Farnsworth v Perkins [1999] CKCA 1; CA 3 1999 (9 August 1999)

IN THE COURT OF APPEAL OF THE COOK ISLANDS
HELD AT AUCKLAND

CA.3/99

BETWEEN

A STEPHEN FARNSWORTH & ANOTHER
Appellants

AND

RONDO W PERKINS & OTHERS
First-Second Respondents

Hearing: 9 August 1999
Coram: The Hon Sir Graham Speight JA (Presiding)
The Hon Sir Ian Barker JA
His Honour Judge AG Mcllugh

Counsel: J Katz QC for Appellants
GB Chapman & AM Manarangi for Respondents

Judgment: 9 August 1999

(ORAL) JUDGMENT OF THE COURT DELIVERED BY THE HON SIR IAN BARKER JA

Solicitors:

Tim Arnold, Solicitor, Rarotonga, for Appellants;
AM Manarangi, Solicitor, PO Box 514, Rarotonga, for Respondents.

This is an appeal against a decision of Hillyer J given in the High Court of the Cook Islands held at Auckland on 19th May 1999. His Honour awarded a global amount of $40,000 for costs and disbursements in favour of the respondents who became entitled to an award of costs upon the filing by the appellants of a non-suit in civil proceedings in the High Court. Such filing was only one working day before the fixture allocated for the hearing of the claim and counterclaim in that Court. The Judge fixed the sum of $40,000 without, as is usual, allocating an amount for costs and then adding disbursements to be fixed by the Registrar.

In his judgment, the learned Judge set out a brief history of the litigation which commenced only in January of this year. It had a fixture allocated by the Chief Justice on 12^th March 1999 for a hearing in Auckland on 12^th April 1999.

Hillyer J had received lengthy submissions from both counsel on the question of costs including particularly the amounts that had been billed to the respondents by their legal advisers in the Cook Islands, New Zealand and the State of Idaho, USA. These amounts totalled some $NZ88,733.00.

After considering the submissions of both counsel, the Judge awarded "an amount of $40,000 which would be the minimum which should be awarded and would be fair to both parties. This would include the costs incurred in the applications before the Chief Justice, and disbursements".

The litigation concerned a dispute between shareholders in a company called Crown Beach Executive Villas Ltd which owned and operated a resort complex constructed on land in the Cook Islands at Vaitamauga. There was a deadlock between the two lots of shareholders; one represented by the appellants, and the other by the first respondents. This deadlock resulted in the litigation. The appellants applied, successfully, for an interim injunction which was granted by the Chief Justice. The respondents did not seek to set aside that injunction. A defence and counterclaim were filed by the respondents on 9^th March 1999: a Judicial Conference was convened by the Chief Justice on 12^th March 1999. The Chief Justice allocated an urgent fixture in Auckland because of the impasse in the management of the company.

It was at this stage that the solicitors for the appellant in Rarotonga instructed senior counsel in New Zealand. The allocation of a fixture due to begin in Auckland on 12^th April 1999, presented substantial difficulties to that counsel and also to the appellants who, like the respondents, were resident in the USA. New counsel for the appellants sought an adjournment before Hillyer J. supported by a memorandum from counsel in support and a memorandum in opposition from the respondent's counsel.

On 1st April 1999, Hillyer J. declined the motion for an adjournment and confirmed the fixture.

The appellants then sought leave to appeal to the Court of Appeal against the refusal of the adjournment. The Chief Justice convened a telephone conference for the purposes of determining the motion for leave to appeal and to consider the parties' respective transcripts of the Judge's oral decision. The Chief Justice declined leave to appeal. The appellants then decided, according to Mr Katz, that their only course was to elect a non-suit. It appears from a memorandum lodged by Mr Katz that counsel considered he could not, for various reasons, in his client's interests, go to trial on the pleadings as then formulated and that he considered be would have no option but to elect a non-suit. A further course of action was contemplated because there was additional evidence which would not be available at the trial date.

Hillyer J. had declined leave to the appellants to amend their claim but had granted their request for additional discovery from the respondents.

At the trial in Auckland on 12th April 1999, the respondents obtained declarations at a formal proof hearing. The appellants attended through counsel but offered no opposition: they did not consent.

There was then a subsequent hearing about costs buttressed by written submissions from both counsel before Hillyer J. This decision resulted in the judgment currently under appeal.

One preliminary matter concerns the jurisdiction of the High Court to make costs orders in whatever amount is considered appropriate. Section 92 of the Judicature Act 1980-81 provides:

"Costs. Subject to this Act and to the provisions of the Crimes Act 1969, the High Court shall have power to make such order as it thinks just for the payment of the costs of any proceedings by or to any party thereto. Such costs shall be in the discretion of the Court, and may, if the Court thinks fit, be ordered to be charged upon or paid out of any fund or estate before the Court."

Rule 300(1) of the Code of Civil Procedure provides to similar effect. We do not read the provisions of Rule 300(3) (which refers to a Scale of Costs) as requiring the scale to be applied in every case other than those which come under the exceptional provisions of Rule 309 which deals with cases involving novel or important questions.

We consider the appropriate approach is that taken by Hardie Boys J in the High Court in New Zealand in Morton v Douglas Homes Ltd (No.2) [1984] 2 NZLR 620 where His Honour indicated "the scale of costs ... was a legislative direction as to what is to be regarded as a reasonable contribution in the ordinary kind of case. If in the circumstances of a particular case compliance with that direction would not achieve the purpose of an award of costs, the Court is entitled to award more (or less). While the nature and course of the proceedings must always be the dominant consideration, there was room for recognising the amount of solicitor and client costs actually and reasonably incurred in the particular case. "

We therefore think the Judge was quite entitled to award for costs whatever amount seemed just to him in all the circumstances of this case. We consider that this was a case, like that of Commerce Commission v Qantas Airways Ltd [1992] 5 PRNZ 457 "where the Court cannot take a view as to the merits of the plaintiff's allegations". There the Court followed another decision in the New Zealand High Court; i.e. that of Henry J in Chase Corporation Ltd v. Rank Overseas Holdings Ltd [1988] 1 PRNTZ 426-430. In that case, Henry J indicated, "It is not possible ... to form a judgment as to real strength or weakness of the claims without undertaking a full evaluation of the evidence and the legal issues, a task which is presently quite unsuitable. There may be instances where a claim is so obviously without basis or an abuse of procedure when it can be said with confidence it should never have seen the light of day... ".

In a similar decision made in Kupe Group Ltd v. Ariadne Australia Ltd (unreported) 13^th January 1992, High Court, Auckland, CP.151/88. There the plaintiff had discontinued on the eve of trial and had sought to oppose an application for costs by a defendant on the basis that the defendant was likely to be made liable if the matter went to trial. It was considered in that case that the Court could not possibly attempt to decide that allegation.

In the Qantas (supra) case, it was also pointed out that the scale is irrelevant in commercial litigation and that there is a discretion to override the scale on an application for costs on a discontinuance. The issue arose from the ownership by Qantas of shares in Air New Zealand and from an attempt by the Commerce Commission to seek some relief from that situation. There were questions of interlocutory issues and was some urgency. $20,000 costs plus disbursements was made to one of the parties. It was noted in that case that costs awarded are not a complete indemnity by any means but awards are normally regarded as a contribution to costs, bearing in mind the amount of time involved and the importance of the litigation.

Having held that the High Court was entitled to make an award of costs, it is now appropriate to consider, as did the trial Judge at first instance for what is it that the first respondents are being compensated, in part, and secondly, how much did they actually expend in costs?

I have already listed, as did the learned Judge, the various interlocutory and other steps taken that involved the Court from the date of commencement of the proceedings in January 1998 until the formal hearing of the counterclaim on 12^th April 1999. In addition, because the non-suit was elected only one working day prior to the trial, one must assume that the defendants are entitled to some contribution for the costs of preparing for trial. This preparation would have had some difficulty because the witnesses were resident in the USA. Fortunately it was possible to cancel the airline bookings: nobody arrived in Auckland needlessly on the part of the respondents.

The next point is the amount of costs claimed. The costs and disbursements for the solicitors in the Cook Islands were $NZ22,180.76 (including VAT). The costs of the solicitors instructed by them in New Zealand were $51,438.71 and the costs and disbursements relating to the litigation payable to US attorneys amounted to $NZ15,113.11. A total of $88,732.58.

Before Hillyer J. it was submitted an order representing a reasonable contribution to the first defendant's costs would be $65,000. Copies of the accounts setting out fill details of the work done were supplied.

There are cases which speak of the `Rolls Royce' treatment for costs and that those liable to contribute to costs should not have to pay for Rolls Royce treatment. Whilst not necessarily categorising this case as displaying Rolls Royce treatment, it seems clear that the preparation undertaken by the respondents was extremely thorough: no undue risks appeared to have been taken and a very thorough presentation resulted.

Mr Katz urged on us that this is litigation in the Cook Islands; that no previous award of costs, even in this Court, produced more than $15,000. There was the sum of $20,000 awarded by this Court in 1994 in respect of litigation concerning constitutional provisions in the Electoral Act relating to the eligibility of public servants to stand for parliamentary office. However, those were, from my recollection, reasonably lengthy proceedings which went to the High Court, the Court of Appeal and then on an application for leave to appeal, to the Privy Council.

As Eichelbaum CJ put it in Waiatarua Action Group v. Minister of State Owned Enterprises [1990] 2 PRNZ 447-451, one should not approach the matter of costs on the basis of the parties' natural desire to have the best representation possible or the costs that may be incurred might be on the "to leave no stone unturned" basis.

Although we acknowledge this was a case involving parties from other jurisdictions, it was not a particularly complex case of the unusual sort. Company deadlock issues are not unusual certainly in a Court in New Zealand; the amount involved was wider $200,000. True, the hearing had to be in New Zealand and witnesses had to come from USA. But we do not think that those facts, on their own, justify putting the costs in a bracket much higher than any cost ever before been awarded in the Cook Islands particularly for a case which never went to trial and which only took a little over three months from start to finish.

It will often be the way that in litigation involving the Cook Islands, there will be hearings in Auckland and Auckland counsel will be involved but this was categorised by Mr Chapman as an international case. It does not strike us as being a case of vast public importance, it had a scope of a fairly routine nature involving warring blocks of shareholders.

We are aware that Courts of Appeal should not, and do not, interfere lightly with cost awards and that this is an appeal from the exercise of a discretion. Wilson & Horton v. Attorney-General [1997] 2 NZLR 513 is but one example (at p 529).of the Court being reluctant on appeal to interfere with a discretionary costs order but nevertheless should do so if it considered the Judge had not proceeded on an incorrect basis.

In this present case, we are of the view that the learned Judge, by making an award of this dimension, went beyond the acceptable limits of the discretion for a matter of this nature. We acknowledge, as he did, costs should not be punitive but we do not think the amount of $40,000 reasonable; even considering the amount that the respondents had incurred.

This is not one of those cases where solicitor/client costs should be ordered. There is a authority suggesting repayment of solicitor/client costs but usually where the party who has to pay has acted in a high-handed or extremely dilatory way. Nobody can say this case was in that category. A large costs order was made yet the case was really brief, lasting only three months. The total amount of the claim was not extraordinarily high.

Giving the matter the best consideration we can, we consider that the amount of costs should be $15,000 plus disbursements as fixed by the Registrar but in any event, those disbursements are not to exceed $5,000, The appeal is accordingly allowed as indicated.

ADDENDUM

After hearing the oral submissions of counsel, we award to the appellants for this appeal $1,000 tests plus reasonable disbursements as fixed (if necessary) by the Registrar.