Byrne v Rose
[2017] NZHC 2886
•23 November 2017
IN THE HIGH COURT OF NEW ZEALAND NELSON REGISTRY
I TE KŌTI MATUA O AOTEAROA WHAKATŪ ROHE
CIV-2015-442-059 [2017] NZHC 2886
BETWEEN FRANK BYRNE AND CHERIE BYRNE
TRADING AS FRANK BYRNE BUILDERS
First Plaintiff
AND
FRANCISCUS PETRUS MARIA VAN GRUNSVEN AND ELIZABETH ANN VAN GRUNSVEN TRADING AS GOLDEN BAY REFRIGERATION AND AIR CONDITIONING
Second Plaintiff
AND
MARK HUME TRADING AS MANA THE PLUMBER
Third Plaintiff
AND
WAITAPU ENGINEERING LIMITED Fourth Plaintiff
AND
DAVID ROSS JACOBSEN AND ANGELA HELEN JACOBSEN TRADING AS GOLDEN BAY FENCING Fifth Plaintiff
AND
ANTHONY PAGE REILLY AND KATHLEEN MARY REILLY, FRANK BYRNE AND CHERIE BYRNE, DOS RIOS DAIRY LIMITED AND JOHN BRYNE AND DEANNA POMEROY- BYRNE TRADING AS FOUR RIVERS EARTHMOVING
Sixth Plaintiff
AND
CAROLYN ROSE Defendant
BYRNE AND BYRNE TRADING AS FRANK BYRNE BUILDERS v VAN GRUNSVEN AND ELIZABETH ANN VAN GRUNSVEN TRADING AS GOLDEN BAY REFRIGERATION AND AIR CONDITIONING [2017] NZHC 2886 [23 November 2017]
Hearing: On the papers Counsel:
G M Downing for Plaintiffs
C Rose in PersonJudgment:
23 November 2017
JUDGMENT (COSTS) OF CLARK J
Pursuant to r 11.5 of the High Court Rules I direct the delivery time of this judgment is
2.00 pm on 23 November 2017
Introduction
[1] Carolyn Rose, the defendant, desired robotic milking machines on her farm. She arranged for the construction of a milking shed and utility rooms for new equipment, and for the installation of robots and a milk refrigeration system. This proceeding was brought by contractors involved in that work. They say Ms Rose failed to pay their invoices. Six parties sued:
(i) the first plaintiff, a building business;
(ii) the second plaintiff, a refrigeration and air-conditioning business;
(iii) the third plaintiff, a plumbing business;
(iv) the fourth plaintiff, an engineering company;
(v) the fifth plaintiff, a fencing business; and
(vi) the sixth plaintiff, an earthmoving partnership.
[2] The first plaintiff was granted summary judgment in respect of part of its claim. Ultimately the various proceedings filed in the District Court were transferred to the High Court and consolidated with the balance of the first plaintiff’s proceeding.
[3] The plaintiffs sought a total of $407,409.48 for unpaid invoices. The defendant counter-claimed for breach of contract and breach of duty of care.
[4] The defendant has settled with four of the six plaintiffs. Settlement with the second, fourth, fifth and sixth plaintiffs was concluded on 30 June 2017.1 The settlements occurred over the weekend prior to the trial which was due to commence on Monday 3 July 2017. The defendant agreed to pay to each of the settled plaintiffs
the full amount sought in their respective claims. The claims of the first and third
1 By consent, judgment was entered for the settled plaintiffs on 31 July 2017 (consent judgment).
From this point I shall refer to them as the settled plaintiffs.
plaintiffs will proceed to trial in 2018. All of the plaintiffs have been represented by the same counsel.
[5] The settled plaintiffs now seek scale costs uplifted by 50 per cent. Ms Rose takes the position it is premature to award or address costs or disbursements while the proceedings remain afoot. If costs must be determined now, which Ms Rose resists, she submits costs should lie where they fall.
Issues
[6] The following issues arise for determination:
(a) Should costs be determined while the proceeding remains afoot?
(b) Should costs be awarded to the settled plaintiffs?
(c) Are grounds for an uplift made out?
(d) What level of interest should be applied?
Should costs be determined when the proceeding is afoot?
[7] The proceeding is continued by two of the six plaintiffs. The question is whether costs should be awarded now or when their claims are finally determined.
[8] Each settled plaintiff seeks a percentage of total costs and disbursements in accordance with an apportionment agreed amongst all plaintiffs at the commencement of the proceeding. The memorandum of counsel for the defendant filed in response to the settled plaintiffs’ claim contained full submissions in support of the following essential propositions:
(a) It is premature to award or address costs or disbursements while the proceeding remains afoot.
(b)If the Court considers that contrary to (a) above, it is appropriate to determine costs for the settled plaintiffs at this stage, neither indemnity
costs nor uplifted costs are warranted.
(c) There has been no hearing and no finding of fact in respect of the settled plaintiffs. There was, instead, a settlement without admission of liability. There is not yet an ‘event’ for costs to follow and costs with the settled plaintiffs, if they are to be determined now, should lie where they fall.
(d)The defendant agrees interest is payable on the settlement payments in accordance with the settlement agreement but says the interest must be quantified.
[9] In support of the proposition that it is premature to address costs or disbursements Mr Carey, counsel for the defendant, submitted this is not a case where the settled plaintiffs were each separately represented and incurred costs separately from the two plaintiffs who remain parties to the proceeding. These are consolidated proceedings with a consolidated claim and with all plaintiffs being represented by the same lawyer. Additionally, the seventh cause of action is a joint cause of action and the eighth cause of action is a claim by the first plaintiff on behalf of the remaining plaintiffs. While the plaintiffs can apportion an award of costs among themselves in any manner they choose the Court is not required to apportion a percentage costs figure to each settled plaintiff. Costs should be awarded as a total and divided amongst entitled parties as they see fit. That is an internal matter in which the Court should not be involved.
[10] To grant the settled plaintiffs’ claim for a percentage of costs partway through the proceeding is unprincipled and would “produce an absurd result if the defendant were to succeed at trial”.
[11] Further, Mr Carey submitted, it can reasonably be questioned whether the agreed apportionment accurately reflects the actual time and costs incurred by the plaintiffs’ lawyer in respect of a particular plaintiff.
[12] Finally, Mr Carey submitted, the plaintiffs’ settlement represents only a minor part of the proceedings. This is said to be acknowledged in a Minute which I issued on 11 July 2017 following:
• termination of the defendant’s retention of her original solicitors;
•telephone conferences with newly instructed counsel to see if he could come up to brief in time for a trial to be rescheduled on 13 July;
•receipt of a memorandum from Mr Carey in his capacity as yet further newly instructed counsel; and
•a further telephone conference convened on 10 July to discuss aspects of the trial. Mr Carey relies on para [5] of my Minute:
[5] … Although four of the plaintiffs have settled, the significant disputes are still on the table. The issues that have been settled are minor by comparison and the four witnesses for the settled plaintiffs, whether they give evidence or not, would make very little difference to the trial length.
[13] A memorandum of counsel for the plaintiffs dated 29 August 2017 annexed a body of documents said to entitle the plaintiffs to the costs and disbursements set out in counsel’s memorandum. A copy of the correspondence between solicitors for the parties concluding the settlement was also included. Although purporting to be in “reply” regrettably, the memorandum addressed no submission or points of principle contained in the extensive memorandum of counsel for the defendant. The Court has been left to consider the defendant’s detailed submissions in the absence of any contrary point of view on behalf of the settled plaintiffs (beyond the bare claim of entitlement to costs).
Principles
[14] In Ng v Pauatahanui Gs Ltd MacKenzie J discussed the correct approach to costs where there has been no judicial determination of the proceedings. Four
particular points emerge from the Judge’s discussion:2
2 Ng v Pauatahanui Gs Ltd [2014] NZHC 3396 at [8].
(a) The court has power to make a costs order when the substantive proceedings have been resolved without trial but the parties have not agreed on costs. There is no tradition of “no order as to costs” merely because a dispute has been settled except as to costs. That said, if it is not possible for the Judge to say what the likely outcome would have been, that in itself is a possible order.
(b)The overriding objective is to do justice between the parties without incurring unnecessary court time and consequent additional costs.
(c) At each end of the spectrum will be cases where the merits and likely successful party will be obvious. In between, to differing degrees, there will be cases that are less clear. How far the court will be prepared to inquire into the unresolved substantive issues will depend on the circumstances of the case.
(d)In the absence of a good reason to make any other order the fall-back position is to make no order as to costs.
[15] MacKenzie J cited BCT Software Solutions Ltd v C Brewer & Sons Ltd,3 a costs appeal, in which Mummery LJ addressed the difficulties inherent in asking a judge to exercise his or her discretion in respect of the costs of an action which the judge has not tried.
[16] MacKenzie J also derived further assistance from Venture Finance Plc v Mead in which Chadwick LJ observed a Judge has jurisdiction to make an order for costs in proceedings in which all substantive issues have been disposed of by agreement.4 But there are dangers on embarking on that course and Chadwick LJ referred to the observations of Mummery LJ in BCT Software Solutions appeal and also Chadwick LJ’s own judgment in which he described circumstances in which it will be proper for
a judge to make no order as to costs:
3 BCT Software Solutions Ltd v C Brewer & Sons Ltd [2003] EWCA Civ 939.
4 Venture Finance Plc v Mead [2005] EWCA Civ 325 at [10].
… unless the Court had a proper basis of agreed or determined facts upon which to decide whether the case was one in which it should give effect to “the general rule” [under the UK Rules] or should make some “different order” … it must accept that it is not in a position to make an order about costs at all. I said this:
‘That is not an abdication of the court’s function in relation to costs. It is a proper recognition that the course which the parties have adopted in the litigation has led to the position in which the right way in which to discharge that function is to decide not to make an order about costs’.
[17] The settlement before MacKenzie J involved no determination of the merits. Consequently, MacKenzie J had to decide whether, had the case proceeded, the likely outcome was obvious from a perusal of the papers alone or whether he should proceed on the basis there was no clear winner or loser.5 The Judge arrived at this analytical approach by applying the principles from the English cases which I have referred to in the immediately preceding paragraphs.
[18] Two important points arise. The English cases as to costs must be seen in light of the particular costs regime applied by the English Civil Procedure Rules 1998. Secondly, the position of multiple plaintiffs, a limited number of whom settle, does not readily fit within the costs regime prescribed by the High Court Rules. That said, the rules reflect the principle that costs follow the event and, all matters in relation to costs are at the discretion of the court.6
Assessment
[19] I am in no doubt that it is appropriate to determine the issue of costs at this stage and that costs should be awarded to the settled plaintiffs. It follows that the answers to the issues posed at [4](a) and (b) are addressed together in this part of my judgment.
[20] First, the primary principle is that the unsuccessful party should pay costs. That is, costs follow the event.7
5 Ng v Pauatahanui, above n 2, at [11].
6 High Court Rules 2016, 14.1.
7 High Court Rules, r 14.2(a).
[21] Secondly, notwithstanding the submission on behalf of the defendant that there has been no admission of liability and settlement was “a pragmatic step to resolve claims that, in large part, were not economic to take to trial” the settled plaintiffs did succeed in their litigation. That much is clear from the fact that, on its face, the consent judgment8 enters “judgment for second plaintiff, fourth plaintiff, fifth plaintiff and sixth plaintiff” (my emphasis). Not only is judgment entered for the settled plaintiffs but settlement with each plaintiff was for the full amount claimed by each settled plaintiff.
[22] Third, I do not agree that if the defendant is successful in defending the claims of the first and third plaintiffs she will not be liable to pay costs to the settled plaintiffs.
[23] Although only one set of costs has been incurred on behalf of the plaintiffs the first and third plaintiffs remain exposed to an adverse costs order if they are unsuccessful in their litigation. I do not regard that as having any bearing on the decision which I must make or the entitlement of the settled plaintiffs to their costs. In a (small) sense the exercise is analogous to the approach to an award of costs where there has been a measure of success on both sides. The approach to such a case was described by Tipping J in Packing In Ltd (in liq) v Chilcott:9
[5] In such a case as the present, where in broad terms each party has had similar success, we do not consider it helpful to focus too closely on the question which party has failed and which has succeeded. Costs in a case such at this should rather be based on the premise that approximately equal success and failure attended the efforts of both sides. To that starting point should be added issues such as how much time was spent on each transaction or group of transactions in issue, and any other matters which can reasonably be said to bear on the Court’s ultimate discretion on the subject of costs. In the end, as in all costs matters, the Court must endeavor to do justice to both sides, bearing in mind all material features of the case.
[24] The settled plaintiffs’ combined success has the defendant paying to them a total sum of $110,916.33. The sum represents slightly more than 25 per cent of the
total amount claimed by all six plaintiffs.
8 See n 1 above.
9 Packing In Ltd (in liq) v Chilcott (2003) 16 PRNZ 869 (CA) at [5].
[25] Scale costs and disbursements as at 30 June 2017 have been calculated on a 2B basis as totalling $109,629.12. The settled plaintiffs seek only 25 per cent of that figure. The settled plaintiffs are not claiming the total costs to which all plaintiffs might be entitled at the conclusion of the trial were they all to succeed. In other words the defendant is not at risk of facing double claims. The remaining two plaintiffs, should they succeed in their litigation, will only be able to claim an award of costs reflecting the proportion of total costs not already awarded to the settled plaintiffs.
[26] The defendant contends the settled plaintiffs are not entitled to costs and that the judgment does not reflect the terms of settlement reached between the parties. The actual term of settlement, as recorded in correspondence, was that “any costs determined by the court”. It is said the settled plaintiffs, who drafted the judgment, have omitted the word “any” when transposing the settlement to the judgment.
[27] I am unable to accede to that argument. The judgment states that the defendant shall pay to each of the second, fourth, fifth and sixth plaintiff sums of (respectively)
$60,451.40, $21,356.37, $13,000.20 and $10,063.22
plus interest from the date each invoice fell due until the date of payment at the rate of 5% per annum (or, in the alternative, at a rate to be determined by the Court); plus costs to be determined by the Court.
[28] The judgment has been sealed. It is not available to me to construe it in a way that is contrary to its very clear terms. The defendant has identified what it says is an error. Yet the defendant took no steps to correct the judgment; to have it recalled and reissued, for example. I agree the correspondence between the parties, apparently recording the terms of settlement, contained as one of the bases upon which the defendant offered to settle: “any costs determined by the Court”. But that correspondence does not prevail over a sealed judgment of the High Court. It is the consent judgment to which I am bound to give effect not the correspondence evincing the terms on which the defendant offered to settle. In any event a term of settlement, recording that any costs are to be determined by the Court, reflects an acknowledgment, if not an acceptance, that costs are at least potentially payable by the defendant.
[29] I am satisfied that the sum of $109,629.12 being the total costs and disbursements claimed as at 30 June 2017, as set out in a schedule to the memorandum of counsel for the plaintiffs dated 29 August 2017, is accurately calculated.
[30] The settled plaintiffs’ total claims of $28,317.28 amount to just over 25 per cent of that figure.
[31] The defendant notes the settled plaintiffs seek costs and disbursements in respect of three amended statements of claim yet r 7.77(8) provides that the party filing an amended pleading must bear all the costs of and occasioned by the original pleading. As permitted by r 7.77(8) I propose to order otherwise. In the end, I must endeavour to do justice to all sides bearing in mind the particular features of this case.10
In particular, I am mindful that the overriding objective of doing justice between the parties should be achieved without incurring unnecessary court time. The objection is in respect of $330 reflecting three sets of filing fees for the amended statements of claim. I do not propose to engage in an analysis of the amendments to the pleadings to identify the extent to which each of the plaintiffs have succeeded on the basis of an amended pleading, or indeed who filed the amended pleading. To the extent there is any injustice in this approach it can be addressed in the final costs award at the conclusion of the trial.
[32] In conclusion, the settled plaintiffs are entitled to an award of $28,317.18 which represents 25 per cent of the total costs and disbursements calculated on a
2B basis as at 30 June 2017. The next question is whether those costs should be uplifted.
Should increased costs be awarded?
[33] The plaintiffs seek a 50 per cent uplift on the grounds:
(a) the settlement achieved for each settling plaintiff the full sum of the plaintiff’s claim;
10 See for example Tipping J in Packing In Ltd (in liq) v Chilcott, above n 9, at [5].
(b)the defendant’s defence and counterclaims were without merit and complex;
(c) not until the last working day before the hearing was due to commence was settlement was offered.
[34] Indemnity costs were initially sought but are no longer pursued.
Principles
[35] The statutory basis for an award of increased costs is provided in High Court
Rules r 14.6(3). In Bradbury v Westpac Banking Corp the Court of Appeal said:11
Departure from the scale entails a fundamental shift from the currently conventional New Zealand approach to costs.
...
The distinction among our three broad approaches – standard scale costs, increased costs and indemnity costs – may be summarised broadly:
(a) standard scale applies by default where cause is not shown to depart from it;
(b) increased costs may be ordered where there is a failure by the paying party to act reasonably;
(c) indemnity costs may be ordered where that party has behaved either badly or very unreasonably.
...
Clear cause must be shown to justify an increase.
[36] The matter was characterised as 2B at the first case management conference.12
[37] The settled plaintiffs have not met the onus of persuading me that increased costs are justified. The settled plaintiffs have not established unreasonable conduct on the part of the defendant. I note that the threshold of unreasonable conduct must be in relation to the proceeding. Further, it is necessary for the party claiming increased
costs to demonstrate that the failure to act reasonably contributed to the time or
11 Bradbury v Westpac Banking Corp [2009] NZCA 234, [2009] 3 NZLR 400 at [9], [27] and [28].
12 Byrne v Rose HC Nelson CIV-2015-442-59, 29 April 2017 at [7].
expense of the proceeding because only to that extent is any percentage uplift from scale justified. The settled plaintiffs have not identified, for example, any respect in which the defendant, in her conduct of the litigation, has failed to comply with High Court rules or court directions or has taken unnecessary steps or without reasonable justification has failed to accept an offer of settlement.13
[38] Although settlement occurred on the eve of trial that of itself, is not a reason to award increased costs. Settlement alone does not signify a meritless defence. Settlement is to be encouraged.14 The settled plaintiffs received the full amount of their claim, and will receive costs according to scale, without the inconvenience of going to trial and the inherent uncertainty in outcome trial entails.
[39] It follows that I do not find a basis for increased costs to be made out. The fact the settled plaintiffs are to be regarded as the successful parties does not, without more, make Ms Rose unreasonable in defending their claims or otherwise justify a departure from the convention that standard scale costs should apply.
Interest
[40] The parties agree interest is payable for each plaintiff at 5 per cent per annum from the date each invoice was due until payment is made. Mr Carey confirmed interest will be paid once quantified. The parties are to quantify what is to be paid. Leave is reserved to revert to the Court if the parties cannot agree the interest due.
Result
[41] The settled plaintiffs’ claim for costs is granted.
(a) I award costs in the sum of $28,317.18 (which, I observe, the settled plaintiffs have agreed to apportion.
(b) Interest is payable at 5 per cent from the date the invoiced sum was due,
13 These are but some of the circumstances in which the court may order a party to pay increased costs: r 14.6(3).
14 Bradbury v Westpac Banking Corp, above n 11, at [16] citing Sir Rupert Jackson in Review of
Civil Litigation Costs: Preliminary Report (London, 2009) at 468.
until payment is made.
(c) Costs on this application are to lie where they fall.
Karen Clark J
Solicitors:
McFadden McMeeken Phillips, Nelson for Plaintiffs
C K Lyon, Auckland for Defendant
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