Waipareira Investments Limited v Grant

[2014] NZHC 192

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2013-404-003477 [2014] NZHC 192

UNDER  Section 3 of the Declaratory Judgment Act

1908 and Part 18 of the High Court rules

IN THE MATTER             of the liquidation of West Harbour

Holdings Limited (in Liquidation)

BETWEEN  WAIPAREIRA INVESTMENTS LIMITED

Plaintiff

ANDDAMIEN GRANT and KIRSTEN SMITH Defendants

Hearing:                   (On the papers)

Counsel:                  M A Muir QC and T J G Allan for Plaintiff

D E Smyth and B J Norling for Defendants

Judgment:                18 February 2014

COSTS JUDGMENT OF VENNING J

This judgment was delivered by me on 18 February 2014 at 4.30 pm, pursuant to Rule 11.5 of the

High Court Rules.

Registrar/Deputy Registrar

Date……………

Solicitors:           Grove Darlow, Auckland

Waterstone Insolvency, Auckland

Copy to:            M A Muir QC, Auckland

D E Smyth, Auckland

WAIPAREIRA INVESTMENTS LTD v GRANT & ANOR [2014] NZHC 192 [18 February 2014]

Introduction

[1]      On 10 December 2013 Allan J delivered a decision in the plaintiff’s favour. The  decision  confirmed  that  the  plaintiff  was  not  a  creditor  of  West  Harbour Holdings Limited (in liquidation) for the purposes of s 240 of the Companies Act

1993 and was not entitled to vote at the relevant meeting so that a purported vote by or on its behalf was of no effect.  The declaration preserved the plaintiff’s security interest.

[2]      Allan J reserved the issue of costs to be dealt with by way of an exchange of memoranda.  It falls to me as Duty Judge to deal with the issue of costs on the basis of the memoranda now exchanged as Allan J has retired.

[3]      The plaintiff seeks costs calculated on a category 3 basis (with some steps at band C) together with an uplift of 50 per cent or in the alternative on category 2, again with an uplift of 50 per cent.

[4]      The defendant liquidators oppose the plaintiff’s  application for costs and

submit that:

(a)       costs should be awarded against the plaintiff’s solicitors;

(b)      costs should lie where they fall;  or

(c)       costs against the defendants should be on a category 2B basis with a

50 per cent reduction;  or

(d)      costs should be on a 2B basis against the defendants. [5]        Both parties have filed detailed memoranda on the issue.

The incidence of costs

[6]      The  plaintiff  succeeded  in  the  application  it  brought  to  the  Court.    The starting  point  is  that  the  defendants,  who  failed  in  opposing  the  plaintiff’s application, should pay the plaintiff’s costs.1

[7]      The  defendants  however  argue  for  costs  in  their  favour  relying  on  the principle set out in Kooky Garments Limited v Charlton.2   I do not consider this to be a case where the principles in the Kooky Garments Limited case apply.   While a partner of Mr Allan’s attended the meeting in issue and purported to vote on behalf of the plaintiff, the issue always was the legal effect of that.  There is no suggestion in this case that the plaintiff’s solicitors have acted improperly, abused the process of the Court or were otherwise in breach of their obligations to the Court.  The plaintiff was advised of the position and confirmed its instructions.  I note at the hearing the

plaintiff was represented by senior counsel.  There is no reason in principle to depart from the general rule that the defendants should pay the successful plaintiff costs.

The appropriate costs category

[8]      The  plaintiff  argues  that  the  proceedings  were  novel  and  should  be categorised as category 3 proceedings.

[9]      I  have  reviewed  the  file.    While  the  issue  raised  may  not  have  been determined by the Court before I am satisfied that the proceedings are properly regarded as of average complexity requiring counsel of skill and experience considered average in the High Court.

[10]     The plaintiffs chose to instruct senior counsel but the categorisation is not driven by the level of experience of counsel appointed by the parties.  It is the nature of the proceedings themselves that determine the appropriate category.

[11]     Category 2 is the appropriate category.  I note that on an earlier interlocutory decision Asher J fixed costs on a category 2 basis.

1      High Court Rules, r 14.2(a).

2      Kooky Garments Limited v Charlton [1994] 1 NZLR 587.

The appropriate band

[12]     The plaintiff seeks an uplift to band C for the preparation for the hearing and submissions on the basis that a comparatively large amount of time was required for those steps as opposed to the normal amount of time.3

[13]     Although it is difficult, not being the trial Judge, having reviewed the file I am unable to accept the plaintiff’s submission that the preparation for hearing and the costs sought for the further submissions in response should be awarded on a time band C basis.  I cannot see why those steps should have required more than a normal amount of time in a proceeding of this nature.

Defendants’ objection to line items

[14]     I  generally  disallow  the  defendants’ objections  to  the  various  line  items claimed by the plaintiff.   The defendants take issue with the plaintiff’s claim for preparation of their initial discovery bundle and for inspecting the defendants’ initial discovery on the basis that that is part of the commencement of proceedings.   I consider an allowance is appropriate in this particular case given the nature of the case and also bearing in mind that schedule 3 was not updated when the High Court Rules were updated to provide the requirement for initial discovery.

[15]     I also allow the plaintiff’s claim for costs for the reply to the affirmative defence.   It is contemplated by the schedule.   It may have been out of time but it nevertheless was a step contemplated and taken.

[16]     I also allow the plaintiff’s claim for preparation of evidence for the hearing. The defendants submit the plaintiff should not be able to claim for costs on Mr Morrison’s third affidavit but the claim made for 2.5 days is in accordance with the total allowance for the preparation of evidence.  I see no need to reduce that sum. For instance, even if the third affidavit had not prepared, 2.5 days would still have

been allowed.

3      High Court Rules, r 14.5(2).

[17]    Next, the defendants object to the plaintiff’s claim for costs for further submissions in reply and to the defendants’ submissions on the s 305(1)(b) status. Again, having reviewed the file, I consider the plaintiff was required to respond in more detail to that issue. The claim for those costs is approved.

[18]     However, I accept the defendants’ submission that there was no need for an allowance for second counsel in this case.

[19]     Finally,  in  the  circumstances  of  this  particular  case,  given  the  detailed response by the defendant I consider it appropriate that there be an allowance for the costs submissions themselves.

Scale costs

[20]     The net result is that the plaintiff is entitled to costs on a 2B basis for 17.7 days at $1,990 which equals $35,223.

Uplift

[21]     The plaintiff then seeks an uplift on the basis of r 14.6(3)(a) and (b)(ii) and (iii).    For  the  reasons  given  above  I  reject  that  an  uplift  is  appropriate  under r 14.6(3)(a).

[22]     Next, having reviewed the decision of Allan J I am unable to accept that it could be said that it is obvious the defendant took or pursued unnecessary steps or arguments that lacked merit or failed without reasonable justification to admit facts, evidence, documents or accept legal argument.  The issue was, as the parties have noted, undetermined in New Zealand.  I disallow the plaintiff’s claim for an uplift.

Disbursements

[23]     That leaves the issue of disbursements.  The defendant takes objection to one item  of  disbursements  claimed  by  the  plaintiff,  namely  the  New  Zealand  Law Society research disbursement in the sum of $143.75.  In Todd Pohokura Ltd v Shell

Exploration NZ Ltd4  Dobson J disallowed a similar claim for legal research other than from the solicitor’s own resources.  I agree that as a matter of general principle solicitors would be expected to carry out or absorb the cost of legal research into the fee portion of their bill.  To that extent the research is taken account of by the scale and should not be approved as a disbursement.  I disallow the disbursement claimed of $143.75.

Result/orders

[24]     The plaintiff is to have costs against the defendant in the sum of $35,223 plus disbursements of $3,796.50 in total $39,019.50.00.

Venning J

4      Todd Pohokura Ltd v Shell Exploration NZ Ltd HC Wellington CIV-2006-485-1600, 1 July 2011 at [61] and [70] in particular.