BGT DEVELOPMENTS LIMITED v HEWSON [2020] NZHC 3291

BGT DEVELOPMENTS LIMITED v HEWSON [2020] NZHC 3291 [14 December 2020]IN THE HIGH COURT OF NEW ZEALANDTAURANGA REGISTRYI TE KŌTI MATUA O AOTEAROATAURANGA MOANA ROHECIV-2020-470-97[2020] NZHC 3291BETWEEN BGT DEVELOPMENTS LIMITEDApplicantAND STEVEN PAUL HEWSON, VICTORIAHEWSON AND FL TRUSTEES 2013LIMITED AS TRUSTEES OF THEHEWSON FAMILY TRUSTFirst RespondentFENTON McFADDENSecond RespondentHearing: On the papersCounsel: D Fraundorfer and R Steens for ApplicantN Smith for Second RespondentJudgment: 14 December 2020COSTS JUDGMENT OF WHATA JThis judgment was delivered by me on 14 December 2020 at 3.00 pm,pursuant to Rule 11.5 of the High Court Rules.Registrar/Deputy RegistrarDate: .Solicitors: Holland Beckett Law, TaurangaIntroduction[1] The second respondent (Fenton McFadden) responded to a judgment of thisCourt in respect of freezing orders over proceeds of sale in the hands of the firstrespondent. In particular, they:(a) Provided a memorandum to the Court setting out its position in respectof the proceeds of sale, noting that they do not hold them, or havecontrol of them, that it was not aware of the transaction underpinningthe freezing orders, that the first and second named first respondents nolonger resided in New Zealand and that they are authorised to acceptservice for the first respondents.(b) Attended a telephone conference under urgency, at which theyconfirmed they did not have instructions to disclose the relevant bankaccount details.[2] Fenton McFadden now seeks an award of non-party costs pursuant tor 14.6(4)(d) of the High Court Rules 2016. It submits r 14.6(4)(d) applies becausethey are not a party to the primary proceeding and have acted reasonably.Fenton McFadden's submission[3] Citing various authority, Fenton McFadden submits that, as a "non-party", it isentitled to its costs for the above attendances.1 It says that their role is akin to that ofa non-party subject to a discovery order.[4] Counsel's actual costs were $2,774, plus GST in relation to the urgentattendances and appearances are reasonable. Fenton McFadden submits this wasmodest, because the standard scale 2B award on equivalent items totals $2,390 (morethan two-thirds of actual costs). They further note the second respondent partnershiphas not sought reimbursement for incurred time and costs in responding to andcomplying with the plaintiff's application and orders.1 Jindal v OM Financial Ltd [2020] NZHC 2444; Hemmingson v Rod [2015] NZHC 2021.[5] Costs on this application for costs are also sought on the basis that the plaintiffhas failed to provide a substantive response to the second respondent's numerousefforts to resolve costs on a discounted basis.2[6] Counsel's actual costs of $1,738, plus GST in relation to the variousattendances and subsequent preparation of this costs application, are said to bereasonable because a standard scale 2B award on the equivalent item totals $956 –55 per cent of the actual costs.Applicant's submission[7] The applicant, BGT, accepts there is authority for "true" non or third partiesbeing compensated for costs, but contends there is good reason3 to depart from thatapproach because Fenton McFadden:(a) is not a true "third party" or non-party with no involvement, save forthe interlocutory application for freezing orders, because theirparticipation would have been and is required in the proceedings and/orapplication in any event, including in their capacity as a trusteecompany;(b) has taken minimal steps4; and(c) has not acted reasonably and/or their costs are unreasonable,particularly where they are unlikely to be out of pocket for those costsregardless of the orders made.[8] BGT further submits:(a) it is not yet clear whether Fenton McFadden played a role in thewrongdoing alleged by BGT. That is, Fenton McFadden could have a2 Citing Body Corporate Administration Ltd v Mehta [2013] NZHC 213 at [85].3 The applicant also relies Jindal v OM Financial Ltd [2020] NZHC 2444, which cited ClearCommunications Ltd v Telecom Corporation of NZ Ltd (1994) 8 PRNZ 200 (HC) as authority.4 Citing Goodler v The Earthquake Commission [2020] NZHC 63.personal interest in the matter, and a personal interest was relevant tocosts in Jerad v Auckland Council.5(b) BGT challenges Fenton McFadden's characterisation of its own role asakin to that of a non-party to discovery. BGT emphasises that here,Fenton McFadden was not required to provide any documents otherthan confirmation of the transfer of funds. No evidence was preparedor filed. The role was more like that of an agent or representative ofthe Trust (who is a party), rather than a non-party.(c) Fenton McFadden would have been served on a Pickwick basis (andtheir participation required) because of their role as the Trust's lawyers– irrespective of being named as party to the application.(d) The "agent" relationship (where Fenton McFadden are involvedbecause of their role as the Trust's lawyers) was relevant to this Courton costs in FM Custodians Ltd v Hannan, where a non-party (areceiver) was not entitled to costs because its involvement was those ofan agent of a true party (FM Custodians).6Costs unreasonable[9] BGT submits that if the Court is minded to award costs, scale costs areappropriate because opposing counsel has not provided enough of a breakdown of anyreal assessment of reasonableness of indemnity costs (such as details of hoursundertaken).7[10] The applicant also submits Fenton McFadden did not act reasonably in allaspects. In particular, the applicant submits BGT should not be responsible for costsrelating to the second teleconference. The applicant notes BGT was required to seekdirections with respect to disclosure of the bank account number where funds were5 Jerad v Auckland Council [2015] NZHC 3357 at [14]. The cited excerpt states, "However, I donot consider that indemnity costs are appropriate in this case. Mr McCartney was anxious toprotect his reputation and had a personal interest in filing the affidavit."6 FM Custodians Ltd v Hannan [2017] NZHC 3286.7 Citing Bei v Wang [2020] NZHC 897 at [78].transferred to. BGT further submits Fenton McFadden "will not actually be out ofpocket if costs orders are not made" because "It is likely that these costs will be passedon to its client, the Trust, or alternatively as a professional fee relating to FL Trustees".[11] Fenton McFadden in reply:(a) provides an account with corresponding time records;(b) replies to the BGT's speculation the second respondent may be joinedto the claim in the future with the submission the claim is "entirelyunsupported" and that no weight should be placed on it;(c) submits the applicant has sought to blur the lines between FentonMcFadden and the first respondents; and(d) in relation to FL Trustees Limited, submits it also had no knowledge ofthe existence of the Heads of Agreement and may well require separaterepresentation to Mr and Mrs Hewson, but that, either way, it shouldhave no bearing on the second respondent's position.Assessment[12] Fenton McFadden responded to the urgent request of the Court as a non-partyto the underlying dispute. They are therefore entitled to their costs on their attendancesin this regard. Further, while the costs may be recoverable from the first respondent,Fenton McFadden should not be put at risk of not recovering their costs for theseattendances. But given the multiple roles performed by them, including as advisor tothe first respondent in respect of the proceedings, and as trustees, some care is neededto ascertain those costs that were incurred as a non-party. In this regard, I considerthat the costs incurred in advising the Court of its position in respect of the proceeds(including in terms of the substance of the dispute) are clearly non-party costs.However, costs incurred in respect of communicating with and taking instructionsfrom the first respondent are not costs incurred as a non-party. Those costs must berecovered from the first respondent.[13] As I am unable to ascertain the proper division of the costs incurred as notedabove, and if the division cannot be agreed, I direct that Fenton McFadden file amemorandum clearly setting out that division. I will then make a final order as to costs.[14] I make no award for costs on the application for costs. The application suffersfrom evident overreach for the reasons just noted.