Carlin Enterprises Limited v Fright Aubrey Limited (in liq) HC Christchurch Civ-2007-409-002030
[2011] NZHC 1680
•27 October 2011
IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY
CIV-2007-409-002030
BETWEEN CARLIN ENTERPRISES LIMITED Plaintiff
ANDFRIGHT AUBREY LIMITED (IN LIQUIDATION)
First Defendant
ANDGARRY RUSSELL SELLARS Second Defendant
Hearing: Dealt with on the papers
Appearances: JBM Smith and P J Woods for Plaintiff
G N Gallaway and A V Foote for Defendants
Judgment: 27 October 2011
JUDGMENT OF CHISHOLM J AS TO INTEREST AND COSTS
[1] In the substantive judgment delivered on 16 June 2011 further submissions were invited in relation to interest and counsel were asked to submit memoranda if agreement could not be reached as to costs. There has been no agreement as to costs.
[2] It is convenient to deal with costs first.
Costs
[3] The following matters need to be addressed: (a) Costs category;
(b) Whether there should be an uplift;
(c) Quantification of costs awarded in relation to Burgess brief;
CARLIN ENTERPRISES LIMITED V FRIGHT AUBREY LIMITED (IN LIQUIDATION) HC CHCH CIV-
2007-409-002030 27 October 2011
(d) Claim for four verified lists of documents; and
(e) Costs of second defendant.
Costs category
[4] At the first telephone conference the proceeding was categorised by an Associate Judge as category 2. The plaintiff seeks to change that categorisation to 3. This is opposed by the first defendant on the basis that a change of categorisation would not be consistent with the principle that the determination of costs should be predictable.
[5] The categorisation made by the Associate Judge should stand unless there are “special reasons” to the contrary: Rule 14.3(2) of the High Court Rules. I am satisfied, however, that special reasons for changing the categorisation have been demonstrated.
[6] First, even though costs were categorised at the initial telephone conference it seems to be clear that the parties wanted the categorisation of costs to be deferred. When the Associate Judge’s minute was issued it clearly escaped the notice of counsel on both sides that despite their memoranda costs had been categorised. Indeed, in a later memorandum counsel for the defendant proposed that the costs be categorised. It follows that the categorisation of costs has never received proper consideration.
[7] Secondly, and following on from the first point, there can be no suggestion that the categorisation has affected the conduct of the parties in the proceeding.
[8] Finally, I am satisfied that these proceedings could not be accurately described as proceedings of “average complexity” in terms of category 2 under Rule 14.3. To the contrary, counsel having special skill and experience was required in terms of category 3 under that rule. Amongst other things, that was reflected in the lengthy submissions advanced on both sides.
[9] The categorisation of costs will accordingly be changed to 3 and the plaintiff will be entitled to costs against the first defendant according to the 3B scale. With the exception of an adjustment to reflect the uplift of three days instead of six days (see below) the plaintiff ’s calculation in the schedule to counsel’s memorandum of
9 September 2011 is endorsed. The plaintiff is also entitled to court fees, experts’
fees and disbursements in accordance with that schedule.
Uplift
[10] An uplift of six days preparation time is sought by the plaintiff to reflect that the trial was adjourned on the third day because of a major change in Mr Sellars’ brief and could not resume until many months later. The plaintiff contends that this turn of events required considerable additional work, including having to prepare for trial a second time.
[11] Any uplift is opposed by the first defendant. It maintains that any additional work that the plaintiff might have had to undertake would have been required anyway; the adjournment was sought by the plaintiff and supported by the defendant when an “unforeseen and unpredictable” issue was raised by a defence witness; a “penalty” should not be imposed; and a split in a trial is not unusual.
[12] The circumstances giving rise to the aborting of the trial on 5 May 2010, which are far from usual are traversed in [37]-[45] of the judgment. There is also reference to the topic at [129]-[130]. The trial was aborted because of a fundamental change in direction at a very late stage. Given that development an adjournment was inevitable. As is apparent from the judgment, such a major change in direction at such a late stage was entirely unacceptable.
[13] If there was going to be such a change by a key witness it should have been identified much earlier. Given the delay before the trial could resume some doubling up in preparation for trial was unavoidable. I am satisfied that in all the circumstances there should be an order for increased costs in terms of Rule
14.6(3)(d). It is not a question of imposing a penalty. Rather, it is a matter of recompensing the plaintiff for additional costs that it faced which were unnecessarily
caused by the actions of the defence. However, taking into account the preparation time allowed by the 3B scale it seems to me that an uplift of six days would be excessive. An uplift of three days will be allowed.
Claim for four verified lists of documents
[14] The plaintiff claims for four verified lists of documents (instead of the usual one). The second and third arose from the first defendant’s joiner of Northwood Views Limited. The fourth concerned the plaintiff’s costs arising from stormwater and reserve contributions (which had earlier been considered by the plaintiff to be irrelevant).
[15] According to the defendant there should only be allowance for one list. It maintains that the second, third and fourth lists arose out of either:
(a) Documents that the plaintiff says it was not obliged to discover but provided after requests by the third party;
(b)Further discovery of documents related to matters at issue in the proceedings, and were therefore discoverable in any event.
Thus the defendant’s position that the usual approach should be adopted and there should only be allowance for the single list.
[16] Regardless of the underlying factors the plaintiff had to provide four lists. This should be recognised in the award of costs. The plaintiff is entitled to costs for the four lists.
Quantification of costs re Burgess brief
[17] As a result of the late service of Mr Burgess’ brief the defendants were awarded costs, but quantification was reserved. The first defendant now seeks costs on a 2B basis for three days.
[18] The plaintiff contends that events have now overtaken the need to quantify costs. It also notes that the first defendant’s claim is more than offset by the late service of Mr Sellars’ revised position.
[19] Costs have already been awarded and should now be quantified. This issue is discreet from the issue of Mr Sellars’ brief. I allow one day on the 2B scale applying at the time.
Second defendant’s costs
[20] The second defendant succeeded against the plaintiff. He claims $4800 plus a filing fee of $90 on the statement of defence.
[21] Having succeeded against the plaintiff the second defendant is entitled to costs. His claims are fair and reasonable and they will be awarded accordingly.
Interest
[22] Interest was awarded from 18 December 2004. However, there was insufficient information for the rate to be fixed and submissions were requested. I am grateful to counsel for their thorough submissions.
[23] The plaintiff’s position is set out in counsel’s memorandum of 4 July 2011:
3.The rate sought is the lesser of that charged to the plaintiff when it borrowed and the prevailing Judicature Act rate. Where the plaintiff was not borrowing (for example section sales extinguished debt) the rate sought is the lesser of the prevailing Judicature Act rate and, in option 1 a combination of the five year Government bond rate and a
30 day bank bill rate, or in option 2, a five year Government bond rate. Under option 1 this produces a total sum of approximately
$345,000. Under option 3 the total sum produced is approximately
$320,000. In both cases interest runs from 18 December 2004 to
30 June 2011. Interest thereafter is sought at the five year bond rate.
Detailed explanations and calculations follow.
[24] Subject to two adjustments, the defendant accepts that the second schedule prepared by the plaintiff represents the appropriate award. The two adjustments reflect:
(a) What the first defendant believes is an error in the calculation which would have the effect of reducing the calculation by $9510.11;
(b)A further reduction of $6767.35 to reflect the first defendant’s contention that further borrowing after September 2005 (by which time the plaintiff had sold the development and repaid its borrowings) were not the concern of the first defendant.
Those adjustments, if accepted, would have the effect of reducing the interest payable by the first defendant to $304,215.76.
[25] It emerged from the memorandum in reply on behalf of the plaintiff that while there was an error, it was in the plaintiff’s memorandum, not the calculation. Thus no adjustment is required in relation to the first matter.
[26] As to the second adjustment sought by the defendant, I accept the plaintiff’s point that it would not have had to borrow as much if it had not paid an excessive price for the land. Under those circumstances the plaintiff’s calculation is appropriate and I am not prepared to make the reduction sought by the first defendant.
[27] Finally, as to which of the calculations in the two schedules should be preferred, I am satisfied that the calculation in the second schedule is appropriate. In my view it will enable the plaintiff to be properly compensated for being out of pocket by virtue of the first defendant’s breaches.
Orders
[28] Subject to the increased costs being reduced from six days to three days the plaintiff is entitled to costs against the first defendant on a 3B basis (as calculated in
the schedule to the plaintiff’s costs attached to the memorandum of 9 September
2011). In addition, the plaintiff is also entitled to court fees, experts’ fees and
disbursements against the first defendant as set out in the same schedule.
[29] The first defendant is entitled to costs against the plaintiff of $1600 in relation to the late filing of the Burgess brief.
[30] The second defendant is entitled to costs against the plaintiff of $4890 as set out in Appendix B to the memorandum of counsel for the defendants dated 31
August 2011.
[31] The plaintiff is entitled to interest against the first defendant (as calculated in schedule 2) of $320,493.21.
[32] Leave is reserved to the parties to apply further should any clarification of these orders be required.
Solicitors:
Anthony Harper Lawyers, ChristchurchDuncan Cotterill, Christchurch
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