AIG Insurance New Zealand Limited v CNZ (Auckland) Limited (in liquidation)

[2023] NZHC 2104

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2019-404-1443

[2023] NZHC 2104

BETWEEN

AIG INSURANCE NEW ZEALAND LIMITED
Plaintiff

AND

CNZ (AUCKLAND) LIMITED (IN LIQUIDATION)

First Defendant

ASK METRO LIMITED
Second Defendant

QBE INSURANCE (AUSTRALIA) LIMITED

Third Defendant

HAMPTON JONES PROPERTY CONSULTANCY LIMITED

Third Party

Hearing:

On the papers

Counsel:

Mathew J Francis/Hugh W King for the Plaintiff Nicola Faulkner for the First and Third Defendants Dianna Fotiades for the Second Defendant

Melissa Russell for the Third Party
Guy Tompkins for John and Chantal Liggins, non-parties

Judgment:

9 August 2023

COSTS JUDGMENT OF ASSOCIATE JUDGE C B TAYLOR

This judgment was delivered by me on 9 August 2023 at 3:00pm

pursuant to Rule 11.5 of the High Court Rules

…………………………. Registrar/Deputy Registrar

AIG INSURANCE NEW ZEALAND LIMITED v CNZ (AUCKLAND) LIMITED (IN LIQUIDATION) [2023] NZHC 2104 [9 August 2023]

[1]                 The plaintiff, AIG Insurance New Zealand Limited (AIG) filed an interlocutory application for orders allowing it to use in these proceedings communications subject to privilege, being privilege jointly held by AIG and various non-parties:

(a)the Liggins;

(b)Mr Hall;

(c)Focus Construction Limited (Focus)

[2]                 None of the parties to this proceeding or interested non-parties opposed the application, although counsel for the Liggins filed a memorandum dated 12 May 2023 seeking costs incurred by Liggins responding to it. Nothing further is required in relation to Mr Hall.

[3]                 On 15 Jun 2023, the Court made the orders AIG sought in its application and invited memoranda on costs by 29 June 2023. The following memoranda have been filed:

(a)a memorandum by counsel for the first to third defendants and the third party dated 22 June 2023;

(b)a memorandum by counsel for the Liggins, dated 29 June 2023;

(c)a memorandum by counsel for AIG dated 29 June 2023.

Issues to be determined

[4]The issues to be determined in this judgment are:

(a)whether AIG should be liable for the reasonable costs of the Liggins, as a non-party, incurred in connection with the application, specified in counsel’s memorandum of 29 June 2023 as $10,614.50;

(b)whether AIG can pass on to the defendants the costs of its application and any non-party costs for which it might be liable.

The Liggins’ costs

[5]                 Counsel for the Liggins seeks full indemnification costs in respect of costs which the Liggins have incurred as a result AIG’s application. The grounds on which the reimbursement of their costs from AIG are sought are:

(a)They are not a party to this proceeding and have no interest in the proceeding or in AIG’s application.

(b)They have acted reasonably and responsibly in response to the application (including by not opposing it).

(c)The application was entirely unnecessary so far as it related to the Liggins. Liggins had already advised AIG that they were willing to consent to AIG’s use of the privileged communications if AIG agreed to reimburse them for their reasonable costs in assessing the documents and attending to confidentiality arrangements (which had been offered by AIG). No response was received to the offer but instead AIG filed the application.

(d)The costs incurred by Liggins are reasonable and are necessary to consider AIG’s application, the various documents and evidence filed as a consequence of AIG’s application, and responsibly advise the Court as to the Liggins’ position.

(e)The Court has a discretion as to all matters of costs incidental to a proceeding, the objective being to achieve an outcome which best meets the interests of justice.

(f)Rule 14.16(4)(d) recognises that an order for indemnity costs is generally appropriate if a person in whose favour the order of costs is made is not a party to the proceeding and has acted reasonably.

(g)An analogy can be drawn to applications for non-party discovery where it is well established that “third parties brought in as by a side wind should not be left meeting their own expenses”.1 Non-parties are entitled to their costs for both responding to an application and complying with the orders made.

[6]                 Counsel for AIG submits that the Court should not exercise its discretion in favour of awarding costs to the Liggins for the following reasons:

(a)the Liggins never agreed that they would consent to AIG’s request to use “without prejudice” communications if AIG paid their costs. Their proposal was that the Liggins would “consider” AIG’s request before confirming consent;

(b)the analogy drawn with non-party discovery is inapt: the collation of documents and the preparation of an affidavit is a time-consuming and expensive process. It cannot be compared with AIG’s simple request to use “without prejudice” documents in this proceeding, particularly when:

(i)the Liggins and their counsel must have been aware of and familiar with the relevant documents already, given Wilson Harle had  been  acting  for the Liggins  in  the  dispute since  6 December 2017;

(ii)the relevant law is clear and straightforward: use of “without prejudice” communications to prove that a party has acted

1      Commerce Commission v Telecom Corporation of NZ Ltd (1994) 8 PRNZ 200 (HC).

reasonably to mitigate losses is a well known exception to the “without prejudice” rule;2

(iii)the Liggins could not reasonably have had concerns about the wider use of the relevant communications outside the proceeding, given High Court Rule 8.30(4).

[7]                 In summary, counsel for AIG submits that the Liggins’ costs were unreasonable.

Conclusion in relation to the Liggins’ costs

[8]                 Having considered the respective memoranda filed by counsel, my views are as follows:

(a)the application was necessary as in my view the communication from counsel for the Liggins did not amount to consent (as submitted by counsel for the Liggins at [3](c) of his memorandum of 29 June 2023);

(b)AIG is correct in its view that a “without prejudice” communication should be able to be used to demonstrate that the party has acted reasonably to mitigate loss and this is a well established exception of the “without prejudice” rule, relying on the authorities of Miller v Linsley & Mortimer and Sheppard Industries Ltd.3 Accordingly it should have been clear to Liggins’ counsel that the law was clear and straightforward on this point;

(c)given Wilson Harle have acted for the Liggins in the matter since 2017, counsel for AIG’s assertion that they should have been familiar with the relevant documents is reasonable;

2      Miller v Linsley & Mortimer [1994] EWCA Civ 39 (CA); Sheppard Industries Ltd v Specialised Bicycle Components Inc [2011] NZCA 346 at [24].

3      Above, n 2.

(d)I accept the submission made by counsel for AIG at 6.2 of his submissions that the comparison of the consent sought to use “without prejudice” communications with non-party discovery is not a valid comparison, and consenting to the use of without prejudice communications should be straightforward;

(e)it is reasonable that AIG make some contribution to Liggins’ costs as the Liggins were non-parties.

[9]                 In my view, a fair contribution would be 50 per cent of the Liggins’ actual costs, amounting to $5,307.25. An order is made below accordingly.

Passing of costs to the defendants

[10]              Counsel for the first to third defendants and third party submit that the costs of the application, both AIG’s costs and those awarded to non-parties (namely the costs awarded to Liggins), should be borne by AIG for the following reasons:

(a)the application was unnecessary, AIG already having the right to use the communications in this proceeding according to the memorandum of counsel for Liggins dated 15 May 2023;

(b)in any event the application was avoidable had AIG:

(i)included a standard disclosure provision in the three settlement offers it provided (two of which were recorded in signed settlement agreements drafted by AIG) with the three non- parties;

(ii)AIG should have sought an order when a discovery order was made in this proceeding on 17 October 2019 by Associate Judge Bell.

[11]              Counsel for AIG submits it is unnecessary and/or inappropriate for the Court to determine now a contingent cost question. He submits whether AIG is entitled to

pass on the costs of its application for the defendants would only fall to be determined if AIG succeeds with its substantive claim and unless and until that time comes it is not necessary for the Court to determine the question and to do so would not be consistent with r 1.2 of the High Court Rules. He submits that AIG reserves the rights to seek costs from the defendants if it is ultimately successful in the substantive proceeding.

[12]              Counsel for AIG also submits that the position taken by the defendants and the third party is without basis for the following reasons:

(a)the application (as against the Liggins) was necessary because the Liggins conditioned any consent to use the documents on their prior to consideration of the matter;

(b)whether at the time of settling the claims with non-parties those non- parties would have consented to AIG’s use in this proceeding of “without prejudice” communications is speculative;

(c)it is unlikely a Court, in a standard case management conference, would have made, without allowing the non-party to be heard, discovery orders requiring disclosure of “without prejudice” communications subject to a joint privilege held by a non-party to the proceeding.

Conclusion in relation to passing of costs to the defendants

[13]              I am of the view that counsel for AIG’s submission is correct, in that it is unnecessary and inappropriate for the Court to determine the passing on to the defendants the costs in relation to the application (both AIG’s costs and the costs awarded to Liggins) at this stage. This issue will be dealt with at the conclusion of the substantive claim. Accordingly, no order is made in this respect.

The position of Focus

[14]Nothing has been filed in relation to costs by counsel for Focus.

[15]              I accept the submissions of counsel for AIG at [11] of his memorandum of  29 June 2023 that Focus does not appear to have incurred any costs. Accordingly no order is made in respect of Focus.

Orders

[16]I order that AIG is to pay costs to the Liggins of $5,307.25.

[17]              No order is made in relation to liability of the defendants in respect of AIG’s costs on the application or the costs awarded to the Liggins in respect of AIG’s application.

…………………………….. Associate Judge Taylor

Solicitors:

Wotton & Kearney (Mathew J Francis/Hugh W King), Auckland, for the Plaintiff

Robertsons (Michael Robertson/Nicola Faulkner), Auckland, for the First and Third Defendant Price Baker Berridge (Dianna Fotiades), Henderson, Auckland, for the Second Defendant Kennedys Law (Melissa Russell/Mark Dennett), Auckland, for the Third Party

Wilson Harle (Guy Tompkins), Auckland, for John and Chantal Liggins (non parties)