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High Court of New Zealand Decisions |
IN THE HIGH COURT OF NEW ZEALAND
AUCKLAND REGISTRY
CIV 2006-404-5175
BETWEEN CASH FOR SCRAP LIMITED
Plaintiff
AND CANWEST TV WORKS LTD
First Defendant
AND
AUCKLAND REGIONAL COUNCIL
Second Defendant
Hearing: 9 July 2008
Counsel:
R E Harrison QC for Cash for Scrap Ltd, Ms C Down and Mr A D
Banbrook
J G Miles QC and A Ferguson
for Canwest TV Works Ltd
No appearance by or on behalf of Auckland Regional Council
Judgment: 17 November 2008
JUDGMENT OF HEATH J
This judgment was delivered by me on 17 November 2008 at 3.00pm pursuant to
Rule 540(4) of the High Court Rules
Registrar/Deputy Registrar
Solicitors:
Wilson Harle, PO Box 4539, Shortland Street, Auckland
C K Lyon, PO Box 128365, Auckland
Counsel:
J G Miles QC, PO Box 4338, Auckland
R E Harrison QC, PO Box 1153, Auckland
CASH FOR SCRAP LIMITED V CANWEST TV WORKS LTD AND ANOR HC AK CIV 2006-404-5175 17
November
2008
Contents
The issue [1]
Introduction
[2]
The costs application [8]
Background
to the defamation proceeding [14]
Was the defamation action tenable? [23]
Analysis of costs claims
(a) The claim for costs against Cash for Scrap Ltd [28]
(b) The claim for costs against
Ms Down [36]
(c) The claim for costs against Mr Banbrook [49]
Result
[59]
The issue
[1] Cash for Scrap Ltd brought defamation proceedings against
Canwest TV
Works Ltd (TV3). Those proceedings were discontinued a few months before trial.
TV3 seeks indemnity costs against not
only Cash for Scrap Ltd but also a director,
Ms Carol Down, and the barrister instructed to act for Cash for Scrap Ltd, Mr
Banbrook.
Introduction
[2] Cash for Scrap Ltd dealt in scrap metal, from premises situated in Bairds
Road, Otara. The company has
an unhappy history of failure to comply with
resource consents granted in its favour. Amongst other things, problems have arisen
from the leakage of oil and other contaminants into the ground, adjacent to a
waterway, as a result of its business operations.
[3] On 26 April 2006, TV3 broadcast a news item from the business premises of
Cash for Scrap Ltd. It did so in the company of
a pollution control officer from the
Auckland Regional Council (the Regional Council). The broadcast was not
complimentary
of Cash for Scrap Ltd's business activities. The company was
identified by name. Visual images of the business premises were
shown. The
pollution control officer was also interviewed.
[4] On 21 July 2006, Cash for Scrap Ltd issued proceedings against
the Regional
Council and named employees. Damages of over $15 million were claimed, based
on misfeasance in public office and intentional
infliction of economic loss by
unlawful means.
[5] In August 2006, Cash for Scrap Ltd issued defamation proceedings against
TV3. Compensatory and aggravated damages were sought, together with special
damages of $1,460,000, alleged to be the equivalent of
six months loss of gross
profit.
[6] The proceeding against the Regional Council was struck out as a result of
judgments
given by Cooper J on 9 October and 20 December 2007.
[7] The defamation proceeding was set down for hearing in May 2008.
An
adjournment was sought because senior counsel, whom Cash for Scrap Ltd intended
to instruct for the trial, was unavailable. On 15 January 2008, Mr Banbrook, an
Auckland barrister who
had been instructed to act for Cash for Scrap Ltd, advised
the solicitors for TV3, by telephone, on 15 January 2008 that the claim
would be
discontinued. A notice of discontinuance was subsequently filed. Costs remained at
large.
The costs applications
[8]
After referring to the sorry history of Cash for Scrap Ltd's failure to comply
with valid regulatory requirements of the Regional
Council and orders of the
Environment Court, Mr Miles QC, for TV3, referred to the principle that a person
who pursues an unlawful
trade, or who participates in illegal acts, cannot maintain an
action for defamation in respect of reputation gathered through illegal
activity.
Mr Miles submitted that the proceeding against TV3 was hopeless from inception.
See, generally, Gatley on Libel and Slander
(10th ed, Sweet & Maxwell London,
2004) at para 2.15 and Wilkinson v Sporting Life Publications Ltd [1933] HCA 46; (1933) 49 CLR
365 (HCA) at 379.
[9] Indemnity costs are sought against Cash for Scrap Ltd, Ms Down and Mr
Banbrook. There are three distinct jurisdictional sources
for the claims.
[10] The claim for costs against Cash for Scrap Ltd must be determined under the
High Court Rules. Rule
476C creates a presumption that a plaintiff who
discontinues shall pay costs to the defendant up to the date of discontinuance. That
presumption can be rebutted: eg Kroma Colour Prints Limited v Tridonicatco NZ
Limited (2008) 18 PRNZ 973 (CA). Whether indemnity costs should be ordered will
turn on the application of r 48C(4) of the Rules.
[11] The jurisdiction
to order non-party costs springs from this Court's inherent
jurisdiction. The circumstances in which costs might be awarded against
a non-party
were discussed in Dymocks Franchise Systems (NSW) Pty Ltd v Todd (No. 2) [2005]
1 NZLR 145 (PC). The questions are whether
the claim for costs against Ms Down
falls within the scope of those principles and, if so, are indemnity costs justified.
[12]
The jurisdiction to award costs against counsel who prosecutes a civil claim
on behalf of a client arises from the High Court's
inherent disciplinary jurisdiction
over legal practitioners. The jurisdiction is founded on the proposition that counsel
owes obligations
to the Court which transcend those owed to a client. The
circumstances in which an order of this type might be
made were discussed in
Harley v McDonald [2002] 1 NZLR 1 (PC).
[13] Mr Harrison QC, for the three parties against whom costs
are sought, submits
that there was a tenable basis for the claims to be brought and that there was nothing
in their prosecution which
would justify awarding increased or indemnity costs
against Cash for Scrap Ltd. Further, Mr Harrison submitted that, on any view,
the
claims for costs against both Ms Down and Mr Banbrook could not be substantiated,
based on the applicable principles laid down
in the two Privy Council decisions to
which I have referred.
Background to the defamation proceeding
[14] In 2001, Cash for
Scrap Ltd was carrying on business from 11 Bairds Road,
Otara. The Regional Council received a complaint about alleged pollution.
Following investigations by the Regional Council and its inability to resolve issues
either by agreement or through the use of abatement
notices, the Regional Council
sought interim and final enforcement orders from the Environment Court. Those
orders were sought to
prevent continuing contamination.
[15] Interim orders were made by consent on 4 November 2002. On the basis of
findings that
it made on 12 December 2002, the Environment Court made final
enforcement orders on 19 December 2002.
[16] During 2003, Cash
for Scrap Ltd, Ms Down and Mr Conway (Ms Down's
partner) were charged with various offences under the Resource Management Act
1991.
Those charges referred to events that occurred between 1 May 2001 and 18
June 2003. Cash for Scrap Ltd and Mr Conway pleaded guilty
to a number of counts
in the indictment shortly before trial. Pleas were entered to three charges of
discharging contaminants onto
land in circumstances that may have resulted in the
contaminant entering a waterway. Cash for Scrap Ltd was fined $25,000.
Mr Conway was sentenced to three months imprisonment. Both appealed against
sentence. The Court of Appeal dismissed those appeals
on 28 October 2004: see R v
Conway [2005] NZRMA 274 (CA).
[17] The Regional Council sought an order for committal against Ms Down for
non-compliance with enforcement orders.
That application was granted by
Judge Hubble on 8 June 2005. Subsequently, it was overturned on appeal to this
Court on the
grounds that Judge Hubble, sitting in the District Court, lacked
jurisdiction to make the order: Conway v Auckland Regional Council
[2007]
NZRMA 252 at [61] and [62]. Lang J held that the applications should have been
filed in the Environment Court and heard by an Environment Court
Judge.
[18] By this time, Cash for Scrap Ltd was conducting its business from premises
at both 11 and 13 Bairds Road, Otara.
[19] On 26 April 2006, the Regional Council took steps to implement enforcement
orders made in respect of the property at 11
Bairds Road that had been granted by
the Environment Court on 6 December 2005. When the enforcement officer went to
Cash for Scrap
Ltd's premises he was accompanied by a TV3 news crew. TV3
filmed some of the events that transpired, despite efforts made on behalf
of
Mr Moorhead, Cash for Scrap Ltd's Chief Financial Officer, to ward them off the
property.
[20] A transcript of the TV3 broadcast
was produced in evidence. After some
unpleasantries were exchanged, in relation to TV3's authority to enter the land. The
transcript
discloses the following discussion between the presenter (Ms
Middlebrook) and the Council enforcement officer:
The Council
says the yard has been polluting water ways for 5 years as
operator William Conway has already been jailed because of it.
[Libby
Middlebrook]
This is just the kind of muddy oily mess that the Council says is
unacceptable. There are
all kinds of contaminants here, hydraulic fluid oil,
fuel and battery acids and all of it flowing directly into the Tamaki
Estuary.
[Libby Middlebrook]
The first thing the Council did this morning was cripple the yard's most
important
piece of machinery the bridge it uses to weigh scrap metal.
That's when the company called in its lawyer. [Libby Middlebrook]
More oil would come off the road in the traffic along there less than what 30
metres away but would go in the back
creek there from this side. [Cliff Lyon
speaking]
The Council was about to remove the weighbridge but it stopped when
theyard said it was seeking a stay of execution from the Courts. [Libby
Middlebrook]
[21] On 27 April 2006, Cash
for Scrap Ltd sought successfully a stay of the
enforcement orders made on 6 December 2005. Shortly thereafter, in August 2006,
the
defamation proceedings were issued.
[22] Mr Harrison, in submissions, highlighted two particular passages:
a)
Ms Middlebrook's statement that "the yard has been polluting
waterways for five years" and
b) That
"there are all kinds of contaminants here, hydraulic fluid, oil,
fuel and battery acids and all of it flowing directly
into the Tamaki
Estuary".
Was the defamation action tenable?
[23] The claims for indemnity costs are based
on the premise that the defamation
proceedings ought never to have been issued. Mr Miles put forward four factors for
consideration:
a) Because Cash for Scrap Ltd's reputation had been derived through
unlawful acts, there was no
reputation to vindicate in defamation
proceedings: Wilkinson v Sporting Life Publications Ltd.
b)
In any event, Cash for Scrap Ltd's claim for $1,460,000 damages was
grossly excessive and not supported by discovered
documents.
c) Conduct of Cash for Scrap Ltd's case involved unjustifiable delays,
failure to make
full disclosure in discovery and breaches of
timetabling orders.
d) Cash for Scrap Ltd issued the
proceeding for an ulterior purpose and
never intended to proceed to trial.
[24] The principle on which Mr Miles
relies is set out in Wilkinson v Sporting Life
Publications Ltd. Dixon J said, at 375-376:
If it is a material part of a
plaintiff's cause of action that he exercises a trade
or calling, conducts a business or has engaged in a transaction and
it is
unlawful for him to do so, his action must fail. But, in my opinion, it is not
the law that a plaintiff who engages in an unlawful pursuit or transaction is
disabled from recovering in respect of defamatory statements, not otherwise
justifiable, merely because they impute
misconduct in the course of or
arising out of that pursuit or transaction.
...
[A plaintiff cannot] recover
when the defamatory character of the
publication complained of consists only in reflections upon his skill, fitness
or competence in a business or a vocation which he carried on unlawfully...
In such a case... the only reputation which he
seeks to protect from
disparagement is dependant upon or arises from an illegal course of conduct.
See also, Rich J at 372;
Starke J at 374; Evatt J at 389-380; and McTiernan J at 380-
381.
[25] Mr Harrison contended that there was no inevitability
about the defamation
proceeding foundering on the illegality point raised by Mr Miles. First, he submitted
that this was an arcane
point; one difficult to find, even in authoritative texts. By
way of illustration, he referred me to Laws NZ, Defamation at para
237 where Rt
Hon Sir Ian McKay, an acknowledged authority on defamation law in New Zealand,
deals with the point in a footnote, under
the heading "mitigation".
[26] No other authority seems to have embraced Wilkinson as a clear statement of
principle, sufficient
to found an application to strike out a Statement of Claim.
Indeed, despite the eminence (particularly in the defamation field) of
counsel
instructed by TV3, the point was not raised until 25 October 2007, in TV3's Second
Amended Statement of Defence. I find it
difficult, in those circumstances, to accept
that the principle was so clearly established that it can provide a basis for indemnity
costs, on the grounds that the proceeding was commenced in wilful disregard of
established principles of law.
[27] While there
may be good reason to suspect that Cash for Scrap Ltd issued the
proceeding as a "gagging writ", it would be difficult to draw safe
inferences that the
slow and somewhat sloppy conduct of the case was undertaken deliberately or that
the proceeding was issued for
an ulterior purpose. What is clear, however, is that the
damages claimed were excessive.
Analysis of costs claims
(a) The claim
for costs against Cash for Scrap Ltd
[28] Rule 476C of the High Court Rules provides:
476C Costs
Unless the
defendant otherwise agrees or the Court otherwise orders, a
plaintiff who discontinues a proceeding against a defendant must
pay costs
to the defendant of and incidental to the proceeding up to and including the
discontinuance.
[29] Mr Harrison
did not dispute application of r 476C. He accepted that Cash for
Scrap Ltd was obliged to pay costs on discontinuance. He did not
accept, however,
that costs should be paid on an indemnity basis.
[30] The costs incurred by TV3 were significant. On the information
provided to
me, they total $97,860.68, up to February 2008.
[31] Increased or indemnity costs may be awarded in the circumstances
identified
in r 48C of the High Court Rules. Rule 48C(3) and (4) provides:
Increased costs and indemnity costs
...
(3) The Court may order a party to pay increased costs if--
(a) The nature of the proceeding or the
step in the proceeding is
such that the time required by the party claiming costs would
substantially
exceed the time allocated under band C; or
(b) The party opposing costs has contributed unnecessarily to
the time or expense of the proceeding or step in the proceeding by--
(i) Failing to comply with
these rules or a direction of
the Court; or
(ii) Taking or pursuing an unnecessary
step or an
argument that lacks merit; or
(iii) Failing, without reasonable justification, to admit
facts, evidence,
documents, or accept a legal argument; or
(iv) Failing, without reasonable justification, to comply
with an order for discovery, a notice for further particulars,
notice for interrogatories,
or other similar requirement under
these rules; or
(v) Failing, without
reasonable justification, to accept an
offer of settlement whether in the form of an offer under rule
48G ... or some other offer to settle or dispose of the
proceeding; or
(c) The proceeding is of general importance to persons other
than just the parties and it was reasonably
necessary for the party
claiming costs to bring the proceeding or participate in the
proceeding in
the interests of those affected; or
(d) Some other reason exists which justifies the Court making
an order for increased costs despite the principle that the
determination of costs should be predictable and
expeditious.
(4) The Court may order a party to pay indemnity costs if--
(a) The party has acted
vexatiously, frivolously, improperly, or
unnecessarily in commencing, continuing, or defending a proceeding
or a step in a proceeding; or
(b) The party has ignored or disobeyed an order or direction of
the Court or breached an undertaking given to the Court or another
party to the proceeding; or
(c) Costs are payable from a fund, the party claiming costs is a
necessary party to the proceeding
affecting the fund, and the party
claiming costs has acted reasonably in the proceeding; or
(d)
The person in whose favour the order of costs is made was
not a party to the proceeding and has acted reasonably
in relation to
the proceeding; or
(e) The party claiming costs is entitled to indemnity costs
under
a contract or deed; or
(f) Some other reason exists which justifies the Court making
an order for indemnity costs despite the principle that the
determination of costs should be predictable
and expeditious
[32] The proceeding was issued some four months after the television broadcast.
The timing is equivocal; it could
be consistent with the issue of a "gagging writ" or a
genuine attempt to vindicate reputation. Mr Harrison submitted that the alleged
defamatory words pleaded in the Statement of Claim (to which reference is made in
para [22] above) were not necessarily confirmed
by the findings of the various
Courts that had ruled on aspects of Cash for Scrap Ltd's activities. I agree that this
issue is not
clear-cut.
[33] Indemnity costs are usually reserved for the most extreme of cases. Rule
48C(4) makes that clear: see, in particular,
the references to frivolous or vexatious
actions or disobedience of a Court order.
[34] The slowness of the proceeding and
the failure to comply with Court orders
in a timely fashion do, in my view, justify increased costs, but not indemnity costs.
See,
in particular, r 48C(3)(b)(i) and (iv). I rely also on the excessive damages
claimed.
[35] Proceedings such as this, particularly
having regard to the amount involved,
generally require a Category 3 order for costs, with most if not all steps based on
band B.
I propose to add an uplift of 50% on such costs. Cash for Scrap Ltd shall
pay costs to TV3 on a 3B basis (plus an uplift of 50%),
together with disbursements.
Both costs and disbursements shall be fixed by the Registrar.
(b) The claim for costs against Ms Down
[36] Mr Miles submits that Ms Down
was the sole shareholder and director of
Cash for Scrap Ltd at the relevant time. He submits that I can infer that she
authorised
a hopeless proceeding to be issued with no intention of prosecuting it to
trial.
[37] I am prepared to infer that Ms Down was
the sole director and shareholder of
Cash for Scrap Ltd at the time it issued the proceedings. By the time Mr Banbrook
gave notice
to the solicitors for TV3 that the proceeding was to be discontinued,
Cash for Scrap Ltd's name had been changed to 123 Metals Ltd.
Nevertheless,
Ms Down's name remained on the public records held by the Registrar of
Companies.
[38] In drawing that inference,
I apply the maxim that all evidence must be
weighed according to the proof which it was within the power of one side to have
produced
and in the power of the other to have contradicted: see Fairchild v
Glenhaven Funeral Services Ltd [2002] UKHL 22; [2003] 1 AC 32 (HL) at 46, para 13, applying
Blatch v Archer [1774] EngR 2; (1774) 1 Cowp 63 at 65 and Snell v Farrell (1990) 2 SCR 311
(SCC) at 328. There was no evidence from Ms Down to assist me on this point.
[39] Mr Miles accepts that TV3 must go further than
pointing to Ms Down's dual
role as director and shareholder. In any case in which a shareholder is also a director
and is concerned
in making decisions about the way in which a company will act,
there will be room to infer that a successful outcome will pass on
benefits to the
shareholder. It would defeat the purpose of the rule that treats a company as a
distinct legal entity from its shareholders
(Salomon v Salomon & Co [1897] AC 22
(HL)) to suggest that something more was not required before a non-party order
could be made.
[40] Mr Miles relies upon the Privy Council decision in Dymocks Franchise
Systems NSW (Pty) Ltd v Todd (No 2) to support that
general proposition. At para
[25], Lord Brown of Eaton-under-Heywood said, for the Board:
(1) Although costs orders
against nonparties are to be regarded as
"exceptional", exceptional in this context means no more than outside the
ordinary run of cases where parties pursue or defend claims for their own
benefit and at their own expense. The ultimate
question in any such
"exceptional" case is whether in all the circumstances it is just to make the
order. It must be
recognised that this is inevitably to some extent a fact
specific jurisdiction and that there will often be a number of different
considerations in play, some militating in favour of an order, some against.
(2) Generally speaking the discretion
will not be exercised against "pure
funders", described in para [40] of Hamilton v Al Fayed [[2002] 3 All ER
641 (CA)]
as "those with no personal interest in the litigation, who do not
stand to benefit from it, are not funding it as a matter
of business, and in no
way seek to control its course". In their case the Court's usual approach is to
give priority
to the public interest in the funded party getting access to
justice over that of the successful unfunded party recovering
his costs and so
not having to bear the expense of vindicating his rights.
[41] Mr Harrison submitted that there was no
evidence to establish that Ms Down
played any role in the provision of instructions for Mr Banbrook to initiate or to
progress the
defamation proceeding. He emphasised the point to which I have
already referred, namely that something more than status as a director
or a
shareholder is required sheet home liability for costs to a director or shareholder.
[42] Mr Harrison submitted further
that it was inappropriate to draw any inference
that Ms Down was involved in the provision of instructions, notwithstanding the
absence
of any evidence from her in opposition to the application. He referred to the
reorganisation of the affairs of Cash for Scrap Ltd
in late March 2007 and the rather
muddled picture that emerged, both as to the way in which continued trading
operations occurred
and the true ownership and control of the company. I was
informed that Cash for Scrap Ltd is now in liquidation.
[43] Nor,
Mr Harrison submitted, ought I to draw any inference of any improper
motive to issue and continue the proceedings from the letter
forwarded by
Mr Banbrook on 21 January 2008 advising that a notice of discontinuance of the
claim would be filed, due to the lack
of shareholder interest in funding the
proceeding further. Mr Banbrook wrote to the solicitors for TV3 in the following
terms:
Further to my telephone advice I now enclose by way of service a copy of a
memorandum of discontinuance of proceedings
the original of which has
been filed in the High Court at Auckland.
I confirm my telephone advice to affect that
the shareholders of Cash for
Scrap Limited have advised me immediately prior to the Christmas vacation
that they
are not prepared to continue to finance this litigation.
You should be aware that the company Cash for Scrap Limited ceased to
trade in the year ended 31 March
2007. As a result the company has no
resources from which to meet any costs order which your client may wish to
pursue.
[44] It was open for Ms Down to provide evidence on her role in prosecuting the
claim. I am prepared to infer that
she gave instructions to Mr Banbrook to prosecute
the proceeding. While there is no basis for me to infer that she acted with an
ulterior
motive, I do draw the inference from Mr Banbrook's letter (para [43] above) that,
unbeknown to TV3, Cash for Scrap had depleted
its financial resources some time
earlier and the "shareholders" (a term which would, at least, include Ms Down) were
funding the
litigation. The earlier information provided through Mr Banbrook to
TV3's solicitors which did not suggest that the company was financially
stretched
tends to explain why an appropriate order for security for costs was not obtained: see
para [49](c) below.
[45]
Although costs orders against non-parties are regarded as "exceptional", as
Lord Brown observed in Dymocks Franchise Systems (NSW)
Pty Ltd, that means "no
more than outside the ordinary run of cases where parties pursue or defend claims for
their own benefit and
at their own expense": at [25](1). The issue is whether it is just
to make an order.
[46] At the time the proceeding was issued
the business of Cash for Scrap Ltd was
in a state of disarray. That is clear from the way in which records were retained and
from
the continuing battles with the Regional Council which must have placed great
burdens on the company, both financially and in diversion
of management time. Ms
Down ought to have known the true financial position. The need for shareholder
funding was not disclosed to
TV3.
[47] Cash for Scrap Ltd is now in liquidation. The proceeding was prosecuted at a
time when its directors ought to have
known that financial difficulties were
worsening.
[48] In those circumstances I consider that costs should be awarded against
Ms
Down, but without the uplift ordered in respect of Cash for Scrap Ltd. I order that
Ms Down pay costs to TV3 on a 3B basis, together
with reasonable disbursements,
both to be fixed by the Registrar.
(c) The claim for costs against Mr Banbrook
[49] Mr Miles
founds TV3's claim for costs against Mr Banbrook on four distinct
points:
a) Mr Banbrook, while acting as counsel
for Cash for Scrap Ltd, during
the currency of proceedings in the Environment Court that preceded
the defamation proceeding, had information in his possession or
control from which he knew, or ought to have
known, that the
company had been operating illegally for many years. In particular,
Mr Miles referred
to the fact that Mr Banbrook was acting as counsel
for Cash for Scrap Ltd at a hearing in the Environment Court
before
Judge McElrea in August 2006, around the same time as the
defamation proceeding was issued. Ultimately, Judge
McElrea made
adverse findings of fact, as a result of evidence given in that hearing,
against Cash for Scrap Ltd and confirmed
that it continued to operate
illegally.
b) Mr Banbrook acted for Cash for Scrap Ltd in both the proceeding
issued against
TV3 and that issued against the Regional Council. Mr
Miles submits that Mr Banbrook engaged in a consistent pattern of
conduct designed to keep the regulator and media at bay while his
client continued its illegal activity.
c) Mr Banbrook
made a representation to the solicitors for TV3 in a
letter dated 8 November 2006 which enclosed financial statements
purporting
to record an actual profit for the six months from 1 April to
30 September 2006 and to forecast an increased profit for the
six
months to 31 March 2007. Although Mr Banbrook knew that a
company reconstruction took place in March 2007, he omitted to
inform TV3's solicitor
of that. On that basis, the solicitors for TV3
incorrectly continued to rely on the information provided earlier, even
though there had been a material change to Cash for Scrap's ability to
meet an order for security for costs.
d) Mr Banbrook
conduct himself in the litigation as if he were the
solicitor for his client, not counsel instructed to act as such. In taking
over that role, Mr Banbrook assumed obligations in respect of
discovery and inspection of documents which he failed to
perform to
the requisite standard. Those failures caused additional cost to TV3.
Mr Miles submitted it was not open to
Mr Banbrook to abdicate his
responsibility for discovery and inspection issues in the context of a
significant claim in
which over $1.4 million had been sought.
[50] Mr Harrison contended that there was no basis on which the Court's quasi-
disciplinary
jurisdiction ought to be invoked to award costs (let alone indemnity
costs) against Mr Banbrook.
[51] Mr Harrison also pointed
to four factors to answer the points raised by
Mr Miles. They were:
a) The fact that Mr Banbrook was involved as counsel
in earlier
proceedings in the Environment Court ought not to weigh against him.
Mr Harrison drew attention
to the specific terms of the alleged
defamation and submitted that there had been no findings of serial
pollution of waterways by the listed contaminants in earlier
proceedings in the Environment Court. He also submitted
that it
would be "very dangerous" to institute a head of liability for costs in
these circumstances which
is dependent upon the degree of
knowledge that a practitioner has when settling the pleadings. Mr
Harrison
submitted that the approach for which Mr Miles contended
might result in a legal practitioner who was ignorant of factual
background being less likely to have an order made against him or her
than one who was fully informed.
He submitted that it was wrong in
principle for the counsel who is best prepared to be the more exposed
to liability.
b) Mr Harrison referred to Cooper J's two judgments in the proceedings
brought against
the Regional Council. He submitted that Mr Miles
was in error in contending that the order striking out those
proceedings demonstrated that it had no merit. Mr Harrison referred
to Cooper J's adjournment of the application
following his first
judgment to give an opportunity for Cash for Scrap Ltd to re-plead.
Re-pleading did
not occur because insolvency intervened before the
second hearing was to take place.
c) On the issue of
alleged misrepresentation over the financial position
of the company, vis a vis security for costs, Mr Harrison submitted
there was no continuing obligation on Mr Banbrook to inform the
solicitors for TV3 of any change
in financial position of Cash for
Scrap Ltd. Further, he pointed out the precise terms of the letter sent
by Mr Banbrook to accompany the financial information provided to
the solicitors for TV3. At the end of
that letter, Mr Banbrook had
invited the solicitors to contact him further if they had any queries on
issues of solvency. That, Mr Harrison submitted, put the onus on the
solicitors for TV3 to revisit this issue.
d) Mr Harrison submitted that Mr Banbrook could not be criticised in
relation to the discovery process.
He drew my attention to an affidavit
sworn by Mr Moorhead explaining the reason for the lateness in filing
a verified list of documents.
He drew attention to a change in
premises, when the company moved to Tide Road, and to a fire which
caused damage to many company records.
[52] Mr Harrison also pointed to what he termed an inability of Mr Banbrook
to
answer a number of allegations on the grounds that, to do so, may contravene legal
professional privilege. In answer to a question
from me, Mr Harrison confirmed that
no waiver had been sought from the liquidator of the company, as client.
[53] The absence
of evidence on certain issues is problematic. I advised counsel
at the hearing that if Mr Banbrook's inability to respond on these
issues became a
critical point I would provide an opportunity for Mr Banbrook to seek a waiver of
privilege and to file a further
affidavit before any decision was given on the present
application. I have decided that further evidence is not required.
[54]
The circumstances in which a Court may make an order for compensatory
costs against a solicitor or a barrister engaged in proceedings
was examined and
explained in Harley v McDonald. Delivering the advice of the Privy Council, Lord
Hope of Craighead identified the
relevant principles, in the context of a claim against
a barrister sole:
[49] A costs order against one of its officers
is a sanction imposed by the
Court. The inherent jurisdiction enables the Court to design its sanction for
breach
of duty in a way that will enable it to provide compensation for the
disadvantaged litigant. But a costs order is also punitive.
Although it may be
expressed in terms which are compensatory, its purpose is to punish the
offending practitioner for
a failure to fulfil his duty to the Court. In Myers v
Elman [1940] AC 282 Lord Wright of Richmond described the Court's
inherent jurisdiction as to costs in this way at p 319:
"The
underlying principle is that the Court has a right and a duty to
supervise the conduct of its solicitors, and visit
with penalties any
conduct of a solicitor which is of such a nature as to tend to defeat
justice in
the very cause in which he is engaged professionally . . ..
The jurisdiction is not merely punitive but compensatory.
The order
is for payment of costs thrown away or lost because of the conduct
complained of. It is frequently,
as in this case, exercised in order to
compensate the opposite party in the action."
The jurisdiction is compensatory
in that the Court directs its attention to
costs that would not have been incurred but for the failure in duty. It is
punitive in that the order is directed against the practitioner personally, not
the party to the litigation who would otherwise
have had to pay the costs.
[50] As a general rule allegations of breach of duty relating to the conduct
of the case
by a barrister or solicitor with a view to the making of a costs
order should be confined strictly to questions which are
apt for summary
disposal by the Court. Failures to appear, conduct which leads to an
otherwise avoidable step in the
proceedings or the prolongation of a hearing
by gross repetition or extreme slowness in the presentation of evidence or
argument are typical examples. The factual basis for the exercise of the
jurisdiction in such circumstances is likely
to be found in facts which are
within judicial knowledge because the relevant events took place in Court or
are facts
that can easily be verified. Wasting the time of the Court or an
abuse of its processes which results in excessive or unnecessary
cost to
litigants can thus be dealt with summarily on agreed facts or after a brief
inquiry if the facts are not all
agreed. Scope for the making of a costs order
that will compensate as well as penalise is then likely to be found in making
an order against the practitioner that will indemnify the opposing litigant
against costs incurred as a result of the
breach of duty that would otherwise
not be recoverable.
[55] Mr Banbrook was not cross-examined. Therefore, I must take
his evidence at
face value in determining whether costs should be awarded. As Lord Hope made
clear in Harley v McDonald, an order
against an officer of the Court is both
compensatory and punitive (at [49]) and the context in which such issues must be
determined
are confined strictly to those which are for summary disposal by the
Court (para [50]).
[56] No counsel should be penalised for
acting in an unpopular cause.
Mr Banbrook has provided detailed evidence explaining his role in prosecuting the
claim, particularly
in answering allegations relating to failures to comply with
requests and orders for discovery. Mr Banbrook deposes that
he relied on an
assessment made by Mr Moorhead to determine the damages claimable.
[57] The evidence of Mr Banbrook, while
revealing a laxity in both prosecution of
the case and in attending to discovery that can be criticised, is not of a type that
would
justify any order for costs. In the absence of cross-examination there is no
evidence to suggest that Mr Banbrook conducted the case
with ill-will towards TV3
or with a deliberate intention (personally) of preventing TV3 from broadcasting
things he knew were true.
As to the point arising from Wilkinson, I do not consider
Mr Banbrook can be criticised for not facing up to it, at least until it
was raised
expressly in TV3's Second Amended Statement of Defence.
[58] I find that TV3 has not made out a case for costs against
Mr Banbrook.
Result
[59] For the reasons given:
a) Costs are awarded in favour of TV3 against Cash for Scrap Ltd on a
3B basis
(together with a 50% uplift) plus disbursements. Both costs
and disbursements are to be fixed by the Registrar.
b) Costs are awarded in favour of TV3 against Ms Down on a 3B basis
together, with reasonable disbursements.
Costs and disbursements are
to be fixed by the Registrar.
c) The application for costs against Mr
Banbrook is dismissed.
[60] Having regard to the circumstances in which the substantive claim was
brought and prosecuted and
to the mix of success and failure on the part of Cash for
Scrap Ltd, Ms Down and Mr Banbrook (all of whom were represented by the
same
counsel at this hearing), I decline to make any order as to costs on the present
application.
[61] I thank counsel for their
assistance.
___________________________
P R Heath J
Delivered at 3.00pm on 17 November 2008
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