COMMISSIONER OF POLICE v BURGESS [2015] NZHC 267

COMMISSIONER OF POLICE v BURGESS [2015] NZHC 267 [25 February 2016]IN THE HIGH COURT OF NEW ZEALANDAUCKLAND REGISTRYCIV-2010-404-2893[2015] NZHC 267UNDER The Criminal Proceeds (Recovery) Act2009BETWEEN COMMISSIONER OF POLICEApplicantAND ROBIN ADRIAN BURGESSFirst RespondentLLANYS GWEN BURGESSSecond RespondentHearing: On the papersJudgment: 25 February 2016COSTS JUDGMENT OF DUFFY JThis judgment was delivered by me on 25 February 2016 at 3.00 pm pursuant toRule 11.5 of the High Court Rules.Registrar/ Deputy RegistrarSolicitors:Crown Solicitor, AucklandBoyle Mathieson, HendersonWoodward Chrisp, GisborneCounsel:C Wilkinson-Smith, AucklandF Deliu, Barrister, Auckland[1] The second respondent in this proceeding, Mrs Burgess, seeks costs in relation to three interlocutory applications which were brought by the applicant, the Commissioner; and one such application which she brought.Application One[2] The first application involved steps that spanned a period of time between 4 November 2014 and 15 April 2015 (Application One). This application was at no time heard by me.[3] The Commissioner queries whether it is appropriate for costs to be ordered for Application One as none of the judges who dealt with that application reserved costs. The Commissioner also questions the degree of success that Mrs Burgess enjoyed in relation to Application One. Finally, the Commissioner asserts that if costs are awarded against him in relation to Application One, he will seek costs in relation to four other interlocutory applications related to this proceeding.[4] The primary principle, as set out in r 14.1 of the High Court Rules, is that costs are at the discretion of the court. However, the exercise of that discretion is qualified by the rules in pt 14 of the High Court Rules and the relevant case law. In this regard the discretion to award costs is not unfettered and must be exercised judicially.1[5] Rule 14.8 specifically addresses costs on interlocutory applications. The rule provides that:(1) Costs on an opposed interlocutory application, unless there are special reasons to the contrary,—(a) must be fixed in accordance with these rules when the application is determined; and(b) become payable when they are fixed.(2) Despite subclause (1), the court may reverse, discharge, or vary an order for costs on an interlocutory application if satisfied subsequently that the original order should not have been made.(3) This rule does not apply to an application for summary judgment.1 Manukau Golf Club Inc v Shoye Venture Ltd [2012] NZSC 109, 21 PRNZ 186 at [7].The annotation to r 14.8 in McGechan on Procedure states that this rule gives effect to the costs principles that:2(a) The party who fails on an interlocutory application should pay the costs involved: r 14.2(a)(b) The determination of costs should be predictable and expeditious: r 14.2(g).The commentary goes on to note that this rule reflects the fact that the merits of particular interlocutory applications and those of the substantive proceeding are different matters.3 The commentary further notes that this rule recognises that the costs of an interlocutory application are best fixed contemporaneously by the Judge or Associate Judge who decides it.[6] Also relevant in the present case is r 14.9 which provides that costs may be determined by a different judge if the judge who heard the matter to which the costs relate is not available conveniently to make the determination. The commentary to r 14.9 notes that implicit in this rule is the general and desirable practice that the Judge or Associate Judge who decides the matter should also determine the costs.4[7] The omissions by the judges who heard the various steps of Application One to make a contemporaneous determination on costs do not necessarily mean that Mrs Burgess is now precluded from seeking costs. Part 14 of the High Court Rules recognises the entitlement of a successful party to costs unless a judge decides on a different outcome. It is a fundamental principle that costs follow the event.5 An omission to determine costs cannot be equated with a decision that costs will not be awarded. In this regard a court cannot deny a successful party costs without first giving reasons for doing so.6 Therefore, the omissions by the judges who dealt with the various steps of Application One either to determine costs or to reserve costs cannot now preclude Mrs Burgess from seeking costs. The failure to deal with costs earlier is no more than an oversight.2 McGechan on Procedure (looseleaf ed, Brookers) at [HR14.8.01].3 McGechan on Procedure at [HR14.8.02], citing Chapman v Badon Limited [2010] NZCA 613, (2010) 20 PRNZ 83 at [12].4 McGechan on Procedure at [HR14.9.01].5 Manukau Golf Club Inc v Shoye Venture Ltd, above n 1, at [8] and [9].6 Manukau Golf Club Inc v Shoye Venture Ltd, above n 1, at [16].[8] Here Mrs Burgess seeks costs at category 2B, which are scale costs that are usually awarded to a successful party in civil proceedings. Ordinarily there is no need for a court to provide a reasoned judgment on an order for scale costs.7[9] Mrs Burgess only seeks scale costs for Application One. Since ordinarily those costs could be awarded without provision of reasons for doing so, a judge who did not hear the steps involved in the application could make the award. However, here the Commissioner contends that at best Mrs Burgess only enjoyed partial success in Application One, which provides a basis for reducing the scale costs.8 On the other hand, some success can usually lead to a full award of scale costs.9[10] I have no difficulty with awarding an amount of scale costs to a successful party. But given my unfamiliarity with Application One I am not well placed to determine if I should take the unusual step and reduce scale costs to reflect Mrs Burgess having no more than partial success in that application. To do so would necessitate a departure from the general principle that was recognised in Zhao v New Zealand Law Society. It may be better, therefore, if one of the judges who dealt with Application One determines the costs award. Those judges are better placed than I am to determine if there should be any reduction to scale costs.[11] Further, apart from Andrews J, who has now retired, the judges who heard Application One are conveniently available to deal with it. I consider, therefore, that it is more appropriate that one of those judges deals with this application. It is for this reason alone that I decline to deal with this part of the costs application.[12] As to the Commissioner's assertion that Mrs Burgess' application for costs inrespect of Application One means that he will seek costs in relation to other interlocutory applications in this proceeding, that is a matter for the Commissioner. His failure to pursue costs on other such applications cannot bar Mrs Burgess from pursuing costs when she has been successful. This reasoning also applies to the other applications in which she was successful and now seeks costs.7 Manukau Golf Club Inc v Shoye Venture Ltd, above n 1, at [16].8 Though any decision to reduce costs to be awarded to a successful party would need to take account of the factors in r 14.7.9 Zhao v New Zealand Law Society [2012] NZHC 3112; see also Shotter v Westpac Banking CorpHC Auckland A995/85, 5 June 1991.Application Two[13] The second application was heard by me on 19 June and 31 July 2015 (Application Two). This application, which was filed by the applicant, sought orders:(a) for the sale of some of the already restrained property; and(b) to restrain further items of property.[14] The application to sell restrained property was abandoned at the second stage of the hearing, being 31 July 2015. It is a general principle in civil proceedings that when an application is abandoned or discontinued then unless the parties have resolved costs as between themselves, the party who brought the abandoned application pays costs. I see no reason why the general principle should not be applied here. The Commissioner wanted to sell certain items of seized property before the substantive application for forfeiture was determined. Mrs Burgess did not want those items sold. Her opposition to this part of the application led to its abandonment. In practical terms she was successful in her opposition.[15] The balance of the application (to restrain further items) has been postponed. It was thought by the parties that decisions on other applications relating to the two proceedings brought under the Criminal Proceeds (Recovery) Act 2009 might avoid any need for the Commissioner to pursue an order to restrain further items of thesecond defendant's property. Here Mrs Burgess opposed additional items ofproperty being restrained and the outcome was that the application is now in abeyance.[16] With Application Two Mrs Burgess was put to the trouble and expense of opposing applications in which she has had some measure of success.[17] The Commissioner has not addressed this aspect of Mrs Burgess' costsapplication.[18] I am satisfied that the measure of success that Mrs Burgess enjoyed should give rise to an award of costs on the basis of the general principle that costs follow the event. That would entail an award of scale costs, which I consider could appropriately be made at scale 2B. However, Mrs Burgess seeks either indemnity costs or increased costs. I will deal with this issue later in this judgment.Application Three[19] The third application was also heard by me on 19 June and 31 July 2015 (Application Three). This was an application filed by the Commissioner seeking an order for cancellation of the weekly payment of $800 that the Court had earlier permitted to be made to Mrs Burgess for living expenses, coupled with a further order that all such earlier payments were to be paid back either by the second respondent or by her lawyer. This application was dismissed. Again Mrs Burgess'success on this application entitles her to an award of scale costs. She seeks an uplift for either increased or indemnity costs. I shall deal with that aspect of the application later.Application Four[20] On 19 June and 31 July 2015 I heard an application by Mrs Burgess seeking the discharge of restraining orders in relation to some of the restrained property (Application Four). This application was partially successful insofar as the restraining orders on some of the subject items were discharged. I am satisfied that here, in accordance with the principle in Zhao v New Zealand Law Society andShotter v Westpac Banking Corporation,10 Mrs Burgess' success in achieving apartial discharge of the restrained items should be recognised by an award of costs.Should the costs awards for Applications Two and Four be reduced?[21] So far only part of Application Two has been determined and in relation to that part Mrs Burgess was successful. The postponement of the other part of the application has effectively severed it, so that when it is heard it will be a discrete matter. The part of Application Two that has been dealt with can in my view give10 Zhao v New Zealand Law Society, above n 9; Shotter v Westpac Banking Corp, above n 9.rise to its own costs award. So for the present, I consider that the postponed part of the application can be put to the side.[22] Regarding Application Four, Mrs Burgess achieved a discharge of the restraint on some items of property. I see no basis here for taking a piecemeal approach to the success that she has achieved. I propose to follow the general approach expressed in Zhao and Shotter.11 Accordingly I will make no reduction of the costs awards to reflect the fact that Mrs Burgess did not achieve a discharge of the restraint of all restrained items.Uplift of costs[23] Mrs Burgess has correctly outlined the law in her submissions regarding when the court will uplift costs. I accept that the relevant principles are those outlined in Bradbury v Westpac Banking Corp.12 The arguments which Mrs Burgess makes for an uplift of costs in relation to part of Application Two, Application Three and Application Four are well made and they require serious and careful consideration by the court.[24] However, one of the first steps in considering an uplift is to take account of the quantum of scale costs that an applicant would be entitled to receive, and then to consider the appropriate extent of any uplift.13 With indemnity costs, a relevantconsideration here is counsel's actual costs.14[25] In the present case, Mrs Burgess has not carried out the exercise of quantifying the scale costs that she would be entitled to receive, nor has she advised me of her actual costs. It may be that given the response by the Commissioner and the argument about reductions to reflect partial success, Mrs Burgess considered she would defer carrying out the quantification exercise until such time as she knew whether the court would consider an award of costs to her.11 Zhao v New Zealand Law Society, above n 9; Shotter v Westpac Banking Corp, above n 9.12 Bradbury v Westpac Banking Corporation [2009] NZCA 234, [2009] 3 NZLR 400 at [27].13 Holdfast NZ Ltd v Selleys Pty Ltd (2005) PRNZ 897 (CA) at [46].14 Bradbury v Westpac Banking Corp, above n 12, at [7]; Health Waikato Ltd v Elmsly (2004) 17 PRNZ 16 (CA) at [50].[26] It seems to me that the appropriate category for the subject applications would be category 2 rather than 3, however the parties may wish to address me on this topic. Whether all the steps taken in the applications could properly be treated as matters under time allocation B rather than A or C is not clear to me. This will have to be addressed by the parties as well.[27] As matters stand, I am in no position to consider an uplift from scale costs, or indeed to make specific orders in relation to scale costs without having the costs quantified for me.[28] The next step, therefore, is for Mrs Burgess to prepare an itemised schedule that quantifies the costs in terms of scale. This will help to inform me on the question of whether I uplift the costs and if I do, to what extent that might be.[29] The application for indemnity costs is critical of the Commissioner's conduct.During the course of the hearing and in the judgment which I delivered, I expressedconcern regarding the Commissioner's conduct in seeking to cross-examine Mrs Burgess on the basis of her having in effect fraudulently obtained a living expenses order of $800 when no such allegations had been pleaded against her.[30] In civil proceedings, allegations of fraud should not be made unless there is a sound basis for doing so. Similarly when fraudulent conduct is being alleged, it must be expressly pleaded with full particulars given. McGechan On Procedure provides a succinct summary of the relevant principles and case-law on this topic.15[31] In the absence of pleadings and perhaps even proper grounds for making the allegations,16 it was wrong for the Commissioner to contend during the hearing and by way of cross-examination of Mrs Burgess that she had acted fraudulently when it came to obtaining the living expense allowance. However, once this was pointed out to the Commissioner it was responsibly acknowledged by him, and so the question of her fraudulent conduct was not pursued. The Commissioner's decision toabandon the allegations of fraud in my view went some way to remedy the wrong15 McGechan on Procedure, above n 2, at [HR5.26.08].16 How else to explain the Commissioner's abandonment of the fraud allegations?done by making them in the first place during the hearing. This is something that Mrs Burgess needs to bear in mind.[32] On occasion, when allegations of fraudulent conduct have been wrongly made and are followed by applications for indemnity costs on the basis that the party making the fraudulent allegations has behaved either badly or very unreasonably, the court has provided the party affected with an opportunity to be heard.[33] Insofar as Mrs Burgess seeks an uplift to increased costs, I have no difficulty dealing with the costs application on the present papers, subject to receiving quantification of scale costs for which she would be eligible. But I consider that in relation to the criticisms made of the Commissioner in support of an award of indemnity costs, I should offer the Commissioner an opportunity to be heard on the matter at an oral hearing. This would give the Commissioner the opportunity to file affidavit evidence, if he so wished, explaining the basis for him making allegations of fraudulent conduct at a hearing that were not sustainable on the application.Result on costs[34] Costs on Application One are to be determined by one of the judges who dealt with that application.[35] Mrs Burgess is entitled in principle to costs for Applications Two, Three and Four. She will need to quantify those costs and should do so by filing a memorandum to that effect by no later than ten working days from the date of delivery of this judgment.[36] The Commissioner has ten working days from the date of receipt of MrsBurgess' further memorandum on costs to file his response.[37] Mrs Burgess has five working days from receipt of the Commissioner'smemorandum to file a reply.Timetable variation[38] The variation to the timetable that was sought by Mrs Burgess has been over taken by time. However, I note the Commissioner did not object to the proposed variation. I can see no prejudice arising from it. Accordingly the variation as sought by Mrs Burgess is approved.