Aquaheat New Zealand Limited v Hi Seat Limited (in liquidation and receivership)
[2014] NZHC 1346
•16 June 2014
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV-2012-404-006729 [2014] NZHC 1346
BETWEEN AQUAHEAT NEW ZEALAND
LIMITED Plaintiff
AND
HI SEAT LIMITED (in Liquidation and Receivership) and LIA LIMITED (in Liquidation and Receivership)
First Defendant
AND
ANDREW JOHN GRENFELL Second Defendant
Appearances: B A Ross for the Plaintiff / Respondent
J Tomlinson for the Second Defendant / Applicant
On thepapers:
16 June 2014
COSTS JUDGMENT OF ASSOCIATE JUDGE SARGISSON
This judgment was delivered by me on 16 June 2014 at 3.30 p.m. pursuant to Rule 11.5 of the High Court Rules.
Registrar/Deputy Registrar
Date.......................................
Solicitors / Counsel: McElroys, Auckland
Kensington Swan, Auckland
Case officer: Kendall Conway
AQUAHEAT NEW ZEALAND LIMITED v HI SEAT LIMITED (in Liquidation and Receivership) and LIA LIMITED (in Liquidation and Receivership) [2014] NZHC 1346 [16 June 2014]
[1] On 30 May 2014 I issued judgment on Mr Grenfell’s application for further
discovery against the plaintiff. I made orders as follows:
The application is allowed to the extent that privilege is set aside in respect of two emails contained in the bundle and any communications made in response to requests made in those emails (or internal records of such responses). The emails are dated 7 August 2012 and were made from Bell Gully to PwC and Horizon; they are the documents numbered HRN.03.14362 and HRN.04.1591 in the bundle.
…
Costs are reserved. If the parties cannot agree on costs, memoranda may be filed and served within 5 working days of the date of this judgment.
[2] Counsel have now filed costs memoranda.
[3] Each party seeks 2B costs against the other essentially on the basis that it was the substantially successful party, and therefore that the statutory presumption that costs follow the event should apply in its favour.
[4] Counsel for the plaintiff submits that the key finding in the judgment was in favour of the plaintiff. This, counsel submits, was because the judgment found the emails and other correspondence over which privilege was claimed to be privileged, and that privilege was waived in the case of only two emails (and their responses).
[5] Counsel also relies on additional points. In summary these are essentially two-fold. The first is that Mr Grenfell’s application was a broad-ranging challenge to confidentiality and privilege claims in respect of a large number of documents that put the plaintiff to needless effort. The plaintiff had to prepare submissions on solicitor-client privilege in relation to non-existent Bell Gully correspondence. Mr Grenfell knew, when filing the application, that Bell Gully in particular had not provided advice to Horizon about the level at which the working capital escrow ought to be set, as this was set out in the copy of Kensington Swan’s letter to Russell McVeagh of 11 November 2013, which he attached to his own affidavit. Additionally Mr Grenfell:
(a) Belatedly agreed to abandon the challenge to confidentiality on the morning of the hearing, meaning that the plaintiff had needlessly prepared for this aspect of the application.
(b)Narrowed the scope of the challenge to privilege at the hearing. If he had communicated the scope of what he was seeking by correspondence prior to the hearing, that would have potentially avoided the need for the hearing.
[6] The second point that the plaintiff relies on is that Mr Grenfell made his application some four months outside the time allowed by the Court’s timetable directions. This has had flow-on consequences:
(a) The plaintiff ’s final brief of evidence required amendment in response to the judgment, and was therefore exchanged beyond the date for exchange and in breach of the Court-ordered timetable.
(b)Mr Grenfell now says he may require further time to exchange his own evidence, meaning that the plaintiff will only receive his evidence in the week prior to trial. The plaintiff says this is highly likely to prejudice its ability to prepare for trial, and as the judgment contemplates, a costs award in favour of the plaintiff is the appropriate way to deal with this prejudice.
[7] Counsel for Mr Grenfell submits the plaintiff’s claim to be the successful party is not correct and that the additional claims the plaintiff relies upon do not bear scrutiny or justify a departure from the normal approach to costs. The judgment found that though selected emails relating to the escrow amount were privileged, privilege had been waived. The application was therefore successful, or successful to a reasonable degree, such that Mr Grenfell should be awarded scale costs as occurred in Rout v Southern Response Earthquake Services Limited [2014] NZHC 1053,
20 May 2014, Gendall J.
[8] Counsel for Mr Grenfell also submits that this is not the case of a plaintiff that has been put to unnecessary cost by a last minute narrowing of the scope of the application, contrary to the plaintiff ’s claim. The reason that orders were not sought on the issue of confidentiality was that parties reached a compromise on the issue of confidentiality just prior to the hearing.
[9] Further, the scope of the challenge to privilege was not so much narrowed as clarified to deal with an alleged inconsistency between the application and the counsel’s submissions. Counsel clarified this inconsistency. Consistently throughout Mr Grenfell merely sought discovery of all documents relating to the escrow amount between Bell Gully, PwC, Aquaheat and Horizon. Kensington Swan’s letter contained no satisfactory denial that Aquaheat had in its custody and control documentation between these entities relating to the escrow amount. Clearly there were relevant emails (and responses) which have now been discovered as a result of orders in the judgment, and but for the application they would still be incorrectly categorised as privileged.
[10] Finally, counsel for Mr Grenfell submits that delays in the exchange of evidence were not due to the lateness of Mr Grenfell’s application, but rather were the result of the plaintiff’s request for a number of extensions that he agreed to. Counsel says that the briefs were originally due five weeks before trial on 16 May
2012 (which was a week later than normal). Upon agreement that deadline was extended to 28 May 2012. He submits these extensions had nothing to do with the timing of the discovery decision, as it had not even been released at the time the parties agreed to the extension. Counsel submits his understanding is that many of Aquaheat’s briefs had to go through internal checks (for example through Horizon and Bell Gully) before they could be filed and served. He points out there is no apparent reason why the content of Aquaheat’s briefs would require change because of any order. He points out that none of the briefs refer to the emails that were ordered to be disclosed.
Decision
[11] Under the statutory costs regime, the presumption is that costs follow the event. High Court Rule 14.2(a) provides that the party who fails with respect to an interlocutory application should pay costs to the party who succeeds. Costs are, however, in the overall discretion of the Court: r 14.1. Relevantly, the Court may order a party to pay reduced costs where reason exists which justifies the Court making such an order despite the principle that the determination of costs should be predictable and expeditious: r 14.7.
[12] The approach where the costs claiming party is only partially successful was set out by the Court of Appeal in Packing In Ltd (in Liq) v Chilcott1:
In a case such as the present, where in broad terms each party has had similar success, we do not consider it helpful to focus too closely on the question which party has failed and which has succeeded. Costs in a case such as this should rather be based on the premise that approximately equal success and failure attended the efforts of both sides. To that starting point should be added issues such as how much time was spent on each transaction or group of transactions in issue, and any other matters which can reasonably be said to bear on the Court’s ultimate discretion on the subject of costs. In the end, as in all costs matters, the Court must endeavour to do justice to both sides, bearing in mind all material features of the case.
[13] The decision of Gendall J in Rout v Southern Response Earthquake Services
Ltd2 referred to by counsel for Mr Grenfell is also apposite.
[14] I am satisfied that counsel for Mr Grenfell is right that, as in Rout, this is a case where the applicant was successful to a reasonable degree. Mr Grenfell successfully sought production of the documents relating to the escrow amount. That he succeeded on the basis of waiver, his alternative ground for his challenge to privilege, is not a reason to treat him as the unsuccessful party. Nor is it a reason to treat the case as one where the parties enjoyed equal measures of success.
[15] Additionally I do not see this as a case where the plaintiff should have costs because it was put to needless effort. I do not think too much should be read into the
1 Packing In Ltd (in Liq) v Chilcott (2003) 16 PRNZ 869 at [5].
2 Rout v Southern Response Earthquake Services Ltd [2014] NZHC 1053.
fact that Mr Grenfell opted not to pursue confidentiality orders at the hearing. My recollection of counsel’s advice at the hearing is that the parties had reached an accommodation on confidentiality. This was put to me as a compromise by the parties, and not a capitulation by either side.
[16] I accept that at the hearing the scope of the application was modified with respect to privilege. Whether or not the modification was simply a clarification (as counsel for Mr Grenfell submits), it brought into sharper focus that Mr Grenfell was seeking documents dealing with advice relating to the escrow amount. Even if this clarification had been made known before the hearing, I do not think it would have had a major impact on the plaintiff’s preparation. There is nothing to suggest anything more than a vague possibility that the plaintiff might have conceded waiver and produced any documents of its own volition without the need for a hearing. I think the reality is there was no realistic prospect that waiver would have been conceded.
[17] Turning then to the plaintiff’s contention that the last of its briefs had to be exchanged in breach of the timetable, I am not persuaded that this was due to the lateness of Mr Grenfell’s application. The plaintiff’s position at the hearing was that it did not receive advice from its own advisers on the level of the escrow amount. Given that position, it is difficult to see how the application (or the orders made on the application) could have any flow-on consequences for the timing of the plaintiff’s evidence. As the application related to this confined issue (and as the plaintiff’s position presumably should not change as the result of an order for production), it is difficult to see how the application would impact on its ability to complete its evidence on time.
[18] The plaintiff’s own convenience seems to have led to its seeking extensions, and to the resulting delay in Mr Grenfell’s own exchange of his briefs of evidence. Counsel for the plaintiff submits that as the plaintiff will only receive Mr Grenfell’s evidence in the week prior to trial, this is “highly likely to prejudice” the plaintiff’s ability to prepare for trial, and should sound in costs. If there is prejudice of this kind (which is presently claimed as a mere possibility), the plaintiff may address this with the trial judge.
[19] As noted in the judgment, I nonetheless accept that the lateness of Mr Grenfell’s application carried with it an inevitable degree of distraction (coming, as it did, after the close of pleadings date when the plaintiff would have preferred to have focused entirely on the preparation for trial). This kind of distraction is one that can be dealt with fairly by an award of costs. Balancing all material features of the case, on reflection I am satisfied that the most appropriate way to do justice to both sides is to allow scale costs to Mr Grenfell, subject to a percentage deduction in favour of the plaintiff.
[20] I propose therefore to allow a 25% reduction on scale costs.
Result
[21] Costs of $4,776.00 are awarded in Mr Grenfell’s favour against the plaintiff
(being 2B costs less a 25% deduction), plus the disbursement claimed of $500.00 for the filing fee on the application.
Associate Judge Sargisson
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