D K RUPA & ORS V BANK OF NEW ZEALAND HC AK CIV 2006-404-005881

D K RUPA & ORS V BANK OF NEW ZEALAND HC AK CIV 2006-404-005881 23 June 2008IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY CIV 2006-404-005881IN THE MATTER OF the Declaratory Judgments Act 1908 AND IN THE MATTER OF Memorandum of Mortgage D587450.1 and D587450.2 and D553980.3 over properties described in certificates of Title NA85/263, 69A/171 and 389/81 BETWEEN DILIP KUMAR RUPA, SARDADEVI RUPA, REWA KARA RUPA AND KOKILA RUPA (PARBHU) Plaintiffs AND BANK OF NEW ZEALAND Defendant Hearing: On the papers Counsel: M J Tingey for defendant Judgment: 23 June 2008 at 9.30amJUDGMENT OF ASSOCIATE JUDGE ABBOTT [as to costs]This judgment was delivered by me on 23 June 2008 at 9.30am pursuant to Rule 540(4) of the High Court Rules.Registrar/Deputy RegistrarTo: D-K Rupa, 103 Wellington Street, Freemans Bay, Auckland For Defendant: Bell Gully, PO Box 4199, Auckland[1] On 31 January 2008 I entered summary judgment for the defendant (BNZ) against the plaintiffs (the Rupas) both on the Rupas' claim and a counter-claim by BNZ. Both claim and counter-claim related to mortgages given by the Rupas to BNZ as security for loans. [2] As part of its counter-claim BNZ sought judgment for legal costs incurred by BNZ in connection with the mortgage. This claim was made pursuant to a provision in the mortgage under which the Rupas agreed that all costs, charges and expenses incurred by BNZ (including solicitor and client legal costs) were part of the monies secured by the mortgage. [3] These costs were not quantified in the statement of claim or evidence in support. I found that BNZ had a contractual right under the standard terms of the mortgage to recover such costs, and reserved judgment on the quantum of that part of the counter-claim. I directed BNZ to file a memorandum advising the quantum of its claim and gave the Rupas opportunity to file a memorandum in response. [4] BNZ filed a memorandum on 15 February 2008 identifying solicitor and client costs of $76,497.28. It seeks judgment for $72,169.04 as a part of these costs ($4,328.24 had been identified in the statement of claim and formed part of the sum of $498,596.96 for which judgment was entered on 31 January 2008). [5] The Rupas were served with BNZ's memorandum on 15 February 2008. They have not filed a memorandum in response. As indicated in my judgment of 31 January 2008, I will now determine the BNZ's claim on the basis of the memorandum filed.Contractual basis for recovery of costs[6] The claim for costs must be considered in light of the parties' agreement in the mortgages. BNZ pleaded the relevant terms of the mortgages given to it by the Rupas in paragraphs 17 – 20 of its counter-claim. The relevant portions for the present claim for costs are:19. The terms of the Beaconsfield Mortgage, Wellington Mortgage, and Surrey Crescent Mortgage are identical and set out in memorandum number 1996/4025 (Memorandum).20. The terms of the Memorandum are relied upon as if it were pleaded in full, and contains the following terms: (a) the plaintiffs are liable, upon demand, to pay all moneys now or in the future owing or remaining unpaid to the BNZ from the plaintiffs (directly or indirectly) whether made available solely to any of the plaintiffs jointly with any other person and in respect of moneys advanced or paid to or for the use of any of the plaintiffs. (b) all moneys now or in the future owing includes legal costs and all other expenses which the BNZ has paid in connection with the Beaconsfield Mortgage or Wellington Mortgage.[7] BNZ sought (at paragraph 33 (d) (v)):(v) costs on a solicitor-client basis pursuant to clauses 1 and 2 of the Memorandum.[8] The standard terms of mortgage referred to in paragraph 19 of the counter- claim were exhibited to the affidavit of Mr D J Cousins (one of BNZ's managers) filed in support of the application for summary judgment on the counter-claim. The claim for costs is made under the following parts of clause 1 of that document:1. Payment of secured moneys 1.1 Mortgagor to pay on demand Subject to any restrictions on the making of any demand which may be imposed on the Bank in any separate written agreement relating to any particular accommodation made available by the Bank, the Mortgagor will on demand (as provided in this mortgage) pay or cause to be paid to the Bank at the office or place of business of the Bank named in such demand, or to any other person or place named in such demand, all the secured moneys.1.2 Secured moneys The term "secured moneys" means all moneys now or in the future owing or remaining unpaid to the Bank from the Mortgagor (directly or indirectly) whether made available solely to the Mortgagor or jointly with any other person and whether in respect of:(h) all other costs, charges and expenses, including all legal costs (both party and party and solicitor and client), which the Bank shall pay or incur in connection with theMortgagor, any account of the Mortgagor, the mortgaged property or this mortgage .Issues[9] I have already found that BNZ has a contractual right under clause 1 to recover legal costs incurred in connection with the mortgage. The general entitlement of a party to include in a contract a term for payment of solicitor-client costs is clear: ANZ Banking Group (NZ) Ltd v Gibson [1986] 1 NZLR 556,566 andAnglesea Medical Properties v Braemar Hospital HC Hamilton CIV 2006-419- 001492, 9 October 2007, Allan J. The costs must, however, be objectively reasonable: Frater Williams & Co Ltd v Australian Guarantee Corporation (NZ) Ltd (1994) 2 NZConv-C 191,873 at 191,887 (CA) and Anglesea Medical Properties v Braemar Hospital HC Hamilton CIV 2006-419-001492, 9 May 2008, Allan J. [10] In light of the lack of response from the Rupas, I will also consider whether it can be said that these costs have been demanded, so as to make them now payable. I will deal with this latter point first.Are the costs payable now?[11] Although BNZ's counter-claim clearly makes a claim for costs in accordance with clause 1 of the standard terms, it did not quantify that claim. As I have said, it identified three payments totalling $4,328.24 and obtained judgment for that amount (as part of the judgment sum already awarded). There is no evidence before the Court, as far as I am aware, of any demand for payment of costs prior to filing of the counter-claim, and the counter-claim itself does not constitute a sufficient demand for other than the $4,328.24. However, I accept that service of the memorandum is a sufficient demand for the sums identified in it, and that those sums are now payable pursuant to clause 1.Are the costs reasonable?[12] This takes me to whether the costs now being claimed are objectively reasonable. This requirement was considered by the Court of Appeal in FraterWilliams & Co Ltd v Australian Guarantee Corporation (NZ) Ltd. After referring to the principle in ANZ Banking Group (NZ) Ltd v Gibson that one party may contractually bind itself to pay the other party's full solicitor-client costs, Fisher J (who delivered the main judgment) stated:. the Court must decide what tasks attract a costs indemnity on a proper construction of the contract, whether the task undertaken in the instant case was one of those contemplated in the contract, whether the steps taken were reasonably necessary in pursuance of that task, whether the rate at which they were then charged was reasonable having regard to the principles normally applicable to solicitor-client costs, and whether any other principles drawn from the general law of contract would in whole or in part deny the claimant its prima facie right to judgment. These are all matters of objective assessment.[13] Fisher J then noted that some of the steps could be delegated to a costs revision under the Law Practitioners Act 1982, or the Court could make its own assessment, and added:If the Court decides to assess the bill itself, there must be room for robust judgment as to the costs considered reasonable in all the circumstances (see, for example,National Bank of New Zealand Limited v Murland (1991] 3 NZLR 86, 100). However, this can not taken to mandate a discretionary approach akin to a Court's assessment of party and party costs. The object is not to exercise a discretion but rather to assess whether the solicitor-client costs sought are properly attributable to the exercise contemplated in the original contract and are charged for at a level which would be regarded as acceptable in a costs revision under the Law Practitioners Act .[14] The decision that I must make is whether the costs now being sought by BNZ are properly attributable to tasks contemplated in the mortgage terms, whether the steps taken were reasonably necessary in pursuing that task, and whether the charges for this work were reasonable having regard to principles normally applied to solicitor-client costs. [15] I am satisfied from perusal of the invoices and narration of work undertaken for the costs now being sought that all work comes within the terms of clause 1.2(h) of the mortgages and was "in connection with the Mortgagor, any account of the Mortgagor, the mortgaged property or this mortgage". [16] I turn now to consider the steps taken, and whether they were necessary. Counsel for BNZ has summarised the steps in his memorandum:a) preparation and service of s 92 Property Law Act notices; b) consideration of documentation sent to the defendant and its solicitors both prior to and after the commencement of the proceedings c) meeting with Mr Rupa [the plaintiff D K Rupa] on a without prejudice basis prior to the commencement of the proceedings and making offers to the plaintiffs to resolve the dispute; d) seeking order for substituted service of [the plaintiff] Rewa Rupa of section 92 Property Law Act notice; e) perusal of and removal of the website hosted by Mr Rupa that was making false and scandalous accusations about the defendant and correspondence with the web host to have it removed; f) perusal and consideration of flyers produced by Mr Rupa, referring to the website, and that were potentially damaging to the defendant; g) the consideration of pleadings filed by the plaintiffs and large volumes of detailed supporting material (most, if not all of which, after consideration was determined by be irrelevant) ; h) preparation of pleadings and applications by the defendant ; andi) consideration attendances [sic] in relation to documents filed after the hearing but before judgment was delivered ...[17] Summaries of the documents considered under items (b), (g), (h) and (i) were annexed to BNZ's memorandum. They show: a) Twelve documents sent to BNZ prior to issue of the proceeding, and a further three after issue of the proceeding. The first group started with two documents referring to "Nuremberg Principles". There was then a series of obscurely phrased documents claiming to have legal effect on BNZ's rights to enforce its mortgages (a proposition which Idismissed in my substantive judgment). The second group (after issue of the proceedings) comprised three letters addressed to various recipients which could generally be described as letters of complaint. b) Forty-three documents filed by the Rupas comprising the pleading of their claims, and various notices and applications with supporting memoranda and affidavits and submissions (this category included ten documents that were filed and served after the hearing); c) Sixteen documents comprising BNZ's pleadings, notices and applications with supporting affidavits and memoranda, and submissions for the hearing (including four documents filed following the hearing); d) Three further documents filed after the hearing (two in February 2007 and one in June 2007) which comprised requests by the Rupas for various public officers to take action on their behalf. [18] Most of this work was clearly necessary in pursuing rights under the mortgages. For example, it was quite appropriate for BNZ to be given legal advice on the range of matters (some of which were obscure at best) raised in the correspondence on behalf of the Rupas as grounds for contesting the Property Law Act notices issued by BNZ. The proceedings issued by the Rupas challenged the validity or enforceability of the mortgages. The counter-claim by BNZ was seeking enforcement of rights under the mortgages. The only work undertaken which raises any question in my mind was the solicitors' advice to the BNZ about potentially defamatory flyers produced by Mr Rupa and comments by him on a website, and steps taken by him to have the material removed from the website. As this work also arises out of the Rupas' dispute with BNZ over the mortgages, I consider that it too comes within the terms of clause 1.2(h). [19] Notwithstanding that many of the documents delivered to BNZ or filed on behalf of the Rupas were obscure as to the matters being raised, and that many proved to have little or no relevance to their obligations under the mortgages, it wasperfectly reasonable for BNZ to take them seriously, seek legal advice on them, and to respond as appropriate. I have not been presented with any information to suggest to me that any of the steps taken by BNZ or its solicitors were unnecessary. There has been ample opportunity for the Rupas to have done so if they had any reasonable ground. [20] This brings me to the last aspect as to whether the charges are reasonable on a solicitor-client basis. The legal fees charged relate to approximately 289 hours of the solicitors' time. The work appears largely to have been carried out by the partner of the firm who appeared as counsel at the hearing, but other solicitors were used from time to time. Conduct of the matter at partner level was clearly important to BNZ, given potential consequences of some of the issues being raised, and arguments advanced by the Rupas. Although that meant that the hourly rate applied for most of the work was high, it is not inconsistent with rates charged by senior practitioners in large central city firms. I also take into account that the fees charged cover attendances over nearly two years, and for a concentrated period of about ten months. Further, I take into account that it was open to the Rupas, on receipt of BNZ's memorandum in February 2008, to seek revision of the accounts under Part 8 of the Law Practitioners Act 1982 (which continues to apply until 31 July 2008), but they have not done so. It is also significant that the Rupas have not filed any memorandum in response to this claim for fees. [21] Taking all these factors into account I find no basis for questioning the reasonableness of the fees claimed, having regard to principles normally applied to solicitor-client costs. [22] The last matter to address is the proof of the costs being sought. The claim made is for $73,851.21 in legal fees and $2,646.07 in disbursements, for a total of $76,497.28 (I take these figures to be GST inclusive). After allowing credit for the $4,328.24 already incorporated as part of the judgment sum awarded on 31 January 2008, judgment is sought for $72,169.04. The invoices produced in support of the claim total $74,021.07 inclusive of disbursements and GST, rather than the $76,497.28 referred to in the memorandum. I am unable to find a direct correlation between these invoices and the costs identified in the statement of claim, for whichjudgment has already been given. Given the acceptance in the memorandum that credit needs to be given against these invoices for the sum of $4,328.24, I enter further judgment for BNZ against the Rupas in respect of costs payable pursuant to clause 1.2(h) of the mortgages in the total sum of $69,692.83, representing proved solicitor-client costs totalling $74,021.07, less the costs of $4,328.24 for which judgment has already been entered._________________________Associate Judge Abbott