Cable Price (NZ) Limited v Easton HC Napier CIV 2010-441-436

[2010] NZHC 1651

IN THE HIGH COURT OF NEW ZEALAND NAPIER REGISTRY

CIV-2010-441-436

BETWEEN  CABLE PRICE (NZ) LIMITED Plaintiff

ANDSTUART DAVID EASTON Defendant

Judgment:      3 September 2010 at 12.30 pm

JUDGMENT AS TO COSTS OF ASSOCIATE JUDGE D.I. GENDALL

This judgment was delivered by Associate Judge Gendall on 3 September 2010 at

12.30 pm pursuant to r 11.5 of the High Court Rules.

Solicitors:           Davys Burton, Solicitors, PO Box 248, Rotorua

Lunn & Associates, Solicitors, PO Box 846, Napier 4110

CABLE PRICE (NZ) LIMITED V SD EASTON HC NAP CIV-2010-441-436  3 September 2010

Introduction

[1]      On 14 July 2010, the plaintiff filed an application to transfer proceedings commenced in the Napier District Court on 7 December 2009 from the District Court to the High Court. The application was made on the grounds that the defendant’s counterclaim in the District Court sought $1 million and was therefore outside the jurisdiction of the District Court.

[2]      At a hearing before me in this Court on 29 July 2010, the plaintiff withdrew its application for transfer on the basis that the defendant’s counterclaim was now reduced to a claim for $8,000. The plaintiff sought costs on the application.

[3]      On 29 July 2010, leave to withdraw the application for transfer was granted accordingly.  There  was  no  appearance  on  that  date  for  the  defendant,  and  the question of costs was reserved. Both parties have now filed and served memoranda as to costs in accordance with directions I made on 29 July 2010.  The plaintiff seeks costs on its withdrawn transfer application from the defendant on a Category 2B basis plus disbursements. The defendant opposes the plaintiff’s application for costs.

Background

[4]      As I have noted above, on 7 December 2009, the plaintiff commenced proceedings in the Napier District Court against the defendant by filing a notice of claim. The claim was apparently served on the defendant on 18 February 2010, and the defendant served a notice of response and a counterclaim on 31 March 2010. The counterclaim sought the sum of $8,500.00. The plaintiff provided an information capsule and a response to the counterclaim to the defendant on 14 May 2010.

[5]      On 28 June 2010 the defendant responded to the plaintiff’s notice of claim with an information capsule. In this information capsule, the defendant expressed an intention to bring a counterclaim in excess of $1 million. In particular, the defendant noted that he “believe[d] that his damages claim will exceed one million dollars” and that it would therefore “be necessary for the proceeding to be transferred to the High Court”. In a “will say” statement contained within the information capsule, it was

stated that the defendant would be relying on evidence provided by a Mr Paul Roche “in support of the defendant’s counterclaim for breach of contract which involves losses of more than 1 million dollars”. The “will say” statement further noted that the counterclaims would be “formally pleaded when the proceeding is transferred to [the] High Court”.

[6]      No further particulars were given of this claim. The defendant did not file a separate information capsule in respect of the counterclaim as required by r 2.27.3

District Court Rules.

[7]      On the basis of the defendant’s information capsule and the statements made in it, the plaintiff subsequently sought to have the proceeding transferred to the High Court by consent. However, in an email dated 13 July 2010, the defendant’s counsel wrote that “it would be a good idea if the parties attended some kind of settlement conference before further  claims  are  filed  and  this  might  be  better  done  in  the District Court”. He also confirmed that he did not have instructions from the defendant on this matter, and that he could not confirm whether he would consent to the proceeding being transferred. He said that he would advise the plaintiff of the defendant’s position on his return to New Zealand.

[8]      The plaintiff chose not to wait any further.  On 14 July 2010 the plaintiff filed its application to transfer the proceedings to the High Court pursuant to s 45 District Courts Act 1947.

[9]      On 16 July 2010, counsel for the defendant wrote to the plaintiff, noting that:

...the  application  relies  entirely  on  the  assumption that  our  client  is  bringing  a counterclaim in the same proceeding for about $1m which it has not yet done and has only indicated an intention that it might bring such a claim in the information capsule which was indicated for the purpose of the settlement conference so all matters could be discussed.

...

As discussed on the telephone, I don’t think there is any urgency really because no counter-claim has yet been filed by our client...

[10]     On  27  July  2010,  the  defendant’s  counsel  advised  the  plaintiff  that  the defendant did not intend to file a counterclaim exceeding $1 million. Accordingly, at the hearing on 29 July 2010, the plaintiff sought leave to withdraw its application to transfer the proceedings.

[11]     The  parties  have  since  been  unable  to  agree  on  the  issue  of  costs.  The plaintiff demanded payment of a sum of $2,104.00 on a Category 2B basis, as opposed to indemnity costs which had been originally foreshadowed. The defendant, however, contended that he should not be liable for costs because the application for transfer was premature.

[12]     On 6 August 2010, the defendant filed an application in the District Court seeking an extension of time to file an information capsule in respect of the counterclaim. The extension was sought on the grounds that the defendant had required time to consider amendment of the claim to include a higher value, with the result that the claim would then have needed to be transferred to the High Court. This application was granted on 25 August 2010.

Discussion

[13]     The plaintiff submits that it was never advised of the defendant’s intention not to proceed with the counterclaim for $1 million when discussing the application for transfer with the defendant’s counsel. It submits that it would not have gone to the expense of making the application if it had been advised accordingly, and that the information capsule filed by the defendant was unequivocal that the proceedings would need to be transferred. The plaintiff argues, therefore, that it was entitled to rely on the information contained in the information capsule, given that there was a very tight time period within which to file the application for transfer.

[14]     The plaintiff further submits that it took a responsible position in applying for transfer to avoid being “bogged down” in interlocutory matters in the District Court, having regard to the defendant’s  failure to  comply with the Rules in  failing to provide sufficient particulars in his counterclaim or to file a separate information capsule. The plaintiff complains now that the claim for $1 million may have been

raised only “as a strategy” to assist the defendant in potential settlement discussions with the plaintiff, and that the claim appears to be baseless and without any foundation.

[15]     Overall, it is submitted that the defendant acted improperly in raising the counterclaim,  failing  to  substantiate  it  or  to  consent  to  a  transfer,  and  then proceeding to withdraw it “at the last possible moment”. As far as I understand the plaintiff’s  position,  however,  the  plaintiff  does  not  seek  indemnity  costs,  but considers that Category 2B costs would be appropriate here.

[16]     The defendant, on the other hand, submits that at no stage did he file a counterclaim for a sum exceeding $1 million. He argues that the counterclaim for

$8,500.00 was never amended and that it was in fact discontinued weeks before the plaintiff’s application for transfer, as a result of his failure to file an information capsule. Rule 2.27.3 District Court Rules provides that a defendant must serve an information capsule within 30 working days after the date on which it has been served with the plaintiff’s response to the counterclaim. Form 4CC, which is the required form for filing an information capsule in respect of a counterclaim, provides that the counterclaim “will end” if the information capsule is not served in time.

[17]     The  defendant  argues  that  its  information  capsule  merely  raised  the possibility that a larger counterclaim would be filed, but that the whole matter raised difficult factual and legal issues which required time to be properly considered. It is submitted that the plaintiff’s application for transfer was made the very next day despite the plaintiff being advised that counsel would need to obtain instructions from the defendant as to whether the defendant would bring such a large counterclaim. Moreover, the defendant submits that there was never any urgency in transferring  the  proceeding,  and  that  s  45  District  Courts  Act  1947  was  not applicable, because no counterclaim for $1 million had yet been filed.

[18]     Section 45 of the District Courts Act 1947 provides that a party may apply for transfer of a proceeding where a defendant has filed a counterclaim which involves a matter beyond the jurisdiction of the Court. Rule 5.69 High Court Rules states that an application under s 45, by a party against whom the counterclaim is

made, must be made within five working days after service on that party. Here, the defendant had filed a counterclaim for a sum of about $8,500.00, but had indicated in his information capsule, in response to the plaintiff’s notice of claim, that he was considering seeking damages of more than $1 million.

[19]     In my view, the circumstances of this case are such that a costs award against the defendant would not be appropriate. Although it is true that the defendant’s counsel could have put more effort into clarifying his client’s position, I consider that it would have been sufficiently clear, based on the email of 13 July 2010, that the defendant had not yet decided whether a counterclaim for $1 million would ultimately be made. This inference could have been drawn from counsel’s suggestion that “it would be a good idea if the parties attended some kind of settlement conference before further claims are filed”.

[20]     In any event, it is clear that no such claim had been filed at the time of the plaintiff’s application, and that the time requirements in r 5.69 thus would not be applicable. In Cromwell Property Holdings & Development Ltd v Checketts McKay (1999) 13 PRNZ 709 at [11], the Court stated that the s 45 jurisdiction is triggered only after the counterclaim has been quantified. Here, the counterclaim had been quantified at $8,500.00, and a further claim for $1 million would have required formal amendment of the counterclaim.   Expressing a broad intention to claim $1 million in an information capsule in response to the plaintiff’s notice of claim was not sufficient.

[21]     For these reasons, I agree with the defendant’s submission that the plaintiff’s application was premature, and that costs should lie where they fall.

Conclusion

[22]     The plaintiff’s application for costs is dismissed.   Costs are to lie where they fall.

‘Associate Judge D.I. Gendall’