Buller Electricity Limited v Electricity Authority
[2024] NZHC 2081
•30 July 2024
IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY
I TE KŌTI MATUA O AOTEAROA TE WHANGANUI-A-TARA ROHE
CIV-2023-485-30
[2024] NZHC 2081
UNDER the Judicial Review Procedure Act 2016 and Part 30 of the High Court Rules 2016 IN THE MATTER
of an application for judicial review
BETWEEN
BULLER ELECTRICITY LIMITED
Applicant
AND
ELECTRICITY AUTHORITY
First Respondent
TRANSPOWER NEW ZEALAND LIMITED
Second Respondent
Hearing: On the Papers Counsel:
T C Weston KC, O D Peers and M Powell for Applicant D A Laurenson KC and J H Stevens for First Respondent
T D Smith, D J Keogh and S E Quilliam for Second Respondent
Judgment:
30 July 2024
JUDGMENT OF McQUEEN J
[Costs]
[1] Buller Electricity Ltd (BEL) sought judicial review of decisions made by each of the Electricity Authority (the Authority) and Transpower New Zealand Ltd (Transpower). In a judgment dated 28 March 2024, I dismissed BEL’s application (the Judgment).1 I recorded that the Authority and Transpower were entitled to costs
1 Buller Electricity Ltd v Electricity Authority [2024] NZHC 706.
BULLER ELECTRICITY LIMITED v ELECTRICITY AUTHORITY [2024] NZHC 2081 [30 July 2024]
and that if counsel were unable to agree costs, memoranda should be filed, and I would decide costs on the papers.2
[2] BEL reached agreement with the Authority as to costs. However, agreement was not reached between BEL and Transpower. BEL and Transpower have filed memoranda and I am therefore required to determine costs between them.
Overall position
[3] Transpower seeks costs on a category 3 basis and allowance for second counsel. Transpower submits this is justified as the proceeding was complex and significant, with wide practical implications and a substantial amount at stake. Transpower has identified in its schedule of costs claimed what band it submits is appropriate for each item.
[4] BEL accepts an allowance for second counsel. BEL also accepts that a category 3 categorisation is generally appropriate but disputes aspects of Transpower’s submissions as to the appropriate category, so far as Transpower relies on those submissions to justify its disbursement claim for expert fees.
[5] BEL accepts Transpower’s schedule of costs save for three items: the disbursement for Houston Kemp’s expert fees of $67,473.17, the 3C allocation for preparation of affidavits and the 3B allocation for discovery.
[6] All matters of costs are at the discretion of the court.3 The general principles which apply to the determination of costs include that costs follow the event, and that the determination of costs should be predictable and expeditious.4
[7] I agree that costs on a category 3 basis is generally appropriate for this proceeding as it is of sufficient complexity and significance that counsel are required to have special skill and experience in the High Court.5 Senior counsel were engaged on behalf of BEL and the Authority, and Mr Smith for Transpower has recognised
2 Buller Electricity Ltd v Electricity Authority, above n 1, at [305].
3 High Court Rules 2016, r 14.1.
4 High Court Rules 2016, r 14.2(1)(a) and (1)(g).
5 High Court Rules 2016, r 14.3(1).
expertise in this area of law. I also agree that allowance for second counsel is appropriate.
[8] I have reviewed the costs claimed by Transpower as set out in its schedule of costs. Leaving aside the matters in dispute between Transpower and BEL, which I address below, I consider the costs and disbursements to be properly claimed.6
[9]I turn then to the matters in dispute.
Contested disbursement—Houston Kemp’s fees
[10] Transpower and BEL disagree as to whether Transpower can claim as a disbursement the fees of Houston Kemp, in respect of expert economic evidence provided by Mr Houston.
[11] Expert witness’ expenses may be awarded by the Court as a disbursement under r 14.12 of the High Court Rules 2016 (the Rules). They must be approved by the Court for the purposes of the proceeding.7 The disbursements claimed must be specific to the conduct of the proceeding, reasonably necessary for the conduct of the proceeding and reasonable in amount.8
[12] Unlike with scale costs, where the disbursement sought meets the requirements in r 14.12(2), a party is generally entitled to recover the actual fees and expenses of its expert witness.9 The question is simply whether the witness’ expenses and fees were necessarily incurred and are reasonable.10 The party claiming this must show that this is the case, on the balance of probabilities.11 A disbursement may be disallowed or reduced if it is disproportionate in the circumstances.12 If necessary, the Court may
6 This includes a claim for its costs in responding to and resolving the application for interim relief, by analogy with item 23. This is not opposed by BEL, and I consider it appropriately claimed.
7 High Court Rules 2016, r 14.12(2)(a)(i).
8 High Court Rules 2016, r 14.12(2).
9 Air New Zealand Ltd v Commerce Commission [2007] NZCA 27, [2007] 2 NZLR 494 at [47].
10 David Bullock and Tim Mullins The Law of Costs in New Zealand (LexisNexis, Wellington, 2022) at [6.5].
11 Auckland Waterfront Development Agency Ltd v Mobil Oil New Zealand Ltd [2015] NZHC 470; (2015) 23 PRNZ 200 at [42].
12 High Court Rules 2016, r 14.12(3).
call for a report be prepared by another professional to determine whether the expert witness’ fee or expense is reasonable.13
Parties’ positions
[13] Transpower claims $67,473.17 in relation to Houston Kemp’s fee. This is supported by invoices and timesheets attached to Transpower’s memorandum. The invoices are rendered in Australian dollars. It appears, although it is not explicitly stated, that the invoice sums have been converted to New Zealand dollars and so the fee claimed is recorded in the schedule of costs in New Zealand dollars.
[14] Transpower says that the evidence of Mr Houston was specific and necessary to the proceeding. Transpower says that BEL’s statement of claim and the expert economic evidence of Mr Mellsop challenged Transpower’s reclassification decision on several grounds, requiring a detailed response. Transpower also submits that the Authority’s response to Mr Mellsop was limited to responding only to “efficiency considerations”, being the only aspect of Mr Mellsop’s evidence directed at the Authority, so Transpower was required to file its own expert evidence to respond to the fuller challenge to the reclassification decision, including analysis of fairness considerations. Transpower says that while unreasonableness was not ultimately argued at the hearing, that position was not clear by the time evidence had to be filed, so it was reasonable to respond to Mr Mellsop’s specific criticisms of the efficiency and fairness merits of the reclassification. Transpower notes that whether evidence is reasonably necessary is not a question of whether the evidence found favour with the Judge, but whether that evidence was properly before the Court.14
[15] Transpower further submits that Houston Kemp’s costs are reasonable given the market rate for the expertise required. Transpower apprehends that Houston Kemp’s fees were higher than those of Mr de Raad (the expert economist who gave evidence for the Authority), but suggests such a comparison is not a sufficient basis to conclude that the fees are unreasonable when assessed against the market for comparable experts.15 Transpower suggests that direct comparison is not
13 High Court Rules 2016, r 14.12(5).
14 Laura O’Gorman (ed) Sim’s Court Practice (online ed, LexisNexis) at [HCR14.12.3].
15 Bates v Auckland Council [2022] NZHC 336 at [133].
possible given Mr de Raad’s familiarity with the Transmission Pricing Methodology (TPM) due to his prior work for the Authority (as Mr de Raad explains in his affidavit), and that Mr Houston had a wider brief and could not limit his analysis solely to efficiency considerations.
[16] Transpower submits that BEL’s attempt to “retrospectively reshape” the case it pleaded does not withstand scrutiny. It says that it is not useful to assess whether evidence was reasonably necessary by looking at written submissions, rather it is the pleadings which shaped the scope of the proceeding at the time the evidence was prepared.
[17] BEL does not suggest that Houston Kemp’s invoice contains steps it considers are unreasonable in that they have taken an unnecessarily lengthy amount of time. Rather, BEL’s position is that it was not necessary for Mr Houston to file such wide- ranging evidence and the fee amount sought is fundamentally disproportionate in the circumstances, and with reference to the expert fees claimed by the Authority. BEL says that Transpower chose to engage with the evidence of Mr Mellsop at a level that was far outside anything that could be found in the contemporaneous record in relation to cl 23 of the TPM (and says that the analysis in Mr Houston’s affidavit was not known to BEL when it filed its claim). BEL notes my finding in the Judgment that the economic evidence did not assist, and says by corollary, that evidence could not have been reasonably necessary for the purposes of the proceeding.
[18] BEL also argues that Mr Houston’s evidence was mostly to support the inclusion of cl 23 in the TPM on efficiency grounds, but this evidence was primarily relevant to the arguments against the Authority and not Transpower. It says that Transpower in its own submissions only cites Mr Houston’s evidence when making submissions in support of the Authority’s position, which also suggests that is the only reason Mr Houston gave evidence in respect of efficiency. BEL rejects the suggestion that Mr Houston needed to respond to “fairness considerations” raised in Mr Mellsop’s evidence, given that all Mr Houston said on the point was that fairness is a concept which sits outside of economic expertise and so he does not address it in substance, and only one page of his 21-page affidavit was directed to that issue.
[19] BEL submits that if the Court considers some award of disbursements should be made in relation to Mr Houston’s fees, this should be capped at $14,937.50 being the amount of expert fees claimed by the Authority.16
Discussion
[20] In the Judgment I commented on the nature of judicial review and went on to observe that:17
While I have been assisted by the evidence filed by the parties in this proceeding, there is a sense in which the extent of the evidence has invited the Court to step beyond the boundaries of the appropriate scope of judicial review, particularly given the specialist expertise of both the Authority and Transpower. In such contexts, the Court is required to be cautious, and is generally reluctant to intervene unless there is a defect showing that decisions were clearly wrong in principle or law.18 A difference in opinion between a specialist decision maker and a party that is affected by a decision will not often result in findings that a decision is clearly wrong in principle or law…
[21] I did not find it necessary to reach conclusions as to the competing economic evidence in the case. I observed that I had received conflicting economic evidence and concluded that the differing expert views as to efficiency did not support a conclusion that the decision by the Authority to adopt cl 23 was unlawful or unreasonable.19 Rather, I concluded that this was a decision open to the Authority.
[22] This broader context is relevant to considering whether the fees incurred in the provision of Mr Houston’s evidence are necessarily incurred. It is well-established that parties bringing judicial review proceedings must be mindful of the evidence that it is appropriate to put before the Court.20
[23] I agree with Transpower that expert witness fees are expenses that are recoverable in principle despite the fact that the Court finds it unnecessary to deal with the issue with which the evidence is concerned, so long as the evidence was obtained
16 BEL records that it agreed to pay the Authority’s expert fees on the basis that it considered there were arguments that it was not payable.
17 Buller Electricity Ltd v Electricity Authority, above n 1, at [106].
18 New Zealand Climate Science Education Trust v National Institute of Water and Atmospheric Research Ltd [2012] NZHC 2297, [2013] 1 NZLR 75 at [48].
19 Buller Electricity Ltd v Electricity Authority, above n 1, at [125].
20 See for example, New Zealand Independent Community Pharmacy Group v Te Whatu Ora –
Health New Zealand [2023] NZHC 1486 at [127]–[131].
reasonably and in good faith.21 However, I consider that there is a distinction to be made between situations where the Court has not ultimately required reference to evidence at all (for example where an issue has settled) and where the Court has considered the evidence but held that it was unnecessary or not useful. The latter situation is the case here. It is conceivable that there may be some situations in which a witness has given evidence that, while given in good faith, goes well beyond what is required to adequately respond to a claim and so may warrant an adjustment as to disbursements claimed.
[24] Here, as explained above, I concluded that the evidence from the expert economists was of little assistance to me. However, while submissions were made at the hearing as to the relevance of the expert evidence to the issues before me, no issue was raised by any party as to its inadmissibility, either at or before the hearing. I note that the extent of Mr Mellsop’s evidence in reply to Mr Houston and Mr de Raad can be seen to demonstrate that BEL had formed the view that it would need such extensive economic evidence to advance its case. Having said this, however, I also acknowledge BEL’s point that the evidence from Mr de Raad and Mr Houston went beyond the contemporaneous record in relation to cl 23 that was then available to BEL.
[25] Ultimately, then, I accept that given the issues that arose on the pleadings and the expert evidence filed in support by BEL, it was not unreasonable in principle for Transpower and the Authority to also file expert evidence as to efficiency in response. This was appropriate so that those parties were in a position to make the submission that it was open to the Authority to consider that adopting cl 23 was consistent with its statutory objective.
[26] I therefore accept that it was necessary for Mr Houston to respond to the “efficiency considerations” raised in Mr Mellsop’s evidence. Mr Mellsop states explicitly in his affidavit that he has been asked by counsel for BEL to give his opinion “as to whether it is efficient to reallocate cost recovery of the Buller assets in the way implied by Transpower’s impugned reclassification”. Although efficiency was a
21 Easton Agriculture Ltd v Manawatu-Wanganui Regional Council HC Palmerston North CIV- 2008-454-31, 22 December 2011 at [38] citing Beach Road Preservation Society Inc v Whangarei District Council (2001) 16 PRNZ 13 (HC) at [18].
limited point in the second cause of action against Transpower, it was expressly raised in the pleadings and therefore it was reasonable for Transpower to provide evidence in response. It was not obvious that Transpower did not have to respond to Mr Mellsop’s evidence in respect of “efficiency”; this was a consideration brought up in the pleadings and Mr Mellsop’s evidence was not sufficiently delineated to be a challenge only against the Authority. I also note that Mr de Raad’s evidence focused on the efficiency of the power to reclassify assets in appropriate cases and does not comment on the efficiency of the reclassification of the BEL assets. As Mr Mellsop addressed BEL’s particular position, this reinforces the need for Transpower to respond to that in its evidence. I also agree with Transpower that, based on the pleadings, reasonableness was a potential argument that could be raised at the hearing in the context of the alleged pre-determination by Transpower. In my view, the concern about reasonableness was essentially premised on the challenge to efficiency.
[27] I consider that it was not inappropriate for Transpower to engage with the cause of action against the Authority. To an extent, that cause of action underpinned the second cause of action against Transpower, and given Transpower’s role in the electricity industry I consider it had an understandable and proper interest in the claim made against the Authority, which, if successful, would have had significant consequences for Transpower.
[28] I accept BEL’s submission that only a relatively small amount of Mr Houston’s evidence was dedicated to the issue of “fairness”. However, the corollary of this is that it likely meant Mr Houston only spent a small amount of time preparing his evidence on this point and so there was likely not great inflation as to the amount of fees claimed as a result.
[29] I consider that Mr Houston’s evidence went beyond the necessary scope in one respect. Mr Houston dedicates about three pages of his affidavit to what he says is Mr Mellsop’s “recurring reference” to the instructed assumption that the BEL assets are “overbuilt”. Although Mr Mellsop does refer to this assumption, because it is clearly a stated assumption in his evidence, he does not go into detail as to why the assets may or may not be overbuilt. This means Mr Houston was accordingly not
required to go into detail about the point of overbuilding, because Mr Mellsop did not do so either. In my view, it was superfluous for Mr Houston to respond to it at length.
[30] The rate at which Houston Kemp charged out its personnel is a further issue. BEL does not challenge the rates directly, preferring to argue that by comparison with the sum paid to the Authority for Mr de Raad’s evidence, the Houston Kemp fee is disproportionate. Even taking account that no details are available to me about the time spent by Mr de Raad or his charge out rate, the contrast between his fee of around
$15,000 and the Houston Kemp fee of around $70,000 is marked. I accept that a comparison between these expert fees simply as total figures is not enough in itself to show that what is claimed in respect of Mr Houston is unreasonable, particularly given the extent of Mr de Raad’s previous work for the Authority and the narrow issue he addressed. Nonetheless, Transpower simply asserts that Mr Houston’s hourly fee (and the hourly fees of others who also contributed to time spent preparing the evidence) are at a reasonable market rate for the expertise required. Mr Houston is charged out at an hourly rate of AUD 1,050. The others who contributed to the preparation of his evidence are charged out at rates between AUD 290–750 per hour. Where almost
$70,000 in expert fees is claimed, I do not consider that Transpower’s assertion is sufficient to establish on the balance of probabilities that the rates are reasonable.22
[31] Given all these matters, I am satisfied that some reduction of the expert fees is required. It is often necessary in a costs context to take a pragmatic approach to ensure that justice is done between the parties, and I conclude that this is such a case.23
[32] I consider that a 20 per cent reduction in the fee charged by Houston Kemp is appropriate. This reduction accounts for:
(a)the extent to which there was an unnecessary scope to Mr Houston’s evidence; and
22 See Auckland Waterfront Development Agency Ltd v Mobil Oil New Zealand Ltd, above n 11, at
[51] and [54].
23 Auckland Waterfront Development Agency Ltd v Mobil Oil New Zealand Ltd, above n 11, at [53].
(b)the significant hourly rates charged, which have not been established on the balance of probabilities as being market rates appropriate for the expertise required.
[33] I direct that $53,978.54 is payable to BEL in relation to the fee for the expert evidence provided by Mr Houston.
Appropriate band for preparation of affidavits
[34] BEL and Transpower disagree as to the appropriate band for preparation of affidavits (item 30 in the schedule of costs).
[35] Band C is appropriate where a “comparatively large amount of time for the particular step is considered reasonable”.24 Transpower submits that band C is appropriate for the preparation of affidavits for four reasons:
(a)due to the technical nature of the TPM, Transpower filed a lengthy affidavit from Ms Osborne (Head of Grid Pricing) to explain the context and background to the TPM, and its implementation.
(b)BEL raised additional challenges that were not initially before the decision maker, including expert economic evidence. Transpower submits that this is unusual in a judicial review proceeding and required a comparatively large amount of time to respond to.
(c)BEL advanced claims regarding the capacity and history of the Affected Assets, which it did not raise at the consultation stage. Transpower submits that this required the preparation of technical evidence on the practical considerations affecting the design and capacity of the Affected Assets and historical evidence as to BEL’s predecessor’s involvement in the development of the lines.
24 High Court Rules 2016, r 14.5(2)(c).
(d)BEL’s allegations of pre-determination required evidence from both decision makers at Transpower for Transpower to avoid any adverse inference being drawn.
[36] BEL disputes this and submits instead that preparation of affidavits should be allocated on a band B basis. BEL submits that the time allocation of an item as band C is unusual in judicial review proceedings,25 and should be properly reserved for exceptional or unique cases, of which the present case is not one.26 In Diagnostic Medlab, the High Court awarded 3C costs to the second defendant (Lab Tests) following the Court of Appeal’s reversal of this Court’s decision.27 Diagnostic Medlab was noted as being exceptional for its scale and complexity, involving 10 hearing days with 68 affidavits and 11,905 pages of documents in 14 volumes.28 BEL says that by comparison, the volume and scope of evidence filed by Transpower was not at a level to justify band C.
[37] The issue is whether the preparation of affidavits required “a normal amount of time” or “a comparatively large amount of time”.29 I am not satisfied that the present case is exceptional. Rather, “a normal amount of time” was required for the preparation of affidavits within a category 3 proceeding. I agree with BEL that in the circumstances a category 3B basis is appropriate.
[38]I therefore determine the allowance for item 30 in the schedule of costs is
$14,120.
Appropriate band for discovery
[39] BEL and Transpower also disagree as to the appropriate band for discovery (item 20 of the schedule of costs).
25 See Brook Valley Community Group Inc v Brook Waimarama Sanctuary Trust [2017] NZHC 2665 at [3]; and Hudson v Attorney-General [2017] NZHC 2790 at [7].
26 New Zealand Independent Community Pharmacy Group v Te Whatu Ora, above n 20; and Diagnostic Medlab Ltd v Auckland District Health Board (No 2) HC Auckland CIV-2006-404- 4724, 23 October 2009.
27 Diagnostic Medlab Ltd v Auckland District Health Board (No 2), above n 26, at [38].
28 At [35]. The extent of evidence and submissions is discussed in the High Court judgment:
Diagnostic Medlab Ltd v Auckland District Health Board [2007] 2 NZLR 832 at [5].
29 High Court Rules 2016, rr 14.5(2)(b) and (c).
[40] Transpower claims for costs of discovery in item 20 on a band B basis, by analogy under r 14.5. Transpower submits that the Court did not make a formal order for discovery but in the parties’ joint memorandum dated 2 March 2023 it was agreed that parties could raise targeted discovery requests. Transpower says that BEL made a targeted request for documents disclosing any reasoning or decision-making process relating to Transpower’s decision to include cl 25 (as it was then) in the proposed TPM. Transpower states it then searched documents including key employee emails, drafts, Board sub-committee papers and minutes, and had them reviewed and redacted for relevance and privilege. Transpower submits this extensive search and tailored assessment of relevance (which it submits reduced the time spent by BEL in its own review) means the band B time allocation is appropriate.
[41] BEL submits that Transpower’s claim is not justifiable for an agreed, informal and targeted discovery process. BEL submits that Transpower’s discovery was limited to 31 documents and was provided informally without any list of documents. When BEL sought further documents, Transpower indicated by letter that all documents had been included as exhibits to the affidavits or were legally privileged. BEL submits that a band A basis is more appropriate given the targeted and informal discovery process that involved a “comparatively small amount of time” compared with the time that would ordinarily be associated with a formal discovery on a 3B basis. Further, BEL suggests that an ordinary amount of time for formal discovery in a category 3 matter would involve substantially more than 31 documents and the provision of a formal list, which in itself is a very significant task, and was not undertaken here.30
[42] The question is whether the informal targeted discovery process undertaken by the parties required “a comparatively small amount of time” or “a normal amount of time” to be considered reasonable.31 On balance, I consider that a band B basis is appropriate. While the discovery process agreed to by the parties was for targeted searches, the nature of those targeted searches and the work required to provide the documents to BEL would reasonably require a normal amount of time. Whether or not a list of the documents was provided is not decisive.
30 I record, however, that Transpower says in its reply submissions that it did provide a list of documents prepared in the usual way.
31 High Court Rules 2016, rr 14.5(2)(a) and (b).
[43]I therefore determine the allowance for item 20 in the schedule of costs is
$8,825.
Order
[44] I order BEL to pay to Transpower costs ($70,600.00) and disbursements ($54,169.84) in the sum of $124,769.84, in accordance with the schedule attached to Transpower’s memorandum seeking costs and disbursements dated 16 April 2024 and with the adjustments as set out above.
McQueen J
Solicitors:
Bell Gully, Wellington for Applicant
Buddle Findlay, Christchurch for First Respondent Chapman Tripp, Wellington for Second Respondent
8
0