inclined to impose.

[9]      Deloitte also says that an uplift of 50 per cent is, in reality, the highest uplift a Court would impose, and should be reserved for the “most unreasonable” types of conduct.

[10]    Finally, Deloitte does not consider that provision for second counsel was warranted, given the proceeding was a “reasonably standard interlocutory application heard on the papers”.

Analysis

[11]     Despite the Court’s finding (in Deloitte’s favour) that Mr Mody and TEL were liable “in respect of the same damage”, Mr Mody was successful in having the claim against him struck out.  Deloitte’s acceptance that it is liable to pay costs is therefore in order.  The only question is whether, as claimed by Mr Mody, Deloitte ought to pay increased costs.

[12]     While, in the end, I came to the conclusion that it must logically be inevitable that Mr Mody’s liability is identical to that of his employer, I did acknowledge the great reluctance of the courts generally to strike out third party notices on that basis. Deloitte’s was not an argument that was so unmeritorious that it should never have been run.  Deloitte cannot be said to have proceeded unreasonably by pursuing it.  I do not consider that an uplift is warranted.

[13]     Finally, I agree with Deloitte that this is not a case for which second counsel was necessary in order to satisfactorily address the issues.  As the 2B categorisation suggests it was a matter of average complexity requiring an average application of time.

[14]    Deloitte will pay Mr Mody 2B scale costs plus disbursements as claimed accordingly with the exception of appearance costs for second counsel.

TEL

[15]     TEL too says it is entitled to costs and on an increased basis.   TEL says Deloitte’s attack on Mr Mody’s position as an employee of TEL obliged TEL to defend its position and assist Mr Mody.

[16]     TEL says an uplift is warranted because it was forced to file an affidavit in response to a “materially incomplete” and therefore misleading affidavit from Deloitte, and further that the claim against Mr Mody was brought against Mr Mody “without warning or discussion” despite its continuous communication with TEL since March 2013.

Analysis

[17]     TEL is right to point out that Mr Steven’s submissions focussed particularly on the abuse of process issue at the hearing.  In the event, that was the successful argument.  Mr Jagose too made submissions on this point, but it was very much the focus of Mr Steven’s case.

[18]     Deloitte rightly points out that at [78] of my judgment, I awarded costs only to Mr Mody and not to TEL.   I think however that [78] can be properly read as leaving the issue of costs generally at large.

[19]     I consider on reflection, that it was both appropriate and necessary for TEL to join in the argument both to support Mr Mody as its employee and to protect its own interests.  An award of costs is therefore appropriate.  Once again however, I do not accept that there is any basis for an uplift beyond 2B scale costs plus disbursements, and no reason to certify for second counsel.  Deloitte will also pay TEL costs on that

basis.

Solicitors:
DLA Phillips Fox, Wellington for Plaintiff

Young Hunter, Christchurch for First and Fifth Defendants Bell Gully, Auckland for Second and Third Defendants Clark Boyce, Christchurch for Fourth Defendant

Chapman Tripp, Wellington for First Third Party
McElroys, Auckland for Second Third Party

Williams J