DRIVE HOLDINGS LIMITED V MISSION BAY PHARMACY LIMITED HC AK CIV 2005-404-00829

DRIVE HOLDINGS LIMITED V MISSION BAY PHARMACY LIMITED HC AK CIV 2005-404-00829 18 December 2006IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY CIV 2005-404-00829BETWEEN DRIVE HOLDINGS LIMITED Plaintiff AND MISSION BAY PHARMACY LIMITED Defendant Hearing: On the Papers Counsel: MA Gilbert for Plaintiff GJ Thwaite for defendant Judgment: 18 December 2006JUDGMENT (No.3) OF COOPER J ON COSTSThis judgment was delivered by Justice Cooper on 18 December 2006 at 4.00 p.m., pursuant to r 540(4) of the High Court Rules Registrar/Deputy Registrar Date: Solicitors: Gilbert Walker, PO Box 1595, Auckland Gregory J Thwaite, PO Box 2062, Shortland Street, Auckland[1] When I delivered my judgment of 27 May 2005, I held that Drive Holdings Ltd ("DHL") was entitled to judgment, including judgment on its claim for costs, subject to the reasonableness of the costs charged by its solicitors. On 10 November 2005 I delivered a further judgment in which I dismissed an application that had been made by Mission Bay Pharmacy Ltd ("MBPL") for an order staying execution of the judgment of 27 May 2005. I held that DHL was entitled to costs in respect of MBPL's application, calculated in accordance with Category 2 Band B. [2] In the meantime, MBPL had, of course, appealed to the Court of Appeal from the 27 May 2005 judgment. Memoranda were filed by counsel dealing with the question of costs in this Court pursuant to the two judgments. Having heard counsel by telephone on 1 June 2006, I deferred dealing with questions of costs pending delivery of the decision of the Court of Appeal. [3] The Court of Appeal's decision was delivered on 29 June 2006. MBPL's appeal was dismissed and in that Court also it was held that MBPL should pay DHL's costs, calculated on an indemnity basis in accordance with clause 11.01(b) of the lease. [4] That clause provides that the lessee shall pay:All costs, charges and expenses for which the lessor shall become liable in consequence of or in connection with any breach or default by the lessee in the performance or observance of any of the terms, covenants and conditions of this lease.[5] I took the view that the costs that had been incurred by DHL in respect of the proceedings which it had had to issue to obtain possession of the premises fell readily within that clause. It is plain from the terms of the Court of Appeal's decision of 29 June 2006 that it was of the same view. [6] There is now a dispute in respect of the costs incurred in respect of the proceeding down to the first judgment. By a memorandum dated 23 November2005, DHL's solicitor had advised that the plaintiff's actual legal costs were $21,995 plus GST and disbursements, to give a total of $26,103.00. Although letters were exchanged between DHL's solicitors and MBPL's solicitor, in the course of which the latter asked the former for advice as to the hours spent and the hourly rate for the charges, no agreement was able to be reached. [7] In his memorandum of 30 November 2005, filed on behalf of MBPL, Mr Thwaite records MBPL's opposition to the award of any sum by way of costs to the plaintiff. That, however, is an issue that I have already determined because, as I have recorded, my judgment of 27 May 2005 made it plain that DHL was entitled to judgment in respect of its costs, subject only to the qualification that they be reasonable. [8] Mr Thwaite next argues that in terms of the judgment the plaintiff's "application for an assessment of costs is out of time". He submits that any claim should have been made within a period of 14 days from the date of delivery of my judgment. [9] The words that I actually used in my judgment at [108] were these:[108] Insofar as the claim for costs is concerned, DHL is again entitled to judgment as sought, subject, however, to the reasonableness of the costs charged by its solicitors. If the amount cannot be agreed, I will receive memoranda from the parties, the plaintiff's to be filed within fourteen days, and the defendant's within seven days after receipt of the plaintiff's memorandum.[10] Mr Gilbert's memorandum of 23 November shows that DHL's solicitors wrote to the defendant's solicitor in an endeavour to reach agreement on costs on 20 June 2005. I accept that that was outside the 14 day period envisaged by the terms of the judgment. However, I note that Mr Thwaite's response of 23 June 2005 was not to say that the letter was somehow out of time. Rather, he wrote seeking a breakdown of the hours spent and the hourly rates charged. That was responded to the following day. Nothing further was then heard from Mr Thwaite until 9 September 2005, following a reminder sent on 7 September 2005.[11] Once again, Mr Thwaite's response of 9 September 2005 did not raise any issue about the timing of DHL's attempts to resolve the costs issue. On the contrary, the response raised issues directed at the quantum of the costs, and suggesting that the High Court Rules should be used as a "touchstone" for the fees. Mr Thwaite suggested that fifty per cent above the amount due under the Rules would be an appropriate amount. The other issue that he raised concerned the quality of the argument that DHL had presented at the hearing. [12] As I see it, the plaintiff endeavoured, albeit not within time, but at a relatively early stage to reach agreement on the question of costs. MBPL's responses did not raise any issue as to the timing of DHL's response. MBPL's stance in raising the issue now is in my view, unmeritorious and does not provide any basis for depriving DHL of the costs to which it is entitled pursuant to the judgment. [13] The next argument put forward by MBPL is that no sum should be awarded as costs, because the plaintiff has incurred no liability. That is based upon the fact that the invoices on which DHL relies are invoices that were sent by its solicitors to Retail Holdings Ltd, the parent company of DHL. In an affidavit sworn on 7 December 2005, Mr Henry, a director of the plaintiff company, deposes that the costs, although invoiced to Retail Holdings Ltd, were in fact incurred by Retail Holdings Ltd on behalf of DHL, and were paid out of funds belonging to DHL. Mr Thwaite's response to the affidavit is to challenge its admissibility. If that challenge was successful, it would, of course, enable his client to succeed because the true facts were not before the Court. That argument is also rejected, as being totally inconsistent with the interests of justice. I have read Mr Henry's affidavit. On the bases of it, Mr Thwaite's second argument fails. [14] Mr Thwaite then addresses an argument that the costs should be based on the second and third schedules to the Rules. Acknowledging that there is no requirement here for the costs to be assessed in accordance with the schedules, nevertheless, Mr Thwaite says that the terms of the judgment requiring that the costs be "reasonable" ought to require at least some reference to the scheduled recovery rates provided by the Rules, in both the High and District Courts. Mr Thwaite even goes so far as to suggest that the District Court rates should apply, because the proceedingcould have been brought in a District Court. Mr Gilbert's responds to the latter point by indicating that DHL does not accept that the proceeding could have been commenced in the District Court, although he does not say why. His main point, however, is that there is no reason to suppose that the argument could have been disposed of any more economically in the District Court and he submits that that Court would not have been able to deal with the matter as efficiently and within the timeframes that proved possible in the High Court. I observe that the Court of Appeal, at [60] held that DHL acted reasonably in commencing the claim in the High Court. [15] In my view, Mr Thwaite's propositions based upon the schedules in the Rules are misconceived. Those schedules are designed to provide appropriate daily recovery rates for awards of costs in the normal course. Here there is a contractual provision that obliges the defendant to pay all of the plaintiff's costs. In other words, the position is to be approached as if it was the kind of litigation in which it would have been appropriate to award indemnity costs under Rule 48C(4). Rule 48C(4)(e) refers to a party claiming costs who is entitled to indemnity costs under a contract or deed. [16] Approached on that basis, I have not found the quantum of the fees charged by the plaintiff's lawyers to be excessive or unreasonable. As Mr Gilbert points out, there was a substantial amount of affidavit material that needed to be filed, and the nature of the case run by MBPL was such that it was necessary to review the dealings of the parties over a substantial period of time. Neither the hours involved, nor the rate of recovery are in my view unreasonable. [17] Mr Thwaite's next proposition was that in presenting its argument DHL had ignored the provisions of the Medicines Act 1981 and there should be some deduction from costs that might otherwise be payable for this reason. Mr Thwaite purports to derive support for his argument from observations that I made in the second judgment delivered on 10 November 2005. However, the passages in that judgment to which Mr Thwaite has referred do not assist him. In the first two references (at [6](d) and [22]) I was merely recording arguments that Mr Thwaite was advancing in support of the application for a stay. At [33] I indicated that I didnot see how any question of compliance with the Medicines Act 1981 was relevant to the question of whether a stay should be granted. Moreover, I went on to observe that I could not see how the capacity of Bayside Pharmacy Ltd (then DHL's intended replacement tenant) to operate a pharmacy could possibly be relevant to the question of whether a stay should be ordered. [18] Mr Gilbert submits that the Medicines Act 1981 had no relevance to the plaintiff's claim. I agree with him and do not see in this issue any basis for discounting the costs that would otherwise be payable. [19] Finally, Mr Thwaite correctly reminds me that MBPL has consistently protested the contents of the judgment that the plaintiff presented for sealing. Again, he refers to what I said on that subject in my second judgment of 10 November 2005. Mr Gilbert responds by saying that the costs claimed by the plaintiff cover the period up to the conclusion of the hearing and that, other than the sealing fee, all of the costs were incurred prior to the order being sealed. Second, the consequence of my judgment was that the defendant was a trespasser with no right to occupy the premises. Despite that, the defendant had taken 40 days to vacate the premises as the record now shows. [20] I do not see anything in this point either. I consider Mr Gilbert's points in response are aptly made. [21] In all the circumstances, I hold that the plaintiff is to have judgment against the defendant for its costs in the sum of $21,995 plus GST and disbursements.