Walker v Gibbston Water Services Limited [2014] NZHC 549 (24 March 2014)

Last Updated: 7 April 2014

IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY

CIV-2012-409-002834 [2014] NZHC 549

UNDER Section 284 of the Companies Act 1993

IN THE MATTER OF Gibbston Water Holdings Limited (in liquidation)

BETWEEN ROBERT BRUCE WALKER as liquidator of Gibbston Water Holdings Limited Applicant

AND GIBBSTON WATER SERVICES LIMITED

First Respondent

CASTLEREAGH PROPERTIES LIMITED

Second Respondent

KRISTINA LOUISE BUXTON Third Respondent

CANTERBURY LEGAL SERVICES LIMITED

_{Fourth Respondent}

Submissions received:

25 February 2014 and 12 March 2014

Counsel: K Sullivan for Applicant

J Moss for Respondents

Judgment: 24 March 2014

JUDGMENT OF ASSOCIATE JUDGE OSBORNE

_{as to costs}

_{[1] This judgment is in relation to costs which were reserved on a substantive}

WALKER v GIBBSTON WATER SERVICES LIMITED [2014] NZHC 549 [24 March 2014]

issue judgment on 7 November 2013.¹

The substantive proceeding

[2] The applicant, Robert Walker, is liquidator of Gibbston Water Holdings Limited. By Originating Application he sought directions in relation to the liquidation. The respondents raised further issues by cross application.

[3] The parties recognised that there would be a convenience to dealing with some issues first as the outcome on those issues might have obviated the need for judgment on the remaining issues. A hearing proceeded in September 2013 on that basis. By my judgment of 7 November 2013 I made orders in favour of Mr Walker on the first issues dealt with. The proceeding in relation to the remaining directions was adjourned.

The costs issues

[4] Counsel agree that the appropriate categorisation of the proceeding under r 14.3(i) High Court Rules is Category 2. They agree that for the attendances to date the determination of reasonable time under r 14.5 is appropriately by reference to Band B. That is also my assessment.

[5] What the parties disagree on is:

(a) Should costs be awarded now to Mr Walker or should costs be fixed and be costs in the cause?

(b) What are the appropriate items to be included and to what extent should there be a full allowance for the items?

(c) Should the Court’s order as to costs be affected by a pending appeal in

relation to the 7 November 2013 judgment?

Should costs follow the event?

[6] Mr Sullivan for Mr Walker submits that costs should follow the event, with the result that the respondents be ordered to pay costs to Mr Walker. Mr Sullivan acknowledges that the originating application and cross-application seek orders which have yet to be heard and determined. He submits that an allowance of two days for the filing of the application and dealing with the cross-application is a modest allowance. He submits that all the other items he seeks relate to the matters determined in the 7 November 2013 judgment and should be included in an appropriate costs order.

[7] Mr Sullivan does not pursue at this point disbursements such as filing fees. Those can be dealt with at a later date when all substantive issues are resolved.

[8] Mr Moss for the respondents submits that the appropriate order is that the costs for the 16 September 2013 hearing and 7 November 2013 judgment be costs in the cause. He submits that Mr Walker accepted the division of the substantive issues into two hearings as appropriate. He submits that if the respondents are ultimately successful on the “overall application”, the almost inevitable outcome is that any costs awarded to Mr Walker now will neutralise the benefit of costs awarded to the respondents if they are eventually successful. Mr Moss submits that that runs contrary to the primary principle under r 14.2(a) that the party who fails with respect to a proceeding should pay costs to the party who succeeds.

[9] Mr Moss emphasises that the September hearing was not an interlocutory hearing in relation to which r 14.2(a) and r 14.8 call for an immediate fixing and awarding of costs (unless there are special reasons to the contrary). Mr Moss likens the situation in this proceeding to that of a plaintiff’s summary judgment application where the substantive merit or otherwise of a plaintiff’s claim is yet to be determined. Rule 14.8(3) expressly excludes summary judgment applications from the ambit of r 14.8(1). The appropriate practice, as indicated by the Court of Appeal

in NZI v Philpott,² is that the Court, in the absence of special features, will, pending

substantive resolution of the proceeding, reserve the costs of an unsuccessful

summary judgment application. From these rules and practices, Mr Moss submits that the necessary implication is that in determining the costs of the overall substantive application, costs will follow the entire event.

[10] In reply, Mr Sullivan noted that the orders made in my judgment of 7

November 2013 dealt substantively with the very appointment of the liquidator and the validity of his preliminary steps. Mr Sullivan characterises those as quite different and discrete issues from those which remain.

[11] There are four substantive matters which remain for trial.

[12] My conclusion as to the incidence of costs is similar, although not identical, to Mr Sullivan’s proposal. Mr Walker has reasonably required direction from the court on a range of issues. There is a degree of interrelationship between some of these issues but they all properly remained for determination. It simply happened to be convenient to deal with some first. That is a different situation to a summary judgment proceeding where the issue at both interlocutory stage and substantive hearing is whether the defendant is liable as claimed by the plaintiff.

[13] As r 14.1(1) prescribes, all matters are at the discretion of the Court insofar as they relate to costs of a proceeding. By r 14.1(2) even rules 14.2 – 14.10 are subject to that overriding discretion.

[14] In my judgment, the just order is that Mr Walker have an appropriate award of costs now.

Costs items to be included?

[15] I deal with items the various steps in the order claimed by Mr Walker:

Filing application and supporting affidavits (Item 37)

(a) Mr Walker claims a full two days (the 2B assessment) for this item.

In his submissions, he justifies the claim for a full two days by reference to the fact that the respondents had a cross-application. I

infer that Mr Sullivan elected, rather than identifying a separate item (say item 38) for filing notice of opposition and supporting affidavits, to put the claim into item 37 alone. In my judgment, the appropriate course at this point is to focus on item 37 as claimed by Mr Walker.

(b) Part of the application (and part of the affidavit evidence) has been dealt with through the first hearing. Therefore, the appropriate course is to allow half the item (meaning one day). This leaves the Court at any subsequent hearing free to deal with remaining costs issues in the knowledge that the full item has not been allowed to date; and

(c) Mr Sullivan’s calculation allowed a daily recovery rate of $1,990 per day for each item claimed, including item 37. That rate was substituted as from 14 June 2012.³ Items in relation to steps taken before that date are appropriately to be allowed at the prior rate of

_{$1,880 per day. In this case that is item 37.}⁴

Preparation of written submissions – item 40

(d) An item 40 allowance is accepted by Mr Moss.

Preparation of bundle for hearing – item 41

(e) An item 41 allowance is accepted by Mr Moss. Appearance at hearing – 16 September 2013 – item 42 (f) An item 42 allowance is accepted by Mr Moss.

Memoranda for conferences/hearings – 5 February 2013, 7 May 2013, 26

_{February 2013 – item 11}

³ _{Rule 4 and Schedule 1 High Court Amendment Rules 2012 (SR 2012/93).}

⁴ Rule 4 and Schedule 1 High Court Amendment Rules 2010 (SR 2010/88).

(g) Mr Walker has claimed for memoranda filed on three occasions at the standard allowance under item 11.

(h) Counsel filed competing submissions as to the extent of which each of these memoranda may be said to relate to this particular part of the proceeding and as to the extent to which one or other counsel was involved in their preparation. A robust approach is called for in relation to such items where counsel have indisputably been involved in the filing of a memorandum. By parallel reasoning with my conclusion in relation to the filing of the originating application itself, I consider it appropriate to allow these items at half the normal allocation.

Sealing order for costs – item 29

(i) Mr Walker claims the normal allowance for sealing an order. Mr

Moss did dispute this item.

Disbursement – agency fee

(j) Mr Walker incurred an agency fee when instructing Christchurch solicitors to appear at the mentions hearing on 26 February 2013.

(k) I do not consider it appropriate to award costs in relation to that attendance, and therefore that disbursement, in this proceeding. The Minute of Associate Judge Matthews of 26 February 2013 records that there was a disagreement between counsel as to whether the respondents should have a costs award at that hearing in relation to wasted costs and made a ruling that costs be reserved.

(l) In the circumstances the agency disbursement should be dealt with when the proceeding concludes.

Calculation of costs

[16] The costs which it is just that the respondents now pay to the applicant amount to $9,641.00 as particularised in Schedule 1.

Stay pending appeal?

[17] Mr Moss noted that there is an extant appeal against my judgment of 7

November 2013. Mr Moss submitted that if the Court were to award costs to Mr Walker such order should be stayed pending the outcome of the appeal. Mr Moss submitted that it is not uncommon for such a stay to be granted.

[18] Rule 20.10(1) provides that an appeal does not operate as a stay of enforcement of any judgment or order appealed against. Rule 20.10(2) permits this Court to make an order staying enforcement of an order appealed against.

[19] In Duncan v Osborne Buildings Ltd,⁵ Gault J delivering the judgment of the Court of Appeal in relation to an application for stay of the summary judgment pending appeal stated:

In applications of this kind it is necessary carefully to weigh all of the factors in the balance between the right of a successful litigant to have the fruits of a judgment and the need to preserve the position in case the appeal is successful. Often it is possible to secure an intermediate position by conditions or undertakings and each case must be determined on its own circumstances.

[20] In this case I have found that Mr Walker is entitled to costs. The respondents have provided no evidence that were they to pay the sum awarded to Mr Walker there is a likelihood that they would not recover it in the event of a successful appeal. On first principles, therefore, Mr Walker should have his costs now.

[21] In reaching this conclusion, I reject Mr Moss’s submission (unsupported by authority) that it is not uncommon for a stay of costs to be granted whilst an appeal is pending. Equally, such does not accord with my practice. A stay of execution of a costs judgment is sometimes agreed between the parties and made the subject of a

_{consent order. It is also the case that there is, from time to time, a question as to the}

⁵ Duncan v Osborne Buildings Ltd (1992) 6 PRNZ 85 at 87.

ability of a party receiving a costs payment to later, upon a successful appeal, reimburse the paying party. That situation makes it appropriate that the Court order a stay even in the absence of agreement between the parties. Otherwise, the principles to which I have referred will generally dictate that the right of the successful party to receive its costs, upon the order being made, should not be cut across by the unsuccessful party’s pursuit of an appeal in the meantime.

[22] There will accordingly be no stay of the costs order.

Order

[23] I order:

(a) The respondents are jointly and severally to pay to the applicant the sum of $9,641.00 on account of costs;

(b) To the extent that this order has not dealt fully with any item under Schedule 3 in relation to attendances in this proceeding to date or with any disbursement incurred to date, issues of costs and disbursements in relation to such remaining items are reserved.

Solicitors:

DLA Phillips Fox, Wellington

J Moss, Barrister, Christchurch

SCHEDULE 1

Applicant’s schedule of costs and disbursements – Category 2B

Item Description Time Amount

37 Filing application and supporting affidavits 1.0 $1,880.00

40 Preparation of written submissions 1.5 $2,985.00

_{41 Preparation of bundle for hearing 0.6 $1,194.00}

_{42 Appearance at hearing on 16 September}

²⁰¹³

_{11 Filing memorandum for the first call on 5}

February 2013

1.0 $1,990.00


0.2 $398.00

_{11 Filing memorandum on 7 May 2013 0.2 $398.00}

11. Filing memorandum for mentions hearing on 26 February 2013

0.2 $398.00

29 Sealing order for costs 0.2 $398.00

Total $9,641.00