George v Sell Smart.biz Limited [2020] NZHC 993 (14 May 2020)

Last Updated: 22 May 2020

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2014-404-2139 [2020] NZHC 993

BETWEEN	ARIANA CAILEEN GEORGE First Plaintiff RODNEY LEE TE WAKA TOTO HOLLAND Second Plaintiff
AND	SELL SMART.BIZ LIMITED First Defendant (Discontinued) DAVID CHARLES PADFIELD Second Defendant (Discontinued) PAUL DILKS Third Defendant Continued ....

Hearing:	On the papers
Judgment:	14 May 2020

JUDGMENT OF KATZ J

[Costs]

This judgment was delivered by me on 14 May 2020 at 1:00pm pursuant to Rule 11.5 High Court Rules

Registrar/Deputy Registrar

Solicitors: Integritas Law Firm, Auckland Counsel: R S Pidgeon, Barrister, Auckland

Copy to: Third Defendant

GEORGE & HOLLAND v DILKS [2020] NZHC 993 [14 May 2020]

TEA CUSTODIANS (BLUESTONE) LIMITED
Fourth Defendant (Discontinued)

PRENDOS NEW ZEALAND LIMITED
Fifth Defendant (Discontinued)

Introduction

[1] In February 2007, Ariana George entered into an agreement with David Padfield to purchase a franchise and associated licence. Ms George and her then de facto partner, Rodney Holland, borrowed money from TEA Custodians (Bluestone) Ltd (“Bluestone”) to complete the purchase, secured by a mortgage over their family home. They defaulted on their repayments, following which the house was sold at mortgagee sale. The relationship between Ms George and Mr Holland ended not long afterwards.

[2] In August 2014, Ms George and Mr Holland brought this proceeding against five defendants including Bluestone, Mr Padfield, and Paul Dilks, the mortgage broker who had helped arrange the Bluestone loan. They subsequently settled and/or discontinued against all defendants except Mr Dilks.

[3] In 2016, Ms George assigned her litigation rights to Mr Holland. Ms George did not wish to continue with the proceeding in her own right, and acknowledged that any proceeds should go to Mr Holland, as the asset that had been lost was his family home (which his mother had significant equity in). Ms George appears to have had little or no equity in the home. The assignment was formally documented. The only relevant plaintiff from 2016 onwards, therefore, was Mr Holland. He has been legally aided at all material times.

[4] At trial I found all four causes of action against Mr Dilks were time barred.¹ I noted, however, that even if they had not been time barred the claims would likely have failed due to causation issues.

[5] As the successful party, Mr Dilks now seeks an award of costs.

1. George v Sell Smart.Biz Ltd [2019] NZHC 37. The first three causes of action were time barred under the Limitation Act 1950, s 28, and the fourth cause of action was time barred by analogy pursuant to the Limitation Act 1950, s 4(9).

Relevant legal principles

[6] The successful party in litigation is normally entitled to an award of costs in their favour, together with reasonable disbursements.² A litigant is only entitled, however, to recover costs incurred when they were legally represented, together with reasonable disbursements. They are not entitled to recompense for the time they have spent personally in bringing or defending proceedings.³

[7] Pursuant to s 45(2) of the Legal Services Act 2011, no order for costs can be made against a legally aided party unless the court is satisfied that exceptional circumstances exist. Mr Dilks did not submit that exceptional circumstances exist here and there do not appear to be any. In particular, there is no evidence to suggest that the assignment of litigation rights from Ms George to Mr Holland was not genuine.

[8] If the exceptional circumstances exception is not engaged, then the court may make an order specifying what order for costs would have been made against the legally aided party, if they had not received a grant of legal aid.⁴ In that event, the successful party is entitled to apply to the Legal Services Commissioner for payment of that sum. The Commissioner has a discretion as to whether or not to make any such payment, with reference to the conduct of the parties to the proceedings, the court’s finding of any exceptional circumstances or lack thereof, and the hardship caused to the applicant were the sums not to be paid.⁵

2. High Court Rules 2016, r 14.2(l)(a); Manukau Golf Club Inc v Shoye Venture Ltd [2012] NZSC 109, [2013] 1 NZLR 305 at [8].
3. McGuire v Secretary for Justice [2018] NZSC 116 at [86]; see also Transit NZ v Cook HC Greymouth CP6/93, 30 June 1994, holding that a party appearing in person may have their costs from before withdrawing their legal representation, and Harrison v Keogh [2015] NZHC 3320 at [10], permitting lay litigants to recover costs for fees paid for professional assistance, even if the litigant conducts the actual litigation themselves. Finally, see Working Capital Solutions Holdings Ltd v Pezaro [2014] NZHC 2480 at [18], where Associate Judge Osborne canvasses the relevant law in some detail.

⁴ Legal Services Act 2011, s 45(5).

5. Legal Services Act 2011, s 46(3) and Para Franchising Ltd v Legal Aid Review Panel [2008] NZHC 8; [2008] 2 NZLR 257 (HC).

What order for costs would have been made against Mr Holland if he was not legally aided?

[9] I therefore now turn to consider what order for costs would have been made against Mr Holland if he were not legally aided. Mr Dilks claims costs and disbursements under four heads:

(a) AUD 16,000 paid in Australia to lawyers who acted for Mr Dilks in related proceedings in Queensland;

(b) AUD 24,255.87, paid by Mr Dilks to the New Zealand lawyers who represented him at an earlier stage of this proceeding, when he successfully applied to Associate Judge Bell to have a default judgment that had been entered against him set aside;⁶
(c) AUD 10,000 as a contribution towards interest payments on a AUD 50,000 loan taken out by Mr Dilks;

(d) AUD 550 incurred in respect of flights and a hotel room for the hearing before me (Mr Dilks travelled from Australia for the trial).

The Australian legal fees

[10] The Australian legal fees relate to a proceeding outside the jurisdiction of the New Zealand courts. My jurisdiction is limited to making an award of costs in this proceeding. If Mr Dilks wishes to recover costs incurred in the Australian legal proceeding, he will need to make an application to the Court that heard and determined that proceeding.

Legal costs incurred in respect of the application to set aside the default judgment

[11] Mr Dilks was legally represented when he applied (in this proceeding) to set aside a default judgment that had been entered against him. Associate Judge Bell granted that application. On the issue of costs, his Honour held:⁷

[31] Because Ms George has assigned her interest in the claim to Mr Holland, Mr Holland is the effective plaintiff in the case. He has a grant

⁶ George v Dilks [2018] NZHC 435.

⁷ George v Dilks [2018] NZHC 435.

of legal aid. I therefore cannot make an order for costs against him. Mr O’Neill seeks a certificate as to the amount of any order for costs that would be made but for the grant of legal aid. In an ordinary case, but for the grant of legal aid, I would have ordered the plaintiffs to pay costs for not having succeeded in setting aside the judgment when it was not obtained regularly. I trust that counsel will be able to agree as to the amount of the certificate. If they cannot agree, memoranda may be filed.

[12] Accordingly, an order has already been made in respect of the costs of that application. I assume, given that both parties were legally represented at the time, that the quantum of costs in relation to that application was resolved as suggested by Associate Judge Bell. If not, memoranda will need to (belatedly) be filed for the attention of his Honour, in accordance with the direction given in his judgment.

The interest on the loan

[13] My understanding is that the relevant loan (in the sum of AUD 50,000) was taken out solely or primarily to fund Mr Dilks’ legal fees in both Australia and New Zealand (which total just over AUD 40,000).

[14] As noted previously, any costs claim in respect of the Australian proceedings must be resolved in those proceedings. In the context of the New Zealand proceeding, any interest incurred on monies borrowed to fund Mr Dilks’ defence are not properly claimable as disbursements.⁸

Travel and accommodation costs

[15] Mr Dilks’ accommodation and air travel costs are conventional disbursements and unobjectionable.⁹ The quantum is clearly reasonable, indeed they appear to be modest. If Mr Holland had not been legally aided, therefore, I would have awarded AUD 550 under this head. This equates to NZD 568.91 on 29 January 2020, the date of judgment.

⁸ Disbursements are defined in the High Court Rules 2016, r 14.12.

9. Robert Osborne and others McGechan on Procedure (looseleaf ed, Thompson Brookers, updated to 9 December 2019) at [HRPt14.10].

Result

[16] No order for costs and disbursements may be made against Mr Holland, as he is legally aided. I certify, however, that I would have awarded disbursements of
$568.91 to Mr Dilks, had Mr Holland not been legally aided.

Katz J