THE HONG KONG AND SHANGHAI BANKING CORPORATION LIMITED V HOWE HC AK CIV-2012-404-0419

THE HONG KONG AND SHANGHAI BANKING CORPORATION LIMITED V HOWE HC AK CIV-2012- 404-0419 [7 November 2012]IN THE HIGH COURT OF NEW ZEALANDAUCKLAND REGISTRYCIV-2012-404-0419[2012] NZHC 2935BETWEEN THE HONG KONG AND SHANGHAIBANKING CORPORATION LIMITEDPlaintiffAND BETSY-ANN HOWEFirst DefendantAND CHRISTOPHER SIMON HOWESecond DefendantHearing: 15 May 2012Appearances: Ms Chamberlain for PlaintiffMs Halloran for DefendantJudgment: 7 November 2012JUDGMENT OF ASSOCIATE JUDGE DOOGUE[on Costs]This judgment was delivered by me on07.11.12 at 4.30 pm, pursuant toRule 11.5 of the High Court Rules.Registrar/Deputy RegistrarDateCounsel:MinterEllisonRuddWatts, P O Box 3798, Auckland – nikki- chamberlain@minterellison.co.nzChris Patterson Barristers, 36 Kitchener Street, Auckland – andrea@patterson.co.nz[1] In this case the parties are in dispute concerning the extent of indemnity costs which the plaintiff seeks to recover. The plaintiff recovered $32,994.83 plus interest of $1,345.80. The plaintiff seeks to recover legal costs on a solicitor/client basis of $33,945.85. The plaintiff is entitled to recover the costs charged because its contract with the defendants says so. But there are limits to what the plaintiff can recover.The costs must be reasonable. The defendants did not contractually engage to paylegal costs which are unreasonable.[2] Traditionally, the approach taken to assessing the fairness and reasonableness of costs includes matters such as what is at stake and the result obtained for the client. In my view if there was a dispute between the bank and its lawyers over the costs in this case there would be good grounds for the bank to decline to pay costs which represented over 100 percent of the amount at stake and what was recovered. On the other hand, it may be that the bank has happily paid those costs not because it considers them to be reasonable but because it believes that it can recover them from the defendants. But the bank cannot outflank the limits of reasonableness in the costs that it recovers in this way.[3] The Court has to take a robust view of these issues. The alternative is that itwill get mired down in expert opinions about what are reasonable costs in all thecircumstances. In my view what costs represent a reasonable proportion to theamount at stake and the amount recovered must lie somewhere along a continuum.One of the problems is that the bank may take the view that it is not the money thatmatters but that it must be seen as being the type of organisation which strictlyenforces debts owed to it no matter how small they are. The bank has not howeverput forward such considerations in this case. I therefore approach matters on thebasis that the amount of what the bank would reasonably spend on pursuing thedefendants in this case has to have some economic rationality. Incurring fees whichare over a 100 percent of the amount at stake is not rational or reasonable. What isrational and reasonable having taken account of the matters that I have been referringto? A range of figures might fall into the category of a reasonable fee. In my viewthat band would extend from 50 percent of the amount at stake up to 66 percent (twothirds). In terms of figures that represents a range of approximately $16,500 to $21,000. Dealing with matters in the round I would select the figure of $20,000 as the approximate upper limit. Accordingly I order that the plaintiff is entitled to ajudgment for solicitor/client costs in the sum of $20,000 together withdisbursements. I understand that there is no dispute about the disbursements chargedbut to cover the eventuality of any such dispute, in case the parties are unable toagree the amount of disbursements they are to be fixed by the Registrar._____________J.P. DoogueAssociate Judge