HELILOGGING LIMITED (in receivership and liquidation) v CIVIL AVIATION AUTHORITY OF NEW ZEALAND [2021] NZHC 1676

HELILOGGING LIMITED (in receivership and liquidation) v CIVIL AVIATION AUTHORITY OFNEW ZEALAND [2021] NZHC 1676 [6 July 2021]IN THE HIGH COURT OF NEW ZEALANDWELLINGTON REGISTRYI TE KŌTI MATUA O AOTEAROATE WHANGANUI-A-TARA ROHECIV-2014-485-11204[2021] NZHC 1676BETWEEN HELILOGGING LIMITED (in receivershipand liquidation)First PlaintiffMARK WAYNE FORD (as trustee of theWESSEX TRUST)Second PlaintiffAND M W FORDThird PlaintiffAND CIVIL AVIATION AUTHORITY OFNEW ZEALANDDefendantHearing: On the papersCounsel: P J Dale QC for PlaintiffsL J Taylor QC and G M Richards for DefendantJudgment: 6 July 2021JUDGMENT OF COOKE J(Costs)[1] Following a trial of little over seven weeks I dismissed the plaintiffs' claims ofmisfeasance in a public office and deceit.1 Following a three-day hearing in the Courtof Appeal, the plaintiffs' appeal was dismissed.2 The Supreme Court declined leaveto appeal.31 Helilogging Ltd (in rec and liq) v Civil Aviation Authority of New Zealand [2019] NZHC 3305.2 Helilogging Ltd (in rec and liq) v Civil Aviation Authority of New Zealand [2021] NZCA 21.3 Helilogging Ltd (in rec and liq) v Civil Aviation Authority of New Zealand [2021] NZSC 49.[2] The defendant now seek costs in this Court. There are substantial areas ofagreement between the parties on the award of costs to the defendant, including thatthis was a category 3 case, but there are also significant differences. The defendanthas set out their position by counsels' memorandum dated 9 June 2021. This has beenresponded to by counsel for the plaintiffs by memorandum dated 21 June 2021, and areply memorandum has been provided by counsel for the defendant of the same date.Claims for time band C[3] Some of the steps in the schedule are claimed by the defendant in time band Crather than time band B and the plaintiffs dispute some of these.[4] As a general point this was a complex proceeding involving serious allegationsof misfeasance in a public office and deceit. Some of the plaintiffs' allegations ofwrongdoing were complicated, and the case overall involved a detailed forensicexercise. In that context it is not surprising that some of the steps in the schedule areclaimed under time band C. But it is important to address the individual steps to decidewhether the claim is appropriate.Filing of statement of defence (step 2)[5] The defendant seeks this step in band C involving six days. This is apparentlydisputed by the plaintiff but was not addressed in the memorandum filed for theplaintiffs.[6] This is an appropriate claim. The suggestion that the defendant's defence to acomplex proceeding involving allegations of misfeasance and deceit could be properlyattended to within the two days contemplated by band B is not realistic. It is to beremembered that this is a time allowance not simply for preparing and then filing thestatement of defence, but for researching the allegations made by the plaintiffs andpreparing a defence. This allowance is justified.Amended statements of defence[7] The defendant's claims for amended statements of defence in response toamended statements of claim in May 2019 and September 2019. Again the claim isunder time band C. This is apparently disputed but not addressed in the memorandumfor the plaintiffs.[8] Again I accept that the allocations are appropriate. They involve two dayseach, but the allegations advanced by the plaintiffs were changing, and needed to befully investigated by the defendant for the purposes of filing the amended defences.These steps are allowed.Interrogatories[9] The defendant seeks an allowance under time band C of four days (rather thanone day under category B) for answering 77 questions by way of interrogatories understep 17. The defendant says that they involved a number of questions that requiredcareful investigation. The plaintiffs accept that the allowance should be greater thanfor band B, but say that only two days should be allowed.[10] Given that it is accepted that the allowance under time band B is not adequateI allow the allowance in band C. It may be that four days is on the high side, but costsshould not descend into a very detailed assessment of time in this way. The reason forhaving three time bands in the schedule is to avoid such an exercise. Time band C isappropriate because, in the words of the rule, a "comparatively large amount of time"rather than a "normal amount of time" is considered reasonable for the particular step.4Any departures are then regulated by rr 14.6(3)(a) and 14.7(a), and they do not applyhere. The claim is accordingly allowed.Split trial application[11] The defendant seeks two days under band C for filing the interlocutoryapplication for a split trial. That involves 2 days rather than the normal 0.6 days. Thatis apparently disputed but not addressed in the memorandum for the plaintiffs. I againaccept that this is appropriate for the reasons addressed above. This was a complexapplication as working out whether and how a trial would be split was difficult, and it4 High Court Rules 2016, r 14.5(2)(c).was not agreed. It required more than the normal amount of time. Accordingly theclaim is allowed.Case management[12] In the first memorandum of counsel for the defendant, three case managementconferences are identified as requiring a band C allocation. That has not beenresponded to in counsel for the plaintiffs' memorandum and I accept the allocationsare appropriate.Discovery[13] The defendant not only seeks allowances under time band C for discovery, butit also seeks an uplift under r 14.6(3)(a). Counsel for the plaintiffs appears to suggestthere should be a reduction for step 20 (lists) and step 21 (inspection) to only five dayseach.[14] There is agreement that the discovery exercise in this case was extensive. Theallegations traversed factual and technical issues from at least 2002–2005, andprobably earlier. The events were some 11 years ago. This involved retrievingarchived material and approaching former Civil Aviation Authority (CAA) employees.For that reason I accept that "a comparatively large amount of time for the particularstep is considered reasonable" under r 14.5(2) particularly in relation to listing andproviding the defendant's discovery, but also inspecting the plaintiffs' documents. Iaccordingly reject the argument by counsel for the plaintiffs that the band C allocationsare inappropriate.[15] But for similar reasons I do not accept the argument that there should be anuplift under r 14.6(3)(a). I do not accept that the time of the party claiming costs"substantially exceed the time allocated under band C". The allocated number of daysof seven and six days respectively is substantial. It is the equivalent of a person on thedaily recovery rate working nearly three working weeks on discovery and inspection,and it could also be expected that solicitors or legal executives with lower charge outrates would be attending to this work. Accordingly I allow only seven and six daysfor these steps.Disbursements: Fees charged by witnesses[16] Two of the witnesses called by the defendant charged for their attendances.The first is Mr Bernie Lewis who was an external consultant retained by CAA at thetime of the decisions in question who gave evidence about the advice he provided. Hisfees were $13,660.40. The second is Mr John Fogden, who was an employee of CAAat the time who is now a self-employed aviation safety consultant who gave evidenceof the role he performed, and his advice. His fees were $14,431.25.[17] Disbursements are allowed under r 14.12. This requires the Court to approvea class of disbursement for the purposes of the proceeding under r 14.12(2)(a), andthat the particular claim be specific to the conduct of the proceeding, reasonablynecessary for it, and reasonable in amount.[18] Mr Lewis' position is not addressed in the memorandum of counsel for theplaintiffs. The fees of experts are a well-recognised class of disbursement. Strictlyspeaking Mr Lewis was not giving expert evidence at trial, but evidence of fact of theexpert advice that he gave at the time. But that distinction is immaterial, and I acceptthis is an appropriate category of expenditure, that it was necessary for the conduct ofthe proceeding, and it was reasonable an amount.[19] Mr Fogden is in a different position because he was giving evidence of fact,and he was an employee of CAA and not an external expert at the time. I agree withthe approach taken by Andrews J in Trustpower Ltd v Commissioner of Inland Revenuethat this expenditure can be allowed, however, and for the reasons she gave.5 As amatter of principle if a claim or defence advanced by a party has put the opposingparty to the cost of retaining a person to give evidence, and if it was reasonable for theperson to charge for their time, then as a matter of principle reasonable costs shouldbe able to be recovered if they are reasonable. Mr Fogden was no longer an employeeof CAA and he operates as a consultant who charges for his time. It was reasonablefor him to charge for his time here. The nature of the plaintiffs' allegations requiredthe defendant to call him as a witness, and to give evidence. The evidence wastechnical in nature and included matters of opinion that he gave at the time. It was5 Trustpower Ltd v Commissioner of Inland Revenue [2014] NZHC 3072 at [69]–[71] and [80]evidence in the area in which he is now a consultant. It needed to be carefullyprepared. His attendances were necessary, and his charges reasonable. They shouldbe allowed.[20] The memorandum of counsel for the plaintiffs objects to the claim on the basisthat the plaintiffs should not be liable for Mr Fogden taking legal advice regarding hisevidence. Counsel for the defendant have confirmed in the response that that is notwhat the claim relates to. So that objection seems to be based on a misunderstanding.Third counsel[21] The defendant seeks recovery for third counsel appearing at the trial in 2019.This is not accepted by the plaintiffs who point out that third counsel did not take anactive role in the proceedings, and that the defendant would also have benefited fromthe assistance of in-house counsel.[22] Step 35 of Schedule 3 refers to "second and subsequent counsel" if allowed bythe Court. As the defendants acknowledge the allowance for third counsel is unusualand needs to be justified by the nature of the proceeding. Such allowances can bemade, however. For example it was permitted in Commerce Commission v Bay ofPlenty Electricity Ltd on the basis that it was "quite appropriate given the nature of theproceeding and the legal and factual complexity".6[23] I accept that such an allowance is appropriate here. This was a long andcomplex case, and it justified two counsel in addition to senior counsel in order for itto be appropriately managed. But it seems to me that it needs to be recognised thatthird counsel will be exercising a more junior role unlikely to involve active advocacy,and likely involving a more junior solicitor. For that reason, rather than the awardbeing 50 per cent of senior counsel the award should be 25 per cent. That is consistentwith the general approach of only allowing second counsel half the allowance of leadcounsel. I do not suggest that it may not be appropriate to allow third counsel at thehigher rate in other situations. But in the present case the third counsel had a more6 Commerce Commission v Bay of Plenty Electricity Ltd HC Wellington CIV-2001-485-917,4 December 2008 at [46].minor role. An award of 25 per cent of senior counsel for attendance at the trial in2019 is accordingly allowed.Claims uplift and reduction[24] Both the defendant and the plaintiffs advance arguments for an uplift in thecosts award under r 14.6, and a reduction in the award under r 14.7 respectively.Uplift[25] The defendant seeks an uplift under r 14.6(3)(b)(ii) and (iii) on the basis thatthe plaintiffs contributed unnecessarily to the time and expense of the proceeding bypursuing unnecessary arguments that lacked merit, and failing to admit facts. This isbased on the proposition that the plaintiffs made and pursued wide ranging andunfocused allegations of fraud and dishonesty which were all unsuccessful. Thisincluded allegations:(a) in relation to the 9 November 2004 memorandum which I subsequentlyheld was only a draft memorandum;(b) in relation to a suggested admission to a reporter for the Close Uptelevision programme;(c) that were complicated and convoluted in relation to the so calledvibration flight and Mr Lewis' email of 14 December 2005;(d) that were unsubstantiated in relation to amendments made to Mr Lewis'letter;(e) that involved allegations of vicarious liability in relation to Mr Lewis;(f) and that generally involved an excessive volume of evidence directedto peripheral issues that was repetitive, duplicated other evidence, andwhich was directed to the wrong questions.[26] The defendant says that the allegations generally lack proper focus andconsequently led to a greater volume of evidence than necessary to fairly address thecase.[27] In response the plaintiffs say that the Court accepted that the plaintiffs had beenunfairly treated, that there were matters emerging from the evidence for which therewas not adequate explanation, that they had properly investigated all matters as far asthey could before trial, and ultimately that this was not a hopeless case that wasmisconceived or based on unreasonable arguments.[28] I have sympathy for the defendant's argument in this respect. Much of theplaintiffs' case appeared to be misconceived and at times based on quite unusualallegations of fraud that suggested a lack of objectivity in the formulation of theallegations. But I am not prepared to uplift costs on this basis. As the plaintiffs say,there was a basis to contend that the decisions involved unfair decision-making.Whilst the plaintiffs saw dishonesty when there was none, it is not unusual for thoseadversely affected by unfair decision-making to lose objectivity and perspective. Ihave the impression that the plaintiffs' advisors also came to believe the allegationsthat were being advanced. Some care needs to be exercised when applying the upliftprinciples in cases involving alleged fraud and dishonesty. A person allegingdishonesty has just as much a right to approach the Court as someone who does not.An uplift should not be granted simply because such allegations are made, and fail.[29] It is appropriate to reiterate, however, that the allegations had no foundation.The individuals associated with the defendant have had to respond to allegations offraud and dishonesty that would have impacted on them personally, and which wereshown to have no foundation. Some of the evidence was of little or no relevance. Butthe costs regime works to properly compensate a successful party for the time takento respond to allegations, and the decisions I have already made address elements ofthe claim by allowing more time. The allowance for the trial itself compensates forthe time actually taken.[30] In the circumstances an award of costs on a category 3 basis, including sometime allowance on time band C properly compensates the defendant for responding tothe plaintiffs wide ranging allegations.Reduction[31] The plaintiffs make an application that there should be a reduction in the costsawarded to the defendant on the basis that there was extensive cross-examination onissues that had no bearing on liability issues. Counsel suggest a week of hearing timewas occupied by unnecessary cross-examination. An issue is also raised concerningtwo days of the trial taken up by what ended up being unhelpful cross-examination ofMr John Jones, the former Director, who for reasons I have addressed was not able togive helpful evidence. It is argued that the cost wasted by his evidence should not bevisited upon the plaintiffs.[32] I do not accept either of these arguments. Whilst some of the lines of cross-examination pursued by the defendant might be criticised, I do not agree that anythinglike one week was involved with such issues. A far greater proportion of the case wasalso devoted to evidence and lines of argument advanced by the plaintiffs that provedto be unhelpful, irrelevant, and at times misconceived. I see no basis to discount thedefendant's recovery because of its own lines of defence.[33] In terms of Mr Jones, it was inevitable that he needed to be called as a witnessgiven the plaintiffs' allegations. Neither the defendant nor the plaintiffs can be said tobe responsible for the fact that he was unable to give helpful evidence. The defendantraised this issue before his cross-examination. It is simply a ramification of the factthat the allegations were made so many years after the events. In other words it is animplication that the losing party needed to wear as part of the cost of the case. I alsosee no reason to disallow disbursements relating to Mr Jones.Costs on costs[34] The defendant seeks an award of costs on the costs application. Given that notall of its arguments on costs have prevailed I decline to award costs on costs.Order against Commercial Factors Ltd[35] The defendant seeks that the cost order be made not only against all of theplaintiffs but also their funder, Commercial Factors Ltd, on a joint and several basis.The plaintiffs say that that is not necessary because Commercial Factors Ltd acceptsliability. But given that it is necessary to make a costs order, and it is accepted thatCommercial Factors Ltd is included as a liable party, then the orders should be againstit as well as the plaintiffs (on a joint and several basis).Conclusion[36] The award of costs will be on the basis outlined above. I proceed on the basisthat the final calculation will be able to be agreed without further Court involvement.Cooke JSolicitors:Neilsons Lawyers Ltd, Auckland for plaintiffsDarroch Forrest Lawyers, Wellington for defendant