Air New Zealand Limited v Air Niugini Limited HC Auckland CIV 2009-404-3460

[2011] NZHC 97

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV 2009-404-3460

BETWEEN  AIR NEW ZEALAND LIMITED Plaintiff

ANDAIR NIUGINI LIMITED Defendant

Hearing:         16 February 2011

On the papers

Counsel:         NS Gedye for plaintiff

SA Barker for defendant

Judgment:      17 February 2011

JUDGMENT OF ASSOCIATE JUDGE FAIRE [on costs]

Solicitors:           Air New Zealand, Private Bag 92 007, Auckland 1142

Buddle Findlay, PO Box 2694, Wellington 6140

AIR NEW ZEALAND LIMITED V AIR NIUGINI LIMITED HC AK CIV 2009-404-3460 17 February 2011

[1]      In  my  judgment  delivered  in  respect  of  the  plaintiff’s  application  for

summary  judgment  on  14 October  2009  I  entered  summary  judgment  for  a substantial part of the claim.  I reserved costs.

[2] requ	On esting t (a)	24 February  2010   counsel  for  the  plaintiff  filed  a  memorandum hat I fix costs on the summary judgment application because: Summary  judgment  was  entered  for  the  majority  of  the  amounts
claimed;
(b)	The summary judgment has been paid; and
(c)	All matters concerning the summary judgment are now at an end with the exception of one invoice which the plaintiff is pursuing as an
ordinary action.

[3]      Counsel for the plaintiff invited the court to fix costs on a 2B basis plus disbursements relating to the application for summary judgment.

[4]      In a minute issued on 3 March 2010 Associate Judge Christiansen, in dealing with costs on the summary judgment application recorded the following:

Both counsel are content to file brief memoranda for the decision to be made by  Faire AJ  on  the  papers.     In  that  respect  I  direct  that  those  brief memoranda be filed by 12 March 2010.

[5]      A memorandum was filed by counsel for the defendant on 26 November

2010.  It drew attention to r 14.8(3).  It noted that summary judgment applications were not covered by the general requirement to fix costs on the completion of an interlocutory application.  Counsel submitted that the correct approach was simply to reserve costs until the final result of the litigation is known.  Counsel drew attention to the fact that the remaining invoice, the subject of the summary judgment application but not included in the judgment, represented 17 per cent of the overall amount claimed.

[6]      Counsel for the defendant also referred to r 14.16.  Rule 14.16 provides:

14.16    Claim and counterclaim both established

The court must award costs as if each party had succeeded in an independent proceeding, unless, in the court's opinion, the justice of the case otherwise requires, if—

(a)       the plaintiff succeeds in his or her proceeding; and

(b)       the defendant succeeds in a counterclaim.

Counsel submitted that in the circumstances of this case, because of the existence of the counterclaim, it would be appropriate to defer entering costs on the summary judgment application until the counterclaim is determined.   In that way the court retains the full discretion to depart from the general requirement of r 14.16 if the justice of the case otherwise requires.  Counsel also referred to the set-off provisions contained in r 14.17 where there are claims and counterclaims.

[7]      The plaintiff’s response, in essence, was that the plaintiff’s costs on filing and pursuing the application for summary judgment in respect of all the other invoices were not materially reduced as a result of the abandonment of the claim for summary judgment in respect of the one invoice.  Further there was no basis advanced so far which justified delaying fixing costs on account of the counterclaim.  Counsel for the plaintiff then varied the application for costs and invited the court to fix costs on an increased basis in reliance r 14.6(3)(b)(5) because there had been a failure to accept an offer of settlement.

[8]      The offer of settlement was contained in the letter of 7 August 2009.   The letter was headed Without prejudice except as to costs.  Counsel submitted, correctly, that  procedurally  the  letter  complied  with  r 4.10.    The  defendant  rejected  the settlement offer.

[9]      The settlement offer was expressed as follows:

Proposal

The following is offered as a pragmatic way to move forward in respect of the invoices:

1.In respect of the 5 invoices listed in paragraph 5 of the statement of claim, Air Niugini to agree quantum at NZ$477,959.92 plus interest to be calculated in due course under Article 6.1.6 MSA.

2.Subject to bringing its cross-claims to account, Air Niugini does not dispute liability to pay the agreed invoice sum of NZ$477,959.92 plus interest.

3.In  consideration  for Air  Niugini’s  agreement  as  to  liability  and quantum as above, Air New Zealand will withdraw its application for summary judgment with costs reserved and will not require payment of the agreed invoice amount until Air Niugini’s cross- claims are determined by the Court or settled.

4.In consideration for Air Niugini’s agreement as above, Air NZ will not pursue penalty interest and costs in respect of the second cause of action in the statement of claim claiming training invoices and that cause of action may be regarded as fully and finally settled by this agreement.

This offer is made on the basis that it is in the interests of both parties to clear away the invoice issues and to focus on the cross-claims alone.  I look forward to hearing from you.

[10]     The judgment result is not precisely that provided for in the offer.  The sum which is mentioned as the settlement sum is greater in the settlement offer than that for which judgment was entered.  There is also no deferment of the obligation to pay in the judgment that was entered whereas there was in the offer.  I do not consider that  in  the  circumstances  of  this  case  it  is  an  appropriate  case  to  apply r 14.6(3)(b)(v).  In the scheme of things there was justification for refusing the offer even though the end result is not too dissimilar from that which was proposed by the plaintiff.  I therefore do not take that aspect into account.

[11]     The memoranda also raise belatedly the issue of what is the appropriate Band for the steps to be taken.  It is claimed that the appropriate Band is Band A in respect of steps 1, and 5.1 in the Third Schedule.

The principles applicable in awarding costs

[12]     Rule 14.1 gives the Court a discretion to order costs in relation to a step taken in a proceeding.  That discretion is generally to be exercised in accordance with the specific rules contained in rr 14.2-14.10:  Glaister v Amalgamated Dairies Ltd.[1]In

[1] Glaister v Amalgamated Dairies Ltd [2004] 2 NZLR 606 at [19].

Mansfield Drycleaners  Ltd v Quinny’s Drycleaning (Dentice Drycleaning Upper

Hutt) Ltd[2] the Court of Appeal said of the costs regime contained in what is now rr 14.2-14.10 that:

[2] Mansfield Drycleaners Ltd v Quinny’s Drycleaning (Dentice Drycleaning Upper Hutt) Ltd (2002) 16 PRNZ 662 at 668). 

there is a strong implication that a Court is to apply the regime in the absence of some reason to the contrary

The test to be applied is entirely an objective and not a subjective one.   The only reference which  it is necessary to make towards actual costs is to be found in r 14.2(f), namely that an award of costs should not exceed the costs incurred by the party claiming the costs: Glaister v Amalgamated Dairies Ltd.[3]

[3] Glaister v Amalgamated Dairies Ltd, above n 1 at 610 [14].

[13]     Rule 14.2 lists the principles applying to determination of costs. Subrule (a) affirms the principle that the losing party should pay the costs to the successful party. Subrule (b) requires that the costs reflect the complexity and significance of the proceedings and refers specifically, therefore, to the categorisation of a proceeding which is provided for in r 14.3.  Subrule (c) requires a consideration of each step for which costs are sought and an application of the daily rate having regard to the appropriate band which is to be applied after a consideration of r 14.5(2) and the Third Schedule to the High Court Rules.

[14]     Rule 14.2(c) requires that costs be assessed by applying the appropriate daily recovery rate to the time considered reasonable for each step reasonably required in relation to the interlocutory application.  Rule 14.5 then provides the mechanism for determining the reasonable time by reference to the appropriate Bands which are set out in Schedule 3.  In this case, what I am required to do is to select whether Band A or Band B should apply.  Band A applies if a comparatively small amount of time was considered reasonable.  Band B applies if a normal amount of time is considered reasonable.

[15]     I shall deal firstly with the quantum of costs.  No contest is made as to the categorisation of the proceedings in terms of r 14.3.   The proceeding is clearly a

Category 2 proceeding.

[16]     The next step in the inquiry is to determine the appropriate Band in respect of item 1 and 5.1 of Schedule 3.   That makes an allowance collectively for the commencement of the proceeding, receiving instructions, preparing and filing and service a statement of claim and notice of proceeding and preparing the summary judgment application as follows:

(a)       If Band A allowed the total allowance is 1.9 days; (b)  If Band B is allowed the total allowance 3.6 days.

No issue is taken as to the appropriate Band in respect of items 5.3 and 5.4.

[17]     I am satisfied that the appropriate allowance of items 1 and 5.1 is Band B.  I

take account of the following:

(a)       The statement of claim contains some twelve paragraphs and runs into four-and-a-half pages;

(b)The  application  for  summary  judgment  is  a  three-quarter  page document;

(c)       The first affidavit in support is a one-and-a-half page document but with substantial exhibits;

(d)The  second  affidavit  in  support  is  one-and-a-half  page  document, again with several exhibits;

(e)       An  affidavit  in  reply,  contains  almost  four  narrative  pages  and  a number of exhibits; and

(f)       A further affidavit on behalf of the plaintiff contains some one-and-a- half pages.

A  review  of  those  documents  indicates  to  me  that  a  Band B  designation  for preparation is appropriate.

[18]     It is appropriate that I record however, the actual rate to be paid as provided in Schedule 2 for Category 2 proceedings for this case is $1,600 per day.  That arises by the operation of the High Court Amendment Rules 2010 which came into force on 24 May 2010 and, in particular, r 5 dealing with the transitional provisions.  All steps that I am ruling upon took place before the amendment increasing the rate in Category 2 came into force.

[19]     I next deal with the matter of principle.   Should a plaintiff who has been substantially successful in a summary judgment application be required to wait until the trial of the remaining portion of the proceeding is concluded before judgment for costs is entered?

[20]     My view is that such a plaintiff is entitled to costs on a successful summary judgment application without deduction at this time.  That is, the judgment for costs should include the items allowed for under items 1, 5.1, 5.3 and 5.4 of the Third Schedule to the High Court Rules.  The entry of judgment on that basis, however, is on the basis that allowances in respect of items 1 and 5.1, if the plaintiff is successful at trial, would not be allowed a second time.  In this way there is no risk of double counting.

[21]     If the plaintiff loses at trial, on the unresolved issue, the costs ordered at the conclusion  of  the  summary  judgment  application  will  not  cause  any  injustice because:

(a)      The costs I ordered are justified by regard to the summary judgment result; and

(b)The defendant’s costs, assuming the court follows the normal position, will be calculated for the preparation and associated matters relating to the defence which are referred to in item 2.  No inconsistency or unfairness or misapplication of what is intended by the rule follows if this approach is adopted.

[22]     Where there is a timing difference between the actual entry of summary judgment and the disposal of the counterclaim, as is the case here, which could be significant bearing in mind that the counterclaim will need a trial, I do not consider that there is a sufficient justification for applying an exception to r 14.16.

Conclusions

[23]     My conclusion is that the plaintiff is entitled to costs based on Category 2

Band B in respect of the summary judgment claim and based on the incorporation of items 1, 5.1, 5.3 and 5.4 of Schedule 3 of the High Court Rules and reflecting the rate which was applicable at the time having regard to what I have said in [18] of this judgment.

[24]     Disbursements shall be fixed by the Registrar.

[25]     So that judgment for the correct figure, having regard to the rulings made in this judgment is entered as judgment for costs, the plaintiff’s counsel shall file a memorandum which sets out the calculation based on the rulings contained in this judgment.  If counsel for the defendant disputes the arithmetic counsel shall advise the  Registrar  immediately and  the  file  shall  be  referred  to  me  for  checking  of arithmetic before the entry of judgment.  If the arithmetic is not disputed judgment shall be entered in accordance with the figures as checked by the Registrar together

with disbursements which the Registrar approves.

JA Faire

Associate Judge