IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE	
CIV-2020-404-001408
[2020] NZHC 2431	

BETWEEN	KYRIAK LAW LIMITED
Applicant	
AND	136 FANSHAWE LIMITED
First Respondent

CARSON FOX BRADLEY LIMITED
Second Respondent

NEW ZEALAND MORTGAGES AND SECURITIES LIMITED
Third Respondent

MANSONS FANSHAWE LIMITED
Fourth Respondent	

Hearing:	16 September 2020	
Appearances:	T Kyriak for Applicant
W McCartney for First and Second Respondents D Bennington for Third and Fourth Respondents	
Judgment:	17 September 2020	

COSTS JUDGMENT OF VENNING J

This judgment was delivered by me on 17 September 2020 at 4.00 pm, pursuant to Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar

Date……………

Solicitors:	Kyriak Law Limited, Auckland
Carson Fox Legal, Auckland Duncan Cotterill, Auckland
Counsel:	W McCartney, Auckland

KYRIAK LAW LIMITED v 136 FANSHAWE LIMITED [2020] NZHC 2431 [17 September 2020]

[1]	The applicant sought orders for particular discovery before the commencement of proceedings against the four respondents. The application was resolved before hearing. The respondents agreed to provide the documents and information sought. The application for discovery was withdrawn by leave. All that remains is the issue of costs. To avoid the further expense associated with the exchange of memoranda on costs the Court heard oral argument on the issue of costs when the matter was before the Court in the duty Judge list on 16 September 2020.

Parties/background

[2]	Kyriak Law Limited (Kyriak) is a law firm. It formerly acted for the first respondent, 136 Fanshawe Limited. The first respondent pursued proceedings against the third and fourth respondents. Prior to the scheduled fixture the first respondent terminated its instructions with Kyriak and instructed the second respondent. The first respondent ultimately settled its claim against the third and fourth respondents before hearing.

[3]	Kyriak claimed a lien over the first respondent’s files in relation to unpaid costs it claims from the first respondent. When Kyriak became aware of the settlement it took steps to enforce its lien. The first respondent did not accept the costs were reasonable and cancelled the contract of retainer. It has subsequently complained to the Law Society about Kyriak’s costs.

[4]	In order to enforce its lien, and before the first respondent had complained to the Law Society, Kyriak engaged in correspondence with the respondents seeking disclosure of the settlement agreement and of the trust records of the second respondent relating to the payment in or distribution out of the settlement moneys.

[5]	The applicant first wrote on 21 July 2020 to the second respondent advising that it had received notice of settlement of the claim by the first respondent against the third and fourth respondents. It requested a copy of the agreement reached between the parties and details of any payment made. On 23 July the second respondent advised that the settlement agreement was confidential and that they had done nothing to prejudice the claimed lien.

[6]	On 27 July Kyriak replied, noting that

In the absence of clarity in relation to the payment of our outstanding fees it is necessary to seek the assistance of the court.

[7]	On 28 July the second respondent’s solicitors advised that they had instructions to make a complaint to the Law Society about Kyriak’s fees, which was expected to be lodged by 7 August, and further stated that:

Meanwhile funds will be held in our trust account.

I repeat, nothing has been done to prejudice your claimed lien.

[8]	I interpolate here that the settlement agreement contained a clause expressly dealing with Kyriak’s costs:

6.1	The Undertaking will be in writing and will say that Matthew Carson undertakes to NZMS, Mansons Fanshawe, and Duncan Cotterill:

1.	To receive into the Carson Fox Trust Account the Settlement Sum.

2.	To hold the full amount of the Settlement Sum claimed by Kyriak Law pursuant to its claim to a solicitor’s lien on the Settlement Sum, until such time as Kyriak Law quantifies its claim, and then to hold the maximum amount claimed by Kyriak Law until the amount, if any, payable to Kyriak Law is agreed, or finally determined by the New Zealand Law Society or by a court or arbitrator.

3.	To pay to Kyriak Law from the amount so held whatever sum is agreed or finally determined to be payable to Kyriak Law.

[9]	Kyriak responded and demanded a detailed undertaking.

[10]	On 3 August the second respondent replied again recording that the terms of the settlement were confidential and they could not therefore discuss the amount they were holding and they would not be giving any undertaking. They again noted they had instructions to make a complaint to the Law Society regarding the fees.

[11]	Kyriak then filed this application on 26 August.

[12]	Kyriak’s application was accompanied by a draft statement of claim to enforce its lien.

[13]	As noted, before the first call of the application the respondents agreed to provide the information sought reserving their position in relation to costs.

Parties’ positions

[14]	Kyriak submits it has succeeded in that it has obtained the information it sought and costs should follow the event. It seeks costs on an indemnity or increased basis against the first respondent and costs on an increased or 2B basis against the second respondent. During the course of oral submissions Mr Kyriak advised for the first time that Kyriak did not pursue costs against the third and fourth respondents. He submitted that costs should lie where they fall in relation to the third and fourth respondents.

[15]	Mr McCartney, appearing for the first and second respondents, submitted that both the first and second respondents were entitled to costs on a 2B basis against the applicant or as a fall-back position in the case of the first respondent, at most costs should lie where they fall.

[16]	Ms Bennington for the third and fourth respondents confirmed they sought costs on a 2B basis against the applicant.

Jurisdiction

[17]	Although this is an application in advance of proceedings, there is clearly jurisdiction to provide for the issue of costs.1 High Court Rule 8.22(3) contemplates costs orders may be made in relation to not only compliance with any order, but also in relation to the application itself.

[18]	In Clear Communications Ltd v Telecom Corporation of New Zealand Ltd the Court confirmed the general discretion as to costs applies.2 When exercising its discretion the Court will take into account a number of factors, including the reasons

1	Nelson v Ditmar [1986] 2 NZLR 48; Skelton v Howcroft [2018] NZSC 67 at [12]; and HCR 8.22(3).
2	Clear Communications Ltd v Telecom Corporation of New Zealand Ltd (1994) 8 PRNZ 200.

the application was opposed, whether the opposition was reasonable and the extent of any success achieved.

[19]	Before addressing Kyriak’s submission that costs should be payable in its favour on an indemnity or increased cost basis, it is necessary to determine where the incidence of costs should lie.

[20]	In support of its application for costs against the first and second respondents, Kyriak says it has succeeded so that costs should follow the event. Counsel referred to the cases of Wislang v University of Otago and Blakley v Blakley as examples of cases where the Court had made costs awards on that basis.3 But in both of those cases there had been a fully opposed hearing and the issues determined on the merits.

[21]	In the present case Mr McCartney filed an amended notice of opposition and submitted that the Court would not have made the order Kyriak sought because the draft statement of claim was complete and showed that Kyriak could have filed its purported proceeding without the information in relation to the settlement and the details of the solicitor’s trust account. In the circumstances it could not be said that Kyriak could satisfy the criteria for the order.

[22]	Mr McCartney also suggested that given the Law Society complaint had been filed no steps could be taken to enforce it.4 I do not regard this application as an application to recover costs. That is not the relief sought. This application is a pre- cursor to such an action.

[23]	Mr Kyriak’s response to Mr McCartney’s first point was that, without knowledge of what was involved in the settlement of previous proceedings the proposed claim might have been impractical. However, as I read the reference to impractical in r 8.20 it is directed at impractical from a legal point of view rather than from a commercial or economic point of view. I note it refers to formulation of the claim.

3	Wislang v University of Otago [2013] NZHC 2533; and Blakley v Blakley [2014] NZHC 1730.
4	Lawyers and Conveyancers Act 2006, s 161.

[24]	There may be force in Mr McCartney’s first point. But the short point in any event is that the application has not been determined on its merits. In response to the application the first and second respondents have obtained the authority of the third and fourth respondents to provide the information to the applicant and the first respondent has authorised the second respondent to provide the relevant information. As they say, the documents have been made available to avoid wasting the Court’s time.

[25]	The first respondent had control of the relevant documentation. It was for it to obtain the consent of the third and fourth respondents to the settlement agreement to the release of the agreement. It also could have instructed the second respondent to release its trust account information. It could have taken those practical steps at an earlier stage. I do not consider it is entitled to costs. But neither should it have to pay the applicant’s costs. It has not been determined against it that it should have or that it would have been ordered to. Kyriak’s suggestion that it should have costs on an indemnity or increased basis is misconceived.

[26]	Mr Kyriak relied on the decision of Woolford J in Gilbert v Auror Ltd.5 The first point is that in fact the costs awarded by the Court were in favour of the respondents not the applicant for pre-commencement discovery. Next, the Court rejected a submission that the applicant had acted vexatiously, frivolously, improperly or unnecessarily, taking the view that the applicant needed time to consider her position on a fully informed basis, also noting that in that case the respondents had argued the applicant had failed to engage with them once the application had been served.

[27]	In this case the parties engaged and ultimately agreed to resolution on a practical basis. The case of Gilbert v Auror does not support the applicant’s claim for costs on any basis.

[28]	The second respondent’s primary obligation was to the first respondent which had engaged it as its legal adviser. I am not prepared to make a finding the second respondent acted unreasonably in its correspondence with the plaintiff. In hindsight,

5	Gilbert v Auror Ltd [2017] NZHC 1655.

the second respondent could have perhaps provided more assurance or clarity to the applicant given the terms of the undertaking in the settlement agreement but I accept it was not required to provide the undertaking demanded by the applicant prior to the issue of proceedings. What it set out in its correspondence was correct. Kyriak sought more by way of its proposed undertaking than was justified.

Result/orders

[29]	In the circumstances, in relation to the first respondent costs are to lie where they fall. In relation to the second respondent the applicant is to pay costs to the second respondent on a 2B basis, together with disbursements. In relation to the third and fourth respondents, the applicant is to pay one award of costs on a 2B basis (that is, the costs are to be shared by the third and fourth respondents) together with disbursements. The third and fourth respondents were represented by one counsel and had no real role to play in responding to the application.

[30]	The costs are to be for the notices of opposition, preparation for a case management conference and a quarter day for the hearing.

Venning J