Litt v Litt [2012] NZHC 1919 (2 August 2012)

Last Updated: 8 August 2012

IN THE HIGH COURT OF NEW ZEALAND HAMILTON REGISTRY

CIV-2011-419-338 [2012] NZHC 1919

BETWEEN SYDNEY BARRY LITT First Plaintiff

AND ROGER BARRY LITT Second Plaintiff

AND COLIN ROY LITT First Defendant

AND HELEN JUNE LITT Second Defendant

AND STUART LINDSAY GORDON Third Defendant

(On the papers) Counsel: DG Hayes for plaintiffs

JA MacGillivray for defendants

Judgment: 2 August 2012

JUDGMENT OF ASSOCIATE JUDGE FAIRE [on costs]

Solicitors: Brook Law, PO Box 9600, Hamilton

Tompkins Wake, PO Box 258, Hamilton 3240

LITT V LITT HC HAM CIV-2011-419-338 [2 August 2012]

Introduction

[1] On 2 April 2012 I entered summary judgment against the first plaintiff. Judgment was entered on the grounds that the plaintiff’s claim was frivolous, vexatious and otherwise an abuse of process because it was time-barred by the equitable doctrine of limitation by analogy.

[2] The second plaintiff was granted leave to discontinue his proceeding on

11 July 2011 and from that date took no further part in the proceeding.

[3] I reserved costs. I gave directions for the filing of memoranda in support of

the defendants’ application for costs against both the first and second plaintiffs.

Costs sought by the defendants

[4] The defendants seek indemnity costs against the first plaintiff in the sum of

$32,977.75 and against the second plaintiff in the sum of $7,742.16. The defendants’ costs calculation is on the basis that the costs incurred by them up to the time of the second plaintiff’s discontinuance have been apportioned so that 50 per cent is applied to the costs claimed against each plaintiff for that period.

[5] The defendants’ case is supported by affidavits from Ms KR Irwin and Mr BT Cullen. Ms Irwin’s affidavit exhibits correspondence between the solicitors for the parties together with the cost invoices that have been issued to the defendants by their solicitors. Mr Cullen, who is a barrister and solicitor and a director of the Hamilton law firm McCaw Lewis, deals in his affidavit with the issue of the reasonableness of the hourly rates charged by the defendants’ solicitor in this proceeding.

[6] This judgment is given on the papers. I sought further clarification from the parties in minutes issued on 4 May, 28 May and 21 June 2012. Counsel have responded to each of those minutes.

The Court’s approach to applications for costs

[7] Rule 14.1 gives the Court a discretion to order costs in relation to a step taken in a proceeding. That discretion is generally to be exercised in accordance with the specific Rules contained in rr 14.2-14.10: Glaister v Amalgamated Dairies Ltd.[1] In Mansfield Drycleaners Ltd v Quinny’s Drycleaning (Dentice Drycleaning Upper Hutt) Ltd it was said of the costs regime contained in what is now rr 14.2-14.10 that:[2]

there is a strong implication that a Court is to apply the regime in the absence of some reason to the contrary

The test to be applied is entirely an objective and not a subjective one. The only reference which it is necessary to make towards actual costs is to be found in r 14.2(f), namely that an award of costs should not exceed the costs incurred by the party claiming the costs: Glaister v Amalgamated Dairies Ltd.[3]

[8] Rule 14.2 lists the principles applying to determination of costs. Subrule (a) affirms the principle that the losing party should pay the costs to the successful party. Subrule (b) requires that the costs reflect the complexity and significance of the proceedings and refers specifically, therefore, to the categorisation of a proceeding which is provided for in r 14.3. Subrule (c) requires a consideration of each step for which costs are sought and an application of the daily rate having regard to the appropriate band which is to be applied after a consideration of r 14.5(2) and the Third Schedule to the High Court Rules.

[9] Rule 14.6 sets out the circumstances where increased or indemnity costs can be awarded.

[10] Rule 14.6 dealing with increased costs provides:

14.6 Increased costs and indemnity costs

_{(1) Despite rules 14.2 to 14.5, the court may make an order—}

(a) increasing costs otherwise payable under those rules (increased costs);

or

(b) that the costs payable are the actual costs, disbursements, and witness expenses reasonably incurred by a party (indemnity costs).

...

(3) The court may order a party to pay increased costs if—

(a) the nature of the proceeding or the step in it is such that the time required by the party claiming costs would substantially exceed the time allocated under band C; or

(b) the party opposing costs has contributed unnecessarily to the time or expense of the proceeding or step in it by—

(i) failing to comply with these rules or with a direction of the court; or

(ii) taking or pursuing an unnecessary step or an argument that lacks merit; or

(iii) failing, without reasonable justification, to admit facts, evidence, documents, or accept a legal argument; or

(iv) failing, without reasonable justification, to comply with an order for discovery, a notice for further particulars, a notice for interrogatories, or other similar requirement under these rules; or

(v) failing, without reasonable justification, to accept an offer of settlement whether in the form of an offer under rule 14.10 or some other offer to settle or dispose of the proceeding; or

(c) the proceeding is of general importance to persons other than just the parties and it was reasonably necessary for the party claiming costs to bring it or participate in it in the interests of those affected; or

(d) some other reason exists which justifies the court making an order for increased costs despite the principle that the determination of costs should be predictable and expeditious.

[11] In Holdfast NZ Ltd v Selleys Pty Ltd guidance was provided on the correct approach where an award of increased costs is sought.[4] Four specific steps require analysis. The first is the establishment of the category for the proceeding. The second step requires a consideration of the reasonable time for each step in the proceeding under r 14.5. The third step requires a consideration of whether any of

_{the steps would substantially exceed the time allocated under Band C. The fourth}

step requires one to stand back and look at the costs award and determine whether any of the matters set out in subr (3)(b) can be applied.

[12] Rule 14.6 in relation to indemnity costs provides:

14.6 Increased costs and indemnity costs

(1) Despite rules 14.2 to 14.5, the court may make an order—

(a) increasing costs otherwise payable under those rules

(increased costs); or

(b) that the costs payable are the actual costs, disbursements, and witness expenses reasonably incurred by a party (indemnity costs).

....

(4) The court may order a party to pay indemnity costs if—

(a) the party has acted vexatiously, frivolously, improperly, or unnecessarily in commencing, continuing, or defending a proceeding or a step in a proceeding; or

(b) the party has ignored or disobeyed an order or direction of the court or breached an undertaking given to the court or another party; or

(c) costs are payable from a fund, the party claiming costs is a necessary party to the proceeding affecting the fund, and the party claiming costs has acted reasonably in the proceeding; or

(d) the person in whose favour the order of costs is made was not a party to the proceeding and has acted reasonably in relation to it; or

(e) the party claiming costs is entitled to indemnity costs under a contract or deed; or

(f) some other reason exists which justifies the court making an order for indemnity costs despite the principle that the determination of costs should be predictable and expeditious: rr 14.2-14.10.

[13] In Paper Reclaim Ltd v Aotearoa International Ltd the Court of Appeal considered the application for indemnity costs pursuant to the now r 14.6(4)(a).[5] The Court emphasised the need to examine the specific grounds set out in the Rule for

_{ordering indemnity costs.}

[14] In Hedley & Ors v Kiwi Co-operative Dairies Ltd it was said:[6]

[8] Such authorities as there are indicate that indemnity costs are awarded where truly exceptional circumstances exist.

The court’s approach was approved in Bradbury v Westpac Banking Corporation.[7]

Grounds advanced in support of the defendants’ application

[15] On 23 November 2010 the defendants wrote an open letter in answer to a letter from the plaintiffs’ solicitors signalling an intention to a make a claim. The defendants’ letter detailed various proceedings that had been brought against the defendants by family members. It drew attention to the fact that the second plaintiff’s bankruptcy extinguished any beneficial interest he might have had prior to his bankruptcy. The letter also addressed the question of laches. It gave notice that if proceedings were issued, an application to strike out and seeking summary judgment based on the two matters mentioned would be made and that indemnity costs would be sought.

[16] On 28 September 2011 the defendants wrote to the plaintiffs’ solicitors. This letter was written after the issue of proceedings on 16 March 2011. The letter was marked “without prejudice save as to costs”. It made two settlement proposals. In the first proposal, the first plaintiff was invited to discontinue his proceedings on the basis that the second plaintiff paid $5000 costs and that both plaintiffs agreed not to bring any further proceedings in relation to the defendants’ River Road farm or family companies. The second proposal advanced was that if the first defendant discontinued his proceedings and agreed not to bring further proceedings, the defendants would not seek costs against him. The defendants’ claim for costs against the second plaintiff, however, would remain on foot. The letter advised that the defendants would rely on the settlement proposals in support of an application for indemnity costs. Neither proposal was accepted.

_{[17] The defendants rely on rr 14.10 and 14.11 which provide:}

14.10 Written offers without prejudice except as to costs

(1) A party to a proceeding may make a written offer to another party at any time that—

(a) is expressly stated to be without prejudice except as to costs;

and

(b) relates to an issue in the proceeding.

(2) The fact that the offer has been made must not be communicated to the court until the question of costs is to be decided.

14.11 Effect on costs

(1) The effect (if any) that the making of an offer under rule 14.10 has on the question of costs is at the discretion of the court.

(2) Subclauses (3) and (4)—

(a) are subject to subclause (1); and

(b) do not limit rule 14.6 or 14.7; and

(c) apply to an offer made under rule 14.10 by a party to a proceeding (party A) to another party to it (party B).

(3) Party A is entitled to costs on the steps taken in the proceeding after the offer is made, if party A—

(a) offers a sum of money to party B that exceeds the amount of a judgment obtained by party B against party A; or

(b) makes an offer that would have been more beneficial to party B than the judgment obtained by party B against party A.

(4) The offer may be taken into account, if party A makes an offer that—

(a) does not fall within paragraph (a) or (b) of subclause (3); and

(b) is close to the value or benefit of the judgment obtained by party B.

[18] The plaintiffs rely on Bradbury v Westpac Banking Corporation. [8] The Court of Appeal referred to earlier authorities where indemnity costs had been ordered in circumstances where a party had commenced or continued a proceeding in wilful disregard of known facts or clearly established law, or had made allegations which ought never to have been made, or unduly prolonged a case by groundless

_contentions.

[19] The defendants rely on the fact that this proceeding was commenced some

17 years after the purchase of the defendants’ River Road property and, as I have

mentioned, followed other proceedings.

Matters advanced on the plaintiffs’ behalf in opposition to the cost orders

sought

[20] Mr Hayes raised the following matters in the memoranda that were filed on behalf of the plaintiffs, namely:

(a) There were factual matters in the 23 November 2010 letter that were not correct. The basis for the strike out was equitable bar by analogy and not a claim of laches;

(b) The 28 September 2011 correspondence attacked the first plaintiff’s

mental state and contained other matters that he did not accept; (c) This was a case for costs on a 2B basis only;

(d) The total costs sought of $40,719.91 is not a reasonable figure having regard to the fact that the total hearing time was approximately three- quarters of a day;

(e) Having regard to the letter of 28 September 2011, that cannot support indemnity costs against the second plaintiff because the proceeding had already issued;

(f) The first plaintiff had, in any event, agreed to cover all costs awarded in the matter and that agreement was evidenced by his agreeing to the second plaintiff discontinuing proceeding. This is consistent with the view that there is no specific provision in the rules justifying an order for costs against a departing plaintiff where other plaintiffs remain; and

(g) One of the invoices issued for the sum of $1,996.50 seems to have been directed at whether a claim for costs could be made against the second plaintiff and was unreasonable, having regard to the potential claim being limited to $5,377.16.

[21] There are other criticisms in relation to relatively small accounts in so far as they might be related to the second plaintiff.

Quantum of the claim for indemnity costs

[22] As a result of the minutes that I issued, the defendants filed an affidavit from a Hamilton legal practitioner.

[23] Mr BT Cullen is a barrister and solicitor. He is a director of McCaw Lewis Ltd. Since 1 April 2011 that company has carried on the partnership business of McCaw Lewis Chapman, barristers and solicitors of Hamilton. Mr Cullen commenced working in the firm in 1984 and became a partner in 1991. The firm is one of the largest legal practices in Hamilton. It covers specialist areas in commercial properties dispute resolution, matters pertaining to Maori and asset protection. Mr Cullen says he has worked in litigation and dispute resolution for all of his career. He is currently the leader of the dispute resolution team in his firm. He specialises in commercial litigation with a focus on contract and tort claims, property disputes, insolvency law and dispute resolution.

[24] Mr Cullen has considered the memoranda filed. He review the hourly rates charged. He has confirmed that they are, of his knowledge, within the range of fees charged within the profession in the city of Hamilton. He has noted that they correspond to the survey of legal firms carried out by Markham, chartered accountants, which was produced to the Court.

[25] Mr Cullen’s affidavit followed the minute I issued on 4 May 2012. That minute attached a copy of my judgment in Crown Money Corporation Ltd v

_{Grasmere Estate Trustco Ltd.}[9] _{The minute required specific information as follows:}

[4] The information required is as follows:

(a) an analysis of 2B costs consequent upon the filing of the notice of discontinuance by Roger Barry Litt and with reference to the specific subparagraphs that are applicable and which are contained in Schedule 3 o the High Court Rules;

(b) an analysis of 2B costs up to and including the entry of summary judgment against Sydney Barry Litt by reference to the specific subparagraphs that are applicable and which are contained in Schedule 3 to the High Court Rules;

(c) Answers to the following questions:

(i) Are the defendants registered for GST purposes?

(ii) If so, will the defendants be able to claim an input credit for the GST portion of the costs billed to them by their legal advisors?

(iii) If so, what is the net fee payable in respect to the bill of costs?

(iv) If the GST portion is not recoverable, what is the gross cost inclusive of GST but excluding disbursements?

(v) Who were the authors who were working on each part of the legal work undertaken and which is referred to [in] the affidavits? What is required is a sufficient description of the work undertaken so that it discloses that it is work reasonably undertaken for the step and which also discloses that the step is a reasonable step taken in relation to the preparation and prosecution of the application to obtain summary judgment against the plaintiffs;

(vi) What rate is charged in respect of each author?

(vii) What experience does each author have? What evidence is relied upon to show that the rate charged is a reasonable on hart the principles normally applicable to solicitor/client costs? Counsel is referred to the comment that I made in paragraph

14(h) of the Crown Money decision.

The claim analysed

[26] It is not necessary that I review the matters that were considered in my judgment dealing with the substantive matter. The heading in my judgment dealing with background matters summarises the litigation that has previously been involved

with the Litt family. There could be no doubt, in my view, that the plaintiffs were well aware of the backgrounds facts and should have been in no doubt concerning the limitation hurdle that they confronted, should they issue proceedings. The history that I recorded in the substantive judgment is an unhappy one for this family. What is apparent, however, is that when the signal was given of yet a further claim to be made, the defendants were put in a position which required considerable research. That was undertaken. The benefit of that was signalled in the first letter that I have mentioned. Despite that, the plaintiffs elected to carry on. That, however, would not have been an end to the matter. When the second letter was sent, and after the proceedings were issued, the plaintiffs had yet a further opportunity to settle the claim. They elected not to do so. Their actions, in my view, fall within the matters referred to in r 14.6(4)(i). Their position falls fairly and squarely within that part of the subrule and, in particular, the matters referred to in Bradbury v Westpac Banking Corporation by the Court of Appeal as being examples of cases where indemnity

costs have been ordered.[10] I am satisfied therefore that this is an appropriate case for

indemnity costs.

[27] The approach that the defendants have taken in apportioning the costs between the first and second plaintiffs, in my view, is entirely reasonable and appropriate. When the plaintiffs embarked on this proceeding they were both effectively in the same position. It was only when it was pointed out that the second plaintiff could have no beneficial at all that he elected to discontinue. He had already been put on notice by the first letter, well before that step was taken and before the proceeding was issued. In my view, he, with his father, should jointly bear responsibility for the defendants’ costs up until the time of the discontinuance.

[28] The only remaining question is the question of whether or not the costs ordered were reasonable in the circumstances. I have carefully considered the invoices and the confirmation from Mr Cullen as to the reasonableness of the hourly rate for the persons concerned. That material is helpful as I make my own

_{assessment of the time spent in relation to this matter. I am satisfied that the charges}

for legal services made to the defendants are reasonable. There is no reason to discount them in any way.

Conclusions

[29] Accordingly, I conclude that the defendants’ application for an order for costs against the second plaintiff in the sum of $7,742.16, including disbursements, is appropriate. I am also satisfied that the defendants’ application for an order for costs against the first plaintiff in the sum of $32,977.75, including disbursements, is appropriate.

Orders

[30] Accordingly I order that:

(a) The first plaintiff pay costs to the defendants in the sum of

$32,977.75; and

(b) The second plaintiff pay costs to the defendants in the sum of

_$7,742.16.

JA Faire
Associate Judge

---

[1] _{Glaister v Amalgamated Dairies Ltd [2004] 2 NZLR 606 at [19].}
[2] Mansfield Drycleaners Ltd v Quinny’s Drycleaning (Dentice Drycleaning Upper Hutt) Ltd _{[2002] NZCA 277; (2002) 16 PRNZ 662 (CA) at 668.}

[3] Glaister v Amalgamated Dairies Ltd, above n 1 at 610[14].

[4] Holdfast NZ Ltd v Selleys Pty Ltd [2005] NZCA 302; (2005) 17 PRNZ 897 (CA).

[5] Paper Reclaim Ltd v Aotearoa International Ltd [2006] 3 NZLR 188 (CA).

[6] _{Hedley & Ors v Kiwi Co-operative Dairies Ltd (2002) 16 PRNZ 694 at [8], Goddard J.}

[7] Bradbury v Westpac Banking Corporation [2009] NZCA 234; [2009] 3 NZLR 400; (2009) 19 PRNZ 385 (CA).

[8] Above, n 7 at [29].

[9] Crown Money Corporation Ltd v Grasmere Estate Trustco Ltd [2008] NZHC 1816; (2008) 19 PRNZ 591 (HC).

[10] Above, n 7.