Brown v Burnett

[2012] NZHC 1137

IN THE HIGH COURT OF NEW ZEALAND ROTORUA REGISTRY

CIV 2012-463-000025 [2012] NZHC 1137

BETWEEN  PAUL MURRAY BROWN, KELLY MARIE BROWN AND MICHAEL JOSEPH ADAMSON, AS TRUSTEES OF THE BROWN FAMILY TRUST

Plaintiffs

ANDKAREN ANNE BURNETT First Defendant

ANDBRUCE EDWARD HODGKINSON Second Defendant

ANDBRUCE HODGKINSON LIMITED Third Defendant

Hearing:         22 May 2012

Counsel:         M R C Wolff for plaintiffs

J P Temm for second and third defendants

Judgment:      25 May 2012

JUDGMENT OF ASSOCIATE JUDGE ABBOTT

This judgment was delivered by me on 25 May 2012 at 4.15pm, pursuant to Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar

Date……………

Solicitors:

B Easton/M Wolff, Grimshaw & C, PO Box 6646, Wellesley Street, Auckland
K Patterson, Barrister & Solicitor, PO Box 13 006, Tauranga
A Vane, Le Pine & Co, PO Box 140, Taupo

Counsel:

J P Temm, Barrister, PO Box 1124, Rotorua 3040

BROWN & ORS V BURNETT & ORS HC ROT CIV 2012-463-000025 [25 May 2012]

[1]      The second and third defendants (the defendants) have applied for an order for costs, following the plaintiffs’ discontinuance of the claims against them.

[2]      The plaintiffs advised that they were discontinuing the claims shortly before hearing of an application by the first and second defendants for security for costs.

[3]      The plaintiffs accept that the defendants are entitled to costs, on a scale 2B basis, but contest the defendants’ entitlement to costs for several of the steps claimed or, in some cases, to the full amount of the costs.

[4]      The  parties’ respective  positions  have  been  set  out  in  memoranda  filed

following the discontinuance.

History of claim

[5]      The  plaintiffs  are  the  former  owners  of  a  residential  property in  Taupo, purchased from the first defendant (the vendor) in August 2007.   The house was constructed in 1992.   The plaintiffs approached the first defendant in early 2007, through a real estate agent, offering to purchase the property.  After entering into an agreement they arranged for the agent to approach the second defendant, a builder, to have him undertake a visual inspection and report on the construction and condition of the property.

[6]      The second defendant carries on business through the third defendant.   He inspected the property and the third defendant provided the plaintiffs, through their agent, with a brief written report that there was no visible damage to suggest any major problems with the house. The report stated explicitly that it was based only on a visual inspection only.

[7]      The plaintiffs sold the property in October 2011 for a substantially lower figure than they had paid for it in 2007.   On 22 December 2011 they issued this proceeding, contending that the building suffered from defects, which had allowed ingress of water and resulted in damage, and that a substantial part of the drop in

value (in excess of $1.1M) was attributable to the defects.   They claimed that the defendants and the vendor were liable for this damage.  In the case of the defendants, they said that the report constituted misleading and deceptive conduct, a negligent misstatement, and a breach of a contractual duty of care.

[8]      At the time of issue of the proceeding, the plaintiffs were all undischarged bankrupts (they were all made bankrupt in late 2010).  The first and second named plaintiffs were also residing in Australia.

[9]      The defendants were served on 7 February 2012.  They applied on 2 March

2012 for security for costs, and sought extension of time for filing their statement of defence until the application was determined.

[10]     At the first case management conference on 12 March 2012, the Court made an order extending time and allocated a defended hearing for the applications on 22

May 2012.  The plaintiffs, at that time, had not responded to the application.  The Court directed that they were to do so (in other words, they were  to file notice of opposition) by 2 April 2012, and any response by the defendants was to be filed and served by 23 April 2012.   The defendants were directed to file and serve their synopsis of argument (and documents required for the hearing) by 14 May 2012, and the plaintiffs to file and serve their synopsis by 17 May 2012.  (The minute of the conference records the directions the other way round, but this was clearly the intent of the directions.)

[11]     The  plaintiffs  did  not  comply  with  the  timetable,  nor  communicate  any position to the defendants or to the Court before 18 May 2012.   The defendants prepared their case in support of the application, and filed and served their synopsis and relevant documents on 17 May 2012.

[12]     On 18 May 2012 the plaintiffs filed a memorandum accepting the vendor’s proposal for provision of security, and informing the Court and the defendants that they intended to discontinue their claims against the defendants.  The claims against the defendants were discontinued at the hearing on 22 May 2012.  The defendants were awarded costs on a scale 2B basis, and directions were giving for filing of

memoranda  if  there  was  any  dispute  over  the  calculation  of  those  costs.    As previously stated, there is a dispute and memoranda have been filed.

The areas of contention

[13]     The defendants claim costs of $7,144.  They seek an order that those costs be paid into Court within 21 days.

[14]     The plaintiffs challenge the following aspect of the defendants’ claim:

(a)      A  claim  for  costs  of  commencement  of  the  defence  (item  2  of schedule 3 to the High Court Rules) on the grounds that a defence has not been filed.

(b)A claim for filing a memorandum for, and appearing at, the  case management conference on 12 March 2012, on the grounds that that work was undertaken jointly for all defendants – the plaintiffs say that the second and third defendants should be entitled to half only of the costs claimable for those steps.

(c)      A claim for appearing at the hearing on 22 May 2012, on the grounds that the same counsel appeared for all defendants at that hearing – the plaintiffs again say that the defendants should be entitled to only half the time for that step.

[15]     The plaintiffs contend that the defendants are only entitled to $2,491.

Analysis

[16]     The principles to be applied in determining this dispute are those set out in r

14.1 and 14.2 of the High Court Rules.  In essence they are that the Court generally has a discretion in relation to the award of costs (r 14.1), but that discretion is applied by reference to the principles set out in r 14.2, including the principle that

costs should be assessed by reference to the steps set out in Schedule 3, and as far as possible determination of costs should be predictable and expeditious.

[17]     As already stated, there is agreement that on the appropriate daily recovery rate ($1,880 for a category 2 proceeding) and as to the time band (B).  Counsel for the defendants advises that the costs being claimed do not exceed the actual costs incurred by the defendants.  The questions are then whether the defendants should be denied the costs for preparation of their defence because they have not, in fact, filed that defence, and whether the costs allocated for other steps should be reduced because counsel was appearing for the vendor also.

[18]     These questions are not addressed specifically by the rules, and accordingly the general discretion can come into play on the basis that the circumstances are either not contemplated by the specific rules or are not fairly recognised by them: Glaister v Amalgamated Dairies Ltd.[1]

[1] Glaister v Amalgamated Dairies Ltd [2004] 2 NZLR 606.

[19]     I do not consider it necessary that a statement of defence be filed, in fact, to entitle a party to the costs allocated for commencement of a defence.  A defendant must be entitled, in circumstances such as these, to recover the costs of taking advice on a claim, including the exploration of potential defences. The fact that there may be grounds for applying for security for costs should not mask the likelihood that a defendant will still need to investigate the claim and any defences – there might be no value in an application for security if there is no arguable defence.  Counsel states that a draft defence was prepared as part of the assessment of the claim and preparation for the application for security (the Court can have regard to merits when determining applications for security).

[20]     I accept that the defendants are entitled to scale costs for commencement of the defence.

[21]     I  do  not  accept  that  there  should  be  a  blanket  discounting  of  the  costs claimable  for  preparation  of a  memorandum  and  for  appearance  at  the  case

management conference, on the basis that the same counsel appeared for both the

vendor and for the defendants.  The cases against the two groups are quite different, both in terms of fact and in terms of the legal issues.   I regard it as a matter of convenience only that counsel prepared a joint memorandum for all – he still had to have regard to the different positions of the two sets of defendants. The same applies to his appearance at the case management conference.  This is exemplified by the fact that the claim against the first defendant is still proceeding, notwithstanding the discontinuance against the second and third defendants.

[22]     I also take into account the principle that as far as possible the determination of costs should be predictable and expeditious.

[23]     An adjustment is warranted, however, in relation to counsel’s appearance at the hearing. The hearing time was divided roughly equally between dealing with the application by the vendor and dealing with the discontinuance against the defendants and the issue over costs.  On that basis I consider that the defendants are entitled to only 50% of the scale for appearance in the hearing on 22 May 2012 – so I reduce the claim for that item from 0.25 to 0.125 of a day.

Decision

[24]     I award costs to the second and third defendants against the plaintiffs in the total sum of $6,909, being costs set out in paragraph 4 of the memorandum of counsel for the second and third defendants dated 22 May 2012, less $235 for the shared appearance at the hearing on 22 May 2012.

[25]     Counsel for the defendants sought costs on the preparation of memoranda. Such costs are not usually awarded.   I see no particular reason to depart from the general approach.  I consider that the second and third defendants are appropriately

recompensed by the order I have made.

Associate Judge Abbott