Yandina Investments Limited v ANZ National Bank Limited

[2012] NZHC 2460

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2010-485-2582 [2012] NZHC 2460

BETWEEN  YANDINA INVESTMENTS LIMITED Plaintiff

ANDANZ NATIONAL BANK LIMITED First Defendant

ANDWESTPAC BANKING CORPORATION Second Defendant

ANDBNZ INVESTMENTS LIMITED Third Defendant

Hearing:         (On papers)

(Heard at Wellington (Commercial List))

Counsel:         C R Carruthers QC and R J Cullen for Plaintiff

S Fitzgerald and S Cogan for First Defendant
R B Lange and P A Windeatt for Second Defendant
J A Farmer QC and A Barker for Third Defendant

Judgment:      21 September 2012

JUDGMENT OF MILLER J (On costs)

[1]      Having struck out Yandina’s claim in my judgment of 20 June, I indicated that I was disposed to allow each of the three banks costs on a 3C basis with provision for two counsel, and left it to counsel to seek agreement.

[2]      Counsel have not been able to agree.  They now ask me to settle the points of difference between them, following which they expect to settle the quantum payable, subject presumably to appeal. As requested, I reserve leave to apply in the event that

they are unable to agree following this judgment.

YANDINA INVESTMENTS LIMITED v ANZ NATIONAL BANK LIMITED HC AK CIV-2010-485-2582 [21

September 2012]

[3]      The first question is whether costs should be awarded at all.  Mr Carruthers QC points out that the banks were trustees for Yandina. The litigation has resulted in the banks paying something, they having conceded that they may have overlooked a sum of $67,272.57 payable under the assignments.  Counsel contends that the banks were not forthcoming with documents, as they ought to have been given their fiduciary status.  Finally, I should bear in mind that Yandina pursues this litigation in order that  it  may pay tax  under a  settlement  with  the Commissioner of  Inland Revenue.

[4]      I am satisfied that costs should follow the result in the normal way.  I accept that  the  banks  were  bare  trustees  under  the  assignments,  they having  remained members  of  the  Maroro  partnership,  but  that  fiduciary  relationship  was  not antecedent to the assignments.  Rather, the assignments created and defined it.  The litigation concerned the meaning of the assignments, so it did not directly engage the

banks’ fiduciary obligations.  Further, as I noted in my judgment[1]  the assignments

described the information to which Yandina was entitled.  I am in no position to say that the banks failed initially to meet their disclosure obligations, either under the assignments or in discovery, or that it would have made any difference for present purposes.  The modest under-payment was an ancillary matter, not the subject of my decision although it has unexpectedly proved controversial since.

[1] Yandina Investments Ltd v ANZ National Bank Ltd [2012] NZHC 1389 at [52] and [53].

[5]      The next question is whether the daily recovery rates in force since 14 June

2012 ought to be used.  They post-date the argument in this case, but the banks point out that there is no transitional provision.   Even without such provision, however, new rules should normally apply prospectively.  I observe that it has been held that the new rates apply prospectively.[2]   I take the same view.

[2] FM Custodians Ltd v Pati and Marques [2012] NZHC 1902.

[6]      The next question is whether category 3C is appropriate.  The banks contend that the strikeout was complex, requiring a great deal of preparation of evidence and submissions, including trawling through now-historical records.   A great deal of money was at stake.  Yandina suggests 2B, arguing that my judgment turned on the

construction of the assignments and the banks have overstated the complexity of the

case.  It also suggests that the banks had been required to obtain the relevant source information in connection with earlier litigation.

[7]      I accept that my judgment did turn on the construction of the assignments, but to say that is to understate the complexity of the case.  The assignments were the last in a series of commercial transactions negotiated or settled across a long period during which applicable tax law changed.  This background considerably informed the analysis of the assignments.   The immediate context for the assignments themselves was controversial.  Yandina’s case, though ultimately unsuccessful, was unquestionably complex, resting in part on the proposition that “net profit” should be ascertained by reference to tax and accounting convention.  As I noted in my judgment, its notice of opposition ran to 33 pages.   I am satisfied that 3C is appropriate.

[8]      The next question is to what extent the three banks ought to be able to claim costs  on  the same 3C  basis.   As  I have  said,  each  was  separately represented, understandably  so  given  the  amounts  at  stake.     Each  negotiated  a  separate assignment with Yandina, although the relevant terms were practically identical. Each filed separate pleadings and evidence.  There were issues about the status of Babcock and Brown, who negotiated each of the assignments, what representations were made, and what knowledge Yandina had of the liabilities it was assuming.  I accept the banks’ submission that 3C is the appropriate category for each of them, so far as pleadings and evidence and preparation of the strikeout applications go.

[9]      The banks did join forces on the submissions, Mr Farmer QC carrying the burden of the substantive argument and Ms Dean QC dealing with limitation.   I understand  that  a  similar  approach  was  taken  in  earlier  interlocutory  hearings, notably  one  in  which  Yandina  sought  to  consolidate  this  proceeding  with  its challenge proceeding.   Mr Farmer accepted that only one set of costs ought to be allowed for preparation of submissions and the hearing itself.  I agree.  So far as the hearing before me is concerned, costs should extend to two juniors, one for each of Mr Farmer and Ms Dean (though the banks obviously may decide among themselves how the costs should be shared).   The consolidation application was a matter of

substance, which indicates (assuming one counsel was responsible for the argument)

that one junior should be allowed for.

[10]     The next question is whether the banks ought to have an uplift on scale.  I accept that had there been a single defendant the case for an uplift would have been strong.    I base that  conclusion  on  the inherent  complexity of  the case and  the amounts at stake, rather than the somewhat protean nature of Yandina’s claim.  But while I have accepted that category 3C is appropriate for each of the banks, it is also true that they joined forces for the good reason that their positions were essentially identical.  There is an element of swings and roundabouts in the costs schedules.  I am not persuaded that an uplift is warranted.

[11]     Yandina makes the point that the limitation issue assumed little significance in the end, as outlined in paragraph [89] of my judgment.   I accept that, but both sides prepared argument and the agreed position was reached only at the hearing.  I am not prepared to discount the banks’ costs on the assumption that they were responsible for the failure to reach agreement earlier.  On the view I took of the case, the limitation defence was destined to succeed at trial.

[12]     Substantial disbursements have been claimed.   I apprehend that I need not review them, at least at this stage.  Some understandably require verification as to amount and to ensure they are true out of pocket expenses of the law firms involved. One point of disagreement may require comment.   The proceeding is filed in the commercial list at Auckland but the strikeout application was heard at Wellington. That is sometimes necessary, as r 10.1(4) of the High Cout Rules recognises, to accommodate  the  Court’s  business.    This  was  such  a  case.    It  seems  to  me appropriate that Yandina should pay reasonable travel and accommodation costs for Mr Farmer, Ms Dean and the two juniors.

[13]     I trust that this judgment will allow counsel to reach agreement.

Miller J

Solicitors:

Thomas Dewar Sziranyi Letts, Lower Hutt for Plaintiff Russell McVeagh, Auckland for First Defendant Simpson Grierson, Auckland for Second Defendant