Walters v Icon Central Limited HC Auckland CIV 2010-404-4877
[2011] NZHC 908
•12 August 2011
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV 2010-404-4877
IN THE MATTER OF an application under Rules 4.58 and 4.63
High Court Rules
BETWEEN JOHN MURU WALTERS Plaintiff
ANDICON CENTRAL LIMITED First Defendant
ANDGLEN D'CRUZ, JASON CUNNINGHAM, BOBBY DAZZLER AUSTRALIA PTY LIMITED, DARREN CHAMINGS AND MANUELA CHAMINGS
Second Defendants
ANDWESTPAC NEW ZEALAND LIMITED Third Defendant
Counsel: J E M Lethbridge for Plaintiff
B O'Callahan for First Defendant
S Hahn for First-named Second Defendant
P Sills for Second to Fifth-named Second Defendants
R B Stewart QC for Third Defendant
Judgment: 12 August 2011 at 4:30 PM
JUDGMENT (NO 2) OF WHITE J [Costs]
This judgment was delivered by me on 12 August 2011 at 4.30 pm pursuant to Rule 11.5 of the High Court Rules. Registrar/Deputy Registrar
Date: ………………….
Counsel: R B Stewart QC, PO Box 2302 Shortland Street, Auckland 1140
P Sills, PO Box 1990 Shortland Street, Auckland 1140
Solicitors: J Lethbridge, Grove Darlow, PO Box 2882 Shortland Street, Auckland 1140
B O’Callahan, Carter & Partners, PO Box 2137 Shortland Street, Auckland 1140
S Hahn, Hesketh Henry, Private Bag 92 093 Victoria Street West, Auckland 1142
M Hemphill, Metro Law, PO Box 68 882 Newton, Auckland 1145
WALTERS V ICON CENTRAL LTD HC AK CIV 2010-404-4877 12 August 2011
[1] In my interpleader judgment of 7 March 2011 I directed Mr Walters, as stakeholder, to pay the following amounts held in his firm’s trust account to the
named second defendants:
D and M Chamings $34,225.00 D and M Chamings 45,775.00 G d’Cruz 44,695.00 J Cunningham 44,995.00 Bobby Dazzler Australia Pty Limited 51,885.00 $221,575.00
[2] In accordance with my judgment and my subsequent minutes of 7 June and
20 July 2011, I have received submissions from the parties on the question of costs.
[3] Mr Walters seeks an order under rule 4.64 of the High Court Rules that solicitor-client indemnity costs totalling $42,407.58 and the sum of $10,000 towards his charges as stakeholder be paid out of the funds as a first charge. Mr Walters’ application is opposed by Icon and the second defendants.
[4] The second defendants have applied for indemnity costs against Icon and
Westpac. Icon opposes their applications.
[5] By joint memorandum dated 17 June 2011 counsel for all the parties have advised that the claim for costs by the second defendants against the third defendant, Westpac New Zealand Limited, is to be adjourned on the following grounds:
(a) The second defendants’ claim for costs against the first defendant is
to be determined.
(b) If the first defendant is ordered to pay costs to the second defendants and those costs are paid, then the second defendants will abandon any claim for costs against Westpac.
(c) If the first defendant fails to pay the costs which it may be ordered to pay to the second defendants, then the second defendants will be entitled to seek a determination of its claim for costs against Westpac. In the event that the second defendants seek a determination of their claim for costs against Westpac, they shall provide written notice to Westpac and Westpac will file any
memorandum with respect to costs within 10 days of receiving such notice.
[6] On this basis I grant the adjournment of the claim against Westpac and determine the claims for costs by Mr Walters and the second defendants against Icon.
Mr Walters’ claim for costs
[7] Mr Walters claims:
(a) indemnity costs of $42,407.58 (including GST) under rule 4.64 of the
High Court Rules as a first charge from the funds held; and
(b) $10,000 on account of his personal attendances in reliance on
Halsbury’s Laws of England.1
[8] Icon does not dispute the quantum of Mr Walters’ costs, but opposes his claim on the grounds that any order for costs made against Icon in favour of Mr Walters would be premature at this stage because:
(a) Icon’s counterclaim in the interpleader proceeding has yet to be resolved; and
(b)consequently the question whether Mr Walters’ default gave rise to the interpleader proceeding is still at large.
[9] The first-named second defendant does not oppose in principle Mr Walters’
entitlement to indemnity costs, but submits that:
(a) Mr Walters’ costs should be paid by the unsuccessful claimants, namely Icon and Westpac: rule 4.64(2) and Shaw v Weldon.2
Mr Walters’ costs should not be paid from the contested funds as this
1 Halsbury’s Laws of England (5th ed, 2008) Vol 25, Interpleader, at [1057].
2 Shaw v Weldon (1884) 2 NZLR 395 (SC).
would result, effectively, in payment of his costs by the successful claimants, the second defendants.
(b)As Westpac has already met Mr Walters’ costs and as the first-named second defendant was unaware that any such agreement existed, the costs should not be reimbursed to Westpac, an unsuccessful claimant, from the contested funds. Any dispute between Westpac and Icon as to where the costs burden should lie is a matter for them.
(c) If Mr Walters’ costs are to be paid from the contested funds, then:
(i)the costs relating directly to the interpleader application need to be distinguished from the cross-claim between Icon and Mr Walters;
(ii) the costs should be paid from the “top up” funds;
(iii)the payment should be on a pro-rata basis, across all contested funds; and
(iv)Icon and Westpac should be ordered to repay any amount deducted from the contested funds.
(d)Mr Walters is not entitled to additional costs ($10,000) in respect of his personal attendances. There is no basis for such a claim.
[10] Similar submissions in opposition to Mr Walters’ claim are made for the
second to fifth-named second defendants. In addition it was submitted that:
(a) Mr Walters has not provided evidence to establish that his actual costs
were “reasonably incurred” as required by Bradbury v Westpac
Banking Corporation;3
3 Bradbury v Westpac Banking Corporation (2008) 18 PRNZ 859 (HC).
(b) GST should also be omitted from the costs: McGechan on Procedure
at [HRPT 14.03].4
[11] In response to the submissions for the second defendants, it was pointed out for Mr Walters that he had exhibited invoices for his costs and that he had only claimed for costs that related to the present proceeding.
[12] Rule 4.64 of the High Court Rules provides:
4.64 Costs of applicant
(1) Unless the court otherwise orders, an applicant is entitled to the indemnity costs (as defined by rule 14.6(1)(b)) of and incidental to the application.
(2) The court may order that the applicant's costs be paid by any 1 or more of the claimants and may apportion the liability between any 2 or more claimants, as it thinks just.
(3) The court may charge any property in dispute, or the proceeds of the sale of it, or both, with payment of the costs of the applicant.
[13] Under this rule:
(a) A stakeholder applicant is entitled to indemnity costs of and incidental to the application unless the court orders otherwise. There is a presumption of solicitor-client costs in favour of the applicant: Wire Makers Ltd v Ross W Thrupp Ltd and Herbison v Hofman,5 but the court retains a discretion to order otherwise if satisfied in the circumstances of a particular case that an order for indemnity costs would not be appropriate.
(b)The presumption in favour of an order for indemnity costs means that it is not necessary for the applicant to meet the requirements of rule
14.6(4) of the High Court Rules as well.
4 Andrew Beck and Others McGechan on Procedure (looseleaf ed, Brookers).
5 Wire Makers Ltd v Ross W Thrupp Ltd (1990) 2 PRNZ 477 (HC) at 481; and Herbison v Hofman HC Christchurch CP 59/01, 23 November 2001 at [20].
(c) The court has a discretion to order that the applicant’s costs be paid by and apportioned between the claimants. Again the court has a discretion to exercise in the circumstances of the particular case.
(d)The court also has a discretion to charge any property in dispute with payment of the applicant’s costs. Although there is no presumption in favour of doing so, a charge against any property in dispute is normal: Shaw v Weldon and Herbison v Hofman at [20].
[14] Rule 4.64 is an important part of the interpleader procedure providing applicants with the protection of indemnity costs and potential security in the form of a charge over the property in dispute or its proceeds. The purpose of the rule is to encourage applicants to use the interpleader procedure by ensuring that they are normally not out of pocket as a result of doing so.
[15] In the present case in terms of rule 4.64(1) Mr Walters is entitled to an order for indemnity costs “of and incidental to the application” unless the court orders otherwise. The original submissions for the second defendants raised four issues:
(a) Were the actual costs “reasonably incurred”?
(b) Did they relate solely to the interpleader application? (c) Should GST be part of the costs order?
(d)Is Mr Walters entitled to recover $10,000 for his personal attendances?
There is no suggestion that Mr Walters is otherwise not entitled to an order for indemnity costs.
[16] On the issues whether the actual costs were “reasonably incurred” and whether they related solely to the interpleader application, I sought and obtained further information from Grove Darlow & Partners, the lawyers who acted for
Mr Walters. As a result of the further information provided to the Court and the other parties by Grove Darlow & Partners, the second defendants no longer pursue these issues. The second defendants accept that Mr Walters’ actual costs were “reasonably incurred” and that they related solely to the interpleader application.
[17] On the issue whether GST should be part of the costs order, Mr Walters now accepts the submission of counsel for the second defendants that GST should not be part of the order: Burrows v Rental Space Ltd.6
[18] As far as the claim by Mr Walters for his costs of $10,000 in respect of his personal attendances is concerned, I accept the submissions for the second defendants that there is no entitlement to recover these costs as a charge against the funds. The passage in Halsbury’s Laws of England relied on by Mr Walters should be distinguished. The authorities on which the passage is based contemplate a party being entitled to recover charges relating to holding disputed goods. Any entitlement Mr Walters has to charge fees could only be against his client, in this case, Icon.
[19] I also accept the submissions for the second defendants that the decision in Brownie Wills v Shrimpton7 should be distinguished from the present case. As Blanchard J said in the judgment of Gault and Blanchard JJ at 327:
The long-established rule is that, as an exception to the general rule denying costs to a litigant in person, a practising barrister and solicitor who brings or defends a proceeding in person or by a partner or employee of the firm is entitled to the same costs as when acting on behalf of a client. So the lawyer litigant may have the same costs as if another lawyer had been instructed but cannot, of course, charge for consulting, instructing, or attending upon him or herself: London Scottish Benefit Society v Chorley (1884) 13 QBD 872.
[20] The Court made it clear in that case that the exception only applies to costs claimed by a “lawyer litigant” where that lawyer represents him or herself (or is represented by a partner or employee of the firm). In Mr Walters’ case, he is not a
self-represented “lawyer litigant”, nor was he represented by a solicitor in his firm.
6 Burrows v Rental Space Ltd (2001) 15 PRNZ 298 (HC).
7 Brownie Wills v Shrimpton [1998] 2 NZLR 320 (CA).
Mr Walters instructed independent solicitors to act for him in the interpleader proceeding, and those legal costs have been separately claimed. In this case, Mr Walters is no different to any other party to litigation with legal representation, although he happens also to be a lawyer. The exception does not apply. As such, the ordinary rules relating to costs under the High Court Rules apply and Mr Walters is only entitled to claim his actual legal costs incurred in the usual course, and not in addition for his own personal time and attendances.
[21] I am therefore satisfied that Mr Walters is entitled to an order for indemnity costs in the sum of $36,242.50 (that is without GST).
[22] The next question in terms of rule 4.64(2) is whether Mr Walters’ costs should be paid solely by Icon as submitted for the second defendants or whether no order should be made against Icon at this stage because Icon’s counterclaim against Mr Walters has not yet been determined.
[23] On the basis that Icon was unsuccessful in its opposition to the claims by the second defendants to the funds held by Mr Walters, the Court would in the normal course make an order that Mr Walters’ costs be paid by Icon. The fact that Icon’s separate counterclaim has not yet been determined does not alter the position because determination of the counterclaim will have no impact on the outcome of the interpleader application. The decision in Wire Makers Ltd v Ross W Thrupp Ltd may be distinguished because there the interpleader application had not been determined.
[24] I am therefore satisfied that Mr Walters’ costs should be paid by Icon.
[25] The next question in terms of rule 4.64(3) is whether payment of the costs should also be charged against the funds. While an order charging a fund may be “normal”, there is no presumption in favour of doing so and the Court retains a discretion to consider all of the relevant circumstances of the particular case. In the present case, for the following reasons, I am satisfied that there should not be an order charging the funds.
[26] First, Mr Walters’ costs should be paid by Icon, the unsuccessful party, and not by the second defendants, who are entitled to the funds. Icon has confirmed that it is in a position to meet the costs.
[27] Second, Mr Walters’ interpleader application was in fact funded by Westpac which is able to require Mr Walters to recover the costs from Icon. There is no suggestion that Westpac’s funding of the application was in any way inappropriate: cf Auckland City Council as Assignee of Body Corporate 16113 v Auckland City
Council and Saunders v Houghton8. But the fact that Mr Walters was funded by
Westpac means that he is not in fact out of pocket and therefore does not need a charge over the disputed funds to protect his position. I agree with the submissions for the second defendants that any costs issues between Mr Walters, Westpac and Icon can be dealt with between them.
[28] My conclusion on this question means that it is unnecessary for me to consider the submissions for the second defendants in relation to the amount of the “top ups” also held by Mr Walters.
Claims for costs by second defendants
[29] The first-named second defendant seeks an order for indemnity costs against
Icon and Westpac in the sum of $23,199 (excluding GST) on the grounds that:
(a) both Icon and Westpac failed to comply with the High Court Rules in respect of the interpleader application;
(b)Icon made a last minute application for all affidavit deponents to be made available for cross-examination at the hearing on 15 February
2011 which caused unnecessary delay and increased costs;
(c) During the hearing Icon abandoned its pleaded claims and introduced new arguments without notice, all of which lacked merit or any
8 Auckland City Council as Assignee of Body Corporate 16113 v Auckland City Council [2008]
1 NZLR 838 (HC); and Saunders v Houghton [2010] 3 NZLR 331 (CA).
evidential basis. Icon failed to act reasonably and thereby contributed to the time and expense of the proceeding;
(d)Westpac which did not appear but relied on Icon to conduct the case for its benefit should be jointly and severally liable with Icon so that the second defendants are not disadvantaged by any impecuniosity of Icon.
[30] The second to fifth-named second defendants also seek orders for indemnity costs against Icon and Westpac in the sums of $14,360 for Jason Cunningham and Bobby Dazzler Australia Pty Ltd and $13,860 for D and M Chamings on the grounds that:
(a) Icon’s claim and Westpac’s reliance on it was obviously hopeless and
lacked an evidential basis;
(b) Icon and Westpac rejected a without prejudice offer to settle;
(c) Icon’s conduct in the proceeding justifies a finding that it acted vexatiously and improperly;
(d) Westpac and Icon should be jointly and severally liable for costs;
(e) Icon and Westpac have improperly kept the second defendants out of their funds since 2009 and caused them to incur significant costs without any arguable reason.
[31] The second defendants did not seek orders for increased costs in the event that their applications for indemnity costs were unsuccessful. Instead they sought orders for costs on a 2B basis.
[32] Icon opposes the costs’ orders sought by the second defendants on the
grounds that:
(a) No orders should be made until the proceeding between Mr Walters and Icon is dealt with. The interpleader proceeding was brought about by Mr Walters’ default.
(b)The application should be adjourned until the counterclaim is decided and a costs order made against the ultimately unsuccessful party: Elder Dempster Lines v Zaki Ishag.9
(c) Alternatively, there should be no order for indemnity costs as Icon acted appropriately and none of the steps it took resulted in increased costs.
[33] As already noted, the claims by the second defendants for costs against Westpac are adjourned by consent in accordance with the joint memorandum of counsel for all the parties dated 17 June 2011.
[34] Icon does not dispute that the actual costs of the second defendants were “reasonably incurred” or that they related solely to the interpleader application. There are therefore two issues in relation to the claims for costs by the second defendants against Icon, namely whether any order should be made and, if so, whether indemnity costs should be ordered.
[35] As successful claimants, the second defendants are entitled to costs against Icon, the unsuccessful party. There is no reason why costs should not follow the event.
[36] I do not accept the submission for Icon that there should be an adjournment of the applications for costs. The counterclaim between Icon and Mr Walters is a separate matter which is of no concern to the second defendants who are entitled to recover their costs now. If Icon is ultimately successful in its counterclaim against Mr Walters, it will be able to recover its costs from him. There was no suggestion that Mr Walters would not be in a position to meet such an order.
[37] As to the question of indemnity costs, the relevant provisions of rule 14.6 are:
14.6 Increased costs and indemnity costs
(1) Despite rules 14.2 to 14.5, the court may make an order—
(a) increasing costs otherwise payable under those rules
(increased costs); or
.....
(b) that the costs payable are the actual costs, disbursements, and witness expenses reasonably incurred by a party (indemnity costs).
(4) The court may order a party to pay indemnity costs if—
(a) the party has acted vexatiously, frivolously, improperly, or unnecessarily in commencing, continuing, or defending a proceeding or a step in a proceeding; or
(b) the party has ignored or disobeyed an order or direction of the court or breached an undertaking given to the court or another party; or
(c) costs are payable from a fund, the party claiming costs is a necessary party to the proceeding affecting the fund, and the party claiming costs has acted reasonably in the proceeding; or
(d) the person in whose favour the order of costs is made was not a party to the proceeding and has acted reasonably in relation to it; or
(e) the party claiming costs is entitled to indemnity costs under a contract or deed; or
(f) some other reason exists which justifies the court making an order for indemnity costs despite the principle that the determination of costs should be predictable and expeditious.
[38] The correct approach to an award of indemnity costs is described in the judgment of the Court of Appeal in Bradbury v Westpac Banking Corporation.10
After discussing the test for indemnity costs, practice in other common law jurisdictions and the assessment of the test, the Court in a judgment delivered Baragwanath J concluded:
[29] We therefore endorse Goddard J’s adoption in Hedley v Kiwi Co- operative Dairies Ltd (2002) 16 PRNZ 694 at [11] (HC) of Sheppard J’s summary in Colgate v Cussons at [24]. While recognising that the categories in respect of which the discretion may be exercised are not closed (see r 14.6(4)(f)), it listed the following circumstances in which indemnity costs have been ordered:
(a) the making of allegations of fraud knowing them to be false and the making of irrelevant allegations of fraud;
(b) particular misconduct that causes loss of time to the court and to other parties;
(c) commencing or continuing proceedings for some ulterior motive;
(d) doing so in wilful disregard of known facts or clearly established law;
(e) making allegations which ought never to have been made or unduly prolonging a case by groundless contentions, summarised in French J’s “hopeless case” test.
[39] Adopting this approach in the present case, I am satisfied that the second defendants are entitled to orders for indemnity costs against Icon essentially because Icon had no basis at all for opposing the claims by the second defendants for the repayment of their deposits. Icon’s grounds for opposing the claims were either not pursued at the hearing or found to be without substance: interpleader judgment dated
7 March 2011 at [3], [16] and [28]-[38]. The nature and last minute timing of the submissions for Icon, together with the steps which it took to seek to delay the hearing, including its unnecessary request to cross-examine all of the deponents for Mr Walters and the second defendants and its decision to adduce no evidence itself, established that it was acting improperly in order to avoid or postpone the inevitable. This was a case which met French J’s “hopeless case” test in J-Corp Pty Ltd v Australia Builders Labourers Federation Union of Workers, Western Australian
Branch (No. 2).11 Icon advanced contentions which were quite simply groundless
and without merit.
11 J-Corp Pty Ltd v Australia Builders Labourers Federation Union of Workers, Western Australian
Branch (No. 2) (1993) 46 IR 301 at 303.
Result
[40] For the reasons given, Icon is ordered to pay the following indemnity costs:
(a) $36,242.50 to the plaintiff, Mr Walters;
(b) $23,199 to the first-named second defendant, Glen D’Cruz;
(c) $14,360 to the second and third-named second defendants, Jason
Cunningham and Bobby Dazzler Australia Pty Ltd; and
(d)$13,860 to the fourth and fifth-named second defendants, D and M Chamings.
D J White J
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