CBL Insurance Limited v Skordakis [2014] NZHC 262 (24 February 2014)

High Court of New Zealand

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CBL Insurance Limited v Skordakis [2014] NZHC 262 (24 February 2014)

Last Updated: 10 March 2014

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV 2013-404-003311 [2014] NZHC 262

IN THE MATTER of the Reciprocal Enforcement of

Judgments Act 1934

BETWEEN CBL INSURANCE LIMITED Applicant

AND NICHOLAS SKORDAKIS Respondent

Hearing: On the papers.

Counsel: G J Turner for the Applicant

R A Edwards for the Respondent

Judgment: 24 February 2014

_{COSTS JUDGMENT OF GILBERT J}

CBL INSURANCE LIMITED v SKORDAKIS [2014] NZHC 262 [24 February 2014]

Introduction

[1] CBL Insurance Limited applied in this proceeding pursuant to s 6 of the Reciprocal Enforcement of Judgments Act 1934 for an order setting aside the registration of a foreign judgment which Mr Skordakis obtained against it. The substantive decision was made by the Victorian Civil and Administrative Tribunal and was then registered in the Supreme Court of Victoria. CBL has been granted leave to appeal but the appeal has not yet been heard. CBL accepts that the appeal in Australia will finally determine its application in this proceeding and accordingly it advised on the morning of the hearing that it did not seek a determination of that application. Instead, CBL applied for an adjournment of the application pending disposal of its appeal, effectively as a way of staying execution of the judgment pending appeal.

[2] In a judgment delivered on 18 December 2013¹ I dismissed CBL’s adjournment application and in consequence I also dismissed its substantive application to set aside registration of the judgment. The parties have been unable to agree costs and accordingly this judgment deals with that issue.

[3] Mr Skordakis seeks indemnity or increased costs. CBL acknowledges that it is liable for costs but submits that these should be assessed on a 2B basis.

Should indemnity costs be awarded?

[4] Rule 14.6(4) of the High Court Rules provides that the Court may order a party to pay indemnity costs in a range of situations, including where the party against whom costs are sought has acted vexatiously, frivolously, improperly or unnecessarily in commencing, continuing or defending a proceeding or a step in a proceeding. Increased costs may be awarded pursuant to rule 14.6(3) where the circumstances or general importance of the case justify it, where the party has caused

_{undue delay or for any other reason which the court is satisfied should displace the}

¹ CBL v Skordakis [2013] NZHC 3447.

general rule that costs must be predictable, expeditious and determined in accordance with the standard scale.

[5] In Bradbury v Westpac Banking Corp² the Court of Appeal discussed the standard required to justify awards of increased and indemnity costs. The Court considered that increased costs may be ordered against a party where that party has acted unreasonably. Indemnity costs are confined to those cases where a party has behaved badly or very unreasonably, such as bringing proceedings for an ulterior motive, pursuing a hopeless case or engaging in misconduct that wastes the time of the Court or other parties.³

[6] Ms Edwards submits that CBL brought the application to set aside the registration of the judgment for the improper purpose of defeating the object of the Australian judgments made against it, to delay payment of the judgment sum, and to bring financial pressure to bear on Mr Skordakis, making it more difficult for him to defend the appeal in Australia effectively. Ms Edwards contends that this is supported by CBL’s conduct at the hearing in electing not to pursue its application. Ms Edwards invites the Court to conclude that CBL acted vexatiously and abused the Court’s processes in bringing the application, intending not to pursue it.

[7] Some support for Ms Edwards’ position is found in the judgment of Zammit AsJ adjourning the appeal to allow Mr Skordarkis time to register and enforce the judgment in New Zealand. His Honour was satisfied that without payment Mr Skordarkis would have difficulty funding his defence to the appeal. He concluded that CBL had been “instrumental by its conduct in frustrating the Court’s processes” and had “made a calculated decision not to pay the judgment order... handicapping Mr Skordarkis ability to properly respond to the appeal.” I do not have the evidence that the Judge relied on to justify these remarks but it is appropriate to accord weight to them especially given the nature of this proceeding.

[8] However, despite these highly critical observations, Mr Skordarkis has not

_{satisfied me that CBL acted vexatiously and abused the Court’s processes in bringing}

² _{Bradbury v Westpac Banking Corp [2009] 3 NZLR 400 (CA) at [27]-[28].}

³ At [29].

its application to set aside registration of the judgment. CBL’s application was founded on eight grounds, including that the Tribunal’s award was not a judgment to which Part 1 of the Act applies and that it had been obtained by fraud. If substantiated, these would have provided legitimate grounds for setting aside the registration. On the face of it, the application was a proper one that CBL was entitled to make.

[9] The fact that on the morning of the hearing CBL sought an adjournment pending the outcome of the appeal rather than pursuing the substantive application, does not demonstrate that it never intended to pursue that application in the first place. CBL accepted that its principal basis for resisting the judgment, namely that it had been procured through Mr Skordarkis’ fraud, would be finally determined by the appeal. In these circumstances, CBL’s late decision to seek an adjournment rather than pursuing the substantive application was pragmatic and does not support the conclusion that its conduct was vexatious and frivolous from the outset. I am therefore not persuaded that indemnity costs are appropriate in this case for those steps leading up to the hearing.

[10] It could be argued that the adjournment application amounted to a collateral attack on the Australian stay decisions because CBL effectively sought to achieve the same result on the same basis. However, in applying for the adjournment, CBL pursued the same course that commended itself to Barker J in Hunt v BP Exploration Company (Libya),⁴ one of the leading cases in this context. I accept that in taking this approach CBL sought, in good faith, a remedy to which it considered itself entitled. I am not satisfied that its decision to seek an adjournment rather than to pursue the substantive application is one that should attract an award of indemnity

costs.

[11] That CBL did not act vexatiously or abuse the process of the Court is supported by the offers it made which were intended to release sufficient monies to Mr Skordarkis to enable him to fund the costs of defending the appeal. Those offers, which were made following the decision of Zammit AsJ, may not have been

_{adequate but I am satisfied that they demonstrate that CBL was not attempting to}

⁴ Hunt v BP Exploration Company (Libya) [1980] 1 NZLR 104 (HC).

prevent Mr Skordarkis from being able to contest the appeal by bringing the present application. Rather, it was seeking access to the Court to protect its own legitimate commercial interests pending a final decision on the appeal.

[12] For these reasons I decline to make an order for indemnity costs.

Should increased costs be awarded?

[13] The accepted approach to assessing increased costs is first to determine the costs that would be payable in any event and then to consider if an order for increased costs is justified by the circumstances of the case or the conduct of the parties. The starting point is to consider the appropriate costs category and then assess a reasonable time for each step in the proceeding including whether additional time should be allowed. Only after this analysis is completed is it appropriate to determine whether additional costs are required, considering the award as a whole.

Costs category

[14] The amount in issue in this proceeding is comparatively modest although I accept that the contest is important to the parties. The legal and factual issues raised by the proceeding are not particularly complex. Ms Edwards did not contend that category 2, being a proceeding of average complexity requiring counsel with skill and experience considered average in the High Court, is inappropriate for the proceeding, although she did provide calculations of the costs that would be available if the proceeding was a category 3 proceeding. I consider that this proceeding is appropriately classed as category 2.

Band for each step

[15] Ms Edwards seeks costs calculated on a band C basis for each step in the proceeding but does not explain why any particular step took more than a normal amount of time. I have considered each of the steps and conclude that band B is appropriate for each.

[16] Ms Edwards submits that because CBL did not advise that it did not intend to proceed with its substantive application until the morning of the hearing, most of the time spent preparing for the hearing was wasted. That may be so but the inquiry at this stage of the analysis is not whether the costs of taking the step were wasted. What must be determined is the reasonable time for the step, whether it was wasted or not. Band B sets the time generally considered reasonable in the normal course for each particular step. The normal amount of time considered reasonable for preparation of submissions is one and a half days. I consider that this is a reasonable allowance of time for this step in this case.

Additional costs

[17] Ms Edwards submits that increased costs should be ordered for a number of reasons. First, she argues that CBL acted vexatiously. I do not accept this for the reasons already given.

[18] Second, Ms Edwards submits that CBL should be ordered to pay increased costs because its application for an adjournment was advanced on the same grounds as it had unsuccessfully advanced on three separate occasions in Australia and therefore evidently lacked merit. While I accept that CBL’s adjournment application was effectively a re-run of the same argument that had been rejected in Australia, the fact that an application has previously failed does not necessarily mean that it had no merit. That it may fail again on review or in subsequent appeals cannot alter whatever underlying merit the application may have had.

[19] Although I dismissed CBL’s application, it could not be said that the application was hopeless and should never have been brought. There is no dispute that CBL is pursuing its appeal in good faith and that the appeal has prospects of succeeding. Particularly in light of the decision in Hunt, CBL’s adjournment application was not so lacking in merit as to justify an award of increased costs on that ground.

[20] Ms Edwards’ third submission in support of her application for increased

costs is that the issues raised by the application required the involvement of

Australian lawyers and this added to the expense of resisting the application. In particular, she contends that it was necessary to consider the jurisdiction of the tribunal which made the substantive decision in Australia now appealed from. This is because one of the grounds relied on by CBL in support of its application to set aside the judgment was that the foreign judgement was not one to which Part 1 of the Act applies. Ms Edwards argues that it was necessary to engage Australian lawyers and for Mr Woods, who is a solicitor in Melbourne, to appear at the hearing. While I accept that Mr Woods’ involvement was of assistance to the Court, I do not consider that the case necessitated the involvement of Australian solicitors.

[21] Next, Ms Edwards submits that increased costs are warranted in this case because CBL did not advise until the morning of the hearing that it would not be arguing its substantive application and instead would be applying for an adjournment of it. Ms Edwards draws attention to the fact that there were eight grounds to the substantive application and that the costs of preparing Mr Skordakis’ response to each of these grounds was wasted.

[22] The Court of Appeal observed in Bradbury that the abandonment of a cause of action of itself is not a pointer to increased or indemnity costs.⁵ By leaving it until the morning of the hearing to advise that it would not be proceeding with this application, CBL left itself exposed to having to pay Mr Skordakis’ preparation costs in relation to the substantive application. However, this is not reason in itself to conclude that the claims were without merit and to award increased costs. For the reasons already given I am not satisfied that the substantive application or the adjournment application were wholly lacking in merit.

[23] Finally, Ms Edwards seeks increased costs pursuant to r 14.6(3)(d) on the basis that CBL did not engage sufficiently in attempting to resolve the issue of costs. A failure to engage on the issue of costs cannot have any bearing on a party’s entitlement or exposure to costs for prior steps. It can only have relevance to the costs of seeking or contesting a costs application. In any event, CBL did attempt to resolve the issue of costs. Mr Turner advises that Mr Woods made a costs proposal

_{on 20 December 2013. Following Mr Turner’s return from holiday, he counter}

⁵ Bradbury, above n 2, at [79].

proposed that costs should be assessed on a 2B basis. This proposal was rejected. Given my conclusion that 2B costs are appropriate in this case, there is no basis to make an award of increased costs on this ground.

Result

_{[24] Mr Skordakis is entitled to costs in this proceeding calculated on a 2B basis.}

M A Gilbert J