Houghton v Saunders [2021] NZHC 3590 (21 December 2021)

Last Updated: 28 January 2022

IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY I TE KŌTI MATUA O AOTEAROA TE WHANGANUI-A-TARA ROHE

CIV-2008-409-348 [2021] NZHC 3590

BETWEEN	E M HOUGHTON Plaintiff
AND	T E C SAUNDERS & ORS First Defendant
AND	CREDIT SUISSE PRIVATE EQUITY LLC Second Defendant
AND	CREDIT SUISSE FIRST BOSTON ASIAN MERCHANT PARTNERS LP Third Defendant

Hearing:	30 November and 1 December 2021
Appearances:	V L Heine QC and J A Tocher for the Plaintiff D J Cooper, M C Harris and S T Coupe for the First Defendants J B M Smith QC, A S Olney and C J Curran for the Second and Third Defendants D Salmon QC and D M Kraitzick for the Non-Parties
Judgment:	21 December 2021

JUDGMENT OF COOKE J

(Final costs awards)

Table of Contents

Background [4]

Costs of stage 1 [15]

The applicable principles [16]

Assessment [22]

Costs of stage 2 [30]

Step 1: Interlocutory applications [33]

Step 2: Other stage 2 steps [43]

Step 3: Trial preparation [50]

Step 4: Disbursements [62]

HOUGHTON v SAUNDERS & ORS [2021] NZHC 3590 [21 December 2021]

Extended liability [73]

Uplifted costs [74]

Claims against JAFL and Mr Gavigan [81]

Mr Houghton’s request to avoid liability [93]

Conclusion [96]

• [1] This judgment deals with the final costs awards to be made in this proceeding. It is intended to bring this long running proceeding to a close. By application dated 28 May 2021 the defendants seek final costs orders following the plaintiff’s claims being struck out as a consequence of a failure to comply with unless orders.¹

• [2] The matters that now fall to be determined are in three main areas:

(a) The costs of the stage 1 trial which Dobson J has previously addressed by making preliminary orders following the successful appeal by the plaintiff group to the Supreme Court. These orders contemplated that the final costs awards for stage 1 would depend on the ultimate outcome of stage 2. It is now necessary to make the final award in relation to stage 1 now that the plaintiff’s claims have been struck out.

(b) The costs for the steps leading up to the plaintiff’s claim being struck out, including the costs of interlocutory steps, and the costs of preparing for the stage 2 trial not already covered by a wasted costs order made following the adjournment of the stage 2 trial.

(c) The defendants’ claim for uplifted costs in relation to the costs contemplated by (b) above, and the claim that costs orders should be made against not only the plaintiff but also Joint Action Funding Ltd (JAFL) and Mr Anthony Gavigan given the role played by them in funding/promoting the litigation. There is also the plaintiff’s claim that only these parties should be liable.

¹ Houghton v Saunders [2020] NZHC 2030 at [71] (strike out); Houghton v Saunders [2020] NZHC 1088 (unless orders).

• [3] Within each of those three areas there are a number of issues to be addressed. They were addressed in detailed written submissions and oral argument over nearly two days. Following the hearing counsel were able to provide me with a list of 14 issues to be determined, 11 of which were described as agreed.

Background

• [4] I will not lengthen this judgment by a detailed description of its background which will be familiar to the participants.

• [5] The plaintiff brought these proceedings as a class action under r 4.24 of the High Court Rules 2016. The plaintiff represented some 3,600 claimants. Litigation funding was arranged by JAFL and Mr Gavigan. The key allegations concerned an allegedly misleading prospectus relating to the public issuing of shares in Feltex Carpets Limited (Feltex) in 2004. The key causes of action were under the Fair Trading Act 1986 and the Securities Act 1978.

• [6] The proceedings were managed in two stages. Stage 1 was to determine Mr Houghton’s claim in full, and also to deal with findings common to the represented group.²

• [7] The stage 1 trial proceeded before Dobson J over 14 weeks. By judgment dated 15 September 2014 he dismissed the plaintiff’s claims, and accordingly the entire proceeding.³ By judgment dated 24 March 2015 Dobson J then ordered that the plaintiff pay costs to the defendants, and these were duly paid.⁴

• [8] The judgment dismissing the claims was upheld on appeal to the Court of Appeal.⁵ On appeal to the Supreme Court, however, that Court found that one of the plaintiff’s allegations of misrepresentation was established as the revenue forecast for the 2004 year in the Feltex prospectus was untrue. The Court held that the proceedings needed to proceed to stage 2 to determine whether any of the represented claimants

² Houghton v Saunders [2012] NZHC 1828 (French J).

³ Houghton v Saunders [2014] NZHC 2229.

⁴ Houghton v Saunders [2015] NZHC 548.

⁵ Houghton v Saunders [2016] NZCA 493, [2017] 2 NZLR 189.

could establish reliance, and that loss to them had been caused by the untrue statement.⁶

• [9] On 14 June 2019, as one of a number of further judgments arising in relation to stage 2, Dobson J made a provisional costs reassessment — that is he determined how the costs of stage 1 should be redetermined following the plaintiff’s partial success arising from the decision of the Supreme Court.⁷ Because the costs award in the defendants’ favour had been paid, this involved determining the amount the defendants needed to repay. That judgment also dealt with the defendants’ application for security for costs for stage 2. As I will address in greater detail below Dobson J ordered that the remaining defendants refund substantial amounts arising from their earlier successful costs award for stage 1, but he also directed that part of the funds he ordered the defendants to repay would be held by them as security pending the plaintiff meeting the terms of a security for costs order that he made. In other words part of the amount the defendants were required to repay was held by the defendants as security for the security.

• [10] The amount ordered by way of security for costs was never provided by the plaintiff. This reflects the fact that the plaintiff struggled to obtain funding to pursue the claims at stage 2. In January 2019 the Court allocated a trial date in November and issued directions for the steps required. But the plaintiff group was unable to meet the directions, including by failing to provide a list of claimants, briefs of evidence or discovery.

• [11] On 29 October the plaintiff applied to adjourn the trial fixture beginning 4 November. This application was heard on the first day of the scheduled trial. Dobson J did not accept the plaintiff’s reasons for seeking an adjournment (that the trial should await an intended appeal to the Supreme Court from rulings he had made about the scope of the stage 2 hearing), but he nevertheless adjourned the trial as the plaintiff was simply unable to proceed such that the adjournment was a fait accompli.⁸

⁶ Houghton v Saunders [2018] NZSC 74, [2019] 1 NZLR 1.

⁷ Houghton v Saunders [2019] NZHC 1362.

⁸ Houghton v Saunders [2019] NZHC 2906.

• [12] A replacement fixture beginning 11 May 2020 was offered and accepted. But by late February 2020 counsel for the plaintiff indicated that the plaintiff would not be ready to proceed with the stage 2 trial in May. The defendants then applied for an order striking out the proceeding if security for costs were not provided, or if the plaintiff was not ready to proceed to trial. This was heard on the first day of the adjourned stage 2 trial on 11 May. Dobson J made an unless order striking out the proceeding if security for costs and funding were not provided by 13 July 2020.⁹ A new trial date was set for 27 October 2020.

• [13] When the plaintiff did not comply with either limb of the unless order the proceeding was duly struck out by the operation of that order. An application by the plaintiff to stay the effect of those orders was dismissed on 11 August 2020.¹⁰ The plaintiff appealed against the May 2020 judgment imposing an unless order. On appeal it advanced alternative arguments for the provision of security but the appeal was declined.¹¹ Leave to appeal was then declined by the Supreme Court.¹²

• [14] The above summary does not include all the interlocutory applications relating to stage 2 that were dealt with by Dobson J during the above chronology events. I will describe those applications to the extent they are relevant below.

Costs of stage 1

• [15] The first matter is to determine what final costs order should be made in relation to stage 1.

The applicable principles

• [16] The stage 1 hearing was in the nature of a trial to determine liability. The costs implications of a proceeding so divided into stages is not expressly addressed by the costs rules. At stage 1 the plaintiff group achieved a partial success as a consequence of the decision of the Supreme Court. Rule 14.2(a) of the High Court Rules establishes a principle that a party who succeeds in respect of a proceeding or interlocutory

⁹ Houghton v Saunders [2020] NZHC 1088 at [92].

¹⁰ Houghton v Saunders, above n 1.

¹¹ Houghton v Saunders [2020] NZCA 638.

¹² Houghton v Saunders [2021] NZSC 38.

application is entitled to costs, and r 14.8 requires those costs to be determined at the time unless there are special reasons. But a stage 1 proceeding is not itself an interlocutory application, and the full proceeding was yet to be determined.

• [17] Under r 14.1 costs are ultimately subject to the discretion of the Court. It is normally appropriate to apply other rules by way of analogy, and on that basis a partial success of stage 1 might suggest that the plaintiff is entitled to a partial costs award by analogy to rr 14.2(a) and 14.8. This issue was addressed by the Court of Appeal in Cousins & Associates v FM Custodians Limited where the Court applied authority from England and Wales and held that reserving costs of a liability hearing until after a quantum hearing was permissible, but not the only way of dealing with costs.¹³ In that case the High Court had awarded the plaintiff costs notwithstanding a second stage quantum hearing had not taken place. The Court observed that another Judge might have been prepared to reserve costs until the final outcome was known but there was no principle requiring this.¹⁴

• [18] I nevertheless see force in the submission that the costs rules generally suggest that a plaintiff should be entitled to costs if they succeed at a liability hearing. The costs rules are intended to be predictable. They follow a schedular approach. There is a requirement under r 14.8 to determine costs of interlocutory steps when they occur unless there are special reasons recognising that costs should not normally be reserved until the proceeding concludes. The rules proceed on the basis that parties should encounter the costs consequences of stances they take during the course of the proceeding. Previously it was not uncommon for costs to be determined as “costs in the cause” — meaning that costs would be awarded to the winner at the end of the proceeding. But this was changed as part of the schedular approach in the current rules. So plaintiffs who succeed at a liability hearing might expect a costs award. This was the approach of the High Court in FM Custodians upheld by the Court of Appeal, and a similar approach has been followed in other cases, such as Strathboss Kiwifruit Ltd v Attorney-General.¹⁵ So this might, at least, be seen as the starting point.

¹³ Cousins & Associates v FM Custodians Limited [2013] NZCA 99 at [16].

¹⁴ At [17].

¹⁵ Strathboss Kiwifruit Ltd v Attorney-General [2019] NZHC 62.

• [19] But as the Court of Appeal emphasised in FM Custodians, there is no explicit rule to that effect, and the matter must be considered to be a discretionary one. In the present case there were reasons why deferring the determination of costs until the final result was justified — the plaintiff had only succeeded in one aspect of a much broader claim, Mr Houghton’s claim had still failed in its entirety, and the question whether the plaintiff could succeed in establishing any reliance and loss arising from the more limited area of success was plainly in issue.

• [20] Dobson J himself indicated that, given the nature of the partial success of the plaintiff at stage 1, it was “most likely that I would have deferred any costs award, pending the stage 2 determination that would reflect the relative importance of making out the untrue statement”.¹⁶ But he also saw the case as involving further complications, including in relation to the funding of the claim for stage 2, and the necessity for security for costs. In determining what orders he would make on a provisional basis he then calculated what costs the plaintiff might be entitled to as a successful party at stage 1 (and assessed 20 per cent of that amount), and then determined an amount had the defendants been successful at stage 1 (discounted by 20 per cent). He deducted the first amount from the second to calculate the amount to be refunded by the defendants. By a happy mathematical coincidence it turns out that this figure represents the defendants recovering almost exactly 66 per cent of a costs entitlement.

• [21] Dobson J also needed to address security for costs. In that context he said:¹⁷

I do not dismiss the conceptual prospect that the defendants may succeed at stage two in circumstances requiring a complete reversal of the two aspects of costs orders made in favour of the plaintiff in this judgment. However, for the purposes of fixing the appropriate quantum of security for costs against that contingency, I am inclined to project (and it can be no more than a projection) that the range of adverse outcomes for the claimants at the most negative end of the spectrum would not warrant depriving them of all of the stage one High Court costs to which they become entitled by virtue of the partial success on stage one in the Supreme Court. Whether viewed as a minimum extent to which the reversal of the orders originally made in favour of the defendant would not be revisited, or by the extent of reduction of the positive costs order in the plaintiff's favour now made in reliance on his partial success, there is a component of the amounts now payable for stage one costs by the defendants

¹⁶ Houghton v Saunders, above n 7, at [30].

¹⁷ At [84]–[85].

to the plaintiff that does not require security against the contingency for repayment. I fix that at $300,000.

As to the balance, security will therefore be needed as a condition of payment by the defendants to the plaintiff for the sum of $932,599.80. Applying a sensible extent of rounding in the plaintiff's favour, this aspect of the order is for $930,000.

Assessment

• [22] The parties argued for a range of different proposals for the appropriate outcome for stage 1 costs. Mr Smith QC argued for the defendants that they must now be regarded as totally successful, and that all the amounts that Dobson J had provisionally ordered them to repay should now be ordered to be paid back to the defendants. For JAFL and Mr Gavigan Mr Salmon QC argued that the plaintiffs should now be entitled to a costs award for stage 1 by analogy with the costs award that the plaintiff had been awarded in the Court of Appeal and Supreme Court for his appeals — that is a discounted costs award in the plaintiff’s favour.¹⁸ For the plaintiff himself Ms Heine QC argued that Dobson J’s provisional assessment should not be disturbed and should represent the final costs award.

• [23] Although there was no appeal to Dobson J’s provisional costs decision I do not believe that the decision is binding in the sense that it determines what the result should now be. His findings were clearly provisional, and dependent on what transpired at stage 2. But although they are not binding they must be persuasive as Dobson J was the trial Judge who had close familiarity with the proceedings. Moreover his analysis is very careful, and detailed. So it should carry significant weight.

• [24] Dobson J decided not to fix the costs of stage 1 until the outcome of stage 2 was known. I see the starting point in those circumstances is that the defendants have prevailed and are entitled to costs, but did not succeed on all issues. Whilst the defendants have not prevailed as a consequence of a hearing on the merits I do not agree that that makes a significant difference. Had the plaintiffs discontinued the proceedings under r 15.23 the defendants would have been entitled to costs unless the Court had ordered otherwise, and the fact that the claim was struck out rather than discontinued cannot put the plaintiff in a better position. The assessment must be made

¹⁸ Houghton v Saunders [2018] NZSC 112; Houghton v Saunders [2019] NZCA 285.

on the basis that the defendants have succeeded, even though the second stage hearing did not proceed. For that reason I do not accept Mr Salmon’s argument that the defendants should be regarded as the successful party for the purposes of the stage 1 trial.

• [25] But the plaintiff’s partial success at stage 1 cannot be ignored, particularly in light of the general scheme of the rules that I referred to at [18] above. Reducing a costs award for partial success by the opposing party is contemplated by r 14.7(d) and the rules should be applied when they address the issue in question. For that reason I do not accept Mr Smith’s submission that the defendant should be awarded costs as if they had completely succeeded in the proceedings throughout.

• [26] In terms of the reduction in the defendants’ costs award it seems to me that there are two potential approaches. The first is to reduce the award by the amount that Dobson J recognised was the minimal amount that the plaintiff was entitled to — being

$300,000. The alternative is to use the net figure which Dobson J’s more elaborate assessment arrived at, reducing the defendants’ award by one third.

• [27] For three inter-related reasons I conclude that the appropriate approach is to reduce the defendants’ entitlement by one third. First, it is not consistent with the scheme of the rules to reduce a defendants’ award by reference to the percentage of an amount to which the plaintiff would have been entitled to if he had succeeded. The percentage reduction should more simply be a percentage deduction from the defendants’ award as r 14.7(d) contemplates. Secondly, the reduction by 33 per cent corresponds with Dobson J’s net outcome which reflected what he thought was the just order for redistribution at that stage recognising the plaintiff group’s partial success. Finally, and most significantly, it seems to me to be the most appropriate award under r 14.7(d) in the present circumstances —the plaintiff group is entitled to a meaningful allowance for partial success at stage 1, and that is properly reflected by reduction of the defendants’ award by one third.

• [28] Accordingly for those reasons I concluded that the appropriate costs award for stage 1 is to award the defendants two thirds of what they otherwise would have been

entitled to. This is consistent with Dobson J’s preliminary redistribution of the costs of stage 1.

• [29] For the avoidance of doubt the amount of $930,000 held by the defendants as security is to be regarded as an amount to which the plaintiff is potentially entitled to in the calculations.

Costs of stage 2

• [30] A more complex set of issues arises from the costs of stage 2. The stage 2 hearing never proceeded notwithstanding that there were three scheduled hearing dates. There were a series of interlocutory applications and other steps for which costs need to be determined. A further complication arises from the fact that following the first adjourned hearing Dobson J awarded the defendants an amount by way of “wasted” costs. In determining the costs of stage 2 this will need to be taken into account.

• [31] As indicated above, it is appropriate that costs be determined in accordance with the overall scheme of the rules following the schedular approach in accordance with Schedule 3 to the High Court Rules (the Schedule). Costs should, as far as practicable, be predictable. For that reason I will seek to apply the rules and the Schedule when they apply, or to apply them by analogy whenever they do not directly apply.

• [32] Following that approach it seems to me that the costs of stage 2 should be addressed in four steps. First I should determine the costs of the interlocutory applications that have not been addressed. Secondly I will deal with the other issues that have been raised in the parties’ submissions in relation to steps in the Schedule relating to stage 2 costs. Thirdly I will make an assessment of the award for the preparation for the stage 2 hearing in light of the wasted costs award already made. Finally I will address arguments advanced in relation to particular disbursements claimed. That approach allows the scheme of the rules to be most closely adhered to, and also ensures that the costs award is properly considered by the Court standing back and reviewing costs overall.

Step 1: Interlocutory applications

• [33] The costs of interlocutory applications occurring during stage 2 need to be fixed. There are a series of issues raised by the plaintiff and defendants. The non- party supported the plaintiff’s submissions that I set out below.

(i) Sub-group application

• [34] First the plaintiff contends that costs should lie where they fall for one of the interlocutory applications called the “sub-group” application. This was an interlocutory application by the plaintiff seeking directions on how the evidence led for some claimants would be treated for the purposes of the claims of the other claimants in particular categories. The application was addressed at hearings, but was never finally determined, although Dobson J was sceptical of the plaintiff group’s proposals.¹⁹ Ms Heine argues that the issues were novel and needed to be addressed in any event such that the costs of the application should lie where they fall. Mr Curran submitted that the application was not successful and costs should be awarded in the normal way.

• [35] I accept that this was a difficult question which the plaintiff responsibly raised by way of an interlocutory application. I also accept that the defendants’ suggested answer to the issue (effectively that there would be a stage 3 should the plaintiff get to that point) may have been as unattractive to the Court as the plaintiff’s proposal. But I do not accept that this should mean that there should be no award of costs in the defendants favour. It seems to me that these factors might well have justified an order that the costs of this application be treated as “costs in the cause” (i.e. the costs would be met by the ultimate loser of the proceeding) but I do not accept that it can be treated on the basis that costs should lie where they fall. The defendants incurred legal expenditure as a consequence of addressing the plaintiff’s proposals, the application was not successful, and the plaintiff’s claims have been unsuccessful. So I agree that the defendants are entitled to costs calculated in accordance with the Schedule.

¹⁹ Houghton v Saunders [2019] NZHC 142.

(ii) Wasted costs application

• [36] The second issue concerns a reduction of the costs awarded on the defendants’ successful application for wasted costs following the adjournment of the stage 2 hearing. The plaintiff seeks that the award be reduced to 50 per cent of the Schedule calculation. The defendants say that a full award is now justified as it has turned out that the costs were entirely wasted.

• [37] The defendants were awarded approximately half of the wasted costs award that they sought. Dobson J then adjourned the defendants’ application for costs indicating that his “provisional view is that the defendants would be entitled to an award, somewhat reduced from the amount calculated pursuant to the scale”.²⁰

• [38] I see no reason to depart from Dobson J’s assessment — that there should be a reduction in the costs awarded to the successful defendants. I do not accept the reduction should be as high as 50 per cent. Halving the award is more than having the award “somewhat reduced”. Success is still success. In the circumstances the appropriate award is to reduce the defendants’ award by 25 per cent.

(iii) Multiple defendants claims

• [39] Finally there is an issue that affects all of the claims for costs of interlocutory applications. The plaintiff raises two closely interrelated issues. First he disputes the claim for third counsel on interlocutory applications and says this is excessive. Secondly, he contends that the defendants should not be entitled to multiply the claims for the same interlocutory application. He says that the applications should have been argued predominantly by one set of defendants with the other defendants receiving only a modest additional award for being heard in support. The defendants respond by arguing that each of these interlocutory applications raised very important issues that warranted separate representation (including the appearance of third counsel) and that no discounts are warranted.

²⁰ Houghton v Saunders [2020] NZHC 265, at [43].

• [40] I accept the submission that third counsel should not be allowed. It is not contemplated by the steps in the Schedule for interlocutory applications, and although it could be allowed by way of analogy for very complex matters I accept that it is unusual to award third counsel.²¹ Dobson J did not award third counsel on previous interlocutory applications and nor do I.²² The fact that some of the applications took place on the first day of the scheduled hearing does not change the entitlement.

• [41] Rule 14.15 provides that the Court must not allow more than one set of costs unless there is good reason to do so if several defendants defended the proceeding separately or it appears to the Court that some or all of them could have done so. This rule can be applied to particular interlocutory applications by analogy. Whilst I accept that the interlocutory applications were important, the defendants could still collectively have made a decision on which of them was to lead the opposition to the plaintiff’s applications, with the other set of defendants then being heard in support — or in the words of r 14.15(b) “all or some of them could have joined in their defence”. I accept that the defendants have already partly reflected this in their costs claims to some extent. But greater allowance should be made for this approach. One defendant should be awarded a full set of costs (including second counsel). But that should not be so for the supporting defendants. For the second supporting group an allowance should only be given for lead counsel for the hearing with no allowance for second counsel. For the same reasons the supporting defendants should only receive 50 per cent of the normal allowance in the Schedule for preparing written submissions. For any remaining defendant separately represented at the hearing of the application an allowance for one counsel appearing is all that would be appropriate.

• [42] There are other issues raised by the plaintiff, but I do not allow the other adjustments contained in the plaintiff’s annotated schedule on the basis that the above decisions deal fairly with the position in an overall sense. For the avoidance of doubt the percentage reduction for the wasted costs application applies after these adjustments are made.

²¹ See, for example, Prattley Enterprises Ltd v Vero Insurance New Zealand Limited [2017] NZHC 1599 at [44]–[45].

²² Houghton v Saunders [2019] NZHC 2567 at [31].

Step 2: Other stage 2 steps

• [43] The next set of issues relates to other claims under the Schedule relating to stage 2 other than interlocutory applications (dealt with above) and stage 2 hearing preparation (dealt with below) over which there are disputes.

(i) Inspection

• [44] There is a dispute about additional discovery given by members of the plaintiff group, and the defendants’ claims for inspection. A total of 41 lists of documents were provided by individual claimants. The first defendant claims that an allowance under 3B for each list and a similar approach is adopted by the second and third defendants. This involves an allowance of more than $70,000 for each set of defendants. The plaintiff points out that only 349 open documents were listed collectively in these lists, and that many of the lists included nil or very little open documents. The plaintiff proposes that each set of defendants should be entitled to a double allowance of costs on a 3B basis for the lists overall.

• [45] To make multiple claims for a step in the Schedule because separate affidavits of documents were served involves a distortion of the process contemplated by the Schedule, particularly when they are sought on a time band B basis for each individual claimant. The claim should be assessed for inspection of the plaintiff group’s discovery overall. I agree that the defendants’ claim is accordingly excessive. The plaintiff’s approach involves an allocation of three days for each set of defendants. An award under band C would involve six days for each set of defendants. I accept that even taken together six days for inspection for each defendant group is excessive. It is difficult to imagine that inspection would have taken more than one working week for these documents. In the circumstances I accept that the plaintiff’s proposal is reasonable and that each set of defendants should be allowed three days for inspecting these documents.

(ii) Global claims at band C

• [46] The plaintiff next objects to the defendants making global claims costs under time band C for the remaining steps contemplated by the Schedule. A number of

claims are made by the defendants on that basis with a total of over $128,000 sought by the first defendant, and over $117,000 for the second and third defendants.

• [47] I accept the plaintiff’s criticism that claims for steps in the proceedings on a blanket time band basis is inappropriate. This is not the approach required by rr 14.2(1)(c) and 14.5, as has been made clear by the Court of Appeal.²³

• [48] In the submissions for the plaintiff an alternative breakdown was provided with different allowances provided for the differing steps. This reduced the first defendant’s allowance to $37,711, and the second and third defendants’ allowance to

$37,695. In response the defendants argued that the original claims were justified, but did not seek to recalculate the claim with different calculations for each of the steps.

• [49] I have looked through the recalculated tables undertaken by the plaintiff to the extent that it is feasible to do so bearing in mind I was not the trial Judge. They appear to make an appropriate step by step assessment of the relevant time required. In the absence of claims made appropriately in accordance with the Schedule, or an alternative recalculation undertaking the same exercise, I accept the plaintiff’s recalculation.

Step 3: Trial preparation

• [50] The next step is to determine the allowance under the Schedule for preparing for the stage 2 hearing. That hearing never proceeded, but it is accepted that the defendants are entitled to the allowances under the Schedule for preparing for it.

• [51] There are three complications. First the defendants seek a higher allowance than contemplated by the steps in the Schedule on the basis that the allowance does not adequately cover the time required. Secondly the defendants seek the allowance on a multiple basis involving two main sets of defendants, and then a further allowance for two directors who were separately represented. Finally there is the complication arising from the fact that Dobson J made an order for “wasted” costs after the adjournment on the first day of the scheduled stage 2 hearing.

²³ Commissioner of Inland Revenue v Chesterfield Preschools Ltd [2010] NZCA 400, (2010) 24 NZTC 24, 500 at 161.

• [52] Under the Schedule for step 33 (preparation of briefs, lists of issues, authorities, and agreeing on common bundle), one day is given for the first to fifth hearing days, 0.75 per day for the sixth to tenth hearing days, and 0.5 per day from then on. Under step 33B (preparing for hearing) one day is given for the first to fifth hearing days, 0.75 per day for the sixth to tenth hearing days, and 0.5 per day from then on.

• [53] The first defendant has followed the Schedule, but it has made the claim twice under step 33B by claiming for “second counsel”. The first defendant also includes a single claim under step 33B in relation to the separate representation of Mr McGill and Ms Withers. This is not disputed. This takes the first defendant’s claim to a total of $229,450. The second and third defendants have adopted a similar approach adding not just a claim for second counsel, but also a claim for third counsel (thereby claiming the allowance under step 33B three times). This takes the second and third defendants’ claim to $238,385.

• [54] The plaintiff makes two key points. First he says that there should be no allowance for second let alone third counsel at all as this is not contemplated by the Schedule. Secondly, and in any event, the plaintiff says that the allowance for these steps should be reduced in an overall way to $110,000 for the first defendant, and

$100,000 to the second and third defendants to correspond to Dobson J’s wasted costs award.²⁴

• [55] I accept that there is no basis to claim for second, let alone third counsel in the Schedule. But doing so can be seen as simply a technique to increase the time allowances contemplated by the step in the Schedule when it does not adequately address the time required. Rule 14.6(3)(a) provides that the costs can be increased if “the time required by the party claiming costs would substantially exceed the time allocated”. It is not uncommon in complex commercial cases for the Court to allow claims higher than that provided for preparation steps in the Schedule. Earlier versions of the Schedule had an allowance for trial preparation at twice the amount of time

²⁴ Houghton v Saunders, above n 20, at [26].

occupied for the trial.²⁵ There is now a more complex equation, and there is the separate allowance under step 33B. Although some care needs to be taken in relation to changes to the Schedule it is notable that a number of cases involving complex commercial cases have allowed increased claims — in Sovereign Assurance Co Ltd v Commissioner of Inland Revenue the Court allowed 2.3 days per trial day; in Trustpower Ltd v Commissioner of Inland Revenue the Court allowed approximately two days per trial day, in Strathboss Kiwifruit Ltd v Attorney-General 1.6 days was allowed for each day of trial; and in Mainzeal Property and Construction Ltd (in liq) v Yan and Ors the Court allowed 2.5 days for each day of trial.²⁶

• [56] I accept there is justification in the defendants seeking an uplift under r 14.6(3)(a), and although the technique they have used to do so here by claiming for second, and indeed third counsel seems to be novel, the particular technique adopted is not decisive.

• [57] There is a further complication arising from the award that has already been made by the Court for “wasted” costs arising from the adjourned trial. Dobson J noted that the plaintiff should not be required to pay the costs of the defendants who had prepared to a “Rolls Royce” standard, and that in the present case he would be less inclined to take into account actual expenditure than he might in other cases.²⁷ He then held:²⁸

A further consideration is the extent to which costs incurred in preparing for a hearing that is then adjourned are genuinely wasted. That extent will vary depending on the scope and nature of factual issues, and the novelty of the legal issues to be determined. In this case, if indeed the stage two hearing proceeds in May 2020, then given the technical nature of the expert evidence and the range of individual circumstances of the claimants on which the defendants may wish to cross-examine them, I project that a substantial portion of the preparatory work will retain much of its utility for the adjourned hearing little more than six months later. Certainly there will be a need to refresh the work, but it is not a case in which the defendants can claim it is entirely wasted.

²⁵ That was the position until February 2009 – see Judicature (High Court Rules) Amendment Act 2008, s 8(1).

²⁶ Sovereign Assurance Co Ltd v Commissioner of Inland Revenue [2012] NZHC 3573 at [12]; Trustpower Ltd v Commissioner of Inland Revenue [2014] NZHC 3072 at [50]; Strathboss Kiwifruit Ltd v Attorney-General, above n 15, at [34]; Mainzeal Property and Construction Ltd (in liq) v Yan and Ors [2019] NZHC 1637 at [53]–[56].

²⁷ Houghton v Saunders, above n 20, at [22]–[23].

²⁸ At [24]–[26] (footnote omitted).

The extent of the on-going utility of preparations undertaken for the November 2019 hearing would need to be reconsidered if the adjourned fixture allocated for May 2020 does not proceed. That would arise as an incident of whatever decisions need to be made in the event that the May 2020 hearing does not proceed.

There can be no arithmetic formula in projecting the extent of wasted costs in this case. Having reviewed all the matters raised in light of my previous experience with the case, I consider the appropriate order for wasted costs is one in the sum of $110,000 for all of the first defendants. That sum is to be shared between the majority and the two directors who have elected to be separately represented, as counsel agree between themselves. I order that the second and third defendants are entitled to an award of $100,000 for wasted costs.

• [58] I do not understand Dobson J to have reached these amounts on the basis that they are purely “wasted” costs in the sense of being costs for legal expenditure that would need to be repeated.²⁹ Rather I understand it to be his assessment of a fair award for trial preparation at that stage bearing in mind all the circumstances. That is particularly reflected in his statement that the utility of the preparations would need to be reconsidered if the hearing did not proceed. I see the award already made to involve a substantial contribution to the entitlement under the Schedule.

• [59] I do not accept the plaintiff’s argument that the defendant should be limited to the awards that Dobson J made. Dobson J explicitly stated that the position might need to be considered if the adjourned trial did not proceed. And it is clearly appropriate to consider this allowance under the Schedule in the context of the overall costs claim. In doing so I am guided by the Schedule and awards in other cases.

• [60] But I do not accept the claims made by the defendants in all respects. Ultimately I accept the approach adopted by the first defendant of adding an allowance for second counsel is appropriate as a technique to fully assess the entitlement for trial preparation. It fairly covers the increased preparation involved in a complex commercial case, together with a contribution to the costs of the tasks that needed to be repeated as a consequence of the adjournment. I do not accept an allowance for third counsel is appropriate, however.

²⁹ Generally there was an unhelpful ambiguity in the use of the expression “wasted” costs. They can be wasted in the sense that they will need to be repeated, or they can be wasted in the sense they were incurred for a trial that never proceeded.

• [61] This means that the first defendant’s entitlement (including the allowance for the separate representation for Mr McGill and Ms Withers) is $229,450. From this needs to be deducted the award of $110,000 already made by the wasted costs order. For the second and third defendants the award should be $181,022.50, from which the

$100,000 already awarded should be deducted.

Step 4: Disbursements

• [62] Finally there are two claims for disbursements that are disputed.

(i) Compass Lexicon

• [63] First the defendants claim the fees of an expert economist, Professor Lehn of Compass Lexicon. Professor Lehn provided expertise of a particular kind (event study analysis) involving a particular speciality which identifies how particular events, such as a misrepresentation, would affect the value of listed securities.

• [64] The total claim is for US$482,000 which, when converted into New Zealand dollars involves $678,682.06. Mr Davy QC contends that this cost is excessive and disproportionate. The plaintiff has offered to pay a total of $200,000. Mr Davy points out that Dobson J discounted the claim for Professor Lehn’s colleague, Professor Cornell who gave evidence at stage 1, and did so by deducting the claim by 35 per cent.³⁰ He emphasised that Professor Lehn replaced Professor Cornell because Professor Cornell’s reputation had been called into question. In an affidavit Mr Gavigan compares the costs of the plaintiff’s own expert in the same field, Mr Greg Houston at approximately AUD$115,000. The fees of Mr Grant Graham were similar. In response the defendants point to a number of cases where the Court has accepted the cost of expensive experts.³¹ They also say that in Australian class actions of this kind American experts are inevitably called, that this is the cost of such experts, and they should be allowed in New Zealand.³²

³⁰ Houghton v Saunders, above n 4, at [104].

³¹ Todd Pohokura Ltd v Shell Exploration NZ Ltd CIV-2006-485-1600, 1 July 2011 ($935,812); Commerce Commission v NZ Bus Ltd (No 2) [2006] NZHC 1144; (2006) 3 NZCCLR 854 ($353,747); Auckland Waterfront Development Agency Ltd v Mobil Oil New Zealand Ltd [2015] NZHC 470 ($575,318).

³² TPT Petrol Pty Ltd v Myer Holdings [2019] FCA 1747; Money Max Int Pty Ltd v QBE Insurance Group Ltd [2018] FCA 1030; (2018) 358 ALR 382; Caason Investments Pty Ltd v Cao (No 2) [2018] FCA 527.

• [65] I agree that it would be excessive and disproportionate to allow the full amount of the defendants’ claim for this disbursement. It is striking that such a significant claim is made for the preparation of evidence that was never called. When reducing Professor Cornell’s claim by 35 per cent, Dobson J said:³³

Without interfering with the autonomy of parties in the choices they make to retain experts, parties cannot rely on the Court to endorse the reasonableness of choices made when it comes to recovering experts’ costs and where the matters addressed might be dealt with by a competent expert closer to home. The circumstances in which international experts are retained need to be assessed in the evidentiary context and the relative importance of opinion evidence to the matters in issue.

• [66] I accept that Professor Lehn had a particular expertise in event study analysis and that there are no New Zealand experts known to have this expertise. But a party cannot expect to instruct overseas experts having considerably higher charge out rates and then seek to recover them in New Zealand without a high degree of scrutiny. There is a need for proportionality in costs awards in New Zealand. In my view it would be disproportionate to allow a single expert’s fee to occupy such a dominating component of the overall costs claim.

• [67] On the other hand litigation of this kind is inevitably complex, and a party bringing a claim of this kind can be expected to be required to meet the costs of experts required to respond to such challenges, as has been the case in Australia. These fees were in fact incurred by the defendants. So I do not accept that the discount can be as significant as argued for by Mr Davy.

• [68] I am not in a position to make a comprehensive assessment of the value of Professor Lehn’s evidence as no hearing proceeded. I agree that his brief of evidence seems comparatively short given the amount charged for it. But brevity is to be encouraged, and it may be that a great deal of analytical work was required to create evidence that concisely addressed the issues. Nevertheless the amount charged is disproportionate particularly as the evidence was never given at a hearing. Bearing all of these factors in mind I adopt a similar approach to that adopted by Dobson J — that is that the claim for the fees of Compass Lexicon will be deducted by 45 per cent.

³³ Houghton v Saunders, above n 4, at [102].

It is higher than 35 per cent adopted by Dobson J given the size of the claim and the fact the evidence was not given.

(ii) Directors’ travel and accommodation

• [69] The last disbursement in dispute is the travel and accommodation costs of the defendant directors. Mr Davy argued that they cannot be recoverable under r 14.12(1)(a) as a disbursement because they are not an expense that would normally be charged separately from legal professional services in a solicitors bill of costs. In Strathboss Kiwifruit Ltd v Attorney-General, the High Court declined a claim for costs on a similar basis as “[t]he party would incur them rather than being charged them in a solicitors bill of costs”.³⁴

• [70] In awarding the defendants’ costs of stage 1 (prior to the required reconsideration) Dobson J held:³⁵

The directors persisted with this claim for reimbursement on the basis that they were sued in their individual capacities as directors. It followed that they were entitled to attend for the purposes of monitoring the evidence in the trial, and to contribute to the provision of instructions to their counsel.

I do not consider it reasonable to require that attendance at a trial away from their city of residence had to be at the directors’ own expense except for the days on which they were giving evidence, when it had significance for them as individuals. In the context of this case, the claim for their travel and accommodation expenses is allowable as a disbursement. The exception to that is the component, if any, of the amounts claimed that relate to alcoholic beverages.

• [71] I agree with this. I do not read r 14.12(1)(a) as requiring a disbursement to be one that would normally be included in a solicitors bill of costs. Rather it requires the disbursement to be incurred for the purpose of the proceeding, and that it be charged for separately from fees in a solicitors bill. It is a cost not normally subsumed with a solicitor’s fee. That charging could be directly from the supplier to the party. The identity of the invoice recipient is irrelevant. The real question is whether the costs was properly incurred for the purposes of the proceeding.

³⁴ Strathboss Kiwifruit Ltd v Attorney-General, above n 15, at [57].

³⁵ Houghton v Saunders, above n 4, at [87]–[88].

• [72] I accept it was here. For these reasons, and the reasons given by Dobson J, I allow the claim.

Extended liability

• [73] The final set of issues relate to the defendants’ claim for extended liability. This arises in two respects. First the defendants say there should be an uplift of the costs award because of the way that the litigation was conducted. Secondly they say that both JAFL and Mr Gavigan should be liable along with the plaintiff for the costs. There is also a related issue raised by the plaintiff who says that only JAFL and Mr Gavigan should be liable, and that he should not be.

Uplifted costs

• [74] The defendants seek an order of uplifted costs under r 14.6. They point to the plaintiff’s failure to provide security for costs, the ongoing failures to comply with many stage 2 directions, and to arguments advanced that lacked merit. They also point out that the defendants were granted a 50 per cent uplift on trial preparation costs when they were initially successful following the stage 1 hearing on the basis that the plaintiffs conduct contributed unnecessarily to the time and expense of the proceeding.³⁶ They accordingly seek a 50 per cent uplift here.

• [75] In response Ms Heine argued that the real reason for the defaults was the plaintiffs inability to obtain funding for stage 2, that this predicament was well known to the defendants, and that it was not credible to say that the plaintiff should have put the proceedings on hold until funding was available. She argued that it was the defendants who were seeking the proceedings be progressed notwithstanding this problem just as much as the plaintiff. In addition she argued that the defendants could not demonstrate that the plaintiff’s defaults had contributed to the costs incurred by the defendants as required by r 14.6(3)(b), let alone that it had done so “unnecessarily”.

• [76] I nevertheless accept Mr Olney’s argument for the defendants that an uplift is warranted in the circumstances of this case. The plaintiff repeatedly failed to meet the

³⁶ Houghton v Saunders, above n 4, at [76], [79] and [135].

directions that were required for the stage 2 hearing, including the requirement to provide security for costs. It may be that the ultimate reason why he failed to do so is that he was unable to secure funding. But the lack of funding was attributable to the fact that the plaintiff’s claims were not economic given the more limited liability finding that had been upheld by the Supreme Court. And in any event the reasons for the failures are not ultimately material. What matters is that the defendants were put to expense by a plaintiff who was unable to meet the Court directions for the progress of the proceeding, or provide the security for costs ordered, but who nevertheless continued to actively pursue the claim requiring the defendants to incur costs in preparing their defence.

• [77] In addition to the multiple failures to meet directions, I also note that the plaintiff advanced five appeals or applications for leave to appeal during stage 2, all of which were unsuccessful. In one way or another these were attempts to broaden the plaintiff’s claims beyond the liability finding made by the Supreme Court which had inherently limited the potential recovery.

• [78] The requirements of r 14.6(3)(b) are also met in this case. That is because the ultimate problem was the plaintiff did not have the resources to pursue the claim, yet the Court was continually advised that the plaintiff would be in a position to do so, and he pushed on with the claims. Had a more realistic approach been adopted, and the plaintiff only pursued the stage 2 hearing once the funding to do so and security were in place, then the defendants would not have been put to the expense they have been put to. I accept that it may well have been that the defendants would have opposed any application for an adjournment or a stay of the proceedings until such funding had been obtained. But this still would have been the appropriate approach, and one that would not have led to the defendants incurring the legal expenses that they have.

• [79] But I agree that the factors raised by the plaintiff and third parties are nevertheless relevant to the extent of the costs uplift. I accept that it would have been obvious to the defendants that there was difficulty with the plaintiff being able to fund stage 2. The defendants could themselves have sought a stay of the proceedings until the plaintiff had provided security for costs, and obtained funding for stage 2. That is

a conventional form of order with security for costs. So both sides have made tactical decisions concerning the pursuit of the litigation. This does not eliminate the basis for the defendants’ claim for an uplift, but it is reason why it should not be as high as sought.

• [80] In the circumstances I uphold the claim for an uplift, and determine that the uplift should be by 33 per cent. They should not be for all the steps involved in stage 2, however. The uplift should not apply to the application for the wasted costs award, or the sub-group evidence application, both of which have distinct features which justify different treatment for the reasons I have explained above. Neither does the uplift apply to the reassessed stage 1 hearing award.

Claims against JAFL and Mr Gavigan

• [81] The defendants seek orders that, in addition to the plaintiff, liability for costs should also arise for JAFL and Mr Gavigan.

• [82] It is well established that such orders can be made under the discretion contemplated by r 14.1. Such an award is unlikely to be made against parties who merely provide litigation funding and nothing more. It is particularly directed to a party who funds the litigation, has a close role in its conduct, and also seeks to benefit from it. In Dymocks Franchise Systems (NSW) Pty Ltd v Todd (No 2) the Privy Council said:³⁷

Although costs orders against non-parties are to be regarded as “exceptional”, exceptional in this context means no more than outside the ordinary run of cases where parties pursue or defend claims for their own benefit and at their own expense. The ultimate question in any such “exceptional” case is whether in all the circumstances it is just to make the order. It must be recognised that this is inevitably to some extent a fact-specific jurisdiction and that there will often be a number of different considerations in play, some militating in favour of an order, some against.

Generally speaking the discretion will not be exercised against “pure funders”, described ... as “those with no personal interest in the litigation, who do not stand to benefit from it, are not funding it as a matter of business, and in no way seek to control its course”. In their case the Court’s usual approach is to give priority to the public interest in the funded party getting access to justice

³⁷ Dymocks Franchise Systems (NSW) Pty Ltd v Todd (No 2) [2004] UKPC 39, [2005] 1 NZLR 145 at [25(1) and (2)].

over that of the successful unfunded party recovering his costs and so not having to bear the expense of vindicating his rights.

• [83] I apply that approach here although I note that these observations do not appear to be directed to professional litigation funders of the kind that have become well established in more recent times in New Zealand.

• [84] As Mr Cooper emphasised Dobson J has already made third party orders of this kind in this proceeding. In awarding stage 1 costs prior to the reconsideration he ordered that JAFL and Harbour Litigation Investment Fund LP (Harbour) be jointly and severally liable.³⁸ When dealing with stage 2 interlocutory costs he again ordered JAFL and Mr Gavigan be jointly and severally liable.³⁹ Finally he ordered that JAFL and Mr Gavigan be jointly and severally liable for the wasted costs award.⁴⁰

• [85] Mr Salmon accepted that JAFL should be jointly and severally liable. But he argued that personal liability for Mr Gavigan was not appropriate. JAFL was a corporate entity that undertook a role as litigation funder and it has a separate legal existence that the Court cannot ignore. It was routine for litigation funding to be provided through such a special purpose entities. However a finding that Mr Gavigan should be personally liable would involve a significant, and potentially dramatic conclusion in the context of litigation funding in New Zealand which could have an inappropriately chilling impact on that funding. He also emphasised the factor (already addressed above) that the defendants proceeded with eyes open and had themselves made an election that the proceedings should be continued rather than themselves seeking a stay. It could not be appropriate to require Mr Gavigan to face personal liability in those circumstances.

• [86] I do not accept Mr Cooper’s argument that an issue estoppel arises from Dobson J’s earlier findings that Mr Gavigan is personally liable. The award against third parties is discretionary in nature. The Court previously made particular findings in the context of the particular matters that the Court was then dealing with. Whether circumstances arise in relation to the application now made needs to be assessed

³⁸ Houghton v Saunders, above n 4, at [20], [25] and [27]–[28].

³⁹ Houghton v Saunders, above n 22, at [50]–[52].

⁴⁰ Houghton v Saunders, above n 20, at [40].

afresh. But I accept the reasons adopted by Dobson J are persuasive when considering the application now made by the defendants. And here I accept for a series of reasons that are consistent with those already found by Dobson J that JAFL and Mr Gavigan should both be liable in addition to the plaintiff for the costs award.

• [87] First, it is apparent that Mr Gavigan was the driving force behind the pursuit of the claims at stage 2. His role was not limited to that of a litigation funder of the kind contemplated by the Privy Council in Dymocks. Rather he was the person in effective control of the pursuit of the litigation.

• [88] Second, it is not correct to categorise either JAFL or Mr Gavigan as litigation funders. The contractual arrangements they entered with the plaintiff may well have adopted a conventional litigation funding structure. But neither JAFL or Mr Gavigan personally provided significant litigation funding. It is more accurate to identify Mr Gavigan’s role as a broker and promoter of the pursuit of the claims, with JAFL acting as his vehicle. The real funding was to come from other sources — for example at stage 1 it came from Harbour.

• [89] It is also apparent that when he played this role Mr Gavigan was in a position to benefit financially if the claims succeeded. Indeed given the contractual arrangements JAFL would take ahead of the plaintiffs themselves. Moreover the more limited potential liability arising as a consequence of the Supreme Court findings would mean that the plaintiffs themselves were highly unlikely to ever see any damages, with any damages awarded going first to the costs of the litigation and to JAFL, and accordingly to Mr Gavigan.

• [90] In that context I reject Mr Salmon’s argument that finding Mr Gavigan personally liable would adversely impact on litigation funding in New Zealand. Mr Gavigan has not performed a traditional litigation funding role, let alone the role of a director/owner of a litigation funder. Established litigation funders use well recognised techniques that reduce the need for concern by their directors that they might become personally liable. Foremost among them is the provision of security for costs. No such security was ever posted for stage 2. I see the role undertaken by Mr Gavigan to be different from that provided by litigation funders, and consistent

with the kind of role that can lead to personal liability of the kind described by the Privy Council in Dymocks.

• [91] Finally, and relatedly to the first point, it is apparent that during the course of the increasingly fraught circumstances of stage 2, with the plaintiff’s repeated failures to meet Court directions, provide security for costs, or find funding, Mr Gavigan had an increasingly direct role in interacting with the Court about the pursuit of the litigation. This included filing memoranda directly with the Court, and providing information and even assurances as to the likelihood of funding being made available. He was not a background figure. So not only was he in control of the litigation in a realistic sense, and the primary beneficiary should it have been successful, but he effectively adopted that role in the face of the Court.

• [92] For these reasons I have little hesitation in concluding that both JAFL and Mr Gavigan should be jointly and severally liable with the plaintiff for the costs award.

Mr Houghton’s request to avoid liability

• [93] Finally the plaintiff contends that he should not be liable, and that only JAFL and Mr Gavigan should be.

• [94] Ms Heine argued that costs are inherently discretionary and the Court should exercise its discretion to order that the costs should be payable solely by the non- parties. Mr Houghton explains in his affidavit he had very little involvement after the Supreme Court decision, that his financial interest was extremely modest, his original investment in Feltex was only $20,000, and that it would be unfair for him to face liability in those circumstances.

• [95] The defendants, JAFL and Mr Gavigan all oppose Mr Houghton’s application, and in any event I see no basis for it. I can understand why Mr Houghton may well claim that Mr Gavigan was really in control of the litigation, and that his personal position became increasingly irrelevant. But that is not a reason why a defendant should be deprived of their right to costs against the party who has actually pursued the proceedings. The plaintiff must be taken to understand the costs implications of his role. Rule 14.14 applies to make him liable, even when JAFL and Mr Gavigan are

also liable. The matters raised by Mr Houghton are matters between Mr Houghton and JAFL and Mr Gavigan. They do not affect the position of the defendants.

Conclusion

• [96] By way of summary, and for the reasons outlined above, I have reached the following key conclusions:

(a) The costs of stage 1 are to be awarded on the basis that the defendants were the successful party, but their costs award is to be reduced by one third to reflect the plaintiff’s partial success.

(b) The defendants are entitled to the costs of the stage 2 interlocutory applications including the sub-group application. For the wasted costs application the costs are to be reduced by 25 per cent. For all interlocutory applications the costs allowed will involve one full set of costs for the defendants taking the leading role (but not including third counsel) with the second set of defendants being allowed only one counsel and 50 percent of the allowance for preparing written submissions. The directors who were separately represented at the hearing of the applications are allowed the cost of one counsel appearing.

(c) The defendants’ claims for other stage 2 steps claimed under the Schedule on a global band C basis are disallowed, and the plaintiff’s recalculation of those steps involving different time band calculations are awarded in substitution.

(d) The defendants are permitted to calculate trial preparation costs by including allowance under step 33B for second counsel (and for Mr McGill and Ms Withers a further single allowance under step 33B). An allowance for third counsel is not permitted. The amounts awarded by Dobson J as wasted costs are then to be deducted from the amounts so calculated.
(e) The claimed disbursement for Professor Lehn of Compass Lexicon is to be deducted by 45 per cent. The claims for travel and accommodation disbursements for the directors are allowed.

(f) The defendants’ claim for an uplift under r 14.6 is granted. The uplift will be 33 per cent, and will exclude the particular steps that I have specified.

(g) The application that JAFL and Mr Gavigan be jointly and severally liable with the plaintiff is granted. The application by the plaintiff that only JAFL and Mr Gavigan be liable is declined.

• [97] The parties also advanced submissions in terms of an award of costs for this application. Given the mixed success of the parties in the arguments before me the costs of this application shall lie where they fall.

• [98] I am conscious that my involvement with this proceeding arises only at the very end, and that the proceeding has had a rich history and a degree of complexity. In those circumstances, but without encouragement, I reserve leave to apply by the filing of memoranda to address any errors, omissions or misunderstandings.

Cooke J

Solicitors:

Antony Hamel Lawyer, Dunedin for the Plaintiff Gilbert Walker, Auckland for the First Defendants

Russell McVeagh, Wellington for the Second and Third Defendants TWA Legal, Auckland for the Non-Parties