Bates v Auckland Council
[2022] NZHC 336
•1 March 2022
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2017-404-2670
[2022] NZHC 336
BETWEEN DENESE ROSEMARY BATES
Plaintiff
AND
AUCKLAND COUNCIL
First Defendant
O’HAGAN BUILDING CONSULTANTS LIMITED
Second Defendant
On the Papers Counsel:
T Rainey and J Heaney for the Plaintiff
S C Price, J K Wilson and R Nolan for the First Defendant A L Holloway and M A Karlsen for the Second Defendant
Judgment:
1 March 2022
JUDGMENT OF GWYN J
(Costs)
This judgment was delivered by me on 1 March 2022 at 4.30 pm pursuant to Rule 11.5 of the High Court Rules.
Registrar/ Deputy Registrar Date:
BATES v AUCKLAND COUNCIL [2022] NZHC 336 [1 March 2022]
TABLE OF CONTENTS
Introduction [1]
The Council’s costs claim [8]
Duration of hearing [9]
Joinder of third parties [11]
Discussion [17]
Costs for second counsel [21]
Discussion [23]
Increased costs [26]
Settlement offers [33]
Discussion [44]
12 December 2019 offer [50]
February 2020 [52]
Discussion [59]
Plaintiffs’ conduct of the case [69]
Discussion [76]
Disbursements [78]
Expert witnesses’ fees and expenses [80]
Discussion [88]
Electronic discovery [97]
Discussion [99]
Memoranda [103]
Discussion [105]
Other miscellaneous issues [108]
O’Hagan’s costs claim [110]
Second counsel [113]
Commencement of a defence [115]
Joinder of third parties [118]
Increased costs [122]
Disbursements [128]
Expert witness costs [129]
Travel and accommodation costs [135]
Discovery support [141]
Result [146]
Introduction
[1] Ms Denese Bates, the plaintiff in this proceeding, and her now deceased husband Mr David Heaney, discovered in 2005 that their house was a leaky home. They had remedial work done to the house in 2007-2009 but, in 2016, discovered damage in the sub-floor area of the house, caused by a serious moisture problem. They brought proceedings against the Auckland Council (the Council) and O’Hagan Building Consultants Limited (O’Hagan), seeking $1.5 million as the cost to repair the house, consequential losses including the cost of alternative accommodation, storage and associated expenses (estimated to be $18,975) and general damages to compensate the plaintiffs’ nonpecuniary losses totalling $60,000, interest and costs.
[2] In a judgment dated 29 September 2021,1 I found against Ms Bates in respect of all aspects but one of her claim against the Council. I upheld her claim that the Council had breached its duty of care in respect of its inspection obligation and ought not to have issued a code of compliance certificate for the house, but went on to find that no causative link was established between that breach and the damage the plaintiff had suffered.
[3] I found that Ms Bates had not made out her claims of negligence against O’Hagan and that, in any event, the evidence for the plaintiff would not have established a causative link between any breach and the damage alleged.
[4] Given my conclusions on liability, it was not necessary for me to consider the scope of any remedial work to the house or the affirmative defences raised by each of the Council and O’Hagan against Ms Bates, or the cross-claims as between the Council and O’Hagan, or O’Hagan’s third party claim against Brackenridge.
[5] Following the release of my substantive judgment the parties were unable to agree the issue of costs. Ms Bates accepts that she must pay costs to the Council and to O’Hagan and the parties agree that 2B scale costs are appropriate. However, very
1 Bates v Auckland Council [2021] NZHC 2558.
little else is agreed. In this judgment I deal only with those aspects of the costs claims from the Council and O’Hagan that are disputed by Ms Bates.
[6]The key issues to be determined are, first in relation to the Council:
(a)Duration of hearing.
(b)The Council’s costs of joining third parties.
(c)Costs for second counsel.
(d)Increased costs, sought under r 14.6(3)(b)(ii) and (v) of the High Court Rules 2016 (the Rules).
(e)Disbursements: (i) Expert witness fees and (ii) external document management support.
(f)Miscellaneous matters.
[7] The issues to be determined in relation to the plaintiff’s costs liability to O’Hagan are:
(a)Costs for second counsel.
(b)Recovery for commencing a defence and a third party defence.
(c)Joinder of third parties.
(d)Increased costs, sought under r 14.6(3)(b)(ii) and (v) of the Rules.
(e)Disbursements: (i) expert witness fees; (ii) external document management support; and (iii) travel and accommodation costs.
The Council’s costs claim
[8] The Council seeks costs in the sum of $223,832.63, being 2B costs (including second counsel certified) with a 50 per cent increase from 22 November 2019, plus disbursements of $134,539.60, together amounting to $358,372.23.
Duration of hearing
[9] The Council seeks costs for 12.5 days of hearing. Ms Bates says the hearing was only 12 days.
[10] The Court sat for 14 days in total, 10 days in March 2020 and four days in September 2021. However, some of those days were half days or less. I have made no allocation for the two days when the Court sat for less than two days (18 and 19 March 2020. On that basis the hearing time for costs purposes is 12 days
Joinder of third parties
[11] The Council joined five third parties who, it says, had primary responsibility for the works that related to the plaintiffs’ pleaded claim. Those parties were:
(a)Brackenridge Builders Limited (the plaintiffs’ first builder), as first third party.
(b)Allied Exteriors Limited (the cladding installer), as second third party.
(c)O’Hagan Building Consultants Limited (the inspector and certifier of the damaged timber), as third third party.
(d)Scribble Limited (the architect involved in the amended building consent), as fourth third party.
(e)Colin Green (the plaintiffs’ second builder who completed the works), as fifth third party.
[12]The Council seeks to recover costs of $26,760 for this step.
[13] The plaintiff disputes this costs calculation. First, Ms Bates says that the time allocation provided for in Schedule 3 item six is for the purpose of calculating costs by a successful defendant against an unsuccessful third party. It is not relevant to the calculation of costs as between plaintiff and defendant. Here, the Council has not been called on to meet any claim for costs by any of the third parties joined to the proceeding. As the Council has not been required to pay costs to any third party, there are no costs relating to the joinder of the third parties which the Council can legitimately claim from the plaintiff.
[14] Second, Ms Bates says that even if the Council is able to recover a time allowance for the joinder of third parties as provided for in Schedule 3, it is not entitled to multiply that time allowance by five, simply because it joined five third parties. All five were joined by the Council in a single statement of claim.
[15] Nor does Ms Bates accept that the Council is entitled to an allowance for the reply filed by the Council in response to the affirmative defences from two of the third parties. Her submission is that the pleadings between the Council and the third parties is a matter between them and is not relevant to an award of costs as between Ms Bates and the Council.
[16] The Council in response says it was reasonable and necessary for it to join all of the five third parties as they were the parties who had primary responsibility for the inadequacies and/or defects that the plaintiffs claimed had caused their loss. As the plaintiffs’ case changed, either by way of amended pleading or through disclosure of further evidence, the Council released all third parties, apart from O’Hagan, with no issue as to costs. There is no suggestion by the plaintiff that any third party was unjustifiably or unreasonably joined and/or that any of the steps taken by the Council in relation to the third parties (such as filing a Notice of Proceeding, Statement of Claim, and Statement of Reply to the Third Party Defences) were not reasonably required.
Discussion
[17] As to the first question whether the Council can recover third party costs from the plaintiff, the plaintiff has not asserted that any of the third parties was unjustifiably
or unreasonably joined. As the Council submits, steps taken by it in relation to the third parties were steps in the proceeding, taken by it as part of its defence of the plaintiff’s claim. I agree there is no reason in principle why the Council should not be able to recover from the plaintiff the costs incurred in joining the third parties. Ms Bates does not advance any authority for the proposition that the Council ought not to be able to claim costs for joinder of third parties where the Council itself has not been called on to meet any claims for costs by any of those third parties. Nor is there anything on the face of Schedule 3 that would prevent the Council recovering third party costs from the plaintiff.
[18] As to whether the Council can claim costs in respect of each of the five third parties, when only one physical pleading was filed, I accept the Council’s submission that the time allowance for commencement of a pleading covers not only the physical document but all underlying attendances, such as receiving instructions, researching facts and law and filing and serving documents. There is no basis in principle for taking a different approach to costs where, for convenience, a party amalgamates five separate third party claims into one statement of claim.
[19] Schedule 3, step 6 provides a costs allowance for “third party notice and statement of claim”. It does not specifically refer to a reply to a third party’s affirmative defence. Schedule 3, step 3 refers, in general terms, to a “reply”. Given that, as I have earlier noted, the plaintiff has taken no issue as to the reasonableness of the Council’s joinder of the third parties, I find that the Council can recover the cost of its reply to the affirmative defences advanced by two of the third parties.
[20] Accordingly, I find that the Council is able to recover scale costs for the steps taken in relation to joinder of each of the five third parties, that is filing a notice of proceeding and statement of claim and statements of reply to third party defences.
Costs for second counsel
[21] The Council seeks costs for second counsel in respect of the hearing itself and, in addition, for the hearing of the plaintiffs’ application to adduce supplementary evidence, on 3 March 2020. The submission for the Council is that second counsel
was reasonably required for that hearing to be able to promptly assess and respond to the plaintiffs’ late filing of supplementary evidence.
[22] The substantive submissions for Ms Bates do not to address this issue, but the attached schedule does not accept that second counsel was required for that interlocutory hearing.
Discussion
[23] Schedule 3, item 27 of the Rules provides for the recovery of an allowance for second and subsequent counsel if allowed by the Court.
[24] I find that an allowance for second counsel is appropriate for the hearing itself: it was lengthy and involved oral evidence, in relation to complex and technical factual matters. The assistance of second counsel was necessary for the briefing and/or management of witnesses.2
[25] The plaintiffs filed an application to permit the use of supplementary evidence from Mr Trevor Jones, Dr Robin Wakelin and Mr Stephen Alexander, on 28 February 2020, with the hearing to commence on 9 March 2020. The application required an oral hearing on 3 March 2020 and I issued a ruling on the application on 3 March 2020 in which I allowed a portion of the brief from Mr Alexander to be admitted, but not the balance of the evidence put forward. Given the lateness of the application, at a time when counsel would have been fully engaged in trial preparation, the significance of the evidence sought to be adduced, and the factual complexity of the case, I certify for second counsel for this hearing.
Increased costs
[26] The Council seeks a 50 per cent uplift on 2B costs, calculated from 22 November 2019 because of what it submits was the plaintiff’s failure without reasonable justification to accept a number of settlement offers made by the Council
2 Mary Moodie Family Trust Board v Attorney-General [2016] NZHC 755, (2016) 23 PRNZ 180 at [9].
and/or to reflect the increased cost to which the Council was put as a result of the plaintiff’s conduct, including the ever-changing nature of its case.
[27] Before I discuss each of the Council’s settlement offers, I set out the relevant rules.
[28] Under r 14.6 of the Rules, the Court may order a party to pay increased costs in certain circumstances. Relevantly, r 14.6 provides:
(3)The court may order a party to pay increased costs if—
(a)the nature of the proceeding or the step in it is such that the time required by the party claiming costs would substantially exceed the time allocated under band C; or
(b)the party opposing costs has contributed unnecessarily to the time or expense of the proceeding or step in it by—
(i)failing to comply with these rules or with a direction of the court; or
(ii)taking or pursuing an unnecessary step or an argument that lacks merit; or
(iii)failing, without reasonable justification, to admit facts, evidence, documents, or accept a legal argument; or
(iv)failing, without reasonable justification, to comply with an order for discovery, a notice for further particulars, a notice for interrogatories, or other similar requirement under these rules; or
(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
…
[29]Rule 14.10 provides:
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
(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.
[30] The party claiming increased costs has the onus of persuading the Court they are justified.3
[31] Under r 14.6(3)(b)(v) the rationale behind awarding increased costs against a party who fails, without reasonable justification, to accept an offer of settlement is that:4
The scarce resources of the Courts should not be burdened by litigants who choose to reject reasonable settlement offers, proceed with litigation and then fail to achieve any more than was previously offered.
[32] In Weaver v HML Nominees Limited the High Court listed a number of factors that may determine whether increased costs for a r 14.10, Calderbank offer should be awarded, including:5
(a)the size of the offer relative to the actual costs of counsel;
(b)the amount of the claim;
(c)the reasonable expectations of the refusing party;
(d)the amount of preparation for trial already undertaken;
(e)whether the proceeding concerns an uncertain area of law;
(f)whether the parties were in a position to assess the merits when the offer was received;
(g)the information available to the party who receives the offer and the extent to which they can assess the offer;
(h)the timing of the offer; and
3 Strachan v Denbigh Property Limited HC Palmerston North CIV-2010-454-232, 3 June 2011.
4 BlueStar Print Group (NZ) Limited v Mitchell [2010] NZCA 385, (2010) 9 NZELC 93, 588 at [20].
5 Weaver v HML Nominees Limited [2016] NZHC 473 at [30] (footnotes and citations omitted).
(i)the conduct of the offeror.
Settlement offers
[33] The plaintiffs’ claim was for $1,505,948 for the estimated cost to repair the house; consequential losses, including the cost of alternative accommodation, storage and associated expenses (estimated to be $18,975) and general damages to compensate the plaintiffs’ nonpecuniary losses totalling $30,000,6 interest and costs. The claim totalled approximately $1.8m.
[34] The case was set down for trial commencing 9 March 2020. The plaintiffs’ fifth amended statement of claim, which was the pleading before the Court at trial, was filed on 26 July 2019; the Council’s statement of defence on 29 July 2019 and the plaintiffs’ reply on 13 August 2019; O’Hagan’s statement of defence on 27 September 2019 and the plaintiffs’ reply on 1 October 2019.
[35] The Council made three offers of settlement, each of which was stated to be “without prejudice save as to costs”:
(a) 22 November 2019 - $400,000.
(b) 12 December 2019 - $300,000.
(c) 10 February 2020 - $500,000.
[36] On 22 November 2019, the Council made an offer of $400,000. The plaintiffs’ evidence had been filed and served by that point and, although the Council’s evidence was not yet due, its offer attached reports from the Council’s expert building surveyor and quantity surveyor witnesses (Messrs Earley and Raynum, respectively). The offer set out in detail the Council’s arguments as to why the plaintiffs’ case against the Council was flawed. In particular, it noted what it said was a causation problem, that the plaintiffs’ remedial scope was gravely overstated, the risk for the plaintiffs of a contributory negligence finding, based on Mr Heaney’s role in coordinating the
6 The Council’s offers refer to an amount of $30,000. By the time of hearing these were estimated at $60,000.
remedial works, and the fact that the plaintiffs’ general damages claim was framed as the “usual tariff” adopted in leaky building claims, when this was not a leaky building case and the house was not the plaintiffs’ primary residence.
[37] The Council made a further offer, of $300,000, on 12 December 2019, by which time it had filed its evidence.
[38] On 10 February 2020, the Council made an offer of $500,000 (which, together with an offer from O’Hagan of $200,000, represented a combined settlement offer of
$700,000).
[39] The Council’s submission is that the plaintiff failed, without reasonable justification, to accept the Council’s offers and also failed to meaningfully engage in relation to those offers. The only counter-offer received from the plaintiff was an offer to settle for $1.375 million, on 11 February 2020.
[40] The Council says that, even without the benefit of hindsight, its offer of 22 November 2019 was a reasonable offer when weighed against the possibility of the plaintiffs’ less than complete success in Court.7
[41] The plaintiff’s response is that her decision to decline the 22 November 2019 offer from the Council was objectively reasonable when assessed at the time the decision was made. She cites Worldwide NZ LLC v QPAM Limited:8
In virtually every case, lawyers for each party will set out in letters their contention as to the legal position. On the law of averages, half the time the position advocated in such letters will accord roughly with what a Court ultimately decides. But that does not mean that a party that has sent such a letter is entitled to increased costs from the date of its prescient letter. That would drive a coach and four through the standard costs regime.
[42] Ms Bates says she cannot be said to have acted unreasonably in not accepting the offer from the Council, because:
7 Weaver v Auckland Council [2017] NZCA 330, (2017) 24 PRNZ 379 at 387 at [35].
8 Worldwide NZ LLC v QPAM Limited [2009] NZCA 226 at [28].
(a)The offer was made very late in the proceeding, after the plaintiffs’ evidence had been served.
(b)The offer gave the plaintiffs very limited time to consider the matters raised: it was open for acceptance only until 5.00 pm Monday 25 November 2019 and, although the Council subsequently agreed to extend the offer for acceptance until Friday 29 November 2019, that did not give the plaintiffs adequate time to consider the matters raised and to respond.
(c)It was conditional upon execution of a settlement agreement “on the usual terms and conditions”, but it was not clear what those conditions were.
(d)The offer was not capable of acceptance by the plaintiffs alone. It required the plaintiffs to discontinue the claim with costs risks and/or provide an unspecified mechanism to protect the Council from claims from other parties pursued by the plaintiffs.
(e)At the time of the offer, the claim for the cost of remedial work necessary to repair the damage to the subfloor of the house was $1,553,923.00, plus interest and costs. The offer from the Council would have resulted in the plaintiffs receiving approximately 25 per cent of what their experts had advised them would be the cost of repairing the defects, which they claim to have been caused by the Council’s negligence.
(f)The offer provided no realistic incentive to settle.
[43] Ms Bates also says that “the Court accepted that the Council was negligent in the performance of its building control functions under the Building Act in respect of the remedial work to the house.” Given that, she says that although the claim ultimately failed because of inability to prove a causal link between the Council’s negligence and the loss, she cannot be said to have acted unreasonably in pursuing the
claim to trial. Ms Bates says that there was nothing in the facts and circumstances here to take the case out of the ordinary case where the plaintiff has failed and no increase in costs should be awarded because of the failure to accept the 22 November 2019 offer.
Discussion
[44] I consider first Ms Bates’ submission about what the Court actually found. The plaintiffs’ fifth amended statement of claim alleged breaches of the duty owed by the Council in respect of each phase of the Council’s functions – the grant of the building consent, inspection of the building work, and issue of the Code of Compliance Certificate. The statement of claim set out seven particulars of those alleged breaches. In my judgment9 I found for the plaintiff only in relation to the allegation of negligence by the Council in issuing the code compliance certificate, but went on to conclude that the plaintiff’s evidence did not establish a causative link between that negligence and the damage. It is therefore not an accurate statement of the position to say that “the Court accepted that the Council was negligent in the performance of its building control functions under the Building Act in respect of the remedial work to the house.”
[45] Second, the Council’s offer was made some three and a half months out from the start of the trial, but after preparation of the plaintiffs’ evidence. The plaintiffs would have been well-placed to consider the detail of the Council’s offer and the accompanying expert reports and there was ample time for the plaintiffs to consider and engage with the offer before trial.
[46] In its 22 November 2019 letter to the plaintiffs the Council said, in relation to “the usual terms and conditions”, that the provisions would include full and final settlement in return for payment of the settlement sum with 20 working day from execution of the agreement and either an obligation on the plaintiffs’ part not to pursue any other parties or an appropriate mechanism to protect the Council regarding the potential for claims brought against it by any other parties pursued by the plaintiffs. Those terms and conditions could fairly be characterised as standard and reasonable, in the context of a multi-defendant/third party proceeding
9 Bates v Auckland Council, above n 1, at [171] and [205].
[47] Ms Bates says the Council was not prepared to allow adequate time for the plaintiffs to discuss the offer with its own experts (ultimately seven days were allowed), but it is clear from the plaintiffs’ letter of 25 November 2019 that the plaintiffs were not prepared to agree to any amendment to the timetable for the filing of the Council’s evidence, to allow for that to occur. In those circumstances, I am not prepared to conclude that the time offered by the Council for consideration of its offer was unreasonable.
[48] With hindsight, the offer was plainly reasonable. However, reasonableness is to be assessed at the time of rejection of the offer, not in relation to the subsequent result.10 I conclude that in all the circumstances of the offer, as summarised at [45] -
[47] above, the plaintiffs did not have reasonable justification for refusing the Council’s offer of $400,000 in full and final settlement.
[49] The Council is entitled to a 50 percent uplift on its costs from 22 November 2019.
12 December 2019 offer
[50]The Council made a further Calderbank offer on 12 December 2019, for
$300,000 (including GST, if any). The offer was open for acceptance until Wednesday 18 December 2019 (giving the plaintiffs four working days to consider and respond). The lower settlement amount proffered is explained by the fact that in the period between this offer and the earlier offer the Council had been required to file its briefs of evidence.
[51] The plaintiffs responded on 20 December 2019, declining the offer on the basis that they would have had to forgo their claim for little more than sunk costs, while exposing themselves to a claim for costs by the other parties to the litigation including the remaining third parties. Although the reduced amount was explicable from the Council’s perspective, I find that the plaintiffs’ explanation for not accepting the offer
10 Detection Services Limited v Pickering [2019] NZHC 638 at [33], citing New Zealand Sports Merchandising Limited v DSL Logistics Limited HC Auckland CIV-2009-404-5548, 19 August 2010 at [36].
is both reasoned and reasonable. Ms Bates cannot be regarded as having acted unreasonably in rejecting the offer.
February 2020
[52] I have already found that the plaintiffs did not have reasonable justification not to accept the Council’s 22 November offer. However, because the February offers of settlement from both O’Hagan and the Council are inevitably intertwined, I have considered the position in relation to the February offer also.
[53] By letter dated Friday 4 February 2020, O’Hagan made an offer, on a Calderbank basis, to pay the plaintiffs $200,000 (including GST if any) in full and final settlement. The letter explained why, in O’Hagan’s view, the plaintiffs’ case based on O’Hagan’s 16 July 2007 letter and the producer statement which it issued, were destined to fail.11 O’Hagan’s offer was open for acceptance until 12.00 pm on Friday 7 February 2021 and was conditional on the Council and all other parties agreeing to release O’Hagan without issue as to costs.
[54] Ms Bates says that because the O’Hagan offer was conditional on the Council and third parties agreeing to release O’Hagan, the plaintiffs had no control over it. She says the offer was plainly not capable of acceptance by the plaintiffs alone, although they did accept the offer by letter dated 7 February 2020.
[55] The Council responded to the O’Hagan offer on 10 February 2020, by which time the date contained in the offer had elapsed. The Council said it would agree to O’Hagan’s proposed settlement on certain specified terms. It also set out an alternative proposal, that the Council would pay $500,000, provided that O’Hagan contributed
$200,000, making a total settlement offer of $700,000.
[56] Ms Bates says that the Council rejected the proposal from O’Hagan, effectively preventing the plaintiffs from settling with O’Hagan on the terms it had proposed. She says the Council’s alternative proposal was not an offer capable of acceptance by the
11 Those causes of action did fail.
plaintiffs. She characterises it as “a suggestion at most” and “an invitation to treat” and says it does not qualify as a Calderbank offer under r 14.10.
[57] Accordingly, Ms Bates says that she did not fail “without reasonable justification” to accept a settlement proposal from either O’Hagan or the Council in February 2020.
[58] The plaintiffs responded with their own Calderbank offer dated 11 February 2021, offering to accept $1.375 million in full and final settlement of all claims against the parties, including costs. That was not accepted by the Council or O’Hagan. The Council says that the plaintiffs’ counter-offer suggests that the plaintiffs were simply refusing to compromise or recognise any risk in their case.
Discussion
[59] The plaintiff was unsuccessful in recovering anything against either the Council or O’Hagan. Plainly, if any of the Council’s offers of settlement had been accepted, that would have saved all parties the costs and difficulty of the proceedings. However, as Woolford J said, in Detection Services Limited v Pickering, “… the reasonableness of an offer must be assessed at the time it was made, not against the end result of the trial.”12
[60] It is necessary to consider the precise terms of the letter on behalf of the Council dated 10 February 2020. That letter responded to O’Hagan’s proposed settlement and also contained an alternative proposal.
[61]In relation to the first, the Council said:
2.Our client would agree to the second defendant’s (O’Hagan) proposed settlement if such is to be on the following basis:
(a)O’Hagan’s settlement payment is to be applied towards the plaintiffs’ claimed losses;
(b)The plaintiffs accept and confirm that the Council is not liable for anything in connection with:
12 Protection Services Limited v Pickering [2019] NZHC 638 at [33], citing New Zealand Sports Merchandising Limited v DSL Logistics Limited HC Auckland CIV-2009-404-5548, 19 August 2010 at [36].
(i)O’Hagan’s design regarding the concrete patio;
(ii)O’Hagan’s letter of 16 July 2007; or
(iii)O’Hagan’s producer statement of 30 April 2009.
(c)Council’s liability (if any) otherwise remains unaffected by settlement with O’Hagan.
3.The reasons for the Council’s position in this regard are as follows:
(a)If the plaintiffs wish to pursue the Council in connection with O’Hagan’s above design, letter or producer statement, then any Council liability in such respects will also most likely be accompanied by primary liability on the part of O’Hagan for such design, letter or producer statement;
(b)In such circumstances, the Council and O’Hagan would be jointly and severally liable. If the plaintiffs were to succeed in connection with O’Hagan’s design/letter/producer statement for the plaintiffs’ asserted quantum, then O’Hagan’s share (as between Council and O’Hagan) would exceed $200,000; and
(c)Accordingly, unless the plaintiffs do not pursue the Council in connection with O’Hagan’s design/letter/producer statement, O’Hagan remains a necessary party. If, in due course, O’Hagan’s defence succeeds (either fully or for a share of less than $200,000) then that remains a costs issue for the plaintiffs.
[62] The plaintiffs had purported, by their letter of 7 February 2020, to accept O’Hagan’s offer, provided the Council also accepted it. It is not strictly accurate to say, as Ms Bates does, that the Council rejected the O’Hagan offer and thus prevented the plaintiffs from accepting it. The Council’s conditions that the plaintiffs not pursue the Council with respect to O’Hagan’s design work and O’Hagan’s producer statement, were (as the submissions for O’Hagan characterise them) “very straightforward”. The plaintiffs provided no reasonable explanation for their decision not to accept, or at least engage with, the O’Hagan offer on the basis proposed by the Council, nor does Ms Bates attempt to do so in her costs submissions. I find that O’Hagan is entitled to a 50 per cent uplift on its costs from 10 February 2020, the date of the Council’s letter when the settlement proposal as a whole became clear.
[63]As to the alternative proposal, the Council’s letter said:
4.We also refer to the various representations and tranches of insurance information provided by Wotton Kearney over the past few days.
5.The matters set out in those representations and information differed from expectations as to O’Hagan’s insurance position. In light of those representations and information, our client has reassessed its position relative to the second defendant regarding any contribution towards a full and final settlement. Accordingly, our client is prepared to enter into a full and final settlement of all matters in this proceeding pursuant to which the sum of $700,000 is paid to the plaintiffs – representing O’Hagan’s offered $200,000 plus $500,000 from the Council. If accepted, a settlement agreement would need to be signed by all parties on the usual terms and conditions (previously provided to the plaintiffs by email). This offer is open for acceptance until 4pm on Tuesday, 11 February 2020.
[64] I do not accept the plaintiff’s characterisation of the alternative proposal as merely a “suggestion” or “an invitation to treat”. While the offer was dependent on O’Hagan’s $200,000 contribution, the plaintiffs knew from O’Hagan’s letter six days earlier that, first, its only asset was its insurance policy and the value remaining in that policy, and, second, that it was prepared to put in $200,000. I agree with the Council that it is disingenuous of the plaintiff to characterise a settlement offer as incapable of acceptance because it was conditional upon the other defendant, O’Hagan (or vice versa). And, as the Council submits, the point of a meaningful response to a settlement offer is to engage in conduct that genuinely seeks to resolve matters, not to seek refuge in technical objections.
[65] The terms and conditions of the settlement proposed by the Council in the alternative were to be as outlined in previous correspondence between the Council and the plaintiffs. As I have already noted, in its 22 November 2019 letter to the plaintiffs the Council said, in relation to “the usual terms and conditions”, that the provisions would include full and final settlement in return for payment of the settlement sum with 20 working day from execution of the agreement and either an obligation on the plaintiffs’ part not to pursue any other parties or an appropriate mechanism to protect the Council regarding the potential for claims brought against it by any other parties pursued by the plaintiffs. Those terms and conditions could fairly be characterised as standard and reasonable, in the context of a multi-defendant/third party proceeding.
[66] The Council’s alternative proposal was made on 10 February 2020, by which time the plaintiffs had the evidence from both the Council and O’Hagan, but with almost a full month before the start of the trial. The plaintiffs were well-placed to
make a realistic assessment of the offer against the prospects of succeeding in recovering the full amount they sought.
[67] The total amount of $700,000, while less than 50 per cent of the total claimed, was $700,000 more than the plaintiffs recovered. Even without the benefit of hindsight, it was a reasonable offer when weighed against the possibility of less than complete success and particularly in light of the shortcomings in the plaintiffs’ claim and evidence detailed by both O’Hagan and the Council in their respective offers. I conclude there was no reasonable basis for turning it down. Ms Bates says the offer was not capable of acceptance, being merely an invitation to treat. I do not accept that submission. It is apparent from the material before me that the plaintiffs did not in any meaningful way engage in a discussion with the Council in relation to the offer. Ms Bates’ objection is, I agree, disingenuous. I conclude, as Katz J did in Weaver v HML Nominees Limited,13 that the plaintiffs’ refusal to engage in any settlement dialogue, or to respond in a realistic way to the settlement offer, was unreasonable.
[68] As I have already found, a 50 per cent uplift on the Council’s costs, from 22 November 2019, is justified.14
Plaintiffs’ conduct of the case
[69] Both the Council and O’Hagan also say an uplift is justified because of the plaintiffs’ conduct of the case.
[70] In particular, the Council notes that at the 11th hour before trial, the plaintiffs sought to introduce supplementary evidence, including from Stephen Alexander and Trevor Jones, two key witnesses for the plaintiffs, both of which concerned matters that ought to have been raised at the outset of the plaintiffs’ case.
[71] Further, the Court directed expert meetings to be convened in the week commencing 10 February 2021 but the plaintiffs’ attempt to introduce the supplementary evidence from Mr Jones led to those expert meetings being delayed. The building surveyors’ conference ended up taking place during the first week of
13 Weaver v HML Nominees Limited, above n 5, at [32].
14 Holdfast NZ Ltd v Selleys Pty Ltd (2005) 17 PRNZ 897 (CA) at [47]-[48].
trial. Whilst the expert quantity surveyors carried out a line by line analysis of the plaintiffs’ costings for the plaintiffs’ asserted remedial dispute (after two meetings on 20 February and 4 March 2020), that process was not undertaken by the plaintiffs’ witness in relation to the defendant’s evidence, even at the quantity surveyors’ conference. That required the Court to make urgent directions requiring conferral to include the defendant’s evidence.15
[72] The Council also says that when the plaintiffs’ evidence at trial did not match the claims made, the plaintiffs’ case again “pivoted”, to such an extent that the Council’s served evidence became redundant, having answered a different case to the evidential state of affairs that existed following the cross-examination of Messrs Alexander and Jones.
[73] Generally, the Council says that a common theme in the proceeding was that many key aspects of information were exclusively in the plaintiffs’ knowledge and control but were withheld until trial and generally only became apparent when drawn out by what was, it says, “necessarily atypical” open cross-examination. Examples of this included the complete lack of any mention in the plaintiffs’ briefs of evidence regarding the covering of the patio vents, the decision not to install the proposed additional ventilation holes, the plaintiff’s enclosing of the timber deck and the established service history of performance of the existing subfloor ventilation.
[74] The Council says that that approach and conduct significantly increased the Council’s costs, both preparing for and attending trial, so as to deal with the shifting nature of the plaintiffs’ case.
[75] Ms Bates’ submissions do not respond to the Council’s assertions about the plaintiffs’ conduct of the case.
Discussion
[76] As I recorded in the judgment, “Ms Bates’ case – both the key aspects of the evidence and the submissions – shifted during the course of the trial. The final form
15 Council’s memorandum dated 5 March 2020 and Court minute dated 6 March 2020.
of Ms Bates’ case was not clear until closing submissions. Unfortunately, that meant the defendants were left to attempt to answer a fluid case, including at the time of making their closing submissions”.16 For example, the judgment pointed to specific deficiencies in the pleading and evidence, such as what it was the plaintiffs alleged was the “defect” in the building;17 whether the plaintiffs’ case was that it was the covering over of the patio vents or the failure to install 15 new ventilation holes in the plans that was causative of the damage.18 I also noted in the judgment that the inconsistencies in the plaintiff’s case made it difficult to analyse each aspect of the claim for the purpose of reaching a decision.
[77] I have already found that the Council is entitled to increased costs for its Calderbank offer, so I do not need to analyse the claim for increased costs under r 14.6 (3)(b)(ii) separately, but if I had been required to do so I would have concluded that an uplift to the Council’s costs was appropriate under this head also.
Disbursements
[78] The Council seeks total disbursements of $134,539.60 comprising witness fees and expenses, Court filing fees and process server fees, land title services and external document management support.
[79]Ms Bates disputes some of those claimed disbursements.
Expert witnesses’ fees and expenses
[80]The Council seeks to recover costs in relation to five expert witnesses:
(a) Mr Earley - $78,287.84; (b) Mr Raynum - $30,875.00; (c) Mr Jones - $9,480.00;
16 Bates v Auckland Council, above n 1, at [59].
17 At [180].
18 At [195]-[196].
(a)Orchiston Architects Limited - $9,645.00; and
(b)AR & JA Drysdale Limited - $1,820.00.
[81] Ms Bates questions the amount of time recorded and charged by Mr Earley: 84 hours preparing his brief of evidence during 15 working days and trial preparation and Court attendance. Ms Bates says the time is excessive and the Court should make a broad assessment of the reasonableness of the invoices. She seeks a reduction of 20 per cent to the overall fees charges by Mr Earley, relying on Sullivan v Wellsford Properties Limited.19
[82] Ms Bates says the lack of narration or details of the work undertaken by Mr Raynum mean that it is not possible to make any assessment of the reasonableness of the fees charged. In addition, there are three invoices with the same date, for very similar amounts, with identical narrations. Again, Ms Bates says the Court should make a reduction of 20 per cent to the overall fees sought in respect of Mr Raynum.
[83] Mr Jones did not ultimately give evidence for the Council – he was the Council’s expert witness on Council practice. Ms Bates says Mr Jones’ evidence should not be allowed because the Court rejected the arguments advanced on behalf of the Council on liability; expert witness fees are not “reasonably necessary” if they were so unrelated to the issues on which the parties succeeded or bound up with the issues upon which the party failed, as to make it unfair or unreasonable to expect the other party to pay.20 Mr Jones did not ultimately give evidence at the hearing. Ms Bates says that the costs relating to Mr Jones’ evidence should not be allowed.
[84] Ms Bates says that the Orchiston Architects invoices appear to duplicate the work carried out by Hampton Jones (Mr Earley) and there is no explanation as to why these costs were “reasonably necessary”. No brief of evidence was served from anyone from Orchiston Architects Limited. The costs should be rejected as a valid disbursement.
19 Sullivan v Wellsford Properties Limited [2018] NZHC 129.
20 Haricot Investments Limited v Maerewhenua District Water Resource Company Limited [2015] NZHC 518.
[85] In relation to AR & JA Drysdale Limited, Ms Bates says that the Council did not serve a brief of evidence from anyone from that firm and the costs cannot therefore be “reasonably necessary” for the conduct of the proceeding.
[86] In response, the Council says its expert witness fees are modest in the context of proceedings that ran for 2.5 years and a scheduled three week trial where the primary contests were of expert evidence matters. Nor is there any suggestion from the plaintiffs that the rates charged by the Council’s experts are out of kilter with market rates.
[87] In relation to Mr Earley it says criticism of the time allowance of two full weeks preparing his evidence, attending at the experts’ conference and being present in Court during presentation of the plaintiffs’ experts’ evidence, is unfounded. In relation to Mr Ranum, it notes that his fee included his served evidence, as well as preparation and attendance at multiple expert conferences. While Mr Jones and Mr Orchiston did not ultimately give evidence, Mr Jones engagement as a council practice expert witness, and Mr Orchiston’s engagement regarding design issues pleaded by the plaintiffs and the joinder of an architect (Scribble) as a third party, were both necessary and not unreasonable, based on the plaintiffs’ own pleading. Similarly, it says the Council cannot legitimately be criticised for engaging a timber decay expert (AR and JA Drysdale Ltd) as part of its defence.
Discussion
[88] Rule 14.12 of the High Court Rules provides that to be recoverable, disbursements must come within the nature of a ‘disbursement’, as defined, and must be specific and reasonably necessary to the conduct of the proceeding, reasonable in amount and not disproportionate to the context of the proceeding.
[89] Witnesses’ expenses, including the fees and expenses of expert witnesses, are a disbursement for the purposes of r 14.12.21 “Disbursement” is defined as “an expense paid or incurred for the purposes of the proceeding that would ordinarily be charged for separately from legal professional services in a solicitor’s bill of
21 Progressive Enterprises Ltd v North Shore City Council (2005) 17 PRNZ 919 (HC) at [22]-[26].
costs”.22 A disbursement is recoverable to the extent it was “reasonably necessary”, “reasonable in amount” and is not held by the court to be “disproportionate in the circumstances of the proceeding”.23
[90] Witness fees and expenses are recoverable even where the witness is not called.24 There may also be circumstances where expert fees are recoverable as being reasonably necessary for the conduct of the proceeding, even where the expert’s attendances do not result in a brief of evidence, for example where the attendance is necessary to assist a party and its counsel in understanding the expert evidence from another party.25
[91] Notwithstanding the plaintiff’s criticism, I conclude that Mr Earley’s invoices are sufficiently detailed to enable an assessment of the necessity and reasonableness of his fees. Although his total fee was large, it is not unreasonably so in the context of the length and complexity of this proceeding.
[92] I accept Ms Bates’ criticism that the invoices for Mr Ranum are insufficiently detailed to enable the Court to assess the reasonableness of the fees charged. For that reason, as in Sullivan v Waterfront Properties Ltd,26 I reduce the claim by 20 per cent.
[93] I accept that the reasonable fees of both Mr Jones and Orchiston may be claimed, although ultimately they were not required to give evidence. As I have noted, that in itself does not preclude recovery, and in this case, the fact that the Council did not ultimately call evidence at trial was a reflection of the changing nature of the plaintiffs’ case.
[94] Although no brief of evidence from Orchiston Architects was served, that firm’s invoices are sufficiently detailed to show the subject of the attendances, including attendances on Hampton Jones and in relation to the WHRS report on the
22 High Court Rules 2016, r 14.12(1).
23 McGechan on Procedure, at 14.12.01.
24 Detection Services Ltd v Pickering [2019] NZHC 638, at 35 and 36; Murray v BC Group (2003) Ltd [2009] 3 NZLR 257.
25 Air New Zealand v Commerce Commission [2007] 2 NZLR 494 (CA) at [64].
26 Sullivan v Waterfront Properties Ltd [2018] NZHC 129 at [52]-[53].
house. I accept that the engagement of Orchiston was necessary for the conduct of the proceeding and that the amount claimed, $9,645.00, is reasonable and recoverable.
[95] The submissions for Ms Bates say in relation to Mr Jones’ attendances, that “the Court rejected the arguments advanced on behalf of the Council on liability.” It is not clear what is meant by this. As noted at [44] above, the Court found for Ms Bates and against the Council in relation to only one of the particulars of the claim relating to liability. It is not a tenable argument that it was not necessary for the Council to engage an expert on council practice, when the plaintiffs’ own case raised that as an issue. Mr Jones’ fee of $9,645 is, in my view, reasonable and recoverable by the Council.
[96] I also accept that the $1,820 sought in respect of the fee from the timber specialist, AR and JA Drysdale Ltd, is recoverable as necessary and reasonable.
Electronic discovery
[97] The Councils seeks recovery of $2,690.76 for Streamlined Litigation Support, being the cost of litigation support services to host the documents involved in the proceeding and provide litigation document management support. Council notes that this promotes efficiencies for managing documents, for example for use in compiling the electronic common bundle, which it points out fell to the defendants to prepare.
[98] Ms Bates disputes this cost. She says the discovery in this case was standard discovery of the Council’s property file and precisely the sort of work that would be done in-house and covered by the time allowance in Schedule 3 of the Rules.
Discussion
[99] As Katz J observed in Auckland Waterfront Development Agency Ltd v Mobil Oil New Zealand Ltd:27
There is no uniform practice across the legal profession as to what electronic discovery work is undertaken in-house and what is outsourced. This is an area where
27 Auckland Waterfront Development Agency Ltd v Mobil Oil New Zealand Ltd [2015] NZHC 470 at [78].
law firms’ capabilities and in-house expertise and resources vary widely. Going through the invoices of a firm that provides electronic discovery services, on a line by line basis, and trying to identify precisely what work might “ordinarily” be done in- house and what might be reasonably outsourced, will be a difficult, if not impossible, exercise.
[100] And in Todd Pohokura Ltd v Shell Exploration NZ Ltd,28 the Court said that parties should be incentivized to adopt the most efficient and cost effective approach to discovery in each particular case. Here, the Council’s solicitors outsourced that storage and support. I accept that such outsourcing is commonplace in medium to large scale litigation, for reasons of cost and efficiency, and there is no reason in principle why it should not be recoverable.
[101] The Council has claimed the time allowance in Schedule 3 for standard discovery, but it is not apparent that there is an overlap between online storage of documents and the solicitor’s role in undertaking discovery. The amount the Council seeks to recover is modest.
[102]I allow recovery for this sum.
Memoranda
[103] The Council sought time allowances for various memoranda filed in Court. It has agreed not to claim costs for some of those but still seeks an allowance in respect of the following:
(a)A memorandum dated 22 July 2018 concerning a step taken in relation to the Council’s claim again the then third third party (O’Hagan).
(b)A joint memorandum dated 30 October 2019, drafted by the Council on trial directions.
(c)A memorandum dated 5 March 2020 seeking urgent directions for QS expert conferencing, which was subsequently granted by the Court.
28 Todd Pohokura Ltd v Shell Exploration NZ Ltd HC Wellington CIV-2006-485-1600, 1 July 2011 at [62]-[66].
[104] Ms Bates response to (a) assumes the memorandum was a memorandum filed for a case management conference (CMC) and she says the Council is not entitled to claim for two CMC memoranda. As to (b), Ms Bates says this was a joint memorandum and “there is no recovery for the cost of signing a document”. And as to (c) Ms Bates says the memorandum was unnecessary.
Discussion
[105] In relation to (a), I accept that the memorandum for which an allowance is sought was not a CMC memorandum. In the absence of any other stated reason why it is not recoverable, I allow this cost.
[106] As to (b), I agree with the Council that it cannot be correct to say as a matter of general principle that no one party could claim a time allowance for a joint memorandum. It is not simply a claim for “signing a document” as the plaintiff asserts. In this particular instance, the joint memorandum was drafted by the Council. It is entitled to claim a time allowance for it.
[107] Finally, in relation to (c), as noted at [69] above the Council submits, and I agree, this memorandum was necessitated by the plaintiffs’ failure to have their expert witness undertake an analysis of the defendant’s expert witness evidence The Council can recover for it.
Other miscellaneous issues
[108] The plaintiff disputes the time allowance for the Council’s reply to the fifth third party’s (Colin Green’s) statement of defence and says it should be 0.6 and not
0.8 as claimed by the Council. The plaintiff is not correct – the time allowance in Schedule 3 is 0.8 and this claim is allowed.
[109] Ms Bates does not accept the time allowance claimed by the Council for its statement of defence to O’Hagan’s cross-claim against the Council (when joined as a defendant to the proceeding by the plaintiffs) dated 18 December 2019. Ms Bates says this was not a step initiated by the plaintiffs, nor can it be attributed to anything the plaintiffs did, so it is not recoverable from the plaintiffs. I do not accept that
submission: the defence was incurred in the overall context of defending the plaintiffs’ claim against the Council. The claim is allowed.
O’Hagan’s costs claim
[110] O’Hagan seeks costs of $82,216.13, made up of $190,737.38 in 2B scale costs (inclusive of an allowance for second counsel and 50 per cent uplift for certain steps) and $91,478.76 in disbursements (exclusive of GST).
[111]Ms Bates does not accept the following aspects of O’Hagan’s claim for costs:
(a)An allowance for second counsel at the interlocutory hearing regarding supplementary evidence.
(b)The time allowance for commencement of a defence by a defendant twice, because O’Hagan was initially joined to the proceeding as a third party and later joined as a defendant.
(c)The time allowance for O’Hagan’s joinder of third parties to the proceeding. Ms Bates says if she is so liable, that recovery can be made only once, not twice because there were two existing third parties.
(d)The claim for increased costs, arising from O’Hagan’s Calderbank offer of 4 February 2020. Ms Bates does not accept that O’Hagan’s letter of 4 February 2020 qualifies as a Calderbank offer. She says it was not capable of acceptance by the plaintiffs alone. Further, Ms Bates says that the plaintiffs cannot be said to have acted unreasonably in circumstances where they confirmed that if all other parties were in agreement they would accept the offer from O’Hagan.
(e)Expert witness costs. O’Hagan seeks costs of its expert witness, Mr Bayley in the sum of $84,547.81.
(f)Travel and accommodation costs. O’Hagan claims as a disbursement the travel and accommodation costs incurred by O’Hagan’s lead
counsel, Mr Holloway, in attending at the hearing in Auckland. Mr Holloway lives in Wellington. The disbursements total $6,930.95.
(g)Ms Bates also disputes the disbursement relating to LawFlow E-discovery support.
[112]I examine each of these in turn.
Second counsel
[113] The substantive submissions for Ms Bates do not address this question but in the attached schedule she disputes O’Hagan’s entitlement for an allowance for second counsel at this interlocutory hearing.
[114] As in relation to the Council’s claim for second counsel,29 I find it was appropriate in the particular circumstances for O’Hagan to have second counsel in attendance at the hearing of the plaintiffs’ application to adduce supplementary evidence. I certify for second counsel.
Commencement of a defence
[115] O’Hagan was initially joined to the proceeding as a third party by the Council (commencement of defence 8 June 2018). It was subsequently joined as a defendant (commencement of a defence 27 September 2019). It seeks to recover the Schedule 3 time allowance for commencement of a defence for both. It says the 2B scale third party costs and disbursements should be paid by the Council or the plaintiff and abides the Court’s decision as to which.
[116] Ms Bates says Schedule 3 provides for only one allowance of two days. She says that, at best, O’Hagan might be entitled to an allowance for filing its defence to an amended pleading (schedule 3 item 9, being $1,434), for the defence filed on 27 September 2019.
29 At [23]-[25] above.
[117] As counsel for O’Hagan says, two defences were filed at different times, responding to two distinct (albeit related) claims. I see no reason in principle why it cannot claim an allowance for each of those. Nor do the terms of Schedule 3 preclude it. As to whether it is the plaintiff or the Council who pays the costs and disbursements for the defence to the Council’s third party claim, the cost of the defence was incurred in the overall context of successfully defending the plaintiffs’ claim. This claim is allowed.
Joinder of third parties
[118] On 27 September 2019, O’Hagan filed a statement of claim against two existing third parties who had been joined to the proceeding by the Council: Brackenridge Builders Ltd and Colin Green. O’Hagan seeks to recover an allowance of 2.4 days (Schedule 3, Item 6) in relation to each of Brackenridge and Green.
[119] Ms Bates says that O’Hagan has not been called onto meet any claim for costs by either of those parties and therefore there are no costs relating to the joinder of the third parties to pass on to the plaintiff. She says that, at most, O’Hagan can recover only once.
[120] The claim against Mr Green was settled during the course of the trial. The claim against Brackenridge was not determined because of my judgment in favour of the Council and O’Hagan.
[121] The plaintiff does not question that the third party claims filed by O’Hagan were reasonable. Each third party claim was, as O’Hagan submits, distinct and therefore required separate assessment, instructions and pleadings. The fact that O’Hagan was not called on to meet any costs by either of the third parties has no relevance to whether or not O’Hagan is entitled to an allowance for joining each of them. I find that O’Hagan is entitled to claim under Schedule 3, Item 6 in relation to each of the third party claims against Brackenridge Builders Ltd and Colin Green.
Increased costs
[122] O’Hagan seeks increased costs in relation to its 4 February 2020 offer to settle the proceeding, under r 14.6(3)(b)(ii), and for the plaintiff’s conduct of the case generally, under r 14.6(3)(b)(v).
[123] As to O’Hagan’s Calderbank offer, Ms Bates says O’Hagan’s offer was not capable of acceptance by the plaintiffs alone, although they did in fact accept the offer on 7 February 2020. The submissions for Ms Bates say the Council responded to the O’Hagan offer after it had expired and “rejected the proposal … effectively preventing Ms Bates from settling with O’Hagan on the terms proposed in the letter dated 4 February 2020.”
[124] I do not accept that is an accurate characterisation of the situation. I have set out at [63] above the terms in which the Council responded to the O’Hagan offer. As noted there, the Council’s conditions that the plaintiffs not pursue it with respect to O’Hagan’s design work and O’Hagan’s producer statement, were straightforward and, in my view reasonable. It was not reasonable for the plaintiffs to refuse to engage with O’Hagan’s offer and the Council response to it.
[125] In any event, as I have concluded in relation to the Council’s claim for increased costs, even without the benefit of hindsight, the alternative proposal put forward by the Council on 10 February 2020, including the $200,000 contribution from O’Hagan, was a reasonable offer when weighed against the possibility of less than complete success. I conclude there was no reasonable basis for the plaintiffs to turn it down.
[126] I have already concluded that the plaintiffs’ conduct of the case also would have entitled the Council to increased costs. My reasons for that conclusion apply equally to O’Hagan.
[127] O’Hagan is entitled to a 50 per cent uplift in costs from 10 February 2020, being the date at which O’Hagan’s letter had been addressed by all parties.
Disbursements
[128]Ms Bates opposes O’Hagan’s recovery of the following disbursements.
Expert witness costs
[129] O’Hagan seeks to recover the costs incurred in respect of its expert witness Mr Bayley. Mr Bayley was engaged to assist O’Hagan in assessing the alleged damage to the house, causation, remediation scope and quantum. He was the only expert witness instructed by O’Hagan. Mr Bayley’s costs total $84,547.81.
[130] Ms Bates seeks a 20 per cent reduction to that amount. She says the invoices provided to support the claim are insufficiently detailed and the Court cannot be satisfied that the fees are reasonable. In particular she points to two of Mr Bayley’s invoices. The first, dated 12 December 2019, for the period 18 October 2019 to 12 December 2019, which at Mr Earley’s charge out rate of 250.00 per hour equates to 145.6 hours/18.2 full days. The second, dated 20 March 2020 for the period 2 March 2020 to 20 March 2020, represents 140.5 hours/17.6 full days’ work, at Mr Earley’s charge out rate.
[131] Counsel for O’Hagan note that Mr Bayley’s charge out rate is $275.00, which although higher than Mr Earley’s, it says is not unreasonable.
[132] I accept that, as O’Hagan’s sole expert witness, Mr Bayley’s evidence was reasonably necessary for the conduct of O’Hagan’s defence.
[133] As to quantum, I have sighted Mr Bayley’s invoice of 18 March 2020. It is detailed as to dates, nature of attendances, time recorded, costs and travel/copy expenses. While I have not seen all Mr Bayley’s invoices, I do not understand the plaintiff to single out some only as being insufficiently detailed. I do not accept the plaintiff’s criticism that the invoices are not sufficiently detailed. The plaintiff does not provide any information from which I might conclude that Mr Bayley’s hourly rate is unreasonably high. Although, as counsel for O’Hagan acknowledge, it was higher than Mr Earley’s rate, that is not a sufficient basis for me to conclude that it was unreasonably high compared when assessed against the market for comparable
experts. Mr Bayley was O’Hagan’s sole expert witness, covering the alleged damage to the house, causation, remediation scope and quantum; he attended at all expert conferencing. Having regard to that, I accept that the total time he billed for was reasonable.
[134]I allow the full amount claimed by O’Hagan in respect of Mr Bayley’s invoices.
Travel and accommodation costs
[135] O’Hagan seeks counsel’s travel and accommodation costs of $5,603.85. O’Hagan was initially represented by Ms Sophie Lucas of Wootton Kearney, Auckland. In mid-2019 Ms Lucas unexpectedly had to take extended leave for health reasons. Because of other commitments within the firm, and to avoid the need to instruct a barrister or a different firm more than one year into the proceeding, O’Hagan instructed Mr Holloway, a partner of the firm based in Wellington, to take over the file. To minimise costs, Ms Meredith Karlsen (second counsel) who was based in Wootton Kearney’s Auckland office, took over day to day carriage of the file.
[136] This Court has accepted that counsel’s travel expenses can be recovered under as a disbursement under r 14.12 if the expense was necessary for the conduct of the proceeding and reasonable.30
[137] Ms Bates accepts that in some circumstances travelling costs may be a reasonably necessary disbursement, but says this is not one of those cases. She relies on Air New Zealand Ltd v Commerce Commission where Hansen J said:31
The appellants submit there was no special justification which made it necessary to instruct out of town counsel and to incur the costs of travel and accommodation, relying on the remarks of Fisher J in Russell v Taxation Review Authority (2000) 14 PRNZ 515 at [24]-[25. I agree that where suitable counsel are available in the city where the hearing takes place, the travel and accommodation expenses of out of town counsel would not normally be recoverable unless there was special justification for instructing them.
30 Mary Moodie Family Trust v Attorney-General, above n 2, at [13], citing Buis v Accident Compensation Corporation (2010) 19 PRNZ 585 (HC).
31 Air New Zealand Ltd v Commerce Commission (2005) 17 PRNZ 786 (HC) at [84].
[138] In that case Hansen J found that the Commerce Commission was justified in instructing Wellington counsel, the Commission itself being based in Wellington, although the hearing was in Auckland.32 On the other hand he found that there were not special reasons for Infratil, who was joined as a party to the appeal, to recover the travelling and accommodation expenses of Wellington counsel, while acknowledging that he could understand why Infratil should have preferred to instruct Wellington counsel. The distinction in that case appeared to depend on the status of the party seeking to recover the disbursement, although that is not explicitly stated.
[139]In Russell v Taxation Review Authority, Fisher J said:33
(e) Counsel's travel and accommodation will be recoverable only where there were particular reasons to justify the instruction of counsel from a distance. The principal justifications will be the unavailability of suitable counsel at the High Court centre in question, the need to instruct counsel in the centre where the party resides, and disqualifying associations between local counsel and the parties or issues at stake.
[140] I accept that there was a good reason, from O’Hagan’s perspective, for Wellington counsel to continue the conduct of its defence after Ms Lucas became unavailable. However, I agree that there was nothing particular to the proceeding that required a Wellington-based partner to continue with conduct of the case. I therefore disallow O’Hagan’s claim for travel and accommodation disbursements.
Discovery support
[141] O’Hagan seeks to recover as a disbursement fees incurred from the external discovery service provider Lawflow for document hosting fees totalling $753.20.
[142] Ms Bates says the discovery involved was standard discovery of O’Hagan’s file and is covered by the time allowance in Schedule 3, which includes an allowance for office overheads and legal research (Russell v Taxation Review Authority). She also submits the costs appear to mostly relate to the storage of electronic copies of the discovered documents which one would expect to part of a law firm’s office overheads.
32 At [85].
33 Russell v Taxation Review Authority (2002) 14 PRNZ 515 at [27(e)].
[143] Justice Katz observed in Auckland Waterfront Development Agency Ltd v Mobil Oil New Zealand Ltd:34
There is no uniform practice across the legal profession as to what electronic discovery work is undertaken in-house and what is outsourced. This is an area where law firms’ capabilities and in-house expertise and resources vary widely. Going through the invoices of a firm that provides electronic discovery services, on a line by line basis, and trying to identify precisely what work might “ordinarily” be done in- house and what might be reasonably outsourced, will be a difficult, if not impossible, exercise.
[144] As the High Court said in Todd Pohokura Ltd v Shell Exploration NZ Ltd,35 parties should be incentivised to adopt the most efficient and cost effective approach to discovery in each particular case. Here, O’Hagan’s instructing solicitors/counsel outsourced that storage. O’Hagan has claimed the time allowance in Schedule 3 for standard discovery, but it is not apparent that there is an overlap with the solicitor’s role in undertaking discovery. The amount O’Hagan seeks to recover is modest.
[145] As in relation to the Council, I accept that O’Hagan may recover disbursements for litigation support services and that this is not, on the face of the invoices, a duplication of the Schedule 3 allowance for standard discovery.
Result
[146] The Council and O’Hagan are entitled to recover costs and disbursements in accordance with the rulings made in this judgment. Each of the Council and O’Hagan is to file a revised schedule of costs for certification by the Registrar.
Gwyn J
Solicitors:
Cameron Flemming Associates Limited, Auckland MinterEllisonRuddWatts, Auckland
Wotton Kearney, Auckland
34 Auckland Waterfront Development Agency Ltd v Mobil Oil New Zealand Ltd, above n 27, at [78].
35 Todd Pohokura Ltd v Shell Exploration NZ Ltd, above n 28, at [62]-[66].
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