Aldrie Holdings Ltd v Clover Bay Park Ltd
[2016] NZHC 1482
•1 July 2016
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV 2014-404-99 [2016] NZHC 1482
BETWEEN ALDRIE HOLDINGS LIMITED
Plaintiff
AND
CLOVER BAY PARK LIMITED First Defendant
ROGER WAYNE PROUT and SHERRELL ANNE PROUT as trustees of CLOVER BAY TRUST
Second Defendants
ROGER WAYNE PROUT Third Defendant
Hearing: 25 May 2016 Counsel:
S B W Foote and A H H Choi for Plaintiff
D J Clark and J S Clark for DefendantsJudgment:
1 July 2016
JUDGMENT (NO. 2) OF HEATH J
This judgment was delivered by me on 1 July 2016 at 3.00pm pursuant to
Rule 11.5 of the High Court Rules
Registrar/Deputy Registrar
Solicitors:
Bell & Graham, Matamata Wilson McKay, Auckland Counsel:
S W B Foote, Auckland
ALDRIE HOLDINGS LIMITED v CLOVER BAY PARK LIMITED [2016] NZHC 1482 [1 July 2016]
CONTENTS
Background [1] The High Court costs’ regime [3] Which party was successful? [6] The primary issue [10] Calderbank principles [14] Calderbank offer: competing submissions [26] Calderbank offer: analysis [28] Remaining issues
(a) Introduction [42]
(b) Claims for procedural steps on a 2B basis [45] (c) Court fees [53] (d) Expert fees and witness expenses [57] (e) Non-party discovery costs [63] (f) Disbursements [66] Costs on the costs’ application [68] Result [71]
Background
[1] On 24 February 2016, I gave judgment on claims brought by Aldrie Holdings Ltd (Aldrie) against Clover Bay Park Ltd (Clover Bay), the trustees of Clover Bay Trust and Mr Roger Prout (together, the Clover Bay interests), as well as counterclaims brought by those defendants against Aldrie.1 I found in favour of Aldrie on its claim under the Fair Trading Act 1986. I assessed its loss, based on a difference in value between true market value and what Aldrie paid for the farm, at
$500,000. I declined to award damages for any consequential losses. Judgment was entered in favour of Aldrie against Clover Bay and Mr Prout (jointly and severally) in the sum of $250,000, together with interest.2 The difference between the proved loss of $500,000 and the amount awarded resulted from conduct on the part of Aldrie’s director, Ms Laboyrie, whom I regarded, “to a large extent, … [as] the author of Aldrie’s financial misfortune”.3 Aldrie’s claim against the Trust failed, as
did all counterclaims.4
1 Aldrie Holdings Ltd v Clover Bay Park Ltd [2016] NZHC 250.
2 Although the Trust was successful, for convenience I use the expression “Clover Bay interests”
to reflect the parties against whom costs are sought; namely, Clover Bay and Mr Prout.
3 Aldrie Holdings Ltd v Clover Bay Park Ltd [2016] NZHC 250 at paras [79]–[89; in particular para [87].
4 Ibid, at para [112].
[2] Costs were reserved. I had been informed that there was relevant pre-trial correspondence to which I would need to refer. I heard oral argument on all questions of costs on 25 May 2016.
The High Court costs’ regime
[3] The nature of this Court’s discretion on questions of High Court costs is set out r 14.1 of the High Court Rules (the Rules):
14.1 Costs at discretion of court
(1) All matters are at the discretion of the court if they relate to costs—
(a) of a proceeding; or
(b) incidental to a proceeding; or
(c) of a step in a proceeding.
(2) Rules 14.2 to 14.10 are subject to subclause (1).
(3) The provisions of any Act override subclauses (1) and (2).
[4] Rule 14.2 sets out a number of principles for the determination of costs. Leaving to one side the identification of an appropriate daily recovery rate to apply, they are:
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:
…
(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:
…
(g) so far as possible the determination of costs should be predictable and expeditious.
[5] The scheme of the costs’ rules was explained by the Court of Appeal in Bradbury v Westpac Banking Corporation.5 Delivering the judgment of the Court, Baragwanath J said:
[27] The distinction among our three broad approaches – standard scale costs, increased costs and indemnity costs – may be summarised broadly:
(a) standard scale applies by default where cause is not shown to depart from it;
(b) increased costs may be ordered where there is failure by the paying party to act reasonably; and
(c) indemnity costs may be ordered where that party has behaved either badly or very unreasonably.
[28] We acknowledge Sir Rupert Jackson’s report that in practice New Zealand scale costs have been permitted to fall far short of that (p 603). That is, however, a matter for the Rules Committee. Subject to that, the starting point of our rules, which gives a one-third or thereabouts deduction from a set figure, is comfortably in the modern main stream. It affords recognition of the access to justice factor that prevails in the United States and should not lightly be departed from. Clear cause must be shown to justify an increase. Our three-stage classification, with a discretion in each class as to where the order should be pitched, accords with that approach. Indemnity costs, which depart from the predictability of the Rules Committee’s regime, are exceptional and require exceptionally bad behaviour. That is why to justify an order for such costs the misconduct must be “flagrant” (Prebble v Awatere Huata (No 2) [2005] 2 NZLR 467 (SCNZ) at para [6]).
Which party was successful?
[6] Mr Foote, for Aldrie, submits that, on any view, Aldrie should be regarded as the successful party in the proceeding. It obtained a money judgment against the Clover Bay interests for $250,000, together with interest. On the other hand, Mr Clark, for the Clover Bay interests, contends that the final outcome should be characterised as one in which the parties achieved equal success. That submission is based on successful defences being offered to various parts of Aldrie’s claims.
[7] A party who succeeds in a proceeding is generally entitled to receive costs.6
While I accept that there were aspects of the claim on which Aldrie failed, I am satisfied that, for the purposes of r 14.2(a) of the Rules, it should be regarded as the
5 Bradbury v Westpac Banking Corporation [2009] 3 NZLR 400 (CA).
6 High Court Rules, r 14.2(a), set out at para [4] above.
successful party. The areas in which it failed to establish other claims can be reflected in the assessment and calculation of costs payable.
[8] Subject to determination of Aldrie’s argument that it should receive increased costs by virtue of an unreasonable rejection of a Calderbank offer, the parties agree that the baseline for the assessment of costs should be on a Category 2 Band B basis.7
[9] I am satisfied that whatever quantum of costs is ordered in favour of Aldrie, it will not exceed the actual costs and disbursements incurred by it.
The Calderbank issue
[10] The next question concerns the weight to be given to a letter sent by the solicitors for Aldrie to the solicitors for the Clover Bay interests, dated 31 July 2014 (the Calderbank letter).8 The letter was written on a “without prejudice save as to costs” basis. Aldrie offered to accept payment of $250,000 in satisfaction of the claim. In the absence of an agreed extension of time, the offer remained open until 6
August 2014.9 A response was sent on 13 August 2014.10
[11] The Calderbank letter was sent in the aftermath of (what can only be described as) a hopeless application for summary judgment. After a defended hearing, it was dismissed by Associate Judge Christiansen, in a judgment given on 2
April 2014.11 Because, in the Associate Judge’s view, the application was doomed to
failure, costs were ordered against Aldrie.12 Those costs have been paid. Accordingly, the issues with which I am concerned relate solely to costs that are
outside the scope of the summary judgment application.
7 Ibid, r 14.3(1) and 14.5(2).
8 Relevant parts of the letter are set out at para [12] below.
9 The letter indicated that an amended statement of claim was likely to be filed on 15 August
2014. One was filed on 20 August 2014.
10 Relevant parts of the response are set out at para [13] below.
11 Aldrie Holdings Ltd v Clover Bay Park Ltd [2014] NZHC 638.
12 Ibid, at para [35].
The Calderbank letter
[12] The Calderbank letter was dated on 31 July 2014. It was prepared after new counsel had been instructed to act for Aldrie, after the unsuccessful summary judgment application. Relevantly, it stated:
Re: CIV 2014-404-99 ALDRIE HOLDINGS LIMITED v CLOVER BAY PARK LIMITED
1. [Aldrie] is timetabled to file an amended statement of claim by 15
August 2014.
2.Prior to incurring the costs associated with that, our client wishes to put forward a settlement offer on a without prejudice save as to costs basis.
3.The starting point from our client’s perspective, is that its case fits easily within the legal and factual requirements for cancellation under s 7 of the Contractual Remedies Act 1979 (“CRA”).
4.The evidence, most of which you have from the summary judgment application, establishes the requisite elements of proof under s 7(3)(a) and 7(4)(b) of the CRA in the following respects:
a.Your client made pre-contractual misrepresentations to our client;
b.The misrepresentations induced our client to enter into the contract for the sale and purchase of 72 Alpine Road, Kaukapakapa dated 23 September 2013 (“the contract”); and
c.The effect of those misrepresentations was to substantially reduce the benefit and increase the burden of the contract for our client.
5.Your client was successful in opposing summary judgment, however that was on the confined ground that misrepresentation claims are not suitable for summary judgment procedure. On the basis of the evidence filed for the summary judgment, it is highly unlikely your client will achieve similar success at trial.
[The alleged misrepresentations were set out in paras 6 to 23 of the letter. Questions of “inducement” and “substantiality” were addressed in paras 24 to 31 (inclusive). Information in relation to a credibility issue was set out in para 32. The letter continued]
Cancellation
33.In these circumstances, a Court should comfortably find that it is just and equitable to order cancellation.
34. On the issue of cancellation, we understand your client’s defence to
be that our client affirmed the contract by settling.
35.Affirmation can only occur with full knowledge of the facts (see s 7(5) CRA). Here, our client affirmed the contract before it had knowledge of the facts. It was not until after settlement that it was discovered your client had misrepresented production, effective areas, and that he grazed 300 cows on leased land to achieve stated production levels.
36.Our client has not affirmed the contract. A party cannot be bound to an election if that party does not know the facts giving rise to the election.
37.The plaintiff will gain its requested order for cancellation. In addition, our client will be seeking interest on the purchase price and associated damages.
Damages
38.Alternatively, as a secondary remedy, our client will be seeking damages of $500,000 to $600,000 plus interest and costs. The bulk of the damages relate to the amount by which our client paid above true market value for the farm.
39.We attach a copy of a draft valuation report, provided without prejudice and confidentially on the basis that it will not be used in cross-examination at trial. The report verifies the damages sought on market value of $500,000.
40.Our client will maintain her claim to further damages outlined in a summary judgment.
Settlement offer
41.Our client is realistic and understands that it will take the next 18 months, and legal fees and disbursements estimated at around
$150,000 to $200,000 to achieve the outcome of cancelling the contract and an award of damages.
42.In the interests of avoiding the costs of trial to achieve the highly probable outcome of cancellation and damages, our client offers to settle its claim now for $250,000 (inclusive of GST).
43.If this offer is accepted, the claim will be discontinued with no issue as to costs.
44.This offer is made on a without prejudice save as to costs basis, and is open for acceptance until 5:00pm on Wednesday, 6 August 2014.
45.This time period is provided because the plaintiff is due to file an amended statement of claim by 15 August, and acceptance will allow that further cost to be avoided.
46.If your client wishes to have more time to consider the offer than that provided, please let us know and we will consider the request.
[13] A response from the solicitors for the Clover Bay interests was sent on 13
August 2014. The offer was rejected. Having sought to refute a number of the allegations made, the letter concluded:
CIV 2014-404-419 – Aldrie Holdings Limited v Clover Bay Park Limited
& Ors
…
The allegations and conclusions in your letter of 31 July 2014 are nothing more than a refined restatement of your client’s Summary Judgment Application. If your client uses those allegations as the basis of an amended statement of claim then our client will be defending the application on the grounds already detailed in its affidavits.
Our client is willing to settle this matter on the basis that all claims are withdrawn and our client does not pursue an application for further costs. This offer remains open for acceptance until 4pm on 19 August 2014 or upon service of an amended statement of claim (whichever is earlier).
If this offer is refused then our client will be seeking costs on an indemnity or increased basis.
Calderbank principles
[14] A Calderbank letter is one in which a party to Court proceedings makes an offer to settle on a without prejudice basis, but reserves the right to produce the letter when question of costs are addressed. The procedure encourages a realistic apprisal of a party’s position in litigation. It enables costs to be sought where an offer has been rejected but a less beneficial outcome results for the party declining the offer.
[15] The description (Calderbank letter) is derived from the first appellate decision in which the efficacy of the procedure was considered: Calderbank v Calderbank.13 In that case, the offer to compromise was made in the context of ancillary relief proceedings on a petition for divorce. At the time Calderbank was decided, a common procedure used by a defendant (typically on a claim in debt) to
protect himself or herself for costs was to make a payment into Court.14
13 Calderbank v Calderbank [1975] 3 All ER 333 (CA).
14 These rules were unduly technical in nature: see paras [17] and [19] below.
[16] The “payment in” mechanism remained available in New Zealand until 31
October 2004.15 The relevant rules were revoked, with effect from 1 November
2004, by the High Court Amendment Rules 2004.16 In their place, a rule was promulgated to deal with circumstances in which Calderbank offers were made.17
[17] The present form of rr 14.10 and 14.11 was introduced by the same amendments to the Rules that abolished the “payment in” regime.18 They represent a refinement of the earlier rules. In a public consultation paper issued before the amendments were promulgated,19 the Rules Committee explained the purpose of its proposed amendments:20
b) Payment into Court and Calderbank Offers
28.The proposed amendments repeal the payment into court system (HCR 347 to 368). Research conducted by the Rules Committee suggests that this complex and unclear procedure is rarely used. Furthermore, the payment into court regime cannot be used as of right following the exchange of evidence, which is often the best time to calculate an appropriate offer if one is to be made at all. The paper on which the Rules Committee has based its provisional decision to abolish the payment into court procedure is contained in Appendix 4.
29.In the place of the payment into court procedure, the effect of Calderbank offer sis made more explicit. HCR 48G is revoked and replaced with new HCR 48G and 48GA. While the effect of any Calderbank offer is still at the discretion of the Court, new HCR
48GA provides a presumption in favour of awarding costs to a party
whose ‘without prejudice except as to costs’ offer was not bettered inthe final judgment.
15 See para [16] below. See also the extract from Health Waikato Ltd v van der Sluis (1997) 10
PRNZ 514 (CA) at 520, set out at para [18] below.
16 High Court Amendment Rules 2004, r 15, revoking rr 347–368 of the pre-existing version.
Reference was made to the new rule (which did not apply in the Employment Court) in Health
Waikato Ltd v van der Sluis (1997) 10 PRNZ 514 (CA) at 521.
17 High Court Rules, r 48G, in the form enacted from 1 November 2004. The first version of this rule appeared in r 46A of the High Court Rules, operating with effect from 1 February 1996. At
that stage, it coalesced with the “payment in” regime.
18 Initially promulgated as r 48GA as introduced by the High Court Amendment Rules 2004.
19 Rules Committee, Consultation Paper, Proposed Amendments to the High Court Rules, District
Courts Rules, and Court of Appeal (Civil) Rules, issued on 19 September 2003.
20 Ibid, at 6 and 7.
[18] In discussing the underlying rationale for the Calderbank letter process, McGechan J, delivering the judgment of the Court of Appeal in Health Waikato Ltd v van der Sluis,21 said:
The Calderbank letter procedure gained its first open recognition in England in Calderbank v Calderbank [1975] 3 All ER 333, a case in the matrimonial jurisdiction where payment into Court was not "a course which would be appropriate" (at p 342 per Cairns LJ). Albeit obiter, the English Court of Appeal approved (ibid) the possibility of a protected offer which could be disclosed after substantive decision as bearing upon costs. After some intermediate development, and some doubts, the possibility was revisited and refined in Cutts v Head [1984] 40 1 All ER 597. The Court recognised an offer of settlement before trial, made without prejudice but expressly reserving the right to produce after substantive judgment on questions of costs, was available where issues extended beyond a "simple money claim". For a claim of the latter variety, payment-in was the appropriate procedure. The practice gained some currency in New Zealand. This Court cautioned in Andrews v Parceline Express Ltd (1994) 7 PRNZ 712; [1994] 2 ERNZ 385, that like restraint was needed in relation to damages at common law, including general damages for distress, arising from breach of contract. …
(Emphasis added)
[19] In Andrews v Parceline Express Ltd,22 the Court of Appeal had opined that Calderbank letters “must not be allowed to subvert the rules relating to payment into Court”. Problems encountered with the technical nature of the payment in rules (for example, see McVicar Timber Industries Ltd v Lloyd23) was one of the reasons why the Rules Committee decided to revoke those rules and place primary emphasis on the more flexible Calderbank procedure.24
[20] In Health Waikato Ltd v van der Sluis, the Court of Appeal considered the weight that should be given to such offers. It did so in the context of an offer by a defendant in proceedings in the Employment Court which equated to the amount of the successful claim made by the employee. However, the offer made no allowance for costs. Because of that, Judge Travis awarded costs and disbursements in favour of the employee, in the sum of $51,500. The employer appealed, complaining that
no weight had been given to its Calderbank letter.
21 Health Waikato Ltd v van der Sluis (1997) 10 PRNZ 514 (CA) at 520.
22 Andrews v Parceline Express Ltd (1994) 7 PRNZ 712 (CA).
23 McVicar Timber Industries Ltd v Lloyd [1978] 1 NZLR 381 (SC), per Somers J).
24 Rules Committee Consultation paper, Proposed Amendments to the High Court Rules, District
Courts Rules, and Court of Appeal (Civil) Rules, issued on 19 September 2003, at 49 and 51.
[21] While differing on some aspects from the reasoning of the Employment Court Judge, the Court of Appeal affirmed his decision to “disregard” the offer. For the Court, McGechan J stated that the Judge’s “underlying thinking [was] clear and
… tenable”.25 He said:26
[Health Waikato], when it offered $10,000 and nothing whatever for costs, quite simply did not offer enough. The Calderbank discretion is a broad one. It can encompass total figures, comprising both compensation and costs components. It was open to the Judge to consider an offer, without something significant added to cover [Dr van der Sluis’] $45,831.54 plus notified costs to that date, should be given no weight. That, in substance, is what happened. That is not the only view which could have been taken. The offer could have been given some diminished weight. However, this is a highly discretionary area, and we cannot say the Judge erred in law or in principle in adopting the approach taken. On a more general plane, those who offer sums without allowance for costs, aware that costs already have been incurred, do so at a risk that offer will prove insufficient.
As stated, we do not agree that insufficient time remained before fixture [the offer was made on 24 February 1995 and remained open for a period of 12 days until the trial started on 9 March 1995] to enable fair assessment of the Calderbank offer made. The Employment Court decision is opaque as to whether the “quantum” point and “time” point, on the basis of which it dismissed the Calderbank letter, were several or cumulative. In the end, it does not matter. The "quantum" point, even taken alone, would justify the discretionary decision reached. We have little doubt that is the outcome which would have resulted on a several approach, even if the approach actually taken was a cumulative one. Addition of the erroneous "time" point would have reinforced; but essentially is superfluous.
In sum, while the approach taken to the Calderbank letter presents some problems, we do not see error in law or principle in the ultimate outcome. …
(Emphasis added)
[22] The present version of the Calderbank rules is set out in rr 14.10 and 14.11. Rule 14.10 is the empowering provision, while r 14.11 explains the effect that such an offer has on costs. Rules 14.10 and 14.11 provide:
14.10 Written offers without prejudice except as to costs
(1) A party to a proceeding may make a written offer to another party at any time that—
(a) is expressly stated to be without prejudice except as to costs;
and
25 Health Waikato Ltd v van der Sluis (1997) 10 PRNZ 514 (CA) at 522.
26 Ibid, at 522-523.
(b) relates to an issue in the proceeding.
(2) The fact that the offer has been made must not be communicated to the court until the question of costs is to be decided.
14.11 Effect on costs
(1) The effect (if any) that the making of an offer under rule 14.10 has on the question of costs is at the discretion of the court.
(2) Subclauses (3) and (4)—
(a) are subject to subclause (1); and
(b) do not limit rule 14.6 or 14.7; and
(c) apply to an offer made under rule 14.10 by a party to a proceeding (party A) to another party to it (party B).
(3) Party A is entitled to costs on the steps taken in the proceeding after the offer is made, if party A—
(a) offers a sum of money to party B that exceeds the amount of a judgment obtained by party B against party A; or
(b) makes an offer that would have been more beneficial to party B than the judgment obtained by party B against party A.
(4) The offer may be taken into account, if party A makes an offer that—
(a) does not fall within paragraph (a) or (b) of subclause (3); and
(b) is close to the value or benefit of the judgment obtained by party B.
[23] Rule 14.11(3) creates a presumptive entitlement to specified costs, in the circumstances it describes. Both r 14.11(3)(a) and (b) are premised on an offer by a defendant to pay money to a plaintiff to settle a claim made against it. Neither part of r 14.11(3) applies (in express terms) to a situation in which a plaintiff offers to accept a lower sum than it actually claims is due. In this case, (using the terminology of r 14.11(3)), Aldrie (Party A) obtained a judgment against the Clover Bay interests (Party B) in a sum that mirrored (excluding interest and costs) the amount it offered to accept.
[24] Rule 14.11(4) does capture a case in which a plaintiff makes an offer as to an amount it will accept. But, there is no presumptive entitlement to costs. Rule
14.11(4) only requires that such an offer may (not must) be “taken into account” in
fixing costs. Although different approaches are contemplated by r 14.11(3) and (4), Brewer J, in Junior Farms Ltd v Commissioner of Inland Revenue,27 equated the position of a plaintiff offering to accept a lesser sum to that claimed to that of a defendant offering to pay such an amount.
[25] The rules about increased costs refer specifically to a Calderbank letter. Rule
14.6(3)(b)(v) provides:
14.6 Increased costs and indemnity costs
…
(3) The court may order a party to pay increased costs if—
…
(b) the party opposing costs has contributed unnecessarily to the time or expense of the proceeding or step in it by—
…
(v) failing, without reasonable justification, to accept an offer of settlement whether in the form of an offer under rule 14.10 or some other offer to settle or dispose of the proceeding; or
….
Calderbank offer: competing submissions
[26] Mr Foote seeks an uplift of 50 percent on 2B scale costs, on the basis that the Clover Bay interests acted unreasonably by not accepting the Calderbank offer. He points to the detailed nature of the letter and emphasises that the “same allegations of misrepresentation ultimately vindicated by” my judgment were proved; namely, the “effective hectares; production levels; herd size; [and] use of leased land”. Mr Foote submits that the settlement proposal reflected the primary weakness of Aldrie’s case in a realistic way. That is a reference to Ms Laboyrie’s failure to undertake due
diligence, which resulted in a 50 percent reduction of the loss otherwise proved.28
27 Junior Farms Ltd v Commissioner of Inland Revenue HC Auckland CIV-2009-404-2870, 5
October 2011 at para [13].
28 In particular, see Aldrie Holdings Ltd v Clover Bay Park Ltd [2016] NZHC 250 at para [87].
[27] Mr Clark, for the Clover Bay interests, submitted that it was reasonable for his clients to reject the offer. Some four months earlier they had succeeded in defending Aldrie’s summary judgment application. Notwithstanding the detail provided in the Calderbank letter, Mr Clark contended that Aldrie’s case continued to lack focus. At the time of the offer, discovery had not taken place.
Analysis on Calderbank issue
[28] Leaving disbursements to one side, the amount of Aldrie’s claim for costs (including the uplift) is $148,852.50. That sum is calculated by reference to steps taken after the Calderbank offer was made and rejected.
[29] There are two distinct questions I need to consider. The first is whether rejection of the offer was unreasonable, in the sense described in r 14.6(3)(b)(v) of the Rules, so that the discretion to order increased costs might be exercised.29 The second, if I were not to accept Mr Foote’s submission in respect of that point, is whether rejection of the offer justifies any other adjustment to the 2B costs claimed.
[30] The starting point for analysis is the terms of the Calderbank letter.30 A number of points are relevant to assessment of the reasonableness, or otherwise, of the decision by the Clover Bay interests to reject Aldrie’s proposal to settle.
[31] First, the letter is dated 31 July 2014. At the time the letter was sent, new counsel had recently been instructed to act. The earlier summary judgment application had been dismissed on 2 April 2014.31 Although the letter set out in some detail likely evidence on the questions of alleged misrepresentation, inducement and substantiality, no formal amended pleading was available to the Clover Bay interests. Nevertheless, they were able to compare the factual assertions in the letter to affidavit evidence given by Ms Laboyrie on the summary judgment
application.
29 Rule 14.6(3)(b)(v) is set out at para [25] above.
30 See para [12] above.
[32] Second, Aldrie placed primarily reliance on the cause of action under the Contractual Remedies Act 1979. That was a cause of action on which Aldrie failed. I found that Mr Prout did not intend that Ms Laboyrie rely on the representations that he made for the purpose of entering into a contract. Thus, no “inducement” had been proved, for the purposes of the Contractual Remedies Act cause of action.32
[33] Third, the remedy of cancellation of the contract was an important part of the letter. Aldrie boldly asserted that it “will gain its requested order”.33 In fact, the claim for cancellation was abandoned at trial. That left only the question of damages to be considered.
[34] Fourth, at the time of the letter, the solicitors for Aldrie expected to file an amended statement of claim by 15 August 2014. That was after the date on which the offer expired, 6 August 2014. The solicitors for the Clover Bay interests replied on 13 August 2014.34 No amended statement of claim was available to them at that time.
[35] The first question is whether there was an unreasonable rejection of the offer, so as to engage the rules relating to increased costs.35 As the Court of Appeal made clear in Bradbury v Westpac Banking Corporation, the scheme of the costs’ rules generally require a “clear cause” to be shown to justify a departure from the predictability of the regime.36 In my view, it was not unreasonable for the Clover Bay interests to reject the Calderbank offer on 13 August 2014.37
[36] Notwithstanding the detailed explanation of the alleged misrepresentations, inducement and substantiality, they were properly regarded by the solicitors for the Clover Bay interests as a “refined restatement” of the grounds on which the unsuccessful summary judgment application had been brought. Having said that, I
acknowledge that the primary reason why that application failed was because a
32 Aldrie Holdings Ltd v Clover Bay Park Ltd [2016] NZHC 250, at paras [96]–[99], applying
Savill v NZI Finance Ltd [1990] 3 NZLR 135 (CA) at 145 and 146.
33 See paras 33 and 37 of the Calderbank letter, set out at para [12] above.
34 See para [13] above.
35 High Court Rules, r 14.6(3)(b)(v).
36 Bradbury v Westpac Banking Corporation [2009] 3 NZLR 400 (CA), at para [28], set out at para
[3] above.
misrepresentation case, involving a conflict of oral evidence on critical issues, was utterly unsuitable for the summary process.
[37] In addition, while reliance was placed on the Contractual Remedies Act cause of action, by the time of trial relief in the form of cancellation had been abandoned. And, the claim under that Act was also unsuccessful as to damages. No reference was made in the letter to the Fair Trading Act cause of action. That was added in a later pleading. It was the cause of action on which Aldrie succeeded at trial.
[38] Although the rules on increased costs are not triggered, there remains a separate question as to whether a party in the position of Aldrie is “entitled” to costs taken on all steps in the proceeding after a Calderbank offer is made. The Calderbank rules38 are independent of those relating to increased costs. An “entitlement” to all costs taken after the offer is made does not have the effect of increasing an amount payable on a standard scale but could encompass a requirement for all of those costs to be paid, without reduction.
[39] I have already discussed the presumptive entitlement to specified costs that results from r 14.11(3).39 Mr Foote argued that, while Aldrie did not qualify under r 14.11(3), its offer to accept a sum equivalent to the amount for which it ultimately obtained judgment should give rise to a similar entitlement by way of analogy. He called in aid the approach taken by Brewer J in Junior Farms Ltd v Commissioner v Inland Revenue.40
[40] Even though r 14.11(3) appears to confer an entitlement to costs if a qualifying offer were made, that sub-rule remains subject to the general discretion of the Court: see r 14.11(1) and (2)(a).41 So, whether a Calderbank letter falls within r 14.11(3) or (4), it remains subject to that overriding discretion, expressed more
broadly in r 14.1.42
38 See para [3] above.
39 See para [23] above.
40 Junior Farms Ltd v Commissioner of Inland Revenue HC Auckland CIV-2009-4904-2870, 5
October 2011.
41 Set out at para [22] above.
42 Rule 14.1 is set out at para [3] above.
[41] I am not satisfied that any adjustment on standard 2B costs is required on the basis of rejection of the Calderbank offer. Although the claim was initially focussed on cancellation rather than damages, and a number of adverse findings were made against Ms Laboyrie, in respect of her conduct, Aldrie remained the successful party at trial and is entitled to costs.43 But, for the reasons I have given in respect of the claim for increased costs, there is no basis on which any adjustment is required under r 14.11 alone.
Remaining issues
(a) Introduction
[42] I received submissions from Mr Foote and Mr Clark on the costs that should be awarded in favour of Aldrie in relation to particular steps taken in the proceeding. Mr Clark objected to any allowance being made in favour of Aldrie in respect of applications for particular discovery against the Clover Bay interests, non-party discovery, and to take evidence from a witness in advance of the trial. For the same reasons advanced in support of those contentions, allowances for the preparation of written submissions and bundles of documents for each are opposed. So too is any allowance for an appearance on the non-party discovery application, and the sealing of that order.
[43] A number of Court fees are also in dispute. These include the original statement of claim on which the unsuccessful application for summary judgment was based; filing fees in respect of the applications for discovery and taking the evidence of a witness in advance of trial; and sealing of the non-party discovery order. The claim is for $35,230; the amount in issue is $3,510.
[44] There are also challenges to the amount payable for expert fees, witness expenses and disbursements.
(b) Claims for procedural steps on a 2B basis
[45] Mr Clark submits that applications for particular discovery and non-party discovery were made prematurely and resulted in consent orders being made. A similar position is taken in respect of the application to have the evidence for a witness taken before trial, to which the Clover Bay interests consented. He contends that, in those circumstances, the costs in respect of those steps should lie where they fall.
[46] The discovery applications came before Associate Judge Christiansen on 18
March 2015. The disputed points were determined, for reasons given on 23 March
2015.44 The Associate Judge reserved costs for determination at trial. However, he provided some observations of the way in which the discovery issues had been addressed before him. They have assisted me.
[47] Judge Christiansen concluded his reasons by stating:
Costs
[49] There are two aspects to this application for costs. One concerns [Aldrie’s] request for the [Clover Bay interests] to pay the costs incurred by the non parties in complying with the discovery obligations the Court has now required of them (cost shifting).
[50] Also and routinely [Clover Bay] has applied for costs upon its application for further discovery from the [Clover Bay interests].
[51] In the Court’s view and it orders accordingly that [Aldrie] is to pay any compliance costs in that regard and thereafter any final decision upon the allocation of those costs shall be reserved until determination of [Aldrie’s] claim.
[52] Regarding the claim for costs against the [Clover Bay interests] the
Court considers these too shall be reserved for determination in the cause.
[53] The non party discovery application was not opposed but otherwise the position adopted by the [Clover Bay interests] in that respect has largely been vindicated. Although [Aldrie] gave notice of its intention to apply for non party discovery, too little time was provided prior to filing the non party discovery applications to enable the [Clover Bay interests’] solicitors to seek appropriate instructions and to respond.
[54] With respect to the costs claims against the [Clover Bay interests] it seems to the Court the position taken by the [Clover Bay interests] in response to [Aldrie’s] discovery applications has largely been vindicated by the orders recorded in this minute.
[48] In light of the Associate Judge’s view that the positions taken by the Clover Bay interests on each of the discovery applications had been substantially “vindicated” by the orders he made, I do not consider it is appropriate to award costs in respect of steps taken in relation to the filing of the two discovery applications, the preparation of written submissions and bundles for the hearing, or the sealing of the order.
[49] The trial was due to begin on 22 June 2015. An application was made for evidence to be taken on a date prior to 22 June because a witness was to be out of New Zealand for the whole of the time estimated for trial. That application came before me on 9 June 2015, on the papers. Mr Foote sought an order that the evidence be taken before a Judge or Registrar, while Mr Clark contended that it should be taken by video-link.
[50] I directed the evidence to be taken, but in a manner different to that proposed by each of Mr Foote and Mr Clark. I said:45
[4] Unless counsel for the defendants can demonstrate prejudice, my preliminary view is that the evidence could be given by video record before a Registrar. That would enable it to be taken in the week before the trial begins with a record of the evidence actually given to assist the trial Judge: see ss 105(1)(a)(iii) and 106 of the Evidence Act 2006.
[5] If that approach were taken, I would envisage reserving leave to either party to seek leave to have additional evidence called from [the witness] on his return, should any unexpected issues arise out of the examination or cross-examination of other witnesses.
[6] If counsel agree to that suggestion, a consent order may be submitted for approval. Otherwise, the Registrar shall arrange a telephone conference before me as soon as practicable so that I can determine the mode by which [the witness’s] evidence should be given.
[51] There was no dispute that the evidence from the witness should be taken before trial. Rather, the issue was one of mode of evidence. The application was
within short compass and was ultimately determined on the basis that a video record could be taken. No hearing was required. The mode of evidence used was different from that proposed initially by both parties. In those circumstances, I regard this application as having been made for the benefit of all parties to the proceeding, and decline to make an award of costs in respect of that step.
[52] For those reasons, I accept the criticisms made by Mr Clark and reduce 2B
costs by $22,969. That means the amount payable under this head is $76,266.
(c) Court fees
[53] Mr Clark submits that Court fees claimed in respect of the discovery applications and the taking of evidence from the witness apply equally to the claims for Court fees in respect of each. I agree. They are disallowed.
[54] I see no reason why a fee should not be claimed in respect of the first version of the statement of claim. Mr Foote abandoned the claim for any fee on filing the application for leave to file the third amended statement of claim. The order for costs made on the summary judgment application in favour of the Clover Bay interests cannot affect the ability to claim for the cost of filing the originating statement of claim when the proceeding was ultimately successful. The filing fee for the third amended statement of claim should be allowed.
[55] Accordingly, I allow the fee of $1350 for the statement of claim. [56] The amount awarded for Court costs is $33,680.
(d) Expert fees and witness expenses
[57] Mr Clark submits that expert fees claimed in respect of Dairy Flat Veterinary Clinic (for Dr O’Reilly) and Harvest Farm Advisory (Mr Blackwell) do not meet the criteria for disbursements, under r 14.12 of the Rules. That provides:
14.12 Disbursements
…
(2) A disbursement must, if claimed and verified, be included in the costs awarded for a proceeding to the extent that it is—
(a) of a class that is either—
(i) approved by the court for the purposes of the proceeding; or
(ii) specified in paragraph (b) of subclause (1); and
(b) specific to the conduct of the proceeding; and
(c) reasonably necessary for the conduct of the proceeding; and
(d) reasonable in amount.
[58] There are three points raised:
(a) Were these expenses specific to the conduct of the proceeding?
(b) Were they reasonably necessary for the conduct of the proceeding? (c) Were they reasonable in amount?
[59] Mr Clark challenges other invoices rendered by Harvest Farm Advisory, dated 26 October 2013 and 10 December 2013, on the grounds that the proceedings were not commenced until 20 January 2014. He submits the balance of those accounts should be reduced, so that Mr Blackwell’s function as a farming consultant to Aldrie is taken into account.
[60] As I explained to counsel during the hearing, my usual practice is to refer assessment of disbursements of this type to the Registrar, under r 14.12(4). However, given the time that has passed since the hearing in June and July 2015, I agreed to determine the challenges myself. Having reviewed the information provided, I intend to take a global approach to the fees and expenses charged in relation to expert witnesses. In doing so, I take account of the fact that some of those who gave opinion evidence were also called as witnesses of primary fact.
[61] I am satisfied that both Dr O’Reilly and Mr Blackwell gave some evidence as expert witnesses. Some adjustment is required to reflect the fact that some of the
invoices in respect of which expert fees are claimed represent work undertaken other (at least) for dual purposes. Taking a broad brush approach to the fees charged, I consider that they should be reduced by 15 percent ($3915.56) so that the amount claimable is $22,188.17.
[62] So far as witness expenses are concerned, I am satisfied that the accommodation costs are reasonable and are properly claimed. The accepted expenses total $747.77. However, the cost of a new shirt (which was presumably retained) for one witness who had to stay in Auckland a night longer than expected is disallowed.
(e) Non-party discovery costs
[63] Aldrie claims a total sum of $15,775.08 to cover costs for which it is responsible for those entities against which non-party discovery orders were made.
[64] Mr Clark submits that this discovery was not reasonably necessary for the conduct of the proceeding, as none of the documents were material to the real issues in the case. Complaints are also made about the reasonableness of costs incurred and charged by Gribbles Veterinary Services Pathology Ltd.
[65] I disallow these costs. They did not contribute to the cause of action on which Aldrie succeeded. To a significant extent, they were relevant to the claims for consequential losses that failed. As a matter of discretion, in the context of this case, I do not consider that it is right for the Clover Bay interests to be asked to bear those costs.
(f) Disbursements
[66] A claim is made for $2,127.50 in respect of the costs of serving the non-party discovery order. I disallow that disbursement. That accords with my approach to non-party discovery issues generally.
[67] That means the amount awarded for disbursements is $6,069.99.
Costs on the costs’ application
[68] After the costs hearing, and without objection from counsel for the Clover Bay interests, Mr Foote sought costs in relation to the present application. Mr Clark did not oppose because he submitted that costs should be awarded in favour of the Clover Bay interests if they were successful in defending the present application.
[69] I accept that there is jurisdiction to make such an order.46 An order of that type was made recently by Dobson J, in Houghton v Saunders.47
[70] As a matter of discretion, I decline to make an order. I consider that both parties have been successful to some extent on the present application, and that costs should lie where they fall in that regard.
Result
[71] For those reasons, I order that costs and disbursements be paid by Clover Bay and Mr Prout (on a joint and several basis) to Aldrie in the sum of $138,951.93, made up of:
(a) 2B scale costs: $76,266 (b) Court fees: $33,680
(c) Expert fees and witness expenses: $22,935.94
(d) Disbursements $6,069.99
46 Based on authorities such as Body Corporate Administration v Mehta [2013] NZHC 213, at para [85] and Auckland Regional Council v Arrigato Investments Ltd (2002) 16 PRNZ 217 (HC) at para [21].
47 Houghton v Saunders [2015] NZHC 548, at paras [174]–[175].
[72] I thank counsel for their assistance.
P R Heath J
Delivered at 3.00pm on 1 July 2016
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