Dunajtschik v Garnham

[2024] NZHC 1199

IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY

I TE KŌTI MATUA O AOTEAROA TE WHANGANUI-A-TARA ROHE

CIV-2022-485-000159

[2024] NZHC 1199

BETWEEN

MARK DUNAJTSCHIK

First Plaintiff

DOROTHY MYRTLE SPOTSWOOD
Second Plaintiff

AND

MICHAEL ROBERT GARNHAM

First Defendant

BALLANTYNE BARKER HOLDINGS LIMITED
Second Defendant

MICHAEL BRIAN SPACKMAN in his

capacity as former trustee of the MIRO TRUST

Third Defendant

MGCG TRUSTEES LIMITED in its

capacity as current trustee of the MIRO TRUST

Fourth Defendant

Hearing:	On the papers
Counsel:	R L Pinny and D Qiu for Plaintiffs J L Verbiesen for Defendants
Judgment:	15 May 2024

JUDGMENT OF ASSOCIATE JUDGE PAULSEN

(Costs)

This judgment was delivered by me on 15 May 2024 at 3.00 pm pursuant to Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar Date:

DUNAJTSCHIK v GARNHAM [2024] NZHC 1199 [15 May 2024]

[1]    This  judgment  concerns  an   application   for   costs   by   the   plaintiff,   Mr Dunajtschik, on his successful applications for further discovery and an unless order against the first, second and fourth defendants.

[2]    Associate Judge Skelton made a tailored discovery order on 15 August 2023 requiring the parties to file affidavits and exchange open documents by 10 October 2023.1   The  defendants  failed  to  comply  with  that  order  despite  extensions  to  1 December 2023 and then 15 December 2023. The first defendant, Mr Garnham, did file an affidavit of documents on 30 November 2023, but acknowledged the affidavit was incomplete. He said he expected to provide further discovery within 10 working days. He did not do so.

[3]    Mr Dunajtschik’s application for particular discovery and an unless order was filed on 29 January 2024 in accordance with a direction of Associate Judge Skelton.

[4]    In a judgment of 12 March 2024, I granted Mr Dunajtschik’s applications.2 I allowed counsel to file memoranda in relation to costs. Memoranda have been received.

[5]    Mr Dunajtschik seeks increased costs on the applications on a scale 2B basis with a 50 per cent uplift, including costs in relation to judicial telephone conferences that predate the making of the applications but are said to have been necessary due to the defendants’ failure to comply with their discovery obligations.

[6]    Mr Garnham does not oppose an award of scale costs being made in favour of Mr Dunajtschik but says increased costs are not warranted in principle or as to the quantum sought.

1      Dunajtschik v Garnham HC Wellington CIV-2022-485-159,  15  August  2023,  Associate  Judge Skelton (Minute).

2      Dunajtschik v Garnham [2024] NZHC 506.

Costs principles

[7]    All matters of costs are discretionary,3 but the discretion must be exercised on a principled basis and having regard to the relevant provisions of the High Court Rules 2016.4

[8]    The determination of costs, so far as possible, should be both predictable and expeditious.5

[9]    The party that fails should pay the costs of the party that succeeds unless there are exceptional reasons to the contrary.6

[10]   The amount of an award of costs is usually determined by an appropriate daily recovery rate to the time considered reasonable for each step reasonably required in relation to a proceeding or interlocutory application. The applicable daily recovery rate depends upon the nature of the proceeding. This is a category 2 proceeding, being a proceeding of average complexity in the High Court.7 Time allocations for steps in any proceeding or interlocutory application are set out in sch 3 of the High Court Rules.

[11]   The Court may make an order for increased costs in the circumstances set out in r 14.6, which relevantly provides:

14.6     Increased costs and indemnity costs

(1)Despite rules 14.2 to 14.5, the court may make an order—

(a)increasing costs otherwise payable under those rules (increased costs); or

(b)that the costs payable are the actual costs, disbursements, and witness expenses reasonably incurred by a party (indemnity costs).

(2)The court may make the order at any stage of a proceeding and in relation to any step in it.

3      High Court Rules 2016, r 14.1(1).

4      Rule 14.

5      Rule 14.2(1)(g).

6      Rule 14.2(1)(a); and Shirley v Wairarapa District Health Board [2006] NZSC 63, [2006] 3 NZLR 523 at [19].

7      Rule 14.3(1).

(3)The court may order a party to pay increased costs if—

…

(b)the party opposing costs has contributed unnecessarily to the time or expense of the proceeding or step in it by—

(i)failing to comply with these rules or with 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

…

(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.

Mr Garnham’s submissions

[12]   Mr Garnham argues that it had been repeatedly foreshadowed, both prior to and at the hearing of the applications on 4 March 2024, that he would be filing a supplemental affidavit of documents on 8 March 2024 complying with his discovery obligations, but that Mr Dunajtschik was unwilling to defer the hearing. His position is that the supplemental affidavit filed on 8 March 2024 satisfied his obligations under both the original tailored discovery order and the particular discovery order made by me on 12 March 2024, albeit that he filed a second supplemental affidavit on 4 April 2024 to confirm this.

[13]   Mr Garnham submits that if Mr Dunajtschik had not insisted that his applications be heard prior to the filing of the supplemental affidavit then the hearing could have been avoided and it is Mr Dunajtschik who has unnecessarily caused costs to be incurred rather than Mr Garnham.

[14]   Mr Garnham also submits if the supplemental affidavit had been taken into consideration it is highly likely that the particular discovery order would not, and the unless order could not, have been made.

[15]   Further, it is submitted that even if there was a “technical failure” to comply with the tailored discovery order at the date of hearing, there was a reasonable justification for this because Mr Garnham was working towards the date of 8 March 2024 “being the date confirmed for the purpose of filing the [s]upplemental [a]ffidavit”.

[16]   Mr Garnham also argues that an increased costs order is an exception to the norm and an infrequent occurrence, and a maximum increase of 50 per cent on scale costs is reserved for the most serious conduct contemplated under r 14.6(3).8 It is said the conduct here was not of the most serious kind.

[17]   In addition, Mr Garnham opposes the making of a costs order in respect of the judicial  telephone  conferences  on  13  November  2023,  4 December  2023  and    1 February 2024 on the basis they predate the application. It is submitted that ordinarily costs in respect to those steps would be dealt with at the end of the proceeding and to deal with them now would represent a significant uplift on the costs ordinarily recoverable following an interlocutory hearing.

My analysis

[18]   The submission that Mr Dunajtschik should have waited for Mr Garnham to file his supplemental affidavit is the same argument advanced at the hearing that Mr Dunajtschik’s application was premature in another guise. I rejected it in my judgment and do so again in this costs context.9 It overlooks several matters.

[19]   The defendants were in default of the tailored discovery order by several months. They had been granted extensions and still failed to comply with the order. At a late stage, Mr Garnham filed an incomplete affidavit of documents stating that further discovery would be provided within a short timeframe but then provided nothing further. The default was sufficiently serious for Associate Judge Skelton to

8      Citing Green & McCahill Holdings Ltd v Williams [2024] NZHC 480 at [7].

9      Dunajtschik v Garnham, above n 2, at [48]–[54].

state in a minute of 13 November 2023 that further non-compliance by the defendants would result in consideration being given to the making of an unless order.10

[20]   Further, Mr Dunajtschik did not have the luxury of time to wait for compliance by the defendants with their discovery obligations as Judge Skelton had directed on 5 December 2023 that he was to file any application for discovery by 29 January 2024, and the issue had to be resolved quickly given the case is set down for trial in July 2024.11

[21]   Mr Garnham’s references to his supplemental affidavit as having been filed “on the date required” and that 8 March 2024 was “the date confirmed for the purpose of filing the [s]upplemental [a]ffidavit” are abstruse. The date of 8 March was not a date accepted by Mr Dunajtschik or the Court for the filing of a further affidavit of documents by the defendants. It was an arbitrary date chosen by Mr Garnham.

[22]   It is also difficult to see why Mr Dunajtschik should have taken Mr Garnham at his word that discovery would be provided by 8 March 2024. It was clear that such further discovery as would be provided was not going to satisfy the requirements of the tailored discovery order. The grounds upon which Mr Dunajtschik’s application for particular discovery was opposed included that the defendants were not required to comply with its terms but were entitled to withhold discovery of documents in the agreed categories they did not consider relevant.

[23]   It is also the case, in my view, that several  of the arguments  advanced  by Mr Garnham in opposition to the application, such as that there was in fact no breach of the discovery order and that the application was premature, were devoid of merit.

[24]   Accordingly, I  am  satisfied  that  there  are  good  grounds  for  awarding  Mr Dunajtschik increased costs under r 14.6(3)(i) and (ii).

10     Dunajtschik v Garnham HC Wellington CIV-2022-485-159, 13 November 2023, Associate Judge Skelton (Minute).

11     Dunajtschik v Garnham HC Wellington CIV-2022-485-159, 5 December 2023, Associate Judge Skelton (Minute) at [5].

[25]   On balance, I have decided that the uplift should be 30 per cent on scale 2B costs. The defendants’ default was serious and had the potential to put the trial in jeopardy. Even if I was to accept the submission that Mr Garnham’s supplemental affidavit complied with his discovery obligations, the defendants were by that date five months in default of the Court’s tailored discovery order despite indulgences that had been extended to them. Contrary to the position that now appears to be taken that Mr Garnham  was always prepared to comply with his  obligations, he defended    Mr Dunajtschik’s application.

[26]   I also do not accept the submission that costs should not be awarded for the judicial telephone conferences. While it is the case that those conferences predated the applications, they were necessary because of the defendants’ breach of the tailored discovery order. Mr Dunajtschik is entitled to the costs of those telephone conferences regardless of the ultimate outcome of the proceeding at trial. I see no reason why he should not be awarded them now.

[27]   I have considered the schedule of costs claimed by Mr Dunajtschik attached to his counsel’s memorandum and consider the sums claimed are correct.

Result

[28]   The plaintiff is awarded costs against the first, second and fourth defendants on a category 2 band B basis of $10,994 with an uplift on scale costs of 30 per cent making a total of $14,292.20, along with any disbursements reasonably incurred as fixed by the Registrar.

O G Paulsen Associate Judge

Solicitors:

Macalister Mazengarb, Wellington

Thomas Dewar Sziranyi Letts, Lower Hutt