White v Bank of New Zealand

[2013] NZHC 2845

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2013-404-2298 [2013] NZHC 2845

BETWEEN  AMANDA ADELE WHITE First Plaintiff

ANDANNE LEOLINE EMILY FREEMAN Second Plaintiff

ANDBANK OF NEW ZEALAND Defendant

Hearing:                   On the papers

Counsel:                  RS Pidgeon for Plaintiffs

DT Broadmore for Defendant

Judgment:                29 October 2013

JUDGMENT OF KATZ J (Costs of Injunction Application)

This judgment was delivered by me on 29 October 2013 at 4:30 pm

Pursuant to Rule 11.5 High Court Rules

Registrar/Deputy Registrar

Solicitors:           Pidgeon Law, Auckland

Buddle Findlay, Auckland

WHITE & FREEMAN v BANK OF NEW ZEALAND [2013] NZHC 2845 [29 October 2013]

Introduction

[1]      Ms Freeman and Ms White (“Trustees”) (who are mother and daughter) are the trustees of the DCT Trust, a family trust established by Ms White.   The DCT Trust was engaged in property development activities.

[2]      In these proceedings the Trustees sought an interim injunction seeking to restrain the exercise of the Bank of New Zealand’s (“Bank”) power of sale upon the expiry of notices issued under the Property Law Act  2007 (“PLA”).   The PLA Notices were served in respect of two properties over which the Bank had security, following defaults by the Trustees under certain loan agreements with the Bank.

[3]      The PLA Notices were due to expire on 10 May 2013.  I heard and dismissed the  Trustees’ injunction  application  on  9  May  2013,  delivering  reasons  for  my decision on 14 May 2013.1   I directed the Bank to file any memorandum on costs within  14  days,  with  the Trustees  to  file  7  days  thereafter.    The  Bank  filed  a memorandum on 22 May 2013.  A memorandum in response was not initially filed by  the  Trustees.     On  13  September  2013  the  Bank  filed  a  supplementary memorandum requesting that I proceed to deal with costs regardless.

[4]      On 18 September 2013, newly instructed counsel for the Trustees filed a memorandum as to costs,2 stating that the failure to do so earlier was an oversight.  It appears that the Trustees, who were self-represented at the injunction hearing, are now legally aided.

[5]      The key issues between the parties are whether the Bank is contractually entitled to indemnity costs and if so, whether the costs sought by the Bank are

reasonable.

1      White & Freeman v BNZ [2013] NZHC 1087.

2      Following which the Bank’s earlier memoranda were also drawn to my attention.

Is the bank entitled to indemnity costs?

Relevant legal principles

[6]      Rule 14.6(4) provides for the circumstances where indemnity costs can be awarded.   The entitlement in this case falls under r 14.6(4)(e), namely “the party claiming costs is entitled to indemnity costs under a contract or deed”.  This must be read together with r 14.6(1)(b) which restricts the entitlement to indemnity costs “reasonably incurred”.

Submissions

[7]      The Bank seeks solicitor-client costs pursuant to clause 5.8 of the Bank’s standard terms and conditions, which were incorporated into the loan agreements dated 2 April 2009 and 19 May 2009:

5.8 Recovery costs

[The Trustees] must pay, on demand, any costs associated with collection or attempted collection of amounts overdue on any account (including collections agent’s costs and legal fees on a solicitor/own client basis).

[8]      The Bank submits that the costs it has incurred in opposing the injunction application are costs associated with collecting the amounts overdue under the loan agreements  following  the  Trustees’  default.  Therefore,  they  seek  costs  on  a solicitor-client basis of $6,312.00 (excluding GST).   However, if the Court deems that solicitor-client costs are not appropriate, the Bank submits that 2B scale costs of

$5,074.50 should be awarded.

[9]      The Trustees accept liability for 2B costs, but dispute liability for solicitor- client costs.  The Trustees note that “every penny counts” for them, so the difference between actual and scale costs is important. The Trustees submit that:

11. The impecuniosity of the plaintiffs arises from the [Bank’s] conduct. In the related procedural realm of security for costs, this is an issue and it is submitted it is a relevant factor in exercising the Court’s discretion as to whether to grant a costs award of actual or indemnity costs.

[10]     I  am  satisfied  that  under  clause  5.8  of  the  Bank’s  standard  terms  and conditions it is entitled to recover solicitor-client costs in this case.   The relevant costs were incurred by the Bank in defending the Trustees’ attempt to prohibit the Bank enforcing its security rights to recover money owing to it under  the loan agreements.    Giving  clause  5.8  its  plain  and  ordinary meaning,  these  are  costs “associated with collection...of amounts overdue on any account...”

Are the costs sought by the bank reasonable?

[11]     In Black v ASB Bank Ltd the Court of Appeal stated:3

[77] As this Court held in Frater Williams & Co Ltd v Australian Guarantee Corporation (NZ) Ltd,4  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? That 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.

[12]     The Court also approved the following passage from the Court of Appeal’s

judgment in Beecher v Mills:5

… 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.

3      Black v ASB Bank Ltd [2012] NZCA 384.

4      Frater Williams & Co Ltd v Australian Guarantee Corp (NZ) Ltd (1994) 2 NZ ConvC 191,873 (CA) at 191,886–191,887.

5      Beecher v Mills [1993] MCLR 19 (CA).

[13]     The  Court  in  Black  concluded  that  determining  whether  indemnity costs claimed under a contract are reasonable involves an objective assessment of the following matters:6

(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.

[14]     Counsel for the Bank has provided an invoice setting out the solicitor-client costs incurred (totalling $6,312.00 excluding GST). This is the sum sought by the Bank. The narrations in the invoice are listed as follows:

Receiving instructions in response to interim injunction application; Reviewing relevant documents;

Drafting notice of opposition;

Drafting affidavits of John Lloyd and Janine Fenton; Compiling affidavits and attending to swearing; Drafting submissions;

Preparing bundle of authorities;

Filing and serving notice of opposition and supporting documents; Preparation and attendance at the High Court injunction hearing; and Correspondence.

[15]     The initial bill was for $7890.00 excluding GST before a 20% discount was applied, reducing the costs to $6,312.00 excluding GST.

6 At [80].

[16]     In my view the steps outlined in the invoice are all natural consequences of the Bank’s right to defend its contractual entitlements.  The tasks undertaken are all properly within the scope of the indemnity clause.   Further, the quantum of costs claimed is clearly reasonable for the scope of work involved.  Indeed the plaintiffs are (appropriately) receiving the benefit  of the 20% discount  that the bank  has negotiated with its legal service providers.

[17]     In this case, scale costs would be $5,074.50.    Based on the principle that scale costs are intended to reflect roughly two-thirds of actual costs, actual costs would be expected to be approximately $7,600.   This lends further support to the view that that the indemnity costs sought of $6,312.00 are reasonable and should be awarded to the Bank.

[18]     There is  no  basis  to  justify ordering taxation  of costs,  as  sought  by the Trustees.  The costs sought are clearly reasonable on the face of the invoice provided by the Bank.

Result

[19]     I  order  that  the  plaintiffs  (jointly  and  severally)  meet  the  defendant’s

solicitor-client costs in the sum of $6,312.00.

Katz J