A P and a W Hughes Limited v Lyall
[2017] NZHC 1573
•7 July 2017
IN THE HIGH COURT OF NEW ZEALAND DUNEDIN REGISTRY
CIV-2015-412-000030 [2017] NZHC 1573
BETWEEN A P AND A W HUGHES LIMITED
Plaintiff
AND
ALLAN JAMES LYALL Defendant
AND
MARK BENNETT Third Party
Hearing: 7 July 2017 (On the papers) Appearances:
D R Tobin and R M Reeve for Plaintiff
J C D Guest for DefendantJudgment:
7 July 2017
JUDGMENT OF DUNNINGHAM J (RE: COSTS DECISION)
[1] After granting judgment in the defendant’s favour in these proceedings I reserved the issue of costs, although I signalled that, in the usual course, they would be calculated on a 2B basis.1
[2] The parties have been unable to agree costs and have filed memoranda on
costs seeking the Court’s determination.
[3] While the parties had agreed in case management conferences, that costs on a
2B basis would be appropriate, the defendant now seeks 2C costs for some steps. He also seeks disbursements for his expert witness fees.
1 A P and A W Hughes Ltd v Lyall [2017] NZHC 1109.
A P AND A W HUGHES LIMITED v ALLAN JAMES LYALL [2017] NZHC 1573 [7 July 2017]
[4] The plaintiff contests the defendant’s claim for 2C costs, submitting that costs should be awarded on a 2B basis or, for some items, on a reduced basis. It also seeks a reduced amount for the fees of one of the defendant’s expert witnesses.
Submissions
Defendant’s submissions
[5] The defendant acknowledges that while the case was heard over seven days, these were not all full days. Therefore, he claims for a hearing time of six days. The plaintiff agrees with this.
[6] The defendant claims costs for a number of steps taken in the proceedings. These are mostly on a 2B basis, except for:
(a) The amount allowed for the preparation of briefs.2
(b) The amount allowed for preparation of hearing.3
[7] The defendant seeks a band C categorisation for both steps (which allocates five days for each step) because of the nature of the proceeding. The defendant submits that the matter required detailed evidence on complicated factual matters and that the outcome was significantly influenced by expert evidence. The defendant briefed ten witnesses, although only nine were called. A five day allocation would be reasonable as that would average a half day per witness. The defendant submits that this case involved significant preparation, beyond what might ordinarily be expected, because counsel had to prepare eight witnesses for cross-examination, three who were giving expert evidence, and prepare detailed closing submissions on the facts.
[8] The defendant also claims for an additional amount for the preparation of submissions of costs and for sealing judgment. Neither step is listed in Schedule 3
but the defendant submits that these matters are analogous to other steps and costs
2 Item 30 of High Court Rules, Schedule 3.
3 Item 33 of High Court Rules, Schedule 3.
are commonly allocated for them by the Court. The defendant seeks only a half day allocation for the two matters, which it submits is a modest amount.
[9] The defendant also seeks disbursements to cover filing fees and the expert witness fees of Mr Butcher and Dr Gibbs.
Plaintiff ’s submissions
[10] The plaintiff submits that a 2B categorisation is appropriate for all steps in the proceedings. It accepts that allocation should be made for sealing the judgment.
[11] The plaintiff disputes the allocation of band C to the preparation of briefs and the hearing, submitting that a band B allocation is sufficient. The plaintiff points out that while the defendant prepared briefs for ten witnesses, these briefs totalled only
37 pages of substantive material. The plaintiff further points out that the briefs are double spaced, giving the impression that they are more expansive than they actually are. Moreover, the defendant’s leading expert, Dr Gibbs, did not reduce his two reports to brief-of-evidence format. The plaintiff submits that the narrative of events and factual matters covered by the majority of the defendant’s briefs were basic. Therefore, an allocation of band C to this matter is not warranted.
[12] The plaintiff submits that the defendant has also failed to put forward a cogent basis for allocating band C to hearing preparation. The proceeding involved a novel but not difficult factual matrix, with many of the legal issues resolved between the parties prior to the hearing. The plaintiff submits that there was nothing in the present proceeding that was more complex or significant than a normal High Court case in which a comparatively large amount of time was required. A band B categorisation is sufficient.
[13] The plaintiff disputes the additional entitlement for preparation of costs memorandum. It submits, with reference to Air New Zealand v Commerce Commission, that it is not standard practice to award costs for costs submissions.4
While acknowledging such costs have been awarded in some cases, this practice is
4 Air New Zealand v Commerce Commission (2005) 17 PRNZ 786 at [97].
similar to a “billing for billing” approach and should be discouraged as a matter of public policy.
[14] The plaintiff submits that Dr Gibbs’ fee invoices are not sufficiently
particularised or reasonable as:
(a) No breakdown has been provided for why he should be entitled to recover for five days despite only appearing for one half day in court and failing to engage in any meaningful caucusing with the plaintiff’s expert;
(b)The second invoice was issued after the decision was released so it may have been calculated in accordance with the result;
(c) He charged three and a half days for veterinary services but has not explained what this involved - his reports refer only to a solitary site visit; and
(d)He produced two separate reports, with significant differences in context and language, but never explained this duplication. It would be unreasonable to charge $1,500 (excl GST) for editing and rewriting given the expectation on expert witnesses of clarity and efficiency and the fact that the reports were not reproduced as part of his brief of evidence.
[15] In light of these factors, the plaintiff’s position is that only $6,525 should be awarded for Dr Gibbs services (a 50% reduction to the quoted fee).
[16] The plaintiff does not agree with the defendant’s claim for item 20 (affidavit of documents) because it disputes whether the defendant ever filed an affidavit of documents, none having been served on the plaintiff.
[17] In respect of the claim for item 32 (preparation of list of issues authorities and common bundle), the plaintiff accepts that the defendant’s counsel reviewed the draft index to the Common Bundle, but this was primarily compiled by the plaintiff’s
solicitors. Moreover, no lists of issues or authorities were ever prepared. Therefore this item should be reduced to one day.
[18] Finally, the plaintiff argues that the allocation for item 2 (commencement of defence) should be halved because the defendant failed to comply with his initial disclosure obligations. Telephone records relating to the material period were only disclosed to plaintiff’s counsel on the first day of trial because the defendant’s previous solicitors overlooked the defendant’s obligations under r 8.4 High Court Rules.
Defendant’s reply submissions
[19] In respect of the claim that the allocation for item 2 (commencement of defence) should be reduced, the defendant says that the documents it initially disclosed to the plaintiff were all that it relied upon in preparing the statement of defence. The Rules require nothing more so the defendant did nothing wrong.
[20] The defendant also confirms, in relation to item 20 that it did create an affidavit of documents, although it was incorrectly described as a list of documents. Therefore it is entitled to costs for this step.
[21] In respect of the challenge to the claim for item 32, the defendant says that Schedule 3 already recognises that the plaintiff carries a greater burden for preparing the bundle. However, the defendant submits that his lawyer’s input was considerable
– reviewing the proposed index, examining the proposed documents and relating those back to the defendant’s briefs and proposed cross-examination. Counsel proposed further documents for inclusion in the bundle. Therefore, the full entitlement under band B for item 32 should be given.
[22] The defendant submits that the plaintiff’s approach to Dr Gibbs’ costs is niggardly. Dr Gibbs came to Court well prepared, which required him to spend time re-reading significant material. Counsel sent transcripts of the plaintiff’s expert witness’s evidence before his arrival, and there should be no reduction to his claimed fee.
[23] The practical difference between the positions is that the defendant seeks costs of $58,872 plus disbursements of $21,600 to reach a total award of $80,472, while the plaintiff says the defendant is only entitled to an award $52,143, comprising $37,018 in costs and $15,125 in disbursements.
Legal principles applying
[24] The legal principles applying to the determination of costs are settled and are set out in rr 14.2 – 14.10 of the High Court Rules. Rule 14.2 sets out the key principles applying to the determination of costs as follows:
14.2 Principles applying to determination of costs
The following general principles apply to the determination of costs:
(a) the party who fails with respect to a proceeding or an interlocutory application should pay costs to the party who succeeds:
(b) an award of costs should reflect the complexity and significance of the proceeding:
(c) costs should be assessed by applying the appropriate daily recovery rate to the time considered reasonable for each step reasonably required in relation to the proceeding or interlocutory application:
(d) an appropriate daily recovery rate should normally be two-thirds of the daily rate considered reasonable in relation to the proceeding or interlocutory application:
(e) what is an appropriate daily recovery rate and what is a reasonable time should not depend on the skill or experience of the solicitor or counsel involved or on the time actually spent by the solicitor or counsel involved or on the costs actually incurred by the party claiming costs:
(f) an award of costs should not exceed the costs incurred by the party claiming costs:
(g) so far as possible the determination of costs should be predictable and expeditious.
[25] In the circumstances of this case, the principle in r 14.2(g) would support the blanket application of 2B costs, whereas the parties claim for either increasing or decreasing costs for individual steps relies on the principles in r 14.2(b) and (c).
[26] The parties do not dispute that these are category 2 proceedings in the terms of the complexity and significance of the proceeding. What they do dispute is the determination of reasonable time under Schedule 3, where band B time allocations apply where a normal amount of time is considered reasonable, and band C applies if a comparatively large amount of time to complete the particular step in the proceedings is considered reasonable.
[27] The other issue raised is whether the Court should order payment of the disbursements sought in full. Disbursements may be included in the costs awarded where they meet the requirements in High Court r 14.12 which require them to be “specific to the conduct of the proceeding”, “reasonably necessary” for it and “reasonable in amount”. The plaintiff contests the claim for reimbursement of all Dr Gibbs’ costs of $13,050, being his GST exclusive fee.
Analysis of the issues raised
Reductions from Band B
[28] The plaintiff ’s submission that the amount claimed by the defendant for the preparation for the bundle and associated tasks, should be reduced is not persuasive. The defendant appears to have carried out such attendances on these tasks as is normal for a defendant and I do not consider it should be reduced.
[29] In relation to the reduction sought for item 2, because of a failure to complete disclosure obligations, I accept there was a failure to provide timely or complete disclosure of relevant telephone records. However, r 8.4(1) High Court Rules states that:
After filing a pleading, a party must, unless subclause (2) applies, serve on the other parties, at the same time as the service of that pleading, a bundle consisting of—
(a) all the documents referred to in that pleading; and
(b) any additional principal documents in the filing party’s control that that party has used when preparing the pleading and on which that party intends to rely at the trial or hearing.
Given that the defendant did not rely on the telephone records in preparing the statement of defence, it was not required to disclose them initially. Therefore there is no reason to reduce the amount of time awarded to the defendant for this step.
[30] The defendant has confirmed an affidavit of documents was prepared and served, so the claim for item 20 is legitimate.
Band C
[31] In respect of the defendant’s claim for a band C categorisation for items 30 and 33, I accept there were 10 witnesses briefed, but the briefs for those witnesses were, on average, not particularly long or complex. In addition, the defendant’s key expert witness did not reduce his reports into a brief. Thus while there was a reasonably large number of witnesses, several of the briefs were very short and confined to one or two factual issues.
[32] Similarly, I do not consider that a comparatively large amount of time was reasonably required to prepare for the hearing. While the factual scenario was novel, it was not out of the ordinary in respect to its complexity. Furthermore, while it may have been factually complex, only limited time was required to analyse the legal issues arising. Accordingly, I am not persuaded that I should depart from a band B allocation for these items.
[33] A further factor which persuades me that it is not necessary to increase or decrease costs for each step is that, when looked at overall, the costs award calculated on a 2B basis is not unduly disproportionate to the defendant’s actual (and, in my view, reasonable) legal costs, of $92,326 (excluding of GST).
[34] In such circumstances it would be contrary to the principle of encouraging predictable and expeditious costs determinations if parties were too readily encouraged to dispute the reasonableness of each claimed item’s time allocation.
Dr Gibbs’ fee
[35] The plaintiff fairly takes issue with the initial failure to appropriately particularise Dr Gibbs’ fee. That makes it more difficult to establish what work was done by him and therefore whether the fee charged was reasonable. That said, the defendant’s reply submissions did adequately remedy this and I accept this disbursement is properly claimable.
Costs memorandum
[36] I accept, as the defendant says, that that there is scope to award costs for the preparation of costs memoranda. However, given I have not acquiesced to the defendant’s request for a departure from 2B costs, I do not think it would be appropriate to do so in this case. Accordingly, no costs are awarded for the preparation of the costs memorandum.
[37] As a consequence, costs of $47,053 are awarded along with $21,650 for disbursements as set out in the schedule attached to this decision.
Solicitors:
Dean Tobin, Barrister, Dunedin
Wilkinson Rodgers Lawyers, Dunedin
Downie Sewart, Dunedin
DEFENDANT’S SCHEDULE OF COSTS AND DISBURSEMENTS
High Court Scale 2B
Item Number Description of Step Time Allocation in Days 2 Commencement of defence by defendant 2.0 10 Preparation for first case management
conference
0.4 11 Filing memorandum for first case
management conference
0.4 13 Appearance at first case or subsequent
management conference (x2 @ 0.3)
0.6 20 Affidavit of documents 2.5 21 Inspection of documents 1.5 30 Defendant’s preparation of briefs 2.5 32 Defendant’s preparation of list of issues,
authorities, and common bundle
2.0 33 Preparation for hearing 3.0 34 Appearance at hearing (principal counsel) 6.0 Sealing judgment 0.2 Total Costs 21.1 @ $2,230.00 $47,053.00
SCHEDULE OF DISBURSEMENTS
Court filing fee 110.00 Dr Gibbs’ fees (exclusive of GST) 13,050.00 Rural Solutions Ltd (Graham Butcher) (exclusive of GST) 8,440.00 Filing fee for sealing of order 50.00 Total $21,650.00
Grand Total $68,703.00
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2
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