HG Metal Manufacturing v. Vashiharan Navaratnam and Sherine Sangeetha Navaratnam

(Given by Courtney J)

On 8 September 2022 this Court struck out two appeals brought by Mr and Mrs Navaratnam.¹ The appeals arose from an application by HG Metal Manufacturing Ltd (HG Metal) to enforce an arbitral award obtained against Mr and Mrs Navaratnam in Singapore in 2020. Specifically, the appeals were against a decision of Woolford J entering judgment against Mrs Navaratnam by default² and a decision of Jagose J striking out judicial review proceedings brought to challenge a decision of Katz J in which she entered judgment against Mr Navaratnam.³

The decision to strike out the appeals was made in the context of a strike out application by HG Metal. The appeal against Woolford J’s decision was struck out as a result of Mr and Mrs Navaratnam’s numerous defaults in complying with this Court’s rules.⁴ The appeal against Jagose J’s decision was struck out as an abuse of process because it sought to relitigate an issue that had been finally determined by Katz J, namely whether HG Metal had satisfied the requirements of art 35(2) of the Arbitration Act 1996 by providing a properly authenticated copy of the award.⁵

HG Metal sought indemnity costs in the event of the appeals being struck out. In our substantive judgment we directed the filing of memoranda to address this issue. HG Metal filed a memorandum as to costs on 28 September 2022. Mr and Mrs Navaratnam did not file a memorandum that expressly dealt with costs on the strike-out application but, rather, applied for recall of the decision striking out the appeals. However, their submissions in relation to the recall included submissions which we treat as also relating to the costs on the strike-out application.

It was appropriate to postpone dealing with costs on the strike-out application until after the recall application had been disposed of. However, HG Metal also sought indemnity costs on the recall in the event that it was refused. That meant that the issues raised in relation to costs on the strike-out application necessarily fell to be determined first in the recall application. In a decision delivered on 14 February 2023 we declined the application for recall and made an order for indemnity costs against both Mr and Mrs Navartnam.⁶ We now determine HG Metal’s application for indemnity costs on the strike-out application. In doing so we necessarily repeat the analysis relating to indemnity costs from the recall decision.

The claim for indemnity costs is based on Mr and Mrs Navaratnam’s liability under the guarantee they both signed on 24 September 2013, which gave rise to the arbitral award against them. The guarantee contains the following cl 6:

The Guarantor shall indemnify HG Metal against the full costs (including legal fees as between solicitor and client) of enforcing or attempting to enforce this Guarantee.

In her decision on costs Katz J reviewed the basis on which indemnity costs might be awarded pursuant to a contractual obligation and concluded that the costs HG Metal had incurred in applying to recognise and enforce the award in New Zealand were costs of "enforcing or attempting to enforce" the guarantee for the purposes of cl 6.⁷ As we indicated in our substantive judgment, Katz J’s finding as to Mr Navaratnam’s liability for indemnity costs arising from the guarantee means that Mr Navaratnam will be liable for indemnity costs in respect of the current appeal.⁸

There is no basis on which to differentiate Mrs Navaratnam’s position from that of her husband on this point. She was a co-guarantor and subject to the same provisions, including cl 6.

In their memorandum filed in support of the recall application, Mr and Mrs Navaratnam submitted that it was premature to consider the question of indemnity costs until their ground of challenge to HG Metal’s original application for recognition and enforcement based on its failure to satisfy art 35(2) of the Arbitration Act had been determined. As we made clear in our substantive judgment, this argument has been finally determined and cannot be revisited. It therefore does not provide any basis on which to refuse to award indemnity costs in accordance with the terms of the guarantee.

HG Metal has claimed a total of $128,686.70 (excluding GST). This figure comprises:

• Solicitor/client costs $122,578.74

• Service charge $3,064.47

• Disbursements $3,043.49

These costs relate to both appeals that were the subject of the strike out application. HG Metal’s counsel advises that the appeals were invoiced together along with other related litigation such as the bankruptcy proceedings. However, counsel has made an assessment of the steps and cost of work relating only to these two appeals. Having reviewed counsel’s memorandum, we are satisfied that all the items claimed for relate to these appeals and were reasonably necessary. We observe that the time taken to dispose of these appeals was unnecessarily increased by Mr and Mrs Navaratnam’s failure to comply with the Court’s directions and by the steps taken by them for the sole purpose of delaying the final determination of the matter.

We make an order that HG Metal is entitled to indemnity costs of $128,686.70 against Mr and Mrs Navaratnam jointly and severally.

Solicitors:

Bell Gully, Auckland for HG Metal Manufacturing Ltd