HENNAH AND HENNAH V KELLY AND KELLY HC NAP CIV-2009-441-000103

HENNAH AND HENNAH V KELLY AND KELLY HC NAP CIV-2009-441-000103 30 September 2009IN THE HIGH COURT OF NEW ZEALAND NAPIER REGISTRY CIV-2009-441-000103UNDER the Arbitration Act 1996 IN THE MATTER OF an application for leave to appeal to the High Court under cl 5(1)(c) of the Second Schedule of the Act, and an application to set aside an award under cl 34 of the First Schedule of the Act BETWEEN GEOFFREY MAURICE HENNAH AND CHERYL ELLEN HENNAH Plaintiffs AND FENTON THOMAS KELLY AND FELICITY MONICA MARY KELLY Defendants Hearing: 30 September 2009 (On the Papers) (Heard at Auckland) Appearances: L J Blomfield for the Plaintiffs J O Upton QC for the Defendants Judgment: 30 September 2009JUDGMENT OF DUFFY J [Re Costs]This judgment was delivered by Justice Duffy on 30 September 2009 at 4.00 pm, pursuant to r 11.5 of the High Court Rules Registrar/Deputy Registrar Date:Counsel: J O Upton QC P O Box 10048 Wellington 6143 for the Defendants Solicitors: Sainsbury Logan and Williams P O Box 41 Napier 4140 for the Plaintiffs Copy To: Kelly McNeil (G D J Wellwood) P O Box 1148 Hastings 4156[1] The defendants were the successful party in an application under cl 5(1)(c) of the Second Schedule to the Arbitration Act 1996 for leave to appeal from a decision of an arbitral tribunal. [2] I held in the judgment of 17 June 2009 that there was no question of law arising from the arbitral decision, as the method of valuation used by the arbitrator was in accordance with the original methodology mentioned in the bailment agreement between the parties. [3] Both parties have filed memoranda on costs. Both parties accept and agree that the application for leave to appeal to the High Court under cl 5(1)(c) of the Second Schedule of the Act is not specifically identified and dealt with in Schedule 3 of the High Court Rules, but that such application is analogous with a defended interlocutory application. [4] The defendants claim costs for a total of $5,120, which is made up as follows: i) Two days for commencement of defence and preparation, filing and serving notice of opposition; ii) No claim for affidavits in support; iii) 0.4 day for preparation of memorandum for judicial telephone conference; iv) 0.4 day for appearance at judicial telephone conference on 18 March 2009; v) 0.25 day for preparation for defended hearing; and vi) 0.25 day for defended hearing on 17 June 2009. This comes to a total of 3.2 days, with costs claimed on a category 2 basis ($1,600 per day), equalling $5,120.[5] The plaintiffs take issue with the two days that are stipulated for the commencement of defence and preparation. The plaintiffs argue that the memorandum filed for the defendants records that the application for leave to appeal was an originating application and that, therefore, costs for the first step are recoverable under item 2 in Schedule 3 of the High Court Rules. The plaintiffs generally accept that the application for leave to appeal was a category 2 proceeding, but submit that r 14(5)(1) of High Court Rules provides that the appropriate time band (A, B, or C) for each step in the proceeding must be separately assessed. [6] The plaintiffs argue that defendants' notice of opposition and supporting affidavits dealt only with the first (of the two) applications made by the plaintiffs, which involved the leave to appeal. Because the legal issues in that application were relatively confined, the plaintiffs submit that band A ought to be applied to the first step claimed by the defendants (permitting only one day for commencement of defence). As a result, the plaintiffs contend that costs should be awarded for 2.2 days, equalling $3,520. [7] The defendants, in reply, argue that the situation faced by the defendants was a proceeding of average complexity requiring counsel of skill and experience considered average in the High Court. The defendants contend that there opposition to the application required: i) a review of the facts, the arbitrator's award, and what had gone on before; ii) interviews with the clients as appropriate; iii) research and review of the case law on whether the plaintiffs' application involved a question of law in any event, and the legal status of the agreement to refer matters to arbitration; and iv) the drafting and finalisation of the notice of opposition.[8] Furthermore, the defendants point out that they have not claimed costs in respect of the affidavits filed in opposition, which involved considerable work in their preparation. They, therefore, submit that if a band A categorisation were considered for the initial notice of opposition, then the defendants would seek one day's preparation for the two affidavits in opposition, which means that the costs claimed would stay exactly the same (being 3.2 days at $1,600 a day, equalling $5,120). [9] The starting point is r 14.1, which provides that all matters are at the discretion of the court if they relate to costs of a proceeding. The principles applying to the determination of costs are set out in r 14.2(a) to (g). Rule 14.3 sets out the categorisation of proceedings in category 1, 2 and 3, where category 1 represents proceedings of a straightforward nature, category 2 proceedings of an average complexity, and category 3 proceedings that are complex and significant. It is further stated by McGechan on Procedure (HR14.3.01) that the categorisation applies to the whole of the proceeding, the whole tenor of the rule is that a proceeding cannot be partly one category and partly another. [10] Schedule 2 sets out the daily recovery rates for the categories referred to in r 14.3, and Schedule 3 provides for the reasonable time for a step in the proceeding. Rule 14.3(2) further provides that a determination of what is a reasonable time for a step must be made by reference to band A (a comparatively small amount of time is considered reasonable), band B (a normal amount of time is considered reasonable), or band C (where a comparatively large amount of time is considered reasonable). In contrast to the categorisation of the proceeding done under r 14.3, the appropriate time band for each interlocutory step in the proceeding is fixed by the Judge, and the bands may differ at each step. [11] When analysing the documents filed by the defendants in opposition to the application for leave to appeal, I have concluded that Band A is more accurate to reflect the reasonable time for the preparation of the notice of opposition. However, I then do accept the argument of the defendants that time should be allowed for preparing and filing the supporting affidavits. I consider that the two affidavits filed in opposition can quite properly be seen as qualifying for one day's preparation. Theresult, when band A categorisation is applied to the initial notice of opposition, but then one day's preparation is given for the two affidavits in opposition, comes to a total of 3.2 days at $1,600 a day, which is the same outcome as was originally sought by the defendants. I am satisfied that the overall preparation of the defendants would be fairly expressed by 3.2 days at category 2B. Consequently, I find that the defendants are entitled to costs of 3.2 days on a category 2B basis ($1,600 per day, which amounts to the sum of $5,120). Duffy J