Bradfields Limited v Brookwater Investments Limited formerly Bradfield Marketing Limited
[2020] NZHC 1835
•28 July 2020
IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY
I TE KŌTI MATUA O AOTEAROA ŌTAUTAHI ROHE
CIV-2017-409-000822
[2020] NZHC 1835
BETWEEN BRADFIELDS LIMITED
First Plaintiff
MATTHEW PETER SULLIVAN
Second PlaintiffGABRIELLE LEE SULLIVAN
Third PlaintiffAND
BROOKWATER INVESTMENTS
LIMITED formerly named BRADFIELD MARKETING LIMITED
First DefendantPAUL WILLIAM BRADFIELD
Second DefendantMALLEY & CO
Third Defendant
Hearing: Determined on the papers Counsel:
B M Russell and MDW King for Plaintiffs
M M Bell and R A Hearn for First and Second Defendants G N Galloway and W J Hamilton for Third Defendant
Judgment:
28 July 2020
JUDGMENT OF GENDALL J
As to Costs
This judgment was delivered by me on 28 July 2020 at 9 a.m. pursuant to Rule 11.5 of the High Court Rules
Registrar/Deputy Registrar Date:
BRADFIELDS LIMITED v BROOKWATER INVESTMENTS LIMITED [2020] NZHC 1835 [28 July 2020]
Introduction
[1] On 7 May 2020 I issued a judgment in this proceeding on claims brought by the plaintiffs against the defendants. These claims related to the plaintiffs’ purchase of a pet care product and air freshener product business owned previously by the first defendant. The second defendant was a director and shareholder of the first defendant company. In turn, the third defendants, who were the lawyers acting for the plaintiffs on the purchase, were sued for their role advising on the purchase.
[2] In that decision I awarded judgment in favour of the plaintiffs against the first and second defendant jointly and severally in the sums of NZ$55,742.94 and AU$6,465.50 and against the third defendant in the sums of $55,742.94 and AU$6,465.50. In addition, I awarded to the plaintiffs interest at the appropriate prescribed rate on those judgment amounts from 28 April 2016 up to the date of final payment.
[3]As to costs, these were reserved but I indicated in my judgment at para [306]:
In the event that counsel are unable to agree between them the issue of costs, then they may file memoranda sequentially (with each a maximum of six pages) and, in the absence of any party indicating they wish to be heard on the matter, I will decide the question of costs based on the memoranda filed and all other material before the Court.
[4] Counsel for the plaintiffs has now filed an initial memorandum seeking costs dated 18 June 2020 together with a reply memorandum on costs dated 8 July 2020.
[5] Counsel for the first and second defendants in turn has filed a memorandum in which the first and second defendants themselves seek costs against the plaintiffs. This memorandum is dated 1 July 2020.
[6] Counsel for the third defendant has filed a memorandum which also seeks an award of costs against the plaintiffs. This memorandum is dated 1 July 2020.
[7] None of the parties have indicated they wish to be heard on the question of costs. I now give this judgment, therefore, based on the memoranda that have been filed and the other material which is before the Court in this matter.
The costs claims
[8] In his memoranda on costs dated 18 June 2020 and 8 July 2020 counsel for the plaintiffs indicates that the plaintiffs seek here an adjusted award of $86,907 for legal costs together with $123,248.47 for New Zealand disbursements and $40,210.63 for Australian (expert evidence) disbursements.
[9] Counsel for the first and second defendants referred to what they say were Calderbank offers made on 2 July 2019. Accordingly, they contend first, that the plaintiffs should receive costs on a scale basis reduced by 50 per cent but only up to 2 July 2019 and the first and second defendants should receive an award of scale costs, including disbursements, with the costs increased by 50 per cent, from 2 July 2019 in reliance on the Calderbank offers.
[10] Counsel for the third defendant in their 1 July 2020 memorandum also referred to Calderbank offers made, including the final joint offer with the first and second defendants. Again, with this in mind, the third defendant’s position is also that:
(a)the plaintiffs should receive scale costs and disbursements up to the date of the Calderbank offer, 2 July 2019, less 50 per cent to reflect unsuccessful arguments the plaintiffs pursued; and
(b)the third defendant should receive their costs and disbursements from 2 July 2019, again based on scale costs plus a 50 per cent uplift, also in reliance on the Calderbank offers.
[11] Counsel for the first and second defendants has provided in various appendices to his submissions details of what he says should be awarded by way of costs and disbursements both to and against the first and second defendants. These details are:
(a)Costs payable by the first and second defendants to the plaintiffs up to 2 July 2019 which he calculates on a scale basis at $14,606.50 (less a 50 per cent reduction) leaving a total of $7,303.25.
(b)The plaintiffs’ disbursements up to that date payable by the first and second defendants being expert evidence, filing and scheduling fees and related matters totalling $33,968.65.
(c)Costs payable by the plaintiffs to the first and second defendants from 2 July 2019 on a scale basis with a 50 per cent uplift - $80,570.
(d)First and second defendants’ disbursements from 2 July 2019 payable by the plaintiffs of $9,552.31.
[12] Counsel for the first and second defendants contends, therefore, that in respect of costs and disbursements here, so far as the first and second defendants are concerned, they are to pay $41,271.90 to the plaintiffs and the plaintiffs are to pay to them $90,122.31. This leaves a net costs and disbursements award in favour of the first and second defendants here, they say, of $48,850.41.
[13] Counsel for the third defendant has provided in an appendix details of his calculations of what he says should be awarded by way of costs and disbursements:
(a)Costs payable by the third defendant to the plaintiffs up to 2 July 2019 on a scale basis totalling $12,822.50 with a 50 per cent reduction, leaving a total of $6,411.25.
(b)Plaintiffs’ disbursements payable by the third defendant, being expert evidence, filing and scheduling fees and related matters, totalling
$39,431.14.
(c)Costs payable by the plaintiffs to the third defendant from 2 July 2019 on a scale basis with a 50 per cent uplift – all up totalling $77,782.50.
(d)Third defendant’s disbursements from 2 June 2019 payable by the plaintiffs totalling $16,158.71.
[14] Therefore, from these calculations, counsel says the third defendant should pay to the plaintiffs the total sum of $45,842.39 by way of costs and disbursements up to
2 July 2019 and the plaintiffs should pay to the third defendant for costs and disbursements from 2 July 2019 the sum of $93,941.21. The net effect, therefore, is that the plaintiffs should pay by way of costs and disbursements to the third defendant the sum of $48,098.82.
Analysis
[15] These proceedings were brought on 29 November 2017 with the plaintiffs originally seeking damages in the sums of NZ$404,624.84 plus AU$28,628. On 30 April 2018 the plaintiffs amended their claim against the Bradfield defendants to seek an additional AU$11 million.
[16] The parties accept that the plaintiffs essentially were successful in this proceeding (although to a rather limited extent) in the sense contemplated by r 14.2 of the High Court Rules as they obtained judgment for payment of a monetary sum against both the first and second defendants on the one hand and the third defendant on the other. The point is made on behalf of all defendants that the monetary sum of the judgment, however, represents only approximately 1.1 per cent of what was claimed by the plaintiffs – being AU$11 million plus NZ$450,000. They say this is of relevance here and should be taken into account in a reduction of any costs award to the plaintiffs.
[17] Both counsel for the first and second defendants and counsel for the third defendant also complain in their submissions that pre-trial the plaintiffs refused to engage in mediation despite the defendants requesting this on a number of occasions.
[18] So far as the Calderbank offers are concerned, r 14.10 of the High Court Rules indicates that a Calderbank offer must be clear as to its terms. If there is a Calderbank offer that the Court does accept meets the requirements of r 14.10, there is a possible presumptive entitlement to costs from the date of the offer.
[19] Here, the first and second defendants and the third defendant made a joint offer to the plaintiffs of $320,000 on 2 July 2019. According to the defendants the 2 July 2019 represents the equivalent to the plaintiffs of obtaining $190,583.65 in damages plus scale costs and disbursements to the date of the offer (with no uplift or reduction in scale) plus three years’ interest at five per cent per annum. The judgment amount in this case was $125,063.40 (plus interest and costs).
[20] Therefore, it does seem that this 2 July 2019 Calderbank offer would have resulted in the plaintiffs obtaining about $65,000 more than what they obtained at trial.
Overall, I accept the offer is, in all respects, a qualifying Calderbank offer under r
14.10. The defendants say, and I agree, that this being the case, there is a “presumptive entitlement” to costs on their behalf (at the scale rate) from the date of this offer, an offer which was bluntly rejected by the plaintiffs.
[21] On all of this, this the plaintiffs do endeavour to argue that all the Calderbank offers were reasonably rejected as:
(a)the time allowed for acceptance of the final offer (they say this was two working days) was too short;
(b)the offers were made too close to the trial (being 27 days prior);
(c)the offers were based on evidence which they say was not accepted by the Court; and
(d)the offers did not provide for the defendants to accept liability.
[22] There is some history with these offers. Insofar as the timing of the offers were concerned, I understand that the second offer in question was made nearly four weeks prior to trial. I find that it is not appropriate to hold that an offer made at this time was one made too late. This would seriously undermine the policy objectives which, as I see it, are promoted by r 14.10 of the High Court Rules.
[23] In addition, as I understand it, an offer had previously been put on 20 June 2019 and declined. The second offer was simply an increase of the amount payable. There had been no change in the parties’ cases in the meantime. And, there is correspondence provided to the effect that the plaintiffs in fact explained that, in any event, their rejection of this offer was based upon the fact that they wanted the dispute to be resolved by the Court.
[24] I conclude that, in all the circumstances here, there is nothing in the suggestion too that the Calderbank offer was made in reliance on rejected evidence nor, in the circumstances, do I find it to be of relevance that there was to be no admission of liability on the part of the defendants.
[25] This whole matter which occupied some two weeks of trial time in this Court has a very unfortunate history.
[26] But, I accept that nothing in the arguments advanced for the plaintiffs here, in my view, means that the Calderbank offer in question made by all the defendants is not a proper offer which qualifies in terms of r 14.10 of the High Court Rules.
[27] In saying that, I note that the plaintiffs who effectively succeeded at trial here (although to a significantly reduced basis) are entitled to their reasonable scale costs and disbursements up to the date of that offer, being 2 July 2019.
[28] From that date I find that the Calderbank offer made to them would have resulted in them receiving an amount in excess of the total judgment they finally received. Therefore, from that 2 July 2019 date both the first and second defendants and the third defendant are entitled to their reasonable costs and disbursements against the plaintiffs.
[29] A separate question arises as to whether the presumptive entitlement to costs which both the first and second defendant and the third defendants have should be limited to scale costs or awarded on an increased or indemnity basis.
[30] A further question is raised as to whether the claim by all the defendants that any scale costs awarded to the plaintiffs for the period up to 2 July 2019 should, in all the circumstances here, bear a 50 per cent reduction. And, an allied issue arises regarding the plaintiffs’ claim themselves for an increase in the scale costs to be awarded to them for the period up to 2 July 2019.
[31] On these questions of whether costs should be awarded to or against the plaintiffs or the defendants here on an increased or reduced basis, I note, first, any party claiming increased costs carries the onus of persuading the Court that the increased award sought is justified. As to increased costs, it is clear these may be awarded where there is a failure by the paying party to act reasonably. Generally, however, this must relate to how that party acted during the litigation and not before it. The Court is also to consider the extent to which any failure to act reasonably
contributed to the time or expense of the proceeding in reaching any uplift from scale costs.
[32] Here, the increases and reductions in scale costs respectively sought are requested at amounts comprising 50 per cent.
[33] As I have mentioned above, the history of this proceeding makes rather unfortunate reading. There can be no question, in my view, that the plaintiffs in any way might be entitled to any uplift in the scale costs to be awarded to them here with respect to the period up to 2 July 2019. I reach this conclusion bearing in mind all the circumstances and the ultimate outcome in which the plaintiffs, although succeeding, did so only to a rather limited extent.
[34] I turn now to the questions as to whether there might be a reduction from scale costs imposed upon the plaintiffs, and as to whether the defendants respectively should be entitled to the 50 per cent increase in the scale costs they request be awarded to them. This question is a more difficult one.
[35] Overall, however, it is my view that the circumstances of this dispute and the final outcome here bring little credit to any of the parties. In all the circumstances, but only by a reasonably fine margin, I take the position that only scale costs with no uplift or reduction should be paid on the one hand to the plaintiffs up to 2 July 2019 and, on the other hand, to the defendants from 2 July 2019.
Decision
[36] So far as the quantum of costs and disbursements to be awarded are concerned, I now outline my decision in this way:
(a)At the outset, I need to say that I have carefully considered the detailed appendix amounts attached to the submissions of counsel for the plaintiffs, counsel for the first and second defendants, and counsel for the third defendant. So far as the plaintiffs’ costs up to 2 July 2019 are concerned, I accept the calculations included in the submissions for the first and second defendants at Appendix 1 together with their
apportionment of these costs as between the first and second defendants, on the one hand, and the third defendant, on the other. This results in the first and second defendants being liable to the plaintiffs for costs up to 2 July 2019 on a scale basis (without any uplifts) totalling
$14,606.50. So far as the third defendant is concerned, the plaintiffs are entitled to costs up to 2 July 2019 on a scale basis (without any uplift) totalling $12,822.50.
(b)Turning now to the plaintiffs’ disbursement claim, this can only relate to disbursements incurred up to 2 July 2019, the date of the Calderbank offer. On this question of disbursements claimed by the plaintiffs, the actual amounts set out in counsel for the plaintiffs’ 18 June 2020 memorandum in Appendix A itemise a New Zealand disbursement costs total of $123,248.47 and an Australian disbursement costs total of AU$40,210.63. These claims are made for disbursements and expert evidence costs from the outset of this proceeding right up to and including the hearing. A portion which obviously includes this trial hearing period relates to that time after 2 July 2019 and is, therefore, not properly claimable by the plaintiffs.
(c)That said, both counsel for the first and second defendants and counsel for the third defendant have set out in their respective Appendices a detailed calculation of the disbursements they say are properly payable to the plaintiffs here up to 2 July 2019. With the exception of matters relating to a BDO accountant’s invoice dated 31 October 2016 totalling
$8,372 and a Mark Russell expert solicitor’s invoice dated 18 August 2016 totalling $5,750, the exclusion of which counsel for the plaintiffs dispute at paragraph 16 of his memorandum dated 8 July 2020, there seems to be little argument from the plaintiffs over the defendants’ assessment of the plaintiffs’ disbursements properly claimable here up to 2 July 2019.
(d)I find, therefore, that with the adjustments I note at [36](c) above, which I accept, and in accordance with the Appendices calculations made by
both counsel for the first and second defendants and counsel for the third defendant that:
(i)the total amount to be awarded to the plaintiffs for disbursements first, against the first and second defendants is the assessed Appendix 1 amount of $33,968.65 together with one half of the $8,372 BDO accountants’ 31 October 2016 invoice total amounting to $4,186, and one half of Mark Russell’s $5,750 invoice dated 18 August 2016, this share amounting to $2,875. These amounts together total $41,029.65. This represents the first and second defendants share of the plaintiffs’ disbursements up to 2 July 2019 payable by them. Adding to this the $14,606.50 for scale costs due to the plaintiffs, the total amount to be awarded to the plaintiffs against
the first and second defendants for costs and disbursements is, therefore, $55,636.15.
(ii)Turning, secondly, to the issue of disbursements payable by the
third defendant to the plaintiffs, again this is outlined at Appendix 1 of the 1 July 2020 memorandum from counsel for the third defendant. The total award accepted by the third defendant as due from it is $39,431.15. In addition to this sum, again, is to be added $4,186 representing one half of the BDO accountants’ invoice and $2,875 representing one half of Mark Russell’s invoice. Totalling these amounts comes to
$46,492.15. This represents the total disbursements to be awarded to the plaintiffs against the third defendant here.
(iii)The total costs and disbursements, therefore, to be awarded to the plaintiffs against the third defendant are the costs of
$12,822.50 noted at [36](a) above and disbursements of
$46,492.15. Together these total $59,314.65.
(e)I turn now to the claims of both defendants for costs and disbursements from 2 July 2019. In doing so I address, first, the claim from the first and second defendants.
(f)Post 2 July 2019, a reasonable amount for this period for the first and second defendants’ costs, I accept, equates more or less to the same amount as counsel for the plaintiffs had calculated in his claim for this period for the plaintiffs’ costs, set out in his 8 July 2020 memorandum. These represented total category 2B scale costs of $47,395. And, as to disbursements, these are properly claimed here by the plaintiffs at
$9,552.31. These amounts together total $56,947.31. (When the plaintiffs’ costs and disbursements entitlement up to 1 July 2019 totalling $55,636.15 is deducted from this $56,947.31, this leaves a net amount by way of costs and disbursements owing by the plaintiffs to the first and second defendants of $1,311.16.)
(g)Post 2 July 2019, so far as the third defendant’s entitlement to costs against the plaintiffs is concerned, a reasonable amount for these costs again calculated on a scale basis (without any uplift) outlined on the same basis as noted at [36](f) above is appropriate here. This is the figure of $47,395. The third defendant’s disbursements, I accept, as noted at Appendix 1 of the third defendant’s 1 July 2020 memorandum at $16,158.71, are to be added to this $47,395 to leave a total amount owing by the plaintiffs to the third defendant for costs and disbursements of $63,553.71. (When this total of $63,553.71 is offset against the amount owing by the third defendant to the plaintiffs for costs and disbursements up to 2 July 2019, as outlined in para [36](d)(iii) above, of $59,314.65 this leaves a net balance owing by the plaintiffs to the third defendant for costs and disbursements of
$4,239.06.)
Orders
[37]Orders are now made as follows:
(a)The first and second defendants are to pay costs and disbursements to the plaintiffs for the period up to 2 July 2019 totalling $55,636.15.
(b)The third defendant is to pay costs and disbursements to the plaintiffs on this proceeding up to 2 July 2019 totalling $59,314.65.
(c)The plaintiffs are to pay to the first and second defendants costs and disbursements on this proceeding from 2 July 2019 totalling
$56,947.31.
(d)The plaintiffs are to pay to the third defendant costs and disbursements on this proceeding from 2 July 2019 totalling $63,553.71.
(e)Simply by way of parenthesis, the net effect of these costs orders when they are offset one against the other is that overall:
(i)The plaintiffs are to pay to the first and second defendants the net costs and disbursements amount of $1,311.16;
(ii)The plaintiffs are to pay to the third defendant the net costs and disbursements amount of $4,239.06.
...................................................
Gendall J
Solicitors:
Lane Neave, Christchurch Corcoran French, Christchurch Chapman Tripp, Christchurch
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