Wagner v Gill HC Auckland CIV-2011-404-3509
[2011] NZHC 1267
•3 October 2011
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV-2011-404-3509
BETWEEN NICOLA JOANNE WAGNER Plaintiff
ANDROBERT GILL First Defendant
ANDDIGITAL PARTNERS LIMITED (IN RECEIVERSHIP)
Second Defendant
ANDDIGITAL PARTNERS (NZ) LIMITED Third Defendant
ANDBA PARTNERS LIMITED (IN RECEIVERSHIP)
Fourth Defendant
ANDBRAND ADVANTAGE MEASUREMENT AND CONSULTING LIMITED
Fifth Defendant
ANDCPG YORK LIMITED Sixth Defendant
AND91991 LIMITED (IN RECEIVERSHIP) Seventh Defendant
AND11260 LIMITED (IN RECEIVERSHIP) Eighth Defendant
ANDBRAND ADVANTAGE LIMITED Ninth Defendant
Hearing: Matter dealt with on the Papers
Counsel: JWA Johnson for Plaintiff
A Gilchrist for First, Third, Fifth, Sixth and Ninth Defendants
Judgment: 3 October 2011 at 1:00 PM
JUDGMENT OF TOOGOOD J
WAGNER V GILL & ORS HC AK CIV-2011-404-3509 3 October 2011
[COSTS]
This judgment was delivered by me on 3 October 2011 at 1:00 pm
Pursuant to Rule 11.5 High Court Rules
Registrar/Deputy Registrar
Introduction
[1] The plaintiff obtained without notice freezing orders on 16 June 2011, for reasons set out in the Judgment of Whata J dated 30 June 2011. Following an interlocutory application by the defendants, made after service of the orders, ancillary orders were made by Allan J on 23 June 2011.
[2] The freezing orders were made in support of a claim brought by the plaintiff against the first to eighth defendants seeking judgment in the sum of $319,606.00; orders under s 348 Property Law Act 2007; and orders under ss 174 and 301
Companies Act 1993.
[3] The plaintiff alleges that she has an arbitration award in her favour for
$319,606.00 and a good arguable case for judgment to be entered against the first, third and fifth defendants on a plea of conspiracy to injure her by unlawful means, based on an intention to enter into an asset-stripping scheme designed to defeat creditors.
[4] In an oral judgment delivered on 24 August 2011,1 after hearing full submissions from counsel for the plaintiff and for the first, third, fifth, sixth and ninth defendants, I set aside the freezing orders and ancillary orders and reserved the question of costs.
The exchange of memoranda
[5] Following exchanges of correspondence between counsel, Mr Gilchrist filed a memorandum on behalf of the defendants, on 9 September 2011, seeking a global order of a contribution to costs in the sum of $25,000.00 plus $1,586.63 for disbursements. On 12 September 2011, Mr Johnson, on behalf of the plaintiff, filed a memorandum seeking an order further reserving the question of costs.
[6] In a Minute dated 16 September 2011, I noted that r 14.8 of the High Court
Rules requires costs on an opposed interlocutory application to be fixed in
1 Wagner v Gill & Ors HC AK, CIV2011-404-3509, 24 August 2011.
accordance with the Rules when the application is determined, unless there were special reasons to the contrary.2 Not being persuaded that special reasons existed, I directed that the plaintiff should have until 5:00 pm, Friday 23 September 2011, to file a memorandum responding to the defendants’ memorandum of
8 September 2011, and said I would determine the question of costs thereafter.
[7] On 22 September 2011, Mr Ormsby for the plaintiff filed a memorandum dealing with the substantive costs issues raised by the defendants’ memorandum. He maintained the position that the issue of costs could “more equitably be dealt with at a different juncture” and submitted, again, that costs should be reserved.
[8] Although the timetable for filing costs memoranda set out in my judgment of
24 August 2011 and Minute of 16 September 2011 did not provide for the filing of any reply submissions on behalf of the defendants, Mr Gilchrist seeks leave to do so.
[9] I do not think any more time should be taken seeking Mr Ormsby’s views on whether leave should be granted. I have read Mr Gilchrist’s memorandum but have put it to one side pending consideration of the issues raised in the earlier memoranda filed, including the plaintiff’s memorandum of 22 September 2011. In the event that I should consider it necessary in the interests of justice to take Mr Gilchrist’s latest memorandum into account, I will seek Mr Ormsby’s views on whether leave to submit a reply memorandum should be granted.
Defendants’ application for costs
[10] In support of the application for costs in respect of the application by the plaintiff for ancillary orders and to set aside the freezing orders, Mr Gilchrist refers to the well-settled principles for the making of cost orders. In terms of categorising costs under rr 14.3 and 14.5, and referring to the time allowances in Schedule 3 to the Rules, Mr Gilchrist suggests that costs should be assessed on a 2C basis, at
least. This would recognise that the proceedings were of average complexity
2 Wagner v Gill & Ors HC AK, CIV2011-404-3509, Minute dated 16 September 2011.
requiring counsel of skill and experience considered average in the High Court,3 and that a comparatively large amount of time for the particular step is considered reasonable.4
[11] Mr Gilchrist then suggests that increased costs should be awarded because:
[a] the nature of the step is such that the time required by the defendants substantially exceeds the time allocated under Band C; and
[b] the plaintiff had contributed unnecessarily to the time or expense of the steps taken by –
[i] failing to comply with the Rules or with directions of the
Court; or
[ii] taking or pursuing an unnecessary step or an argument that lacked merit; or
[iii] failing without reasonable justification to accept an offer of settlement.
[12] Mr Gilchrist says that costs calculated on a 2B basis would amount to
$9,964.00 and, if calculated on a 2C basis, would be $15,228.00. To each calculation he would add $752.00 as an allowance for preparing the costs memorandum. He invites a comparison between those calculations and the defendants’ actual costs of $45,000.00. In support of submission that band C is appropriate, Mr Gilchrist argues that interlocutory applications comprise a full range of issues from discovery and the provision of further and better particulars of a pleading to fully defended applications for interlocutory injunctions. He submitted that interim injunction applications consume much greater time than other types of interlocutory applications and that they warrant a band C
categorisation in the usual course of events.
3 High Court Rules, r 14.3.
[13] In support of an application for increased costs under r 14.6, Mr Gilchrist says that the defendants’ costs were increased by the failure of the plaintiff to provide a casebook until after the defendants’ submissions were due, requiring the defendants to file a revised version of their submissions and a supplementary casebook covering documents not included in the plaintiff’s volume.
[14] Mr Gilchrist also referred to a letter dated 22 August 2011 (which he described as a Calderbank letter) with which he had included a copy of the judgment of Wylie J in related proceedings, Premier Events Group Limited v Beattie;5 Regan & Ors v Gill & Ors,6. It was submitted that, in deciding that case, the Judge set out the purpose and function of a freezing order and analysed the evidence in such a manner as should have made it clear to the plaintiff that she did not have a sufficient case to maintain the freezing order earlier made without notice.
[15] I do not think it is appropriate to refer to the letter of 22 August 2011 as a Calderbank letter. The defendants' solicitors simply invited the plaintiff’s solicitors to consider matters and confirm that the freezing order would not be maintained, and said that if Ms Wagner elected to proceed the defendants would seek indemnity costs from 22 August 2011. The defendants sought proposals for costs and timetabling in the event that the plaintiff did elect to withdraw the application to maintain the freezing orders.
The plaintiff’s position on costs
[16] In responding to the defendants’ position on costs, counsel for the plaintiff
argues:
[a] It was held by the Court that the plaintiff had a good arguable case which would justify the making of a freezing order.
[b] Although the Court ultimately refused to grant the order on the grounds that there was no risk of dissipation of assets, this was not an
5 Premier Events Group Limited v Beattie HC AK CIV-2010-404-3178, 16 August 2011;
argument the defendants put before the Court prior to the hearing. In this regard, Mr Ormsby points to the impression given by the first defendant that his financial position was precarious, and that he could ill afford lawyers’ bills. Counsel submitted that the plaintiff had been led to underestimate the significance of the dissipation point when preparing the freezing order application.
[c] The defendants could have avoided the added cost of the hearing to continue the freezing order had the defendants spoken with the plaintiff following the ex parte application. Counsel said that the defendants had made no efforts to resolve the matter amicably but rather had challenged the matter in a defended hearing. He submitted that had the defendants earlier communicated to the plaintiff that the first defendant was capable of meeting the cost of judgment, the matter could have been resolved without the need for a defended hearing.
[d] As to the defendants’ reliance upon non-disclosure to the Court of relevant information, I had held in my judgment setting aside the freezing orders7 that non-disclosure did not have any seriously injurious effect on the defendants.
[e] The plaintiff should not bear the defendants’ costs in applying to Allan J for ancillary orders; the need for the application arose because of the BNZ’s uncertainty as to how to apply the without notice freezing order correctly.
[17] The application for increased costs is opposed, the plaintiff submitting that the absence of a risk of dissipation was not put before the plaintiff in the so-called Calderbank letter and the defendants’ assertions as to increased costs through inadequate filing of documents is not sustainable. The plaintiff submits that any question of costs should be approached on a category 2B basis, but maintains her
earlier position that costs should be reserved.
7 At [30].
Discussion
[18] Nothing in Mr Ormsby's memorandum persuades me to alter the view, which I thought I had expressed firmly in my Minute of 16 September 2011, that there is no reason in this case to depart from the usual rule that costs in an interlocutory proceeding should be fixed at the time the proceeding is determined.
[19] The parties are agreed that these proceedings should be treated as category 2 proceedings for which the daily recovery rate is $1,880.00. The time allocations in Schedule 3 permit the Court to recognise that some interlocutory proceedings are of greater complexity, or are necessarily more time-consuming, than others of the same type depending on the matters in issue in the particular proceeding or interlocutory step.
[20] In the present case, the defendants had no ability to comment on the form of the freezing orders sought by the plaintiff before they were made. It was reasonable for the defendants to take steps to clarify the effect of the orders made without notice when the defendants’ bank considered that it could not approve any dealings with the various bank accounts except to the extent that any transaction was approved in advance by or on behalf of the plaintiff. In the end, the plaintiff agreed through counsel that it would be sufficient compliance for the defendants to provide weekly summaries to the plaintiff’s solicitors of transactions passing through the fifth defendant’s bank account. I also consider that, in the circumstances, the defendants were entitled to apply for interim orders suppressing publication of their names.
[21] I am not persuaded that an award of increased costs under r 14.6 is justified. While I understand that the failure of the plaintiff to file a casebook in time may have required the defendants to revise their submissions, allowing increased costs on that basis would amount to an inappropriate tinkering with the results produced by a straightforward application of the schedule.
[22] I have considered whether the plaintiff’s attitude towards the question of dissipated risk, which seems to me to have been and to remain somewhat unrealistic, should result in an increased award.
[23] Mr Ormsby complains that the defendants did not highlight the failure of the plaintiff to demonstrate a risk of dissipation in the written material submitted in support of the application to discharge the freezing orders, or in the opposition to continuance. He also says that the plaintiff was justified in making the application for freezing orders because she had an arguable case and there were assets within the jurisdiction.
[24] That approach misses the point. An arguable case and the availability of assets are qualifying criteria; the real issue on any application for a freezing order must be the risk of dissipation, otherwise the application amounts to little more than an application for a charging order on the basis that the plaintiff has a case to be argued and there are assets to attach. In making the application for a freezing order on a without notice basis, the plaintiff assumed the risk that, on a subsequent and more comprehensive analysis, a sufficient prospect of dissipation would not be made out.
[25] Further, there is no merit in the plaintiff's complaint that the defendants chose to apply to the Court for relief from the freezing orders rather than engage in dialogue with the plaintiff. The plaintiff elected to apply to the Court, without notice to the defendants, for orders having a potentially significant effect on the defendants. She cannot now be he heard to complain when the defendants exercise their rights to apply to the Court for a discharge of the orders. It was equally open to the plaintiff to initiate solicitor-to-solicitor discussions.
[26] The defendants were put to more time and expense than would ordinarily be the case in respect of a straightforward interlocutory proceeding and I turn to consider whether that consideration can be addressed by the classification of the proceedings in terms of Schedule 3.
[27] There were actually three interlocutory applications in respect of which the defendants are seeking costs: the defendants’ application for ancillary orders; the defendants’ application to set aside the freezing orders; and the plaintiff’s application for an order continuing them. On that basis, the defendants are entitled to claim a time under allocation under paragraph 4.12 of Schedule 3 for the applications heard
by Allan J, and under paragraphs 4.12 and 4.13 of Schedule 3 for the application to discharge the freezing orders and the opposition to the application to continue them. That would allow the defendants a total of six days for preparation of its pleadings and affidavits, if costs are assessed on a 2C basis. That may seem excessive, but I consider that the overall justice of the case is best served, and the importance of relative certainty in the application of the costs rules is respected, by categorising the interlocutory proceedings as 2C proceedings, but declining the application for an award of increased costs under r 14.6.
Result
[28] The plaintiff is directed to pay a contribution to the defendants’ costs on the interlocutory proceedings related to the granting and discharge of the freezing orders, calculated on a 2C basis, plus disbursements.
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Toogood J
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