GENERAL FINANCE LIMITED v SEREPISOS [2017] NZHC 2823

GENERAL FINANCE LIMITED v SEREPISOS [2017] NZHC 2823 [17 November 2017]IN THE HIGH COURT OF NEW ZEALANDWELLINGTON REGISTRYI TE KŌTI MATUA O AOTEAROATE WHANGANUI-Ā-TARA ROHECIV-2016-485-835[2017] NZHC 2823BETWEEN GENERAL FINANCE LIMITEDPlaintiffAND ALLIKI SEREPISOSDefendanton the papersCounsel: S O McAnally for the PlaintiffK R Smith for the DefendantJudgment: 17 November 2017JUDGMENT OF ASSOCIATE JUDGE SMITH - COSTS[1] On 28 September 2017 I dismissed an application for particular discovery bythe defendant (Mrs Serepisos) against the plaintiff (General Finance). In myjudgment, I indicated that "costs will be at least on a 2B basis, but it may be thatGeneral Finance is entitled to assert a claim for indemnity costs under cl 7(f) of therelevant term loan agreement".1 I invited counsel to confer over costs, and if theywere unable to agree, General Finance was to file and serve a memorandum on costswithin 10 working days.[2] The parties have been unable to agree on costs, and General Finance now seeksindemnity costs of $9,660.00 (including GST) and disbursements of $1,010.47(including GST). General Finance notes that, being a finance company, it is unable to1 General Finance Ltd v Serepisos [2017] NZHC 2367 at [48].recover GST by way of input credit due to s 14(1)(a) of the Goods and Services TaxAct 1985.[3] General Finance also asks for an additional award of costs in the sum of$2,012.50 (including GST), for producing its counsel's memorandum on costs.Counsel refers to Mrs Serepisos' "apparent unwillingness to engage on this particularquestion in a timely fashion".Legal principles applicable to indemnity costs[4] Pursuant to r 14.6(4)(e) of the High Court Rules 2016 (HCR), the court mayorder a party to pay indemnity costs if the party claiming costs is entitled to indemnitycosts under a contract or deed.[5] In Black v ASB Bank, the Court of Appeal discussed the proper approach to anapplication such as the present:2[80] Assessing whether the indemnity costs claimed under a contract arereasonable involves the Court making an objective assessment of thesematters:(a) what tasks attract a costs indemnity on a proper constructionof the contract;(b) whether the tasks undertaken were those contemplated in thecontract;(c) whether the steps undertaken were reasonably necessary inpursuance of those tasks;(d) whether the rate at which the steps were charged wasreasonable having regard to the principles normallyapplicable to solicitor/client costs; and(e) whether any other principles drawn from the general law ofcontract would in whole or in part deny the claimant its primafacie right to judgment.[6] In Frater Williams, the Court observed that there is "room for robust judgmentas to the costs considered reasonable in all the circumstances".32 Black v ASB Bank Ltd [2012] NZCA 384 at [80].3 Frater Williams & Co Ltd v Australian Guarantee Corp (NZ) Ltd (1994) 2 NZ ConvC 191,873(CA) at 191,887.Relevant contractual terms[7] Clause 7(f) of the term loan agreement provided:Costs of default are payable: All sums expended by [General Finance] in theexercise of [General Finance's] rights and powers following a default or inexercising or enforcing or attempting to exercise or enforce any power, rightor remedy contained or implied in this contract are payable by [Mrs Serepisos]to [General Finance] upon demand. This clause does not limit any other termof this contract relating to costs; nor is it limited by any other such term.[8] Clause 12(a)(ii) of the term loan agreement provided:Costs payable by [Mrs Serepisos]: [Mrs Serepisos] must pay to [GeneralFinance] upon demand, [General Finance's] legal costs (as between solicitorand client) for:(ii) costs on default: legal services arising from or relating to any defaultunder this contract or the enforcement or exercise or attempted enforcementor exercise of any of [General Finance] rights, remedies and power under thiscontractSubmissions[9] Mr McAnally submits that while the costs General Finance seeks were incurredopposing Mrs Serepisos' application, that application was brought in the course of aproceeding to enforce General Finance's right to payment under the loan contractfollowing her default. He submits that this brings the costs within the meaning of cl7(f), and that equally applies to disbursements.[10] Mr McAnally argues that the $9,660.00 fee was reasonable. He notes that ona 2B basis costs would have been $7,024.50, and given that scale costs are intended toreflect two-thirds of a reasonable fee, the fee in fact charged can be consideredmodest.4[11] Mr Smith questions whether the steps taken by General Finance werereasonably necessary. He submits that this matter was not overly complex, and it didnot justify the time expended by General Finance. However, he did not take issue withthe hourly rate of $500.00 claimed for Mr McAnally's attendances, nor with the4 High Court Rules 2016, r 14.2(1)(d).reasonableness of the disbursements claimed, or the reasonableness of the "costs oncosts" claim.Discussion and conclusions[12] There are two preliminary matters. First, I accept Mr McAnally's submissionthat the costs now claimed are costs incurred by General Finance in enforcing orattempting to enforce its rights, and are thus covered by cls 7(f) and 12(a)(ii) of theterm loan agreement.[13] Secondly, the concern I raised in my costs judgment on the summary judgmentapplication about the ultimate recovery General Finance might make at trial does notapply here.5 Costs on a summary judgment application are not required to be fixed onthe determination of that application.6 But r 14.8(1) of the HCR provides that costson other kinds of opposed interlocutory application are to be fixed when theapplication is determined, unless there are special reasons to the contrary. In Chapmanv Badon Limited, the Court of Appeal noted that:7[the requirement that costs are normally to be fixed when an interlocutoryapplication is determined] reflects the fact that the merits of particularapplications and the merits of the substantive proceedings are differentmatters.[14] I am satisfied that that is the position with Ms Serepisos' unsuccessfuldiscovery application, and that there are no "special reasons" why costs on thatapplication should not be fixed now.[15] I consider that Mr McAnally's comparison of the amount claimed with scalecosts for the discovery application provides a good indication that the amount of timespent by counsel for General Finance was not unreasonable. I further note that theamount of time spent was increased by the need to prepare the bundle of documents,which was not done by Mrs Serepisos. I consider that the costs claimed on thediscovery application were reasonable in all the circumstances.5 See General Finance v Serepisos [2017] NZHC 1367 at [14]-[17].6 High Court Rules, r 14.8(3).7 Chapman v Badon Ltd [2010] NZCA 613 at [12].[16] On the question of disbursements, I note that the majority are for travelexpenses. It has been held that travel expenses are a disbursement under r 14.12(1) ofthe HCR so long as they were reasonably necessary for the conduct of the proceedings,in accordance with r 14.12(2)(c).8[17] Mr McAnally refers to the following dicta from Fisher J in Russell v TaxationReview Authority:9It would be hard to argue necessity where there is an adequate choice ofsuitable counsel in the High Court centre involved and no other specialjustification for instructing out of town counsel. Of course that is only thestarting point. Available experience and expertise is one obvious dimension Another could be the location of the client. If the client comes from adifferent region the cost of transporting counsel from that region might wellbe outweighed by efficiencies gained during the preparatory stage.[18] Mr McAnally submits that the travel expenses were reasonably necessary inthis case, because General Finance is Auckland-based, and this is a serious matter forit. He refers to the connection between the discovery application and the substantiveproceeding, and submits that the cost of briefing outside counsel would likely haveexceeded the travel expenses sought ($840.04) in any event.[19] I accept that it was reasonable for General Finance to incur these travelexpenses, and that they are not excessive. If General Finance had briefed Wellingtoncounsel to appear at the hearing of the discovery application that counsel would havebeen required to spend "reading in" time, the cost of which would likely have equalledor exceeded the $840.04 now claimed as a disbursement.[20] The remainder of the disbursements comprise the filing fee for the notice ofopposition, binding supplies, office expenses and courier charges. I do not considerthat any of these expenses were unreasonable.[21] With respect to the claim for "costs on costs", Mr McAnally refers to thefollowing statement of Allan J in Body Corporate Administration Limited v Mehta (No4):108 Buis v Accident Compensation Corporation (2010) 19 PRNZ 585.9 Russell v Taxation Review Authority (2000) 14 PRZN 515 at [25].10 Body Corporate Administration Limited v Mehta (No 4) [2013] NZHC 213 at [85].It is now well established that costs may be awarded in respect of anapplication for costs. An application for costs is to be treated no differentlyfor costs purposes from an ordinary interlocutory application, so costs may beawarded according to scale or on an increased or indemnity basis asappropriate.[22] Mr McAnally notes that Mrs Sereposis rejected an offer to settle costs at a totalof $9,500, and that this application would not have been necessary but for thatrejection.[23] In light of the conclusions reached above, I agree with Mr McAnally that theoffer regarding costs was a reasonable one in the circumstances. I accept that GeneralFinance is entitled to an award of "costs on costs".[24] However, I consider that $2,012.50 is rather high for the memorandum oncosts, where concerns over the importance of the proceeding would not have been assignificant a factor as may have been the case on the summary judgment applicationor on Mrs Serepisos' discovery application. I think the justice of the case will be metby an award of $1,500 for the "costs on costs" claim.Result[25] Mrs Serepisos is to pay General Finance costs totalling $12,170.47,comprising:(a) costs of $9,660 (including GST) on the unsuccessful discoveryapplication;(b) disbursements of $1,010.47 (including GST); and(c) "Costs on costs" of $1,500.00 (including GST).Associate Judge SmithSolicitors:Keegan Alexander, Auckland for the PlaintiffPeter C Gilbert – Willis Street, Wellington for the Defendant