MAURICE DESMOND HAYES & COLIN HENDERSON v NEW ZEALAND OSTRICH SERVICES LIMITED & ORS [2000] NZCA 134 (20 July 2000)

IN THE COURT OF APPEAL OF NEW ZEALAND

ca 218/99

	between	MAURICE DESMOND HAYES & COLIN HENDERSON
		First Appellant

	AND	NEW ZEALAND OSTRICH SERVICES LIMITED
		Second Appellant

	and	FIGHTER TRAINERS LIMITED
		First Respondent

	AND	RHN HOLDINGS LIMITED
		Second Respondent

Hearing:	17 July 2000
Coram:	Keith J Doogue J Fisher J
Appearances:	D M O'Neill for appellants P J Andrews for respondents
Judgment:	20 July 2000

judgment of the court delivered by DOOGUE J

Introduction

[1] This is an appeal from an award of costs in the High Court of $85,000 to the respondents against the appellants.There were other lesser orders as to costs and disbursements which are not in contention.

Background

[2] The order under appeal was made after Salmon J had considered some 90 pages of submissions and supporting papers from the parties in respect of costs. Salmon J was the trial Judge.The trial extended over three days.

[3] The proceeding related to an aircraft.In September 1998 the respondents, who were the plaintiffs, obtained an ex parte interim injunction from Salmon J placing the aircraft in their custody and restraining the appellants, who were the defendants, from dealing with it or any other assets or liabilities of the first respondent.Between that date and September 1998 and the trial in April 1999 the proceeding came before no fewer than seven other Judges on 13 other occasions, most of them following applications by the appellants.There was a minor variation of the original injunction by consent.The appellants were successful in respect of one of their interlocutory applications and partially successful on another.In most other instances it appears the appellants were seeking an indulgence of some kind.

[4] Following trial the High Court upheld the case for the respondents both in respect of their claim and in respect of the appellants' counter-claim, although the respondents did not succeed on one of their causes of action.

Judgment Under Appeal

[5] The Judge summarised the opposing contentions of the parties in respect of costs in the following manner:

The plaintiff claims to be entitled to a substantial order for costs close to an order on a solicitor and client basis for the following reasons.

1. FTL's right to redeem the debenture in favour of the third defendant was at all times beyond question.

2. Even if the "shareholders agreement" was ever a valid contract it was clearly unenforceable.

3. There was never any conduct on the part of the replacement directors of FTL which viewed objectively could give rise to relief under the Companies Act.

4. The second and third defendants engaged in procedural applications of dubious utility which served only to delay the substantive hearing and increase costs.

The plaintiff's solicitors costs are said to total $135,000 plus GST.An award is sought close to this sum, together with an order for payment of all Court fees, disbursements and witnesses expenses which total $10,259.79.

In response the defendant argues that the amount of costs spent by the plaintiffs is exorbitant and that there are certain interlocutory matters which went in the defendants' favour which ought to be taken into account by way of deduction from the costs that would otherwise be payable to the plaintiff.The defendant argues that this is not a case for anything approaching solicitor and client costs and that the defendants' approach to the litigation was a reasonable one in the circumstances.

It is also argued that, because the plaintiffs lost on one of their causes of action, a deduction should be made in that regard.The defendants analyse the costs issue by reference to the factors referred to in Holden v Architectural Finishes Ltd [1997] 3 NZLR 143 and conclude that an appropriate award would be in the vicinity of $25,000 plus disbursements.

[6] In determining that the costs should be $85,000, the Judge said this:

In assessing an appropriate contribution towards costs I take into account the following factors.

1. The plaintiff succeeded in its claim.The fact that it failed in one of its causes of action should not, in my view, result in a reduction in the costs otherwise payable unless that cause of action has had a significant effect on the length and complexity of the hearing.That is not so in this case.

2. As I indicated in my judgment I consider that Messrs Hayes and Henderson were motivated by a desire to retain control over the assets and to frustrate the intentions of the plaintiffs.I also held that FTL had been entitled to redeem the debenture and I accept the plaintiffs' submission that the law on that aspect of the matter was clear.

3. There should be some allowance made for the defendants' success in relation to interlocutory applications.

4. I accept that the plaintiffs' solicitor's costs have been adequately itemised and detailed to enable an assessment to be made as to their appropriateness.

5. As indicated, I consider there to have been little justification for the attitude of the defendants towards the claim, and that is a factor to be taken into account in assessing quantum.

6. I think to some extent costs have been inflated by the decision to engage out of town counsel and that factor should be taken into account in the overall assessment of costs.

Argument and Discussion

[7] The appeal is against the exercise of a discretion.The appellants must show that the Judge acted on a wrong principle or that he failed to take into account some relevant matter or that he took into account some irrelevant matter, or that he was plainly wrong: May v May (1982) 1 NZFLR 165, 170.

[8] As this Court said in Thoroughbred & Classic Car Owners' Club Incorporated v Coleman & Anor (unreported, CA 203/93, 25 November 1993):

It is unusual for an appeal to be brought to this Court on costs only and only rarely could an appeal succeed in that field, for this Court is always especially reluctant to disturb a decision of a High Court Judge on a matter as discretionary as that of costs. (page 2)

[9] That view was echoed by this Court in Wilson & Horton Ltd v Attorney-General [1997] 2 NZLR 513, 529:

An award of costs is discretionary, and will rarely be interfered with on appeal.

[10] This appeal is governed by the law as it stood before the High Court Amendment Rules 1999.There is no dispute that under the earlier regime party and party costs were normally quantified on the basis of a reasonable contribution in all the circumstances to the successful party's costs actually and reasonably incurred: Morton v Douglas Homes Ltd (No. 2) [1984] 2 NZLR 620, 625; Holden v Architectural Finishes Ltd [1997] 3 NZLR 143.

[11] The Judge's discretion in respect of costs was not fettered in any way. What was a reasonable contribution always depended upon the circumstances of the case.In some cases the circumstances justified a contribution close to, or even equating with, reasonable solicitor and client costs but not necessarily actual solicitor and client costs.In other cases the reasonable contribution was much less than either reasonable or actual solicitor and client costs.Where other factors were even, a reasonable contribution to costs was likely to be of the order of two-thirds of costs reasonably incurred. We note in passing that that approach has since been carried through into the new costs rules, albeit converted into an objectively considered scale.

[12] In the present case the costs order was for 63% of the costs actually incurred.Having regard to the various considerations which weighed with Salmon J in reaching his order, it cannot be said on the face of it that that is an unreasonable contribution if the costs actually incurred were reasonably incurred.The appellants' position is the more difficult when the Judge took the view that the respondents' costs were sufficiently itemised and detailed to enable an assessment to be made as to their appropriateness.

[13] The appellants first submit that the trial Judge failed to consider the basic principle that the party and party costs are to be quantified on the basis of a reasonable contribution in all the circumstances to the successful party's costs actually and reasonably incurred.Given what we have just said and the clear reference by the trial Judge to the factors referred to in Holden v Architectural Finishes Ltd, we can see no basis for that submission.It seems clear that the trial Judge was very well aware of that principle, and in fact has substantially applied it.

[14] Secondly it is submitted that the trial Judge would appear to have given little weight to

(a) The respondents lost one cause of action at the trial;

(b) The two applications brought by the appellants were successful;

(c) The fact that this was only a three day trial; and

(d) The rest of the appearances were eight callovers.

[15] The Judge considered and referred to the first two of those factors and took them into account.The weighting of them was a matter for him.The last two of those factors were before the trial Judge, and there is nothing to suggest they were not taken into account.

[16] The third submission for the appellants is that

No consideration was given to the principle that where a party seeks a contribution of a high amount to its actual costs then there must be information before the Court to enable a threshold determination to be made as to whether actual costs were necessarily and reasonably incurred and are themselves reasonable.This would require a breakdown of hours worked with particularisation of hourly rates allocated.

[17] It is submitted:

The information before the Court was insubstantial and did not allow the Court to ascertain whether the costs were incurred reasonably and actually incurred in relation to this matter.

[18] The appellants' submissions fail to take into account that the Judge accepted that the respondents' costs had been adequately itemised and detailed to enable an assessment to be made as to their appropriateness.There had been extensive submissions upon the point.It is clear that the Judge not only turned his mind to that issue but made a finding which was open to him upon the material before him.

[19] As a subsidiary argument under this head, the appellants submit that if the actual costs of the respondents are taken as a starting point then the matter should not be approached on the basis of the best representation possible or incurring of costs on a "no stone left unturned" basis.In other words, it is submitted the awarding of costs should not be that "a `Rolls Royce' approach gets a `Rolls Royce' award".

[20] Once again the problem for the appellants is that this point was firmly before the trial Judge, and he has given some credence to it in his finding that costs had been inflated by the decision of the respondents to engage out of town counsel.That factor was taken into account in the overall assessment of costs.The additional problem for the appellants is that here there was information before the Judge to enable an assessment to be made as to the appropriateness of the respondents' actual costs.

[21] It is submitted for the appellants that the sum awarded is grossly excessive if a comparison is made with the new Third Schedule to the High Court Rules.As that Schedule did not apply at the time that the present order was made, we see no justification for considering the detailed consequences of that Schedule.In any event the High Court Amendment Rules 1999 preserve ample discretion to depart from scale where grounds for doing so are made out.It by no means follows that costs would have been awarded on the basis chosen by the appellants in the calculations put before this Court.

[22] It is apparent that the Judge was substantially influenced by the conduct of the appellants in the litigation, for which he saw little justification. The Judge was of the view that that conduct increased both the length and complexity of the proceedings.It was open to the trial Judge to take the view that to a large extent the costs which were actually incurred by the respondents were unnecessarily incurred because of that conduct.

[23] The award of costs may well reflect more than 63% of the costs reasonably incurred when allowance was made for the discounting factors taken into account by the Judge.Nonetheless, in the circumstances as he found them, it does not follow that a higher percentage was necessarily an unreasonable contribution.

[24] None of the arguments put before us on behalf of the appellants give this Court any entitlement to interfere with the discretionary decision of the Judge in respect of costs.None of the permitted grounds of intervention have been made out.

Result

[25] The appeal is dismissed.The respondents are entitled to their costs in this Court, which are fixed in the sum of $3,000, together with reasonable disbursements, which, in the event of disagreement, are to be fixed by the Registrar.

Solicitors

Inder Lynch, Papakura, for appellants

KPMG Legal, Wellington, for respondents