Waipuru Investments Limited v Bishop
[2017] NZHC 924
•9 May 2017
IN THE HIGH COURT OF NEW ZEALAND PALMERSTON NORTH REGISTRY
CIV-2016-454-000072 [2017] NZHC 924
IN THE MATTER of section 200 of the Property Law Act
2007
BETWEEN
WAIPURU INVESTMENTS LIMITED First Plaintiff
JOHN ALEXANDER DUNCAN COOPER and W H WILSON LIMITED Second Plaintiffs
AND
RAYMOND VINCENT BISHOP AND LISA GRACE BISHOP
First Defendants
WILLIAM MARK FEARON Second Defendant
ALLIED PETROLEUM (NI) LIMITED Third Defendant
TIL FREIGHTING LIMITED Fourth Defendant
FARMLANDS COOPERATIVE SOCIETY LIMITED
Fifth Defendant
Hearing: 5 May 2017 (Determined on the papers) Counsel:
R C Laurenson for the Plaintiffs
No representation by or on behalf of the DefendantsJudgment:
9 May 2017
INTERIM JUDGMENT ON COSTS OF ASSOCIATE JUDGE MATTHEWS
[1] On 14 October 2016 the Court delivered an oral judgment on an application
for summary judgment in which the Court made orders under the Property Law Act
WAIPURU INVESTMENTS LTD & ORS v BISHOP & ORS [2017] NZHC 924 [9 May 2017]
2007 directing a sale of a property by auction. The application for summary judgment was not opposed by any defendant.
[2] In paragraph [64](e) of the judgment the Court directed the plaintiffs to file and serve on the defendants a memorandum on the issue of costs, and they duly did so. The defendants have not filed any document in response to this memorandum.
[3] The plaintiffs seek indemnity costs relying on a covenant in the mortgage held by the first plaintiff, and a term loan agreement to which the second plaintiff was a party. These covenants provide, respectively:
The mortgage:
26. Costs
26.1 The Mortgagor will pay to NZGT upon demand NZGT’s solicitor’s
costs (on a solicitor client basis) for: (a) ...
(b) ...
(c) legal services arising from or relating to any default under this Mortgage or the enforcement or exercise or attempted enforcement or exercise of any of NZGT’s rights, remedies and powers under this Mortgage or any transaction required or contemplated by this Mortgage;
(d) ... (e) ...
(f) legal services relating to the protection of NZGT’s security interest under this Mortgage (including the investigation of any claim relating to the Land which might affect that interest),
In each case on a full indemnity basis.
The term loan agreement:
12. COSTS
(a) Costs payable by you: You must pay to the lender upon demand, the
lender’s legal costs (as between solicitor and client) for:
(i) ...
(ii) costs on default: legal services arising from or relating to any default under this contract or the enforcement or exercise or attempted enforcement or exercise of any of the lender’s rights, remedies and powers under this contract (including the giving or attempted giving of any notice under the Property Law Act
1952 or any enactment in substitution for that Act, the
inspection and valuation of the land and, if the lender is a solicitor’s nominee company, the cost of compliance by the relevant solicitor with the Solicitors Nominee Company Rules
1996 or any similar rules in relation to the matters mentioned in this paragraph (ii);
(iii) ...
(iv) legal costs of lender: legal services relating to the protection of the lender’s security interest taken in conjunction with this contract (including the investigation of any claim relating to the land which might affect that interest)
(b) Costs payable despite nature of lender: This clause applies notwithstanding that the lender may be a solicitor or a solicitor’s nominee company.
[4] Rule 14.6(4)(e) of the High Court Rules provides that the Court may order a party to pay indemnity costs if the party claiming costs is entitled to indemnity costs under a contract or deed. Therefore the Court may make an order as sought by the plaintiffs.
[5] The claim for indemnity costs seeks an award for both solicitors’ fees and counsel’s fees. The solicitors’ fees claimed are in the sum of $29,775, and counsel’s fees are $87,500, in both cases plus GST. Thus the total claimed for professional fees is $117,275 plus GST.
[6] The approach the Court is to take to an assessment of a claim for indemnity costs under a contract or deed is set out in the judgment in the Court of Appeal in Black v ASB Bank Ltd. The Court said:1
[77] As this Court held in Frater Williams & Co Ltd v Australian Guarantee Corportation (NZ) Ltd, where there is a contractual right to indemnity costs the question for the Court asked to make an order is: for the necessary steps, are the costs claimed reasonable in amount? This is because r 14.6(1)(b) permits the Court to order payment of costs “reasonably incurred”. It follows from the wording of r 14.6(1)(b) that indemnity costs are determined with reference to actual costs, but may be less than the actual costs if the Court considers the actual costs were not reasonably incurred.
[78] In Frater Williams this Court emphasised the word “reasonable” does not import a discretion in the usual sense. The principle that one party may contractually bind itself to pay the other party’s full solicitor/client costs is established: ANZ Banking Group (NZ) Ltd v Gibson. These two points were well made in the course of the following observations by this Court in Beecher v Mills:
1 Black v ASB Bank Ltd [2012] NZCA 384 at [77]-[80].
… In the case of a contract [giving an indemnity for costs] it must in the end be a matter of determining what recovery is expressly or impliedly intended. In principle, anything less than a full indemnity for costs properly incurred must leave the indemnitee with part of the liability for which the indemnifier is prima facie responsible (Simpson and Miller v British Industries Trust Ltd (1923) 39 TLR 286, 289). In the absence of a contrary indication it is not to be assumed that the parties intended such a result. Nor can there ordinarily be any room for the exercise of a judicial discretion to order less costs and thereby erode the contractual protection the indemnity was intended to provide. A contractual obligation of that kind is enforceable unless contrary to public policy and, as in ANZ Banking Group (NZ) Ltd …, we are unable to see how requiring the Beechers in this case to meet all costs (calculated on a solicitor/client basis) properly incurred by Mr Mills in relation to the performance of the indemnity under cl 20 could be said to impede the administration of justice or otherwise be contrary to any discernible public policy considerations.
[79] Thus, where the entitlement to indemnity costs is contractual and the Court is exercising its power under r 14.6(4)(e), the position is distinctly different from orders under either of r 14.6(4)(a) or (b). Bradbury v Westpac Banking Corp demonstrates the different approach required where an order is made under r 14.6(4)(a).
[80] Assessing whether the indemnity costs claimed under a contract are reasonable involves the Court making an objective assessment of these matters:
(a) what tasks attract a costs indemnity on a proper construction of the contract;
(b) whether the tasks undertaken were those contemplated in the contract;
(c) whether the steps undertaken were reasonably necessary in pursuance of those tasks;
(d) whether the rate at which the steps were charged was reasonable having regard to the principles normally applicable to solicitor/client costs; and
(e) whether any other principles drawn from the general law of contract would in whole or in part deny the claimant its prima facie right to judgment.
[citations omitted]
[7] The Court went on to note that in Frater Williams, the Court had observed that an assessment of an indemnity fee, which is often made in circumstances of constrained time, may be made on a robust basis by the Court forming a judgment on the costs considered reasonable in all the circumstances. In the event of the party liable to pay the costs not being content with such a judgment, but indicating to the Court that a detailed vetting of the reasonableness of the costs was sought, avenues
are open to the Court. These are reference to assessment by the method of taxation under the High Court Rules, the appointment of a suitably qualified practitioner to report to the Court, and a complaint to the Law Society under s 132(2) of the Lawyers and Conveyancers Act, if that avenue of review remains available, a point discussed at some length by the Court.
[8] Against this background, I am invited in the memorandum of counsel for the plaintiffs to take a robust view and assess and award costs to the plaintiffs as claimed in the memorandum. It is clear that in so doing I must apply the approach set down in Black v ASB Bank Ltd. But the Court is faced with a claim for indemnity costs in a total sum of $117,275 plus GST and disbursements on an unopposed application for summary judgment. This exceeds by an extremely wide margin any award of costs on an unopposed summary judgment that might be reasonable. If costs were awarded on scale 2, band B, which would be appropriate for a case of this nature, costs awarded would likely be less than $10,000. I am mindful, however, that the defendants have not engaged with the plaintiffs’ application for costs, anymore than they did with the plaintiffs’ application for summary judgment and that they are not therefore likely to take any of the steps that might be available to them for review of the costs, as set out by the Court of Appeal in Black.
[9] Counsel has set out the number of hours in which he was engaged, so a calculation is readily made of his hourly charge-out rates and they do not appear to me to be out of a range which the Court would consider acceptable. I do not have equivalent information from the plaintiffs’ solicitors. Where I part company with the extent of the claim is in the question of whether the amount of time spent was necessarily or reasonably involved in achieving the tasks required to bring this case before the Court. Of course the plaintiffs were not to know that the case would proceed on an undefended basis when it was prepared and filed and they were entitled to have their legal representatives prepare it on the basis that the application for summary judgment may be opposed. For all that, though, this was an application for summary judgment which is predicated on the assumption that the plaintiffs can show that there is no arguable defence to the claim, and if that is not the basis on which the claim is brought an application for summary judgment should not be made.
[10] The total time spent by counsel is 214.5 hours. The hours spent by the solicitors for the plaintiffs are not disclosed, but as their fee is roughly one-third of the fee of counsel, it would seem they would have spent around another 70 hours, if their charge-out rates were approximately the same. Although I am not able to establish the number of hours spent with precision, it seems as though it will have been in the order of 285 hours. That equates to approximately seven full working weeks devoted entirely to the task of preparing the papers for this case and appearing on the undefended application.
[11] The statement of claim is not a document of undue complexity. It comprises
44 clauses and, as would be expected on a claim of this nature, one cause of action. Three affidavits were filed in support. These are comprehensive and lengthy. The affidavit of Mr J A D Cooper contains 30 exhibits, and other documents are exhibited to the other affidavits.
[12] I am not satisfied that the time which was taken on this case was necessarily all devoted to undertaking the tasks that were necessary. Those tasks were, obviously, the pleadings in the statement of claim, the preparation of evidence by way of affidavit and, as far as the solicitors for the plaintiffs were concerned, administrative steps by way of service of the proceedings which themselves required the preparation and filing of further affidavits by way of service.
[13] If I were to take a robust approach as invited by counsel I would find myself unable to award costs as sought, even without opposition to the award from the defendants. This was a relatively straightforward case to obtain an order under the Property Law Act. The factual material which the Court needed to see was quite extensive, so I would expect a fee to be more than for a case brought on a more simple factual matrix, but I am unable to see that the costs claimed could cover steps which were necessary to pursue the tasks given to the solicitors and counsel for the plaintiffs. It is appropriate therefore to give the solicitors and counsel concerned an opportunity to provide more information to the Court.
[14] I am mindful that although a significant amount of factual material was put before the Court, the Judge found himself able to issue an oral decision on the
afternoon of the day on which argument was presented. This does not suggest that the issues to be decided by the Court were unduly complex. Indeed, they were not. And, of course, the application was not in fact opposed.
[15] The solicitors and counsel for the plaintiffs may file further material in support of their client’s claim for indemnity costs which, in terms of paragraph [80] of the decision in Black, indicates whether every task undertaken was one contemplated in the contracts of indemnity, whether those steps were reasonably necessary in pursuance of those tasks and, in relation to solicitors’ fees, whether the rate at which those steps were charged was reasonable. In preparing further material for the Court, counsel and the solicitors concerned should be aware that as officers of the Court they are accountable to the Court. Depending on the response to this interim judgment, the matter may be referred to the Law Society, or the taxation provisions of the High Court Rules may be invoked. I do consider that the judgment of the Court in Black requires the Court to award costs at any level sought, no matter how excessive the sum claimed may be. Depending on my view when I have considered the further material filed, I will consider appointing counsel to assist the
Court.
J G Matthews
Associate Judge
Solicitors:
Gillespie Young Watson, Lower Hutt
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