Worldwide NZ LLC v QPAM Ltd
[2009] NZCA 226
•2 June 2009
IN THE COURT OF APPEAL OF NEW ZEALAND
CA582/2008
[2009] NZCA 226
BETWEENWORLDWIDE NZ LLC
First AppellantANDJAMES GOSNEY
Second Appellant
ANDQPAM LIMITED
First RespondentANDJACOBSEN VENUE MANAGEMENT NEW ZEALAND LIMITED
Second Respondent
Hearing:26 March 2009
Court:Chambers, Randerson and Potter JJ
Counsel:M J Fisher for Appellants
A C Sorrell and S L Robertson for First Respondent
C P Browne for Second Respondent
Judgment:2 June 2009 at 4 pm
JUDGMENT OF THE COURT
A The appeal is allowed.
B The order for costs made in the High Court on 27 August 2008 is quashed.
C In substitution therefor, an order is made that the appellants must pay the first respondent by way of costs the sum of $13,110 and the second respondent by way of costs the sum of $10,800. The appellants’ liability is joint and several.
D With respect to costs in this court, the respondents must pay the appellants costs for a standard appeal on a band A basis, reduced by a third, plus usual disbursements. The respondents’ liability is joint and several.
REASONS OF THE COURT
(Given by Chambers J)
A costs appeal
[1] This is the third time these parties have been before this court. This time Worldwide NZ LLC and James Gosney are the appellants. They appeal against a costs judgment made by Hugh Williams J on 27 August last year: Worldwide NZ LLC v QPAM Limited HC AK CIV 2006-404-1827. That costs judgment fixed costs in respect of the following interlocutory matters:
(a)An unsuccessful application for an interlocutory injunction by Worldwide against QPAM Limited, the first respondent, and Jacobsen Venue Management New Zealand Limited, the second respondent, the judgment on which was delivered by Hugh Williams J on 30 May 2006 (“the 30 May judgment”);
(b)An unsuccessful application for stay of execution pending appeal, again brought by Worldwide, the judgment on which was delivered by Hugh Williams J on 26 May 2006 (“the 26 May judgment”);
(c)Two interlocutory appearances before Frater J.
[2] The real dispute before us relates to the orders for costs made in respect of the 26 May judgment and the 30 May judgment. The issue concerning the appearances before Frater J is trifling. We deal with that briefly at the end of these reasons.
[3] In essence, Hugh Williams J ordered Worldwide to pay the respondents costs in respect of the 26 May judgment and the 30 May judgment on a 2B basis X 3. Mr Fisher, for the appellants, contends that Hugh Williams J’s costs decision was unprincipled and plainly wrong. He also contends that the judge took into account irrelevant considerations in reaching that decision.
[4] We begin by setting out the relevant facts. We then set out the costs as fixed by the judge flowing from the 30 May judgment, the breakdown of those costs, the judge’s reasons for increased costs, and our analysis of those reasons. We then do the same exercise with respect to the costs order flowing from the 26 May judgment. Finally, and briefly, we shall deal with the costs order Hugh Williams J imposed with respect to the hearings before Frater J.
The relevant facts
[5] A dispute arose in 2006 about the operation of pre-emption provisions in documents governing the relationship between the two participants in the entity set up to develop the Vector Arena, a major indoor entertainment facility in downtown Auckland. The development was substantially funded by the Auckland City Council.
[6] The entity was a unit trust called the Quay Park Arena Management Trust (“QPAM Trust”). This trust had two classes of units, A units and B units. The trustee of the QPAM Trust was QPAM Limited (“QPAM”), the first respondent. QPAM had two classes of shares, A shares and B shares. The A shares in QPAM were “stapled” to the A units in the QPAM Trust, and the same applied to the B shares and the B units. Prior to the events which precipitated this litigation, Jacobsen Venue Management New Zealand Limited, the second respondent, and interests associated with it (to which we shall collectively refer as “Jacobsen”) held the A shares and A units (75% of the total number of shares and units) and Worldwide held the B shares and B units (the remaining 25%). Jacobsen was entitled to appoint three directors of QPAM and Worldwide was entitled to appoint one director.
[7] In January 2006, the ultimate parent company of Worldwide, Worldwide Entertainment Inc (“WEI”), went into receivership. That arguably triggered in Jacobsen’s favour certain pre-emption provisions in the trust deed for the QPAM Trust and in the constitution of QPAM. Relations between Worldwide and Jacobsen became edgy. Worldwide became concerned about Jacobsen’s intentions. On 4 April, Michael Goldberg, WEI’s receiver, purported to remove Jack Utsick, Worldwide’s representative on the QPAM board, as a director and to appoint Mr Gosney in his place. On the same day, Worldwide commenced a proceeding against QPAM, seeking interim orders relating to the provision of information by QPAM to Worldwide and seeking to restrain QPAM’s board from meeting or transacting any business until after the information had been provided. That application was considered by Frater J late on 4 April, and again on 5 April. The parties eventually reached an agreed position concerning the provision of the information sought. The judge reserved costs.
[8] On 26 April, Jacobsen gave notice of the exercise of its pre-emptive rights. QPAM in turn advised that, such notice having been given, it now proposed to treat Jacobsen as holder of all the shares in QPAM and all the units in the QPAM Trust.
[9] Worldwide disputed QPAM’s and Jacobsen’s interpretation of the relevant pre-emption provisions. On 9 May, Worldwide filed an amended statement of claim, joining various Jacobsen entities as defendants to the earlier proceeding. Worldwide sought an interlocutory injunction requiring the respondents to treat Worldwide as still being the lawful owner of the B units and B shares and to treat Mr Gosney as a validly appointed director. Worldwide also sought certain ancillary orders protecting the ongoing position of it and Mr Gosney until the pre-emption process, and the disputes about its operation, were resolved. Worldwide served these documents on the respondents the following day.
[10] Worldwide’s application came before Baragwanath J on 11 May. He made certain holding orders and directed the substantive application be heard on Monday, 15 May. He fixed a timetable for the exchange of affidavits.
[11] The hearing before Hugh Williams J began at 10 am on 15 May. The first thing His Honour had to deal with was the respondents’ challenge to two affidavits Worldwide had filed that morning. His Honour delivered an oral judgment (“the 15 May judgment”), holding all of Mr Goldberg’s latest affidavit inadmissible save for one paragraph and holding an affidavit by Grant Burns, a chartered accountant, inadmissible. The challenge to the admissibility of these affidavits was made orally for obvious reasons: the respondents had received them just that morning.
[12] Having cleared up that evidence question, Hugh Williams J proceeded to hear Worldwide’s application for interlocutory relief. The hearing ended at about 6.30 pm. The judge indicated he would reserve his decision. At that point, Mr Fisher sought an extension of Baragwanath J’s interim orders until a reasonable period after delivery of Hugh Williams J’s reserved judgment. The judge reserved his decision on the extension application overnight, but ordered that Baragwanath J’s orders were to remain in place in the meantime.
[13] The next day Hugh Williams J issued a minute. He rescinded Baragwanath J’s orders. He advised that his reasons for so ruling would be given when he delivered his reserved judgment on the injunction application.
[14] The following day, Worldwide filed an appeal in this court against Hugh Williams J’s decision to rescind Baragwanath J’s orders. Worldwide also applied in the High Court for a stay of execution of Hugh Williams J’s orders pending appeal. This application was filed a little after 5 pm and served just after 6 pm.
[15] The following day (18 May), Hugh Williams J heard the stay application. He reserved his decision.
[16] On 26 May, the judge delivered his decision on the stay application. He refused a stay.
[17] Four days later, His Honour delivered his reserved decision declining the application for an interlocutory injunction.
[18] It is the events up to this point which were the subject of the costs judgment currently under appeal. Later events are largely irrelevant, but we need to mention several. We shall take them in chronological order.
[19] On 7 June, Worldwide filed an appeal against Hugh Williams J’s decision declining the application for an interlocutory injunction. Several days later it abandoned its first appeal (filed on 17 May).
[20] On 10 November 2006, this court dismissed Worldwide’s appeal against Hugh Williams J’s decision: Worldwide NZ LLC v QPAM Limited CA122/06. This court also dealt with an appeal against the 15 May judgment. It was dismissed: at [48]. This court ordered Worldwide to pay to each respondent costs of $6,000 and usual disbursements. That was the standard costs award for a one day hearing at that time.
[21] On 1 December 2006, Winkelmann J declined to strike out Worldwide’s statement of claim under r 186 of the High Court Rules, save for an alternative cause of action based on estoppel. She also declined the respondents’ application for summary judgment. Appeals from this judgment by Jacobsen and QPAM were largely unsuccessful: [2008] NZCA 105.
The 30 May judgment
[22] The orders sealed following the costs judgment divided costs into the three categories set out at [1] above. With respect to the 30 May judgment, QPAM received $16,800 and Jacobsen $14,880. The difference reflects the fact that Jacobsen was not represented at the 11 May hearing before Baragwanath J and did not take part in two telephone conferences conducted by Baragwanath J the following day.
[23] Apart from that, the awards are identical. With respect to each respondent, the award covers:
(a)Preparing and filing opposition to interlocutory application for interlocutory injunction and supporting affidavits – 0.6 days;
(b)Preparation for hearing of defended interlocutory application – 1.0 day;
(c)Appearance at hearing of defended interlocutory application (15 May) – 1.0 day;
(d)Second counsel on 15 May 2006 – 50%.
[24] Mr Fisher does not challenge any of the four heads of award. Nor does any party challenge the assignment of category 2 to this proceeding. Nor does Mr Fisher challenge the band B time allocation the judge fixed. Indeed, he concedes that step (a) could well have been assessed on a band C basis (two days). What he does challenge is the judge’s decision to treble the 2B rate.
[25] The judge determined that the respondents were entitled to increased costs under r 48C(3) of the High Court Rules (as they then were). At [19]-[23], he set out the reasons for that view:
(a)“Significant additional time, out of normal hours and under pressure, was required to be expended by solicitors, counsel and witnesses for the defendants”;
(b)“The plaintiffs failed to reconsider their position following receipt of the 26 April letter and adjust their approach to the claim accordingly or to recognise the letter as an offer of settlement”;
(c)“There is a certain amount of evidence supporting the submission that service of documents on the defendants was late and might have been designed to put additional pressure on them … in order to achieve an advantage for the plaintiffs”;
(d)Worldwide sought an unduly tight timetable, which put additional pressure on the respondents;
(e)Worldwide failed “to file an undertaking as to damages”.
[26] Mr Fisher criticised all these reasons. We deal with them in turn.
[27] As to (a), we accept that the respondents’ lawyers would have had to do some work “out of normal hours and under pressure”. That is by no means unusual where parties are engaged in an urgent interlocutory injunction battle. At the same time, it should not be overlooked that, between the date of service of the application (10 May) and the date of the hearing (15 May), there were only four clear days (two of them the weekend). We accept Mr Fisher’s concession that step (a) should be calculated on a band C basis ie two days (notionally assigned to 11 and 12 May). We also think one day was an insufficient allowance for step (b). We think the judge would have been entirely justified in increasing that to two days under r 48C(3)(a) (notionally assigned to the weekend, 13 and 14 May). That covers the entire period between service and hearing. We acknowledge that each respondent may have had more than one lawyer working on this matter, with the consequence that potentially more than four lawyer-days might have been worked. On the other hand, however, it may well be that our assumption that the whole weekend was worked is generous to the respondents. As well, we know, because Hugh Williams J referred to the fact, that the respondents “sensibly shared the arguments at the [15 May] hearing”: see [19](b). Given that, a combined allowance of four days for step (b) between the two respondents seems reasonable.
[28] As to (b), we do not consider Worldwide acted unreasonably following receipt of Jacobsen’s 26 April letter. That letter set out Jacobsen’s lawyers’ view as to the legal position, but we would not construe it as an “offer of settlement”. The only element of an “offer” in the letter was advice that Jacobsen was willing to pay fair value for the B units. But that offer was based on a contention that legally no payment was required for the units. The validity of that contention is yet to be determined. In virtually every case, lawyers for each party will set out in letters their contentions as to the legal position. On the law of averages, half the time the position advocated in such letters will accord roughly with what a court ultimately decides. But that does not mean that a party who has sent such a letter is entitled to increased costs from the date of its prescient letter. That would drive a coach and four through the standard costs regime.
[29] We think it is noteworthy that this court, in its 10 November 2006 judgment, did not decide whether Worldwide had a seriously arguable case. It determined the matter against Worldwide on the “balance of convenience” limb of the standard interlocutory injunction test. A key factor in determining “balance of convenience” was an undertaking Jacobsen gave, by counsel during the hearing and confirmed in writing after the hearing, concerning Worldwide’s “ongoing interest in the B units”: at [34]-[38]. Following the giving of those undertakings, this court concluded at [39]:
But we are satisfied for the reasons set out above that, given the terms of the undertakings, the balance of convenience favours Jacobsen. In our view, the undertakings provide reasonable protection for the position of Worldwide pending resolution of the disputes between the parties and completion of the pre-emptive rights process.
[30] In addition, it seems clear that this court did not regard Worldwide’s stance in seeking an interlocutory injunction as in any way improper. The costs order against Worldwide was entirely standard.
[31] We also note in this regard that Winkelmann J, in declining the respondents’ application for summary judgment, recognised that Worldwide’s claim was arguable. The respondents’ appeals from this judgment were largely unsuccessful, this court noting that “the approach contended for by QPAM and the Jacobsens [as to valuation was] neither fair nor reasonable”: [2008] NZCA 105 at [29].
[32] As to (c), it is hard to see how this factor could have had relevance so far as this part of the costs claim was concerned. The application was filed on 9 May and served the following day. We have effectively allowed for the entire period between service and hearing.
[33] As to (d), we do not see how Worldwide can be criticised for an unduly tight timetable. First, the circumstances were urgent. Secondly, QPAM agreed to the timetable and joined Worldwide in seeking an urgent fixture for the hearing of the application. Thirdly, Baragwanath J obviously considered the timetable appropriate for the circumstances. In any event, a more relaxed timetable would probably have led to the respondents’ lawyers spending more time in preparation, thereby cranking up further actual costs. In other words, the tight timetable probably ended up saving the respondents money and reducing the shortfall between actual costs and court-ordered costs recovery.
[34] As to (e), this factor could have no relevance with respect to the application for an interlocutory injunction, as an undertaking as to damages was filed with the application on 9 May. The respondents accept this. The lack of an undertaking could potentially affect only the award in respect of the early appearances before Frater J. But QPAM did not seek or receive increased costs in respect of those appearances.
[35] In our view, none of the grounds cited at [25] above support increased costs other than the first, and then only so far as step (b) was concerned. The concern with respect to the time allocation for step (a) should have been met not by an award of increased costs but rather by application of a band C time allocation for that step.
[36] Further, we accept Mr Fisher’s submission that there was no logical or principled basis for the judge’s decision simply to treble the 2B rate. Such a measure was contrary to this court’s decision in Holdfast NZ Limited v Selleys Pty Limited (2005) 17 PRNZ 897.
[37] Mr Browne sought to uphold Hugh Williams J’s decision on a different ground from those His Honour had set out. This was that “the claim currently pursued by [Worldwide] is a new one which would not support an application for injunctive relief”. That may well be, but it is not relevant. No one is disputing that Worldwide must pay costs to the respondents in respect of the 30 May judgment and the 26 May judgment. Essentially, the quantum of those costs should be ascertained as if they had been quantified at the dates of those judgments. That is a fundamental premise of the costs regime: see r 48E(1). The only reason we have looked at later developments when assessing Hugh Williams J’s ground (b) is that they confirm that Worldwide was not acting unreasonably in not blindly accepting the terms of Jacobsen’s 26 April letter.
[38] The appropriate award of costs with respect to matters covered by the 30 May judgment (incorporating the 15 May judgment), using the steps set out at [23] above, were:
Step (a)
2 days
Step (b)
2 days
Step (c)
1 day
Step (d)
0.5 days (50% of 1 day)
TOTAL
5.5 days
X $1,600
$8,800
[39] In addition, QPAM should receive in respect of attendances on 11 and 12 May the claimed 0.4 days ($640). This means, for the period between service (10 May) and hearing (15 May), QPAM will have received costs based on a time allocation of 4.4 days. The total award for QPAM under this head is, therefore, $9,440.
The 26 May judgment
[40] With respect to the 26 May judgment, the respondents each received $6,000. Each award covers:
(a)Preparing for hearing of defended interlocutory application for stay – 0.5 days;
(b)Appearance at hearing of defended interlocutory application (18 May) – 0.5 days;
(c)Second counsel on 18 May 2006 – 50%.
[41] Mr Fisher does not challenge any of the three heads of award. He does not challenge the time allocations. What he does challenge, again, is the judge’s decision to treble the 2B rate.
[42] It is important to remember the timing with respect to this matter. The application was served on the respondents just after 6 pm on 17 May. Hugh Williams J then heard the parties (a half day hearing) the following day. There simply was not time to spend more than the assessed half day in preparation. The respondents received a one day allocation each; from their point of view, time spent from start to finish was less than a day. The judge, in deciding to award treble 2B, did not assign any separate reasons to this part of the decision. In our view, none of the grounds set out above at [25] applies to this costs order. We can see no ground for departing from a standard 2B allocation. The judge effectively awarded each party three days’ costs for something that was completed in less than a day. That, with respect, was plainly wrong and unprincipled.
[43] Under this head, Worldwide should have to pay each respondent standard 2B costs (plus allowance for second counsel), namely $2,000.
Appearances before Frater J
[44] QPAM sought costs, on a 2B basis, with respect to the appearances before Frater J on 4 and 5 April. The total came to $1,600. Hugh Williams J awarded that sum. There was no trebling of the rate on that item. Mr Fisher complained he had not been properly heard with respect to that claim. But he was not able to advance any other argument as to the unreasonableness of that award. It was clearly within the judge’s discretion.
[45] We also mention here a photocopying disbursement in favour of QPAM of $70. Mr Fisher did not dispute that.
Result
[46] We allow the appeal. With respect to Hugh Williams J, the award made was unprincipled and based on faulty reasoning. Although the fixing of costs is a discretionary decision, the errors made here are capable of review and indeed must be corrected.
[47] We accordingly quash the award of costs made on 27 August last year. In its place, we make the following orders.
[48] The appellants must pay QPAM costs of $13,110, made up thus:
(a) The 30 May judgment
$9,440
(b) The 26 May judgment
$2,000
(c) The appearances before Frater J
$1,600
(d) Agreed disbursements
$70
[49] The appellants must pay Jacobsen the sum of $10,800, made up thus:
(a) The 30 May judgment
$8,800
(b) The 26 May judgment
$2,000
[50] These figures are to be contrasted with what Hugh Williams J ordered, namely $24,470 in the case of QPAM and $20,880 in the case of Jacobsen.
[51] The appellants are entitled to costs on the appeal. We award costs for a standard appeal on a band A basis. We reduce those costs by a third on the basis that the amount at stake was “of exceptionally low value” in terms of civil appeals to this court and that the issues at stake were of little significance: see Court of Appeal (Civil) Rules 2005, r 53F(b) and (c). This court recently made the same costs order in another case which raised very similar issues to this: see Saunders v Winton Stockfeed Limited [2009] NZCA 148 at [38].
Solicitors:
Brookfields, Auckland, for Appellant
Stewart Germann Law Office, Auckland, for First Respondent
Wilson Harle, Auckland, for Second Respondent
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