BRICKHILL CAPITAL (NZ) LTD v DEFONE GLOBAL INVESTMENTS LTD [2017] NZHC 383

BRICKHILL CAPITAL (NZ) LTD v DEFONE GLOBAL INVESTMENTS LTD [2017] NZHC 383 [9 March2017]IN THE HIGH COURT OF NEW ZEALANDAUCKLAND REGISTRYCIV-2016-404-003300[2017] NZHC 383BETWEEN BRICKHILL CAPITAL (NZ) LIMITEDPlaintiffAND DEFONE GLOBAL INVESTMENTSLIMITEDDefendantHearing: 7 March 2017Counsel: P W David QC and O E Jaques for the PlaintiffNo Appearance of, or for the DefendantJudgment: 9 March 2017JUDGMENT OF EDWARDS JThis judgment was delivered by Justice Edwardson 9 March 2017 at 12.00 pm, pursuant tor 11.5 of the High Court RulesRegistrar/Deputy RegistrarDate:Counsel: P W David QC, AucklandSolicitors: Russell McVeagh, WellingtonIntroduction[1] The plaintiff applies for summary judgment against the defendant for thefollowing amounts:(a) US $6,866,709;(b) Contractual interest of US $36,498.50;(c) Costs of NZD $124,235.65; and(d) Disbursements of NZD $14,729.73.[2] The defendant is an offshore company with its registered office in theSeychelles. It has not taken any steps in the proceeding.The claim[3] The plaintiff operates a leveraged derivative foreign currency trading platform.The defendant had a foreign currency trading account with the plaintiff.[4] The Trades are governed by the plaintiff's Terms of Business and theClient Service Agreement. Clause 22.8 of the Terms of Business provides that theclient "shall indemnify the [plaintiff] against any loss, liability and cost the [plaintiff]may suffer or incur as a result of [defendant's] breach of any material provision ofthis Agreement". Clause 13 of the Client Service Agreement includes a furtherindemnity clause whereby the defendant "agrees to indemnify [the plaintiff] againstany and all claims, damages, costs (including those stemming from regulators)involving the [defendant's] activities including account deficits, losses and expenses(including attorney's fees) ".[5] Clause 5.5 of the Client Service Agreement provides for interest on overdueaccounts and any other fees and expenses not paid "at the rate of TWO percentagepoints (2%) per month above the base rate provided by Barclays London or themaximum amount allowed by law, calculated from the due date to the date of receiptof the overdue amount by [the plaintiff] (after as well as before judgment)compounded and payable at intervals selected by [the plaintiff] at its discretion".[6] Between 29 September and 6 October 2016, the defendant placed a number ofGBP:USD buy positions (Trades) through its account with the plaintiff. As a result ofsignificant downward movement of the GBP:USD cross-rate on 7 October 2016(reported by media agencies as the pound sterling "flash crash"), the Trades wereclosed out leaving the defendant indebted to the plaintiff in the sum of US $6,866,709.That sum comprises an outstanding debt of US $6,404,238, and an indemnity claim ofUS $462,471.[7] The plaintiff made formal demand for payment on 6 December 2016. Thedefendant has not responded to the demand, or raised any other reason for non-payment.[8] On 12 January 2017, copies of the notice of proceeding, statement of claim,initial disclosure, and application for summary judgment, were served on thedefendant. On 25 January 2017, a copy of the affidavit of Mr Guoxian in support ofthe application for summary judgment was also served on the defendant. Affidavitsof service have been filed. There was no appearance for the defendant when theapplication was called in the summary judgment list on 7 March 2017.Decision[9] I am satisfied that judgment should be entered against the defendant for thesum of US $6,866,709 (comprising the outstanding debt and indemnity sum as referredto above) plus contractual interest calculated to the date of judgment ofUS $36,498.50. Judgment for those sums is entered below in accordance with thedraft form of order filed by the plaintiff's counsel.[10] There remains an issue as to costs. Costs in the sum of NZD $124,235.65, anddisbursements in the sum of NZD $14,729.73 are sought on an indemnity basispursuant to the clauses in the Terms of Business and Client Service Agreement.[11] Where there is a contractual right to indemnity costs the question for the Courtis: "for the necessary steps, are the costs claimed reasonable in amount?"1 The Courtmust make an objective assessment of the following matters:2(a) What tasks attract a costs indemnity on a proper construction of thecontract;(b) Whether the tasks undertaken were those contemplated in thecontract;(c) Whether the steps undertaken were reasonably necessary in pursuanceof those tasks;(d) Whether the rate at which the steps were charged was reasonablehaving regard to the principles normally applicable to solicitor-clientcosts; and(e) Whether any other principles drawn from the general law of contractwould in whole or in part deny the claimant its prima facie right tojudgment.[12] Applying those principles to the present case, I am satisfied that the indemnityclauses of the contractual documents which govern the Trades are expressed in thewidest of terms. The tasks involved in preparing proceedings, including the legal feesand disbursements incurred, fall within the ambit of those indemnity clauses.[13] The steps taken to prepare proceedings were also reasonably necessary in thecircumstances. I accept that the subject matter of the claim was complex. Theassessment of loss was not a straightforward exercise. The fact that the defendantentity was resident overseas, and the director of the plaintiff company also residedoverseas added to the complexity. As a result, significantly more time was required inrelation to each step in the proceeding than would otherwise be required in astraightforward claim.1 Black v ASB Bank Ltd [2012] NZCA 384 at [77].2 At [80].[14] However, on the basis of the affidavit evidence filed by both the New Zealandand Australian solicitors, there would appear to be an overlap in the steps taken byeach of those firms. That overlap is evident in the giving and taking of initialinstructions, the preparation of pleadings, and the preparation of the affidavit insupport of the application.[15] Despite its international flavour, I do not consider the claim required theinvolvement of two sets of solicitors located in both Australia and New Zealand.Although the steps taken by each individual set of solicitors would appear reasonableon their own, I am not persuaded that the duplication of certain steps was reasonablynecessary in the circumstances.[16] The affidavit provided by the Australian solicitors provides a breakdown of thecosts incurred. Making an allowance for costs incurred in briefing lawyers in theSeychelles and Singapore (which is appropriate), there is approximately AUD $35,000incurred in relation to steps which appear to have been duplicated between the twofirms. I do not consider that cost to have been reasonably incurred in thecircumstances. Taking a robust approach to the assessment of reasonableness,3 andhaving regard to prevailing exchange rates, I consider that only costs in the sum ofNZD $85,000 can be considered reasonably incurred and accordingly may be claimedby way of indemnity.[17] On its face, the sum of NZD $85,000 would still appear high for an undefendedsummary judgment application. However, counsel inform me that the scale costscalculated on a 3C basis for an undefended summary judgment application wouldamount to NZD $51,000. That suggests that actual costs in the sum of NZD $85,000is not completely out of range. In any respect, there is no evidence that costs in thesum of NZD $85,000 were not properly incurred. To exercise my judicial discretionto award a lesser sum would "erode the contractual protection the indemnity wasintended to provide".43 Above n 1 at [81].4 Ibid.[18] I therefore award costs in the sum of NZD $85,000, and disbursements in thesum of NZD $14,729.73.Result[19] I accordingly enter Judgment for the plaintiff against the defendant as follows:(a) Judgment on the plaintiff's first claim against the defendant for thepayment of the outstanding debt in the sum of US $6,404,238.(b) Judgment on the plaintiff's second claim against the defendant forpayment of the indemnity sum of US $462,471.(c) Interest on both sums being US $36,498.50.(d) The defendant is to pay the plaintiff's costs of and incidental to thisapplication of NZD $85,000 together with disbursements ofNZD $14,729.73.Edwards J