Aon New Zealand v Moffett Orchards Limited

[2016] NZHC 1212

IN THE HIGH COURT OF NEW ZEALAND NAPIER REGISTRY

CIV-2015-441-000075 [2016] NZHC 1212

BETWEEN

AON NEW ZEALAND

Appellant

AND

MOFFETT ORCHARDS LIMITD Respondent

Hearing:	On the papers
Judgment:	8 June 2016

COSTS JUDGMENT OF HINTON J

This judgment was delivered by me on 8 June 2016 at 11.00 am pursuant to Rule 11.5 of the High Court Rules

………………………………………..

Registrar / Deputy Registrar

Solicitors:

I Law, DLA Piper, 205 Queen Street, Auckland

M Lawson, Lawson Robinson, Napier

AON NEW ZEALAND v MOFFETT ORCHARDS LIMITD [2016] NZHC 1212 [8 June 2016]

[1]      The parties in this case have found a pragmatic solution to an appeal that was set to be heard on 17 November 2015, resulting in the appeal being withdrawn. Now, both parties seek costs.   One says the appeal was always going to succeed, hence its entitlement to costs on a 2B basis plus increased costs.  The other party says it is the party which is entitled to costs because the withdrawal of an appeal should be treated as abandonment.

Background

[2]      The respondent, Moffett Orchards Ltd (MOL), arranged the “AON Client Placement Facility” policy of insurance through the brokerage of the appellant, AON New Zealand (AON) in 1999 and it renewed the policy thereafter.

[3]      In the 2009-2010 policy period, MOL made a claim which was declined by the lead co-insurer, IAG New Zealand Ltd trading as NZI.

[4]      MOL, through its solicitors, disputed the declinature with NZI.

[5]      In June 2013 MOL sued AON, claiming that AON was liable as the insurer under the policy.

[6]      In November 2014, AON sought summary judgment but was unsuccessful in the District Court.  It appealed to this Court.  Its position on appeal was essentially the same as that at first instance, namely that MOL’s claim against AON as an insurer was factually and legally misconceived.

[7]      On 16 November 2015, I called a telephone conference with counsel and queried whether the appeal could be resolved on the basis of MOL substituting the co-insurers in place of AON, together with the co-insurers recognising they were the correct defendants.  Following this, the parties sought an adjournment of the appeal, pending the substitution of the co-insurers.

[8]      On 26 January 2016, MOL filed an amended statement of claim wherein it joined the co-insurers as second defendants and abandoned its claim against AON as

an insurer.  MOL now pleads negligence against AON in its capacity as a broker in the alternative to its claim against the insurers.

[9]      AON has since withdrawn the appeal and seeks costs against MOL on the appeal.

Submissions

[10]     Mr Law, for AON, submits that MOL has abandoned its claim against AON as insurer and effectively conceded AON’s position on appeal.  Accordingly, costs should follow the event.

[11]     He calculates costs on a 2B basis, set at $14,049 plus $540 for the filing fee on the appeal and a further $372.30 for travel costs.  Mr Law says travel costs are sought because the parties did not reach agreement until the eleventh hour, therefore requiring counsel to travel to Napier as was arranged.

[12]     AON seeks a 50 per cent uplift because first, Mr Law says MOL’s claim against AON lacked a proper evidential foundation and, secondly, it waited until the eleventh hour before conceding that it would substitute the named insurers for AON.

[13]     MOL opposes AON’s application for costs and seeks costs on a 2B basis.

[14]     Mr Lawson, for MOL, submits that AON’s position has not been conceded on appeal.  As far as MOL is concerned, the District Court decision was in its favour and AON’s appeal has not been determined. Accordingly, it has not been shown that AON was correct to bring an appeal.   Mr Lawson submits further, that if AON wanted to test its prospects of success at trial, then it would not have agreed to the pragmatic course of action that has been followed.   In those circumstances, says Mr Lawson,  costs  should  be  awarded  to  MOL  for  the  unsuccessful  summary judgment application in the District Court and for costs incurred by MOL in preparation for defending the now abandoned appeal.

[15]     In my assessment, neither party is entitled to costs.  First, there are obvious public policy reasons in favour of encouraging parties to reach agreements, such as the one reached here.  In my view, it would be wrong to hold parties liable as to costs in the ordinary way, as sought by counsel, because one of the very benefits of reaching such an agreement (and therefore disposing of the proceedings) is to limit the parties’ exposure to costs. A procedure of this character should be encouraged by the Court.

[16]     Secondly, neither party is right to say that it has succeeded, either by the other party conceding the points of appeal (in the case of AON), or abandoning it (in the case of MOL).   This is not a case where there is a winning or losing party. Indeed, the very essence of doing away with the appeal is that the points of appeal will  not  be determined.   Therefore,  this  case falls  outside  the general  principle applying to the determination of costs in that there is not a losing party who should

pay costs to the successful party.1

[17]     Moreover, I do not agree with Mr Law that lateness is an issue here.  I refer to r 14.2(f) of the High Court Rules, dealing with Calderbank offers.  That rule allows for the making of an offer “at any time”, though it is accepted that the later the offer the less its impact on costs, because a very late offer will have little or no impact on

the  parties  in  the  substantive  proceedings.2      However,  in  this  case,  the  parties

successfully reached agreement and disposed of the appeal proceeding.  Therefore,

MOL’s delay had little impact on the outcome of this case.

[18]     Further, settlement of the appeal required initiative also on the part of AON, as MOL’s broker, to get the actual co-insurers to agree that they were the correct defendants, so that they could be safely substituted.  It did not seem that AON had

done that earlier.

1      High Court Rules, r 14.2(a).

2      Andrew Beck (ed) McGechan on Procedure (online looseleaf ed, Westlaw NZ) at [HR04.10.02].

[19]     For the reasons given, there will be no award of costs.

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Hinton  J