100 Investments Limited v Walker

[2021] NZHC 283

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2019-404-001160

[2021] NZHC 283

BETWEEN

100 INVESTMENTS LIMITED

First Plaintiff/First Respondent

FTG SECURITIES LIMITED
Second Plaintiff/Second Respondent

RFD FINANCE LIMITED
Third Plaintiff/Third Respondent

TOMANOVICH HOLDINGS LIMITED
Fourth Plaintiff/Fourth Respondent

AND

ROBERT BRUCE WALKER

First Defendant

JOHN MARSHALL SCUTTER
Second Defendant

LPF GROUP LIMITED

Third Defendant/First Applicant

SPF NO 10 LIMITED (IN LIQUIDATION)

Fourth Defendant/Second Applicant

Hearing:	On the papers
Judgment:	26 February 2021

JUDGMENT OF WYLIE J

This judgment was delivered by Justice Wylie

On 26 February 2021 at 10.00 am Pursuant to r 11.5 of the High Court Rules Registrar/Deputy Registrar

Date:…………………………

Solicitors/counsel:

Hucker & Associates/A Barker QC, Auckland Tompkins Wake, Auckland

MinterEllisonRuddWatts/D Bigio QC, Auckland

100 INVESTMENTS LTD v WALKER [2021] NZHC 283 [26 February 2021]

[1]                 I refer to my judgment of 9 December 2020 in which I ordered the plaintiffs security for costs in favour of the third defendant, LPF Group Ltd (“LPF”) and the fourth respondent, SPF No 10 Ltd (“SPF”).1 I expressed the view that all parties had achieved a measure of success, noting that the security that I ordered the plaintiffs to pay was higher than that offered but less than that sought. I expressed the preliminary view that costs should lie where they fell, but invited the parties to file memoranda if they disagreed.

[2]                 LPF does disagree and a memorandum seeking costs has been filed on its behalf. There is no application for costs by SPF.

Factual background

[3]                 As I understand it, the plaintiffs initially offered to provide $45,000 as security for LPF’s costs. LPF rejected that offer and, on 24 July 2020, made a “without prejudice save as to costs” offer indicating that it would accept security in the sum of

$150,000. That offer assumed a 10 day trial, adopted band B for discovery and allowed $50,000 for the anticipated costs of expert witnesses.

[4]                 The plaintiffs did not accept this offer and instead, by email dated 27 July 2020, offered $70,000 by way of security with payment on a staged basis.

[5]                 By email dated 31 July 2020, LPF made a further “without prejudice save as to costs” offer to accept $110,000 by way of security, also on a staged basis.

[6]The plaintiffs rejected this further offer and restated their offer of 27 July 2020.

[7]                 In an open letter dated 1 September 2020, after LPF had filed its application seeking security, the plaintiffs again offered to provide security in the sum of $70,000. In an open letter dated 18 September 2020, LPF offered to accept $150,000. Both offer and counter offer assumed security would be provided on a staged basis.

1      100 Investments Ltd v Walker [2020] NZHC 3248.

[8]I have ordered the plaintiffs to provide security for LPF’s costs in the sum of

$175,000 on a staged basis.

Submissions

[9]                 LPF acknowledges that costs are in the discretion of the Court, but argues that it has achieved an outcome closer to its position than the position taken by the plaintiffs. It notes that I preferred its view as to trial duration over that taken by the plaintiffs and that I ordered the plaintiffs to provide $105,000 more than they offered, but only $75,000 less than the amount it sought. It seeks costs on a 2B basis together with a 50 per cent uplift, arguing that the plaintiffs failed, without reasonable justification, to accept any of their offers of settlement. It says that the plaintiffs’ decisions to reject their various offers were unreasonable given that this Court had already described the plaintiffs’ claims as weak, and given that it offered to accept less than was ultimately fixed by the Court. It argues that its offers were materially more favourable to the plaintiffs than the outcome achieved.

[10]              The plaintiffs accept that the fact that an offer is made prior to hearing is a relevant factor in determining any costs award. They noted that the offer made on 24 July 2020 was premised on the basis of a 10 day trial, the offer of 31 July 2020 on a five day trial, and the offer on 18 September 2020 on a 14.25 day trial. It submitted that the trigger is whether or not it was reasonable for them to reject the offers made. They say that the issues litigated at the hearing were all legitimate areas of dispute – trial length, what allowance should be made for experts costs and what banding was appropriate for discovery. It was argued that these issues were all matters on which the parties could reasonably disagree and that it was not unreasonable for them to take the stance they did. The plaintiffs accept that costs on a 2B basis are appropriate (indeed they have already made an offer to that effect). They do not, however, accept that it is appropriate to increase any costs award, and argue that to do so would effectively double count the offer made. It is noted that LPF sought $250,000 of security, that it advanced that position at the hearing, and that security in that sum was not ultimately ordered by me.

Analysis

[11]              Costs are in the discretion of the Court2 and that remains the case even where an offer to settle is made.3 Nevertheless, where a party to a proceeding has made a written offer to the other party that is expressly stated to be without prejudice except as to costs and that relates to an issue in the proceeding, there is a presumptive entitlement to costs in favour of the party who made the offer if the offer would have been more beneficial to the party to whom it is made than the judgment obtained by that party against the party making the offer.4

[12]              In this case, there were two offers made by LPF without prejudice save as to costs and a third offer made on an open basis. All of the offers made by LPF would have been more beneficial to the plaintiffs than the ultimate order made by me.

[13]              I was unaware of the offers when I expressed the preliminary view that costs should lie where they fall. I have now been appraised of the situation and provided with copies of the offers made. I accept that it follows from the fact that the offers were made that LPF is presumptively entitled to an award of costs, notwithstanding that costs remain in the discretion of the Court. Further, in my view, there is nothing to displace that presumption.

[14]              The application itself was not complicated. Notwithstanding the seniority of the counsel who argued it, it is appropriate that costs should be fixed on a 2B basis. Both parties accept this. Costs calculated on a 2B basis total $8,484.50.

[15]              The rules relating to the making of offers without prejudice except as to costs and the effect of such offers on costs awards are independent of r 14.6, which provides for increased or indemnity costs.5

[16]              Rule 14.6(3) provides that the Court can order a party to pay increased costs if the party opposing costs has contributed unnecessarily to the time or expense of the

2      High Court Rules 2016, r 14.1.

3      Rule 14.11(1).

4      See rr 14.10 and 14.11.

5      Rule 14.11(2)(b).

proceeding or a step in it by failing, without reasonable justification, to accept an offer of settlement, whether in the form of an offer under r 14.10 or some other offer to settle or dispose of the proceedings. The reasonableness of a party’s rejection of an offer falls to be assessed at the time of rejection and not against the subsequent result. Much depends on the extent and timing of the offer, the reasonable expectations of the party refusing the offer and the party’s ability at the time of the offer to properly assess its merits.6

[17]              The plaintiffs’ refusal to accept any of the offers made undoubtedly contributed unnecessarily to the time and expense of the hearing. Was their failure to accept any one of LPF’s offers unreasonable? There were two main issues dividing the parties and preventing them from reaching an agreement for security – first, the likely length of the hearing, and secondly, what allowance should be made for experts. I consider each in turn.

(a)As I noted in my substantive judgment, I did not consider that the plaintiffs’ estimate that the hearing would take only five days was sufficient. In my view, and given the matters noted in my substantive judgment, the plaintiffs’ estimate was unreasonable.

(b)So was the plaintiffs’ assertion that expert evidence was unnecessary. Again, as I noted in my substantive judgment, it is not for a plaintiff to dictate how a defendant should respond to a claim, particularly a claim such as that in this case, which raises novel issues and seeks a substantial sum. I also recorded in my substantive decision the topics that it had been suggested experts should cover are likely to be in issue and the expert evidence might well assist me in considering the same.

The appropriate categorisation for discovery did not take much time at the hearing and it does not in my view affect the position.

6      New Zealand Sports Merchandising Ltd v DSL Logistics Ltd HC Auckland CIV-2009-404-5548, 19 August 2010 at [36].

[18]              In my view, there was an element of obduracy and thus unreasonableness in the stance taken by the plaintiffs. All of the offers made by LPF were more beneficial from the plaintiffs’ perspective than the order ultimately made by me. As a result, Court time, party effort and expense was taken up in dealing with an issue that should have been settled. Increased costs are justified.

[19]              As I have noted, costs on a 2B basis total $8,484.50. I do not consider it appropriate to increase that sum by a 50 per cent uplift as sought by LPF. It seems to me that a 50 per cent uplift is excessive and that such an uplift should be available only in more extreme cases. I do, however, award an increase of 25 per cent. In my judgment, a 25 per cent uplift better reflects the extent to which the plaintiffs were unreasonable. The total award of costs is therefore $10,605.62. There was no dispute about the disbursements claimed – filing fees totalled $434.78.

[20]              Accordingly, I award costs in favour of LPF and against the plaintiffs in the sum of $10,605.62, together with disbursements of $434.78.

Wylie J