King v PFL Finance Limited [2014] NZHC 1442 (25 June 2014)

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BETWEEN	THOMAS FREDRICK MAZLIN KING and JUDITH RUTH KING as partners of the TFM AND JR KING PARTNERSHIP First Plaintiffs HAVELOCK FARMS LIMITED Second Plaintiff
AND	PFL FINANCE LIMITED First Defendant CRAIG BEECROFT Second Defendant

Hearing:	22 May 2014
Appearances:	D G Chesterman for First Plaintiffs K M Quinn and M H Tushingham for Defendants
_Judgment:	_{25 June 2014}

This judgment was delivered by Justice Peters on 25 June 2014 at 2.45 pm pursuant to r 11.5 of the High Court Rules

[1] In my reasons for judgment in this matter I gave the Defendants leave to file and serve a memorandum on costs.¹

[2] Since then, I have received the Defendants’ memorandum of 21 March 2014, the Plaintiffs’ (“Kings”) of 6 May 2014 and the Defendants’ in reply of 9 May 2014. I have also had the benefit of counsels’ oral submissions.

(b) what order for costs would have been made against the Kings with respect to the proceedings if s 45 of the Act had not affected their liability.

[4] For the reasons given below, I propose to make an order pursuant to s 45(5) of the Act. The quantum of that order may be affected by matters set out at the end of this judgment and, once those are clarified, the quantum of the order will be fixed.

(1) If an aided person receives legal aid for civil proceedings, that person's liability under an order for costs made against him or her with respect to the proceedings must not exceed an amount (if any) that is reasonable for the aided person to pay having regard to all the circumstances, including the means of all the parties and their conduct in connection with the dispute.

(2) No order for costs may be made against an aided person in a civil proceeding unless the court is satisfied that there are exceptional circumstances.

(3) In determining whether there are exceptional circumstances under subsection (2), the court may take account of, but is not limited to, the following conduct by the aided person:

(4) Any order for costs made against the aided person must specify the amount that the person would have been ordered to pay if this section had not affected that person's liability.

(5) If, because of this section, no order for costs is made against the aided person, an order may be made specifying what order for costs would have been made against that person with respect to the proceedings if this section had not affected that person's liability.

[6] For reasons which it is unnecessary to address, the Defendants do not seek an order pursuant to s 45(1) of the Act. Accordingly, it is unnecessary to consider whether, having regard to s 45(3), exceptional circumstances exist so as to permit the Court to make such an order against the Kings.

[7] Instead, the Defendants seek an order pursuant to s 45(5) of the Act. As I understand it from the Defendants, if such an order is made they may apply to the Legal Services Commissioner (“Commissioner”) for payment of some or all of the costs.²

[8] In his memorandum of 6 May 2014, counsel for the Kings submitted that a party seeking an order under s 45(5) may first be required to establish liability under s 45(1). As is clear from s 45(1), that would require a finding of “exceptional circumstances” pursuant to s 45(2) of the Act. At the hearing, however, counsel accepted that a party could seek an order under s 45(5) without first proceeding under s 45(1).³

[9] The Defendants were successful in defending all causes of action against them. They also succeeded on substantial portions of their counterclaim. In those circumstances, I am satisfied that I should make an order pursuant to s 45(5) of the

³Laverty v Para Franchising Ltd [2006] 1 NZLR 650 (CA); W v Attorney-General HC Wellington CIV-1999-495-85, 25 September 2008; P v Attorney-General [2010] NZHC 2387; (2010) 20 PRNZ 78 (HC), AB v Attorney-General [2012] NZHC 3626; and Olliver v Mulholland (No 2) [2014] NZHC 317.

[10] With their memorandum of 21 March 2014, counsel for the Defendants submitted a schedule of the costs and disbursements that they contended would have been ordered but for s 45 of the Act.

[11] Having received the submissions of counsel for the Kings, counsel for the Defendants agreed that several of the items claimed required adjustment and they submitted a revised schedule after the hearing on 22 May 2014 (“schedule”).⁴The agreed revisions address the matters in [41], [42] and [49] of the Kings’ submissions and it is unnecessary for me to make any further reference to them.

[12] Counsel for the Kings submitted that any order I make under s 45(5) of the Act must reflect the fact that the Second Defendant, Mr Beecroft (and possibly PFL also), has rendered invoices in the receivership for legal expenses incurred in this litigation.

[13] Counsel for the Defendants assures me that, if I were to make an order for costs in the sum claimed, there would be no prospect of either Defendant “profiting” within the meaning of High Court Rules, r 14.2(f).

[14] Section 45(5) requires an order specifying the costs that would have been ordered against the Kings but for s 45. I do not consider it necessary for that order to reflect any sums that may have been charged or recovered in the receivership. The Commissioner may take a different view, of course, if called upon to make a contribution. Moreover, the Defendants must not recover more than the quantum of

[15] The Defendants seek provision for second counsel. The Kings do not object in principle to such provision but seek some deduction for days or periods when only one counsel was present.

[16] Counsel for the Defendants opposes any deduction. He submits that second counsel was present in Court for the vast majority of the trial and that on those few occasions when he was not, he was organising the Defendants’ witnesses, reviewing and making corrections to the notes of evidence and was otherwise engaged on the litigation.

[17] My recollection is that any periods in which second counsel was not present were minimal. Even if a deduction for those periods were appropriate, the sum involved would be trivial in the scheme of this litigation. I do not propose to reduce quantum on account of that matter.

[18] The Defendants seek an order for costs based largely on the 2B scale. They do, however, seek costs on a 2C basis for some steps.

[19] There is no dispute that the Defendants should have costs on a 2C basis in respect of step 21 in the schedule, being inspection of documents. The other items on the schedule in respect of which the Defendants seek costs on a 2C basis are:

(a) matters pertaining to case management (items 4.10 and 4.11); (b) particular interlocutory applications (items 4.13 and 4.14);

(c) preparation of lists of documents by the Second Defendant (item 20); (d) Defendants’ preparation of briefs or affidavits (item 30); and

[20] I am satisfied that it is appropriate to award costs on a 2C basis in respect of the items to which I have referred.

[21] In so far as concerns the items referred to in [19](a) and [19](b), in [5] of a memorandum to the Court dated 20 June 2012, previous counsel for the Kings agreed that an award on a 2C basis for those items was appropriate. I am satisfied that the time engaged on the other matters referred to in [19] above would have substantially exceeded that anticipated by band B, and that an order under band C is appropriate.

[22] The Kings’ earlier solicitors, Carter & Partners, paid the Defendants $17,000 to resolve two applications by the Defendants for costs, those applications being made in memoranda dated 21 September 2012 and 1 October 2012.

[23] The submission for the Kings is that Carter & Partners’ payment was made in respect of some of the costs that the Defendants now seek and they ask that I reduce the amount I order under s 45(5) by at least $10,000 to reflect what they submit would otherwise be an element of double recovery. The Defendants oppose any reduction.

[24] By way of example, the Kings refer to the Defendants’ claim for an amount for preparation for trial. They submit, correctly, that a portion of Carter & Partners’ payment was to settle a claim that the Defendants had made for wasted preparation in advance of the trial fixed for September 2012. It was necessary to adjourn that trial because the Plaintiffs were not ready to proceed.

[25] I do not accept the Kings’ submission recorded in [24] above. To the extent Carter & Partners payment was for trial preparation, it was for wasted preparation. I readily accept that preparation would have been wasted, given that it occurred some

9 months before the case did go to trial. The Defendants’ claim for trial preparation

[26] There would, however, be merit in the Kings’ submission if the Defendants were now seeking an award for an item for which the payment of $17,000 was made. For instance, the Defendants could not properly claim now a cost or disbursement for which Carter & Partners had already reimbursed them. I should add that it does not appear on the face of the schedule that the Defendants are seeking to do so but I should like confirmation.

[27] Given that, I ask counsel for the Defendants to confirm as soon as possible that no claim is made for a cost or disbursement that was in fact covered by Carter & Partners’ payment of $17,000. On receipt of that confirmation, I propose to make an order in the sum of the schedule filed with the Defendants’ supplementary memorandum dated 22 May 2014. Alternatively, the Defendants should file an amended schedule and an explanatory memorandum.

High Court of New Zealand Decisions

King v PFL Finance Limited [2014] NZHC 1442 (25 June 2014)