Whitford Properties Limited (in liquidation) v Bruce

[2016] NZHC 1339

IN THE HIGH COURT OF NEW ZEALAND

AUCKLAND REGISTRY

CIV-2014-404-1977

[2016] NZHC 1339

BETWEEN

WHITFORD PROPERTIES LIMITED

in liquidation) Plaintiff

AND

ROBERT IAN BRUCE

First Defendant

COUMAT LIMITED
Second Defendant

GREGORY BRUCE HAYHOW

Third Defendant

Hearing:

On papers costs submissions

Appearances:

L A O'Gorman / A L Harlowe for the ANZ Bank (24 March 2016, 11 May 2016)

R S Phillips / K L Blackmore for Second and Third Defendants (23 February 2016, 1 and 6 April 2016)

J S Cooper for Mr Allen as Respondent/proposed Third Party (24 February 2016)

Judgment:

21 June 2016

JUDGMENT OF ASSOCIATE JUDGE J P DOOGUE

[Regarding Costs of Non-party Discovery]

This judgment was delivered by me on

21.06.16 at 10 a.m., pursuant to Rule 11.5  of the High Court Rules.

Registrar/Deputy Registrar

WHITFORD PROPERTIES LIMITED (in liquidation) v BRUCE & ors [2016] NZHC 1339 [21 June 2016]

[1]        On the 2 February 2016 ANZ and the applicants (who were the second and third defendants) agreed to making an order for discovery by ANZ of the following categories of documents relating to:

The mortgages formally registered over the property owned by the

plaintiff… :

(a)    All tenders received by ANZ from Wayne Ramon Allen either personally or jointly with any other person, or any company with which Wayne Ramon Allen was known by ANZ to be associated; and

(b)    All emails between ANZ staff and Wayne Ramon Allen sent during the month of April 2014.

[2]        The ANZ now seeks to be paid its actual solicitor and client costs incurred both in relation to responding to the application for non-party discovery and for carrying out discovery of the categories of documents that were eventually agreed upon.

[3]        ANZ’s counsel referred to the leading authority on the question of costs that are to be ordered on applications of this kind, Clear Communications Ltd v Telecom Corporation of NZ Ltd. The Judge noted that the rule recognised that the party obtaining discovery may be ordered to pay costs on a full basis to the third party making discovery but does not make such an order mandatory.1

[4]        The Judge also noted that it was traditional for costs purposes to recognise that there were two separate phases involved in an application for non-party discovery, namely, the application itself and the compliance with any order that is made.2

[5]        Dealing with the first part of the enquiry, that is the costs on the application, the Judge determined that it was relevant to look at the reasonableness of any opposition that might be filed to the application. The Judge noted that notwithstanding the opposition an order was made although the respondents had some success

1      Clear Communications Limited v Telecom Corporation of NZ Ltd at 201.

2      At 202.

concerning the nature of discovery ordered. But in the particular circumstances of that case he considered that costs should lie where they fall.

[6]        So far as the costs of compliance with the order were concerned, the Judge noted:

Once the order was made, whether or not justifiably resisted, it was the third parties’ duty to comply, and in the difficult circumstances of this arbitration to take considerable care over compliance. Costs involved in that operation should, in the absence of good reason to the contrary, be recoverable from the party requiring discovery. Third parties brought in as by a sidewind should not be left meeting their own expenses. Those costs are of course to be reasonable in the circumstances. I do not see a reason in the circumstances of this case for order otherwise.

[7]        After noting that there had been some dispute about the reasonableness of the costs which the respondents in that case were claiming the Judge concluded:

I rather think the total expenditure in the end may well reflect a fair enough indemnity on an unders and overs basis, and am not inclined to be too exact.³

[8]        The complaint which the applicants make concerning the compliance costs in this case is that they are “manifestly excessive and unreasonable, and in many of the areas of costs claimed include double up of time between authors”.

[9]        The costs actually claimed are set out in the memorandum that counsel for the ANZ filed. The cost relating to the application total $6993 and the costs of compliance

$5011.50. Counsel for the applicant set out a chronology of the dealings between the parties which ranged over the period from 24 November 2015 to March 2016.

[10]      The costs included negotiating the terms of what would actually be ordered with the memorandum asserting that there was some variation of what the applicants turned out to be seeking that emerged during the scope of the discussions. It does however appear that there may not have been any opposition filed with the ANZ being content to negotiate consent orders. It is clear that the ANZ engaged their solicitor’s assistance within a day or two of receiving the application.

3 At 202.

[11]      However, it is fair to accept that part of the activity of the professional advisers related to settling the terms of the order and the balance is to be ascribed to compliance with the order once it had been made.

[12]      It is not clear what the nature of the negotiations about the form of the order involved. It would appear that issues of privilege were apparently examined at some point by the bank’s advisers – some of the communications being of course those involving all being related to third parties. As well, it would seem that the communications to some extent reflected the stance of the bank questioning the necessity for some of the documents such as emails which the applicants were seeking to obtain.

[13]      Looking at matters overall, there is no reason to suppose that there was any disqualifying conduct on the part of the ANZ in relation to costs on the application. They were entitled to ensure that the proper balance was established between their (and their clients’) entitlement to privacy without obstructing the applicants’ legitimate entitlement to seek documents on discovery that were relevant to the litigation in which they were involved.

[14]      In these circumstances, I consider that in principle there is no reason why the ANZ, which was an unwilling participant which was involuntarily brought in to a dispute that did not involve it, should not be indemnified for all of its costs, both those relating to the application and the costs of compliance with the consent order that was made on the application. There is no reason why there should be any apportioning of the costs of the exercise between the applicant and the ANZ which occurs routinely by application of costs schedules when fixing costs between the actual litigants in a proceeding. Apportionment in those circumstances reflects amongst other things what if any success one party or the other had in the proceeding overall. Considerations of that kind are inapplicable in cases like the present. Different considerations apply, in other words, where peripheral figures become enmeshed in the proceedings for the purposes of providing discovery which is to be used to assist one of the actual parties to the dispute which is under litigation.

[15]The next issue concerns the quantum of the costs which ought to be allowed.

[16]      Counsel for the second and third defendants, Mr Barter, considered that the amount of costs which was being sought was excessive. He contended that there had been duplication in the sense that ANZ’s solicitors provided services relating to the application from no less than four of the firm’s lawyers (including a partner) to review the application for non-party discovery.

[17]      Mr Barter referred to the authority of Just Kids Limited v Pumpkin Patch Limited 4 as authority for the proposition that the:

Courts have also recognised that duplication of costs by authors are not reasonable costs for the party seeking discovery to pay.

[18]      In my view, the decision in Just Kids Limited does not necessarily bind the court hearing the present application to such a conclusion. The decision is an example of the exercise of the court’s discretion in the particular circumstances of that case. Of course, care needs to be taken to ensure that there has not been duplication of costs claimed. It is part of the court’s obligation to ensure that the party claiming costs is not profligate and that the work is undertaken with proper efficiency. Obviously, the requirement for efficiency can be breached even where only one solicitor is engaged because of poor work processes, duplication etc. Conversely, there may be circumstances where involving multiple solicitors may enhance efficiency. It will be obvious that in a case where a junior solicitor is out of his/her depth, costs can be run up that do not reflect the value of the services provided. I am therefore of the view that while the involvement of four solicitors on the initial discussion concerning the application may provide indications of over employment on the task, that does not necessarily follow.

[19]      Counsel for the ANZ has pointed out in the memorandum that the costs which are claimed approximate to what would be the entitlement of the ANZ calculated on a 2B basis. Mr Barter has not sought to argue to the contrary. I agree that that is a

4      Just Kids Limited v Pumpkin Patch Limited [2013] NZ HC 334.

reasonable and useful cross check to ensure that excessive costs have not been claimed. My conclusion is that after some doubt on the matter, I accept that the costs ought to be granted as sought.

Costs of third-party

[20]      As I have earlier indicated, the third party did not have an entitlement to be heard on the application for joinder. The second and third defendants in effect opened the gate to this happening by serving the third party with the application. Once the matter was called before the court, Mr Barter did not oppose the court hearing from Ms Cooper on behalf of the third party.

[21]      I do not consider that the second and third defendants should be able to contend in this case that the submissions that Ms Cooper made on behalf of the third party were futile or wasted. Had the third party not appeared to successfully oppose the making of the order, it may reasonably be envisaged that the outcome would have been that an application would have been subsequently filed to strike out the third party from the proceedings or to seek summary judgment on his behalf having the same effect. The fact that the court declined the application obviated the need for any such application.

[22]      Having regard to the particular circumstances in which the third party came to appear in this case, I consider that the discretion of the court ought to be exercised in favour of making an order for costs in favour of the third party.

[23]      The order contemplated that there would be an affidavit of documents and that the documents listed would be made available for inspection.

J P Doogue

Associate Judge