CP WYNDHAM STREET HOTEL HOLDINGS LIMITED V HAMES SHARLEY INTERNATIONAL LIMITED HC AK CIV 2007-404-003376

CP WYNDHAM STREET HOTEL HOLDINGS LIMITED V HAMES SHARLEY INTERNATIONAL LIMITED HC AK CIV 2007-404-003376 11 October 2007IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY CIV 2007-404-003376UNDER the Companies Act 1993 BETWEEN CP WYNDHAM STREET HOTEL HOLDINGS LIMITED Applicant AND HAMES SHARLEY INTERNATIONAL LIMITED Respondent Hearing: 11 October 2007 (on the papers) Counsel: V Bruton for applicant A Kashyap for respondent Judgment: 11 October 2007 at 1630JUDGMENT OF ASSOCIATE JUDGE FAIRE [on costs]Solicitors: Brookfields, PO Box 240, Auckland for applicant A Kashyap, PO Box 26 596, Epsom for respondent[1] The applicant applied to set aside a statutory demand issued by the respondent for $26,930.14. [2] The application was first called on 28 June 2007. The respondent did not oppose the making of an order setting aside the statutory demand. As result an order was made setting the statutory demand aside. [3] A discussion then ensued on the question of costs. The position is summarised, albeit with hearsay evidence, in the affidavit of SL Bartlett sworn on 28 June 2007. [4] The affidavit is important because it highlights the following matters: a) Costs on a 2B basis had been earlier discussed and were determined as $3,680 in accordance with the Third Schedule to the High Court Rules; and b) Indemnity costs were sought because: i) The applicant and respondent had no relationship which would justify the demand; ii) The demand had not been issued by the solicitor for the respondent but had been issued by the client/respondent company without the solicitor's knowledge from a precedent; and iii) Disposal of the question of costs on the day had meant that counsel were involved at Court for a half-day on what was essentially a mention matter. [5] The indemnity costs sought are $9,196. Although invoices have been attached and a full description of the attendances involved there has not been a precise allocation, on a hourly basis, of the time charged. Having reviewed the description of the attendances and the documents on the Court file I, nevertheless,am satisfied that the indemnity costs claimed are reasonable costs for solicitor/client attendances in respect of this matter.Principles applicable in awarding costs[6] Rule 46 gives the Court a discretion to order costs in relation to a step taken in a proceeding. That discretion is generally to be exercised in accordance with the specific Rules contained in rr 47 – 48G: Glaister v Amalgamated Dairies Ltd [2004] 2 NZLR 606 [19]. In Mansfield Drycleaners Ltd v Quinny's Drycleaning (Dentice Drycleaning Upper Hutt) Ltd (2002) 16 PRNZ 662 at 668 the Court of Appeal said of the costs regime contained in rr 47-48G that:there is a strong implication that a Court is to apply the regime in the absence of some reason to the contraryThe test to be applied is entirely an objective and not a subjective one. The only reference which it is necessary to make towards actual costs is to be found in r 47(f), namely that an award of costs should not exceed the costs incurred by the party claiming the costs: Glaister v Amalgamated Dairies Ltd at 610 [14]. [7] Rule 47 lists the principles applying to determination of costs. Subrule (a) affirms the principle that the losing party should pay the costs to the successful party. Subrule (b) requires that the costs reflect the complexity and significance of the proceedings and refers specifically, therefore, to the categorisation of a proceeding which is provided for in r 48. Subrule (c) requires a consideration of each step for which costs are sought and an application of the daily rate having regard to the appropriate band which is to be applied after a consideration of r 48B(2) and the Third Schedule to the High Court Rules. [8] Rule 48C sets out the circumstances where increased or indemnity costs can be awarded. [9] Rule 48C in relation to indemnity costs provide:48C Increased costs and indemnity costs(1) Despite rules 47 to 48B, the Court may make an order (b) That the costs payable are the actual costs, disbursements, and witness expenses reasonably incurred by a party (indemnity costs). . (4) The Court may order a party to pay indemnity costs if— (a) The party has acted vexatiously, frivolously, improperly, or unnecessarily in commencing, continuing, or defending a proceeding or a step in a proceeding; or (b) The party has ignored or disobeyed an order or direction of the Court or breached an undertaking given to the Court or another party to the proceeding; or (c) Costs are payable from a fund, the party claiming costs is a necessary party to the proceeding affecting the fund, and the party claiming costs has acted reasonably in the proceeding; or (d) The person in whose favour the order of costs is made was not a party to the proceeding and has acted reasonably in relation to the proceeding; or (e) The party claiming costs is entitled to indemnity costs under a contract or deed; or (f) Some other reason exists which justifies the Court making an order for indemnity costs despite the principle that the determination of costs should be predictable and expeditious.[10] In Paper Reclaim Limited v Aotearoa International Limited [2006] 3 NZLR 188, the Court of Appeal considered the application for indemnity costs pursuant to r 48C(4)(a). The Court emphasised the need to examine the specific grounds set out in the Rule for ordering indemnity costs. [11] Counsel have referred in memoranda to the judgment of Goddard J in Hedley & Ors v Kiwi Co-operative Dairies Ltd (2002) 16 PRNZ 694 at [8] where Her Honour indicated that:indemnity costs tend to be reserved for cases where truly exceptional circumstances exist.[12] The distinguishing feature in this case is that the statutory demand has been issued by the respondent company itself and apparently without the specific authority of the solicitor who was ultimately instructed on the respondent's behalf. The statutory demand, which was exhibited to the papers set before me, clearly show a signature over the typed name of the solicitor for the respondent. The evidential support for what happened is set out in the affidavit of SL Bartlett, to which I have made reference. [13] The above circumstances make this case quite different from the standard statutory demand application, which is withdrawn. The actions taken by the respondent company, which are not contested, were clearly improper. One can only speculate that had proper instructions been given to the respondent's solicitor, the statutory demand would never have been issued in this case in any event. The evidence is that there is no contractual relationship between the applicant and the respondent, which would justify the statutory demand. Having said that, it is the particular action of the respondent company, in issuing the demand under a signature which purports to be its managing director and it solicitor when same is not the position, that leads me to the conclusion that an order is justified pursuant to s 48C(4)(a) on the grounds that the respondent has acted improperly in this matter. [14] Accordingly, I order that the respondent pay the applicant's costs in the sum of $9,196.00. That order includes disbursements, as the total that I have ordered is the total sum recorded in the invoices presented to the Court. _____________________ JA Faire Associate Judge