Ballantyne Trustees Limited v HFK Limited
[2020] NZHC 2301
•4 September 2020
IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY
I TE KŌTI MATUA O AOTEAROA ŌTAUTAHI ROHE
CIV-2015-409-000173
[2020] NZHC 2301
BETWEEN BALLANTYNE TRUSTEES LIMITED, A N HEAD, B R HEAD, CALMWATER ENTERPRISES PTY LIMITED and
S B KEUNG as Trustees of the GBR Trust Plaintiffs
AND
SENG BOU KEUNG
Second Plaintiff
AND
HFK LIMITED
First Defendant
AND
KEIRAN ANNE HORNE
Second Defendant
Hearing: Determined on the papers Counsel:
M J Tingey for Plaintiffs
J E Eckford for First and Second Defendants
Judgment:
4 September 2020
JUDGMENT OF ASSOCIATE JUDGE PAULSEN
This judgment was delivered by me on 4 September 2020 at 3.00 pm pursuant to Rule 11.5 of the High Court Rules
Registrar/Deputy Registrar Date:
BALLANTYNE TRUSTEES LTD v HFK LTD [2020] NZHC 2301 [4 September 2020]
Introduction
[1] The defendants applied for and obtained an order that the plaintiffs provide a second tranche of security for costs.1 In my judgment, I suggested that costs might lie where they fall. Both parties disagree. Each has applied for costs.
Background
[2] In a judgment of 6 May 2016, Associate Judge Osborne ordered the plaintiffs to provide a first tranche of $25,000 as security for the defendants’ costs and disbursements to the point when trial directions were made. The defendants’ application was adjourned to be brought on to determine a second tranche of security for costs for steps from setting down to trial.2
[3] In a memorandum filed for a teleconference on 28 April 2020, the defendants’ counsel submitted that a second tranche of security was payable. It was proposed the plaintiffs pay $25,000 with a further amount to be paid on account of experts’ fees once an estimate was obtained.
[4] The plaintiffs opposed further security being required. In a memorandum of 28 April 2020, Mr Tingey submitted there was no basis for further security at that stage, and nothing to suggest the first tranche had been used up by steps taken by the defendants.
[5] In accordance with directions made at the 28 April 2020 teleconference, the defendants filed their application for a second tranche of security which the plaintiffs continued to oppose. The application was heard on 24 July 2020.
[6] The positions adopted by the parties are set out in my judgment of 31 July 2020.3 In summary the defendants sought further security of $81,979 comprised of legal costs on a 2B basis of $30,114 and disbursements of $51,865 for experts’ fees.
1 Ballantyne Trustees Ltd v HFK Ltd [2020] NZHC 1911.
2 At [2]-[10].
3 At [10]-[14].
The plaintiffs argued the application was premature, the defendants were acting oppressively to stifle the plaintiffs’ claim and the amount sought was excessive.
[7] I held the application was not premature, the defendants’ actual costs exceeded the amount of the first tranche and, the defendants’ application was not oppressive. However, the evidence provided in relation to experts’ fees was unsatisfactory4 and some items claimed related to case management conferences that should not be required. The plaintiffs were ordered to provide further security of $25,000 with leave reserved for the defendants to apply for further security for costs in relation to experts’ fees and counsels’ appearances at trial.
The submissions
The defendants
[8] The defendants rely on the general principle that the party who fails in relation to any application should pay the costs of the party who succeeds.5 The application was necessary, and an order was made in their favour. On this basis, they are entitled to costs.
[9] The defendants seek a 50 per centum uplift on 2B scale costs on the basis the plaintiffs unreasonably refused to accept what they proposed in their counsel’s memorandum for the 28 April 2020 teleconference.6 They also seek disbursements of the filing fee and hearing fee on the application.
The plaintiffs
[10] The plaintiffs argue the defendants were not successful as they had sought a second tranche of $81,979 but were awarded only $25,000. The plaintiffs contend they had always agreed to pay further security, subject only to the defendants providing confirmation that the first tranche had been exhausted. They consider I “implicitly concluded” that information was necessary to determine the application,
4 At [20]-[23].
5 High Court Rules 2016, r 14.2(1)(a).
6 Rule 14.6(3)(b)(v).
but it was not made available until after the hearing. Had this information been provided the plaintiffs would have provided further security.
[11] The plaintiffs also rely on a without prejudice except as to costs offer of 16 July 2020 (a week before the hearing) where they offered to pay $25,000 as security for costs. The defendants counter-offered at $51,865. The plaintiffs seek costs on the basis the defendants, without reasonable justification, did not accept an offer of settlement which would have resolved the application.
[12] The plaintiffs also argue that in a costs context the courts have taken into account the nature and reasonableness of positions taken in settlement discussions. They say the defendants’ counter-offer of $51,865 was unreasonable. It included a large amount for experts’ fees when the court found the defendants had not established the experts had useful evidence to give or that the fee estimate was sufficiently reliable to form the basis for payment of security. As the defendants provided no further information to justify the experts’ fees, the counter-offer was unreasonable.
[13] The plaintiffs seek 2B scale costs to 17 July 2020, presumably on the basis that they were always willing to provide further security. For attendances after 17 July 2020, they seek either indemnity costs,7 or a 50 per cent uplift on scale costs.8 The plaintiffs also seek disbursements for counsel’s travel costs.
My approach
[14] All matters of costs are discretionary, but the discretion must be exercised on a principled basis in accordance with the High Court Rules. The party who has lost should pay the costs of the party that has won.9 The loser pays costs unless there are exceptional reasons to the contrary.10 The determination of costs, so far as possible, should be both predictable and expeditious.11
7 Rule 14.6(3)(b)(v).
8 Rule 14.6(4)(a).
9 Rule 14.2(1)(a).
10 Shirley v Wairarapa District Health Board [2006] NZSC 63, [2006] 2 NZLR 523 at [15] and [19].
11 High Court Rules, r 14.2(1)(g).
[15] The first step then is to determine who is the successful party overall. If one party has achieved overall success it will be necessary to consider if there are grounds to award increased/indemnity costs or to reduce/refuse costs upon any of the grounds set out in the High Court Rules.12
Discussion
[16] While it is not always straight-forward to determine which is the successful party overall this is not such a case.13 The defendants applied for a second tranche of security for costs. The plaintiffs opposed that application entirely but were ordered to provide a second tranche. The fact the defendants did not obtain an award for the full amount they sought does not mean they did not achieve success overall as “success on more limited terms is still success”.14 The defendants were successful.
[17] I do not accept the defendants’ submission they are entitled to an uplift on costs. Their statement of position for the 28 April 2020 teleconference was not an offer that the plaintiffs could reasonably have accepted. It assumed the plaintiffs would provide security for experts’ fees based on an estimate to be obtained, which is a position that I did not accept in my judgment. In so far as it contemplated any dispute concerning the experts’ fees would be brought back to the court, it would not have avoided a hearing.
[18] The next issue is whether the defendants should be refused costs or have their entitlement reduced for any of the reasons advanced by the plaintiffs. The pertinent rules are rr 14.7, 14.10 and 14.11 of the High Court Rules which relevantly provide:
14.7 Refusal of, or reduction in, costs
Despite rules 14.2 to 14.5, the court may refuse to make an order for costs or may reduce the costs otherwise payable under those rules if
---…
12 Emmons Developments New Zealand Ltd v Mitsui Sumitomo Insurance Company Ltd [2020] NZHC 932 at [26]-[27].
13 At [28].
14 Weaver v Auckland Council [2017] NZCA 330, (2017) 24 PRNZ 379 at [26]; Water Guard NZ Ltd v Midgen Enterprises Ltd [2017] NZCA 36 at [13]; Midgen Enterprises Ltd v UV Water Systems Ltd [2017] NZSC 68.
(d) although the party claiming costs has succeeded overall, that party has failed in relation to a cause of action or issue which significantly increased the costs of the party opposing costs; or
…
(f)the party claiming 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;
14.10Written 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
(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.
14.11Effect 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.
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.
[19] The plaintiffs contend they had always agreed to provide a second tranche but had sought confirmation that the first tranche was exhausted. They submitted had this information been provided they would have paid further security. I do not accept this submission for two reasons.
[20] First, the position the plaintiffs have always adopted, at least until they made the offer of 16 July 2020, was that no second tranche was yet payable. In his memorandum of 28 April 2020, Mr Tingey states, “There is no basis to seek further security at this stage”. In their notice of opposition, the plaintiffs opposed the making of any of the orders sought by the defendants. In addition to taking the stance the application was premature, the plaintiffs asserted the application was an attempt to stifle the claim. That was the position they continued to maintain at the hearing.
[21] Second, I had not implicitly concluded the defendants were required to prove the first tranche had been exhausted before ordering a second tranche. That is not my view, but the argument fell away as the defendants’ solicitors confirmed that actual costs exceeded the amount of the first tranche.15
[22] There are two factors I consider justify me reducing costs that would otherwise be payable to the defendants. First, the defendants were not wholly successful. Experts’ fees made up the largest portion of the $81,979 sought as the second tranche. The defendants failed to provide satisfactory evidence concerning these experts’ fees. The issue was plainly sign-posted and should have been dealt with. The issue was important, and a matter upon which the plaintiffs relied in opposition to the application and was a significant focus of counsel’s submissions at the hearing engaging r 14.7(d) High Court Rules.
[23] The next matter is the plaintiffs’ without prejudice except as to costs offer. The offer was in these terms:
In relation to the defendants’ application for a second tranche of security for costs, I am instructed to offer, on a without prejudice save as to costs basis, the sum of $25,000 as security for costs from the plaintiffs. If accepted payment would be made immediately to my trust account and counsel would vacate the hearing set down for 24 July 2020.
15 Ballantyne Trustees Ltd v HFK Ltd, above n 1, at [17].
[24] I do not accept the plaintiffs’ stance that this was an entirely reasonable offer the defendants should have accepted. The offer was made at a late stage. It makes no provision for the defendants’ costs necessarily incurred in making the application. The offer was also not on as beneficial terms as the defendants achieved as I have ordered they are entitled to apply for further security, including in respect of experts’ fees. That said, the effect of the making of the offer is within the discretion of the court.16 Given the defendants’ failure to provide evidence supporting the claim for security for experts’ fees, their counter-offer of $51,865 represented an overly optimistic appraisal of their position and was likely to stifle further discussion.
My assessment
[25] The extent to which the defendants’ costs should be reduced cannot be approached as a mathematical exercise. The reduction should not undermine the principles that the successful party should be compensated for costs they have expended and that costs should be predictable and expeditious.17 Standing back and looking at the matter with a broad lens the defendants should get costs. An appropriate result is that the defendants’ costs should be reduced by 50 per cent.
Result
[26]The plaintiffs’ application for costs is dismissed.
[27] The defendants are awarded costs on their application for a second tranche of security for costs calculated on a 2B basis with a 50 per cent reduction. The costs are to be fixed by the Registrar. The defendants are entitled to a further sum of $2,100 for disbursements.
O G Paulsen
Associate Judge
16 High Court Rules, r 14.11(1).
17 Taylor v Roper [2019] NZHC 16 at [20]-[22].
Solicitors:
Ronald W Angland & Son, Leeston, Canterbury
Parker Cowan, Queenstown
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