Clark v Rural Livestock Limited

[2019] NZHC 2111

IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY

I TE KŌTI MATUA O AOTEAROA ŌTAUTAHI ROHE

CIV-2017-409-000213

[2019] NZHC 2111

BETWEEN

JASPER WINSTON CLARK, JOAN CAROL CLARK and JASPER ROSS CLARK

Plaintiffs

AND

RURAL LIVESTOCK LIMITED

Defendant

Hearing:	Determined on the Papers
Counsel:	A D G Hitchcock for Plaintiffs H McIntosh for Defendant
Judgment:	27 August 2018

JUDGMENT OF ASSOCIATE JUDGE PAULSEN

[On Costs]

This judgment was delivered by me on 27 August 2019 at 12.30 pm pursuant to Rule 11.5 of the High Court Rules

Registrar/Deputy Registrar Date:

Solicitors:

AWS Legal, Invercargill

Van Aart Sycamore Lawyers (Tony Sycamore), Dunedin

CLARK v RURAL LIVESTOCK LTD [2019] NZHC 2111 [27 August 2018]

Introduction

[1]                 The plaintiffs brought this proceeding alleging various breaches of obligation by the defendant when engaged to act as the plaintiffs’ agent to transact sales, purchase livestock on the plaintiffs’ behalf and to arrange for the lease and agistment of livestock.

[2]                 The trial was before Nation J and the evidence was heard on 1 – 4 May 2018. Submissions were presented on 12 September 2018. On 2 April 2019, Nation J issued a judgment awarding the plaintiffs various sums plus interest (as set out in paragraph [303]).1

[3]                 In paragraph [305] of his judgment, Nation J held that the plaintiffs are entitled to costs. He directed that if no agreement was reached on costs, memoranda were to be filed. The parties did not reach agreement and memoranda have been filed by counsel dated 15 May 2019, 29 May 2019 and 11 June 2019 addressing the matters in dispute.

[4]                 Pursuant to r 14.9 High Court Rules 2016, I am determining those matters, as Nation J is not conveniently available to make this determination.

The plaintiffs’ position

[5]                 The plaintiffs’ counsel, in his memorandum of 15 May 2019, has, on behalf of the plaintiffs, sought costs calculated on a 2B basis totalling $56,196, along with disbursements of $16,386.24. The plaintiffs argue that costs should follow the event, that they were successful in the proceeding and, that there is no justification for reducing their entitlement to costs.

1      Clark v Rural Livestock Ltd [2019] NZHC 671.

The defendant’s position

[6]                 The defendant’s counsel does not take issue with the plaintiffs’ categorisation of the proceeding or with the arithmetic of costs and disbursements for each step taken, on a 2B basis.

[7]                 However, the defendant argues that the plaintiffs are not entitled to costs for hearing preparation and appearance (totalling $16,725), nor the hearing fees ($11,200). The defendant argues it should be awarded its hearing preparation and appearance costs ($16,725). This submission is based on the following grounds:

(a)The proximity of the overall judgment sum to the amounts of multiple offers of settlement made by the defendant, both before and during the trial;

(b)That the plaintiffs refused to engage with the defendant about settlement after the hearing of evidence and before judgment; and

(c)That considerable time was spent on aspects of the plaintiffs’ claim

which were either withdrawn or which failed.

The settlement offers

[8]The defendant relies on rr 14.10(1) and 14.11(3). It submits that it made six

“qualifying” offers to settle the plaintiffs’ claim under r 14.10(1), namely:

(a)An offer of $315,000 on 28 April 2018 (3 days before the hearing);

(b)An offer of $330,00 on 29 April 2018 (2 days before the hearing);

(c)A further offer of $330,00 on 1 June 2018 (after the evidence was heard);

(d)An offer of $92,500 (excluding a claim in respect of 176 heifers) on     8 June 2018;

(e)An offer of $335,000 on 25 June 2018; and

(f)A final offer of $420,000 on 1 August 2018 (payable by three instalments over two years).

[9]                 The defendant argues that even the lowest of these offers exceeded the amount that the plaintiffs obtained under their judgment, so that the reversal principle in       r 14.11(3) HCR applies.

[10]              This submission is based on two propositions. First, that the amount of the judgment against which an offer made under r 14.10(1) is to be measured should include interest and costs only to the date of the offer.2 Second, because the plaintiffs advised the Court that historically they do not claim GST input credits for the GST inclusive invoices in issue, it follows that the GST components of sums awarded by Nation J (as well as interest on those sums) “should not be counted as regards costs.”

[11]              Making allowance for those adjustments, the defendant argues, the amount the plaintiffs were entitled to under the judgment as at the date of the first offer (28 April 2018) totalled $313,641 (as set out in paragraph 6 of counsel’s memorandum of     29 May 2019) which is less than the $315,000 that was offered in settlement.

[12]              Furthermore, the defendant argues that even without such adjustments the proximity of the overall judgment sum to the amounts offered is notable in itself and relevant in a costs context because:

Given that Rural was so actively trying to settle the case on fair terms, and Rural’s offers and reasoning were so close to what the Court then ordered, it would be unjust for them to have no costs consequence.

[13]              The defendant concedes that its first two offers were made very shortly before the hearing but argues that such timing is not fatal to its position under r 14.11, as sometimes even offers made post-hearing should be accepted.3 In explanation for the lateness of the offers, the defendant says that it was settling two other proceedings and had expected the hearing of this proceeding to be moved back, giving it more time to

2      Tower Insurance v Kilduff and Veritas (2012) Ltd [2019] NZCA 82.

3      Rodgers v Advance Creative Technologies Ltd [2013] NZHC 577; [2013] NZCCLR 17.

settle with the plaintiffs. Finally, it argues that it can reasonably be inferred from the plaintiffs’ rejections of every offer made by it that even if it had presented pre-trial offers several weeks earlier, the plaintiffs would not have accepted them.

[14]              To summarise, the defendant seeks, in effect, to be treated as the successful party on the basis that its offers exceeded the amount of the judgment obtained by the plaintiff. In order to compare “like with like” the defendant submits that interest and costs must be calculated to the date of the offers, and that in addition the judgment sums must be adjusted to remove GST (and interest on them).

[15]              I accept this submission in so far as it concerns costs and interest. In Tower Insurance v Kilduff the Court of Appeal said:4

… In order to compare “like with like” the more appropriate course was to only take into account that portion of the costs award that related to the costs and disbursements incurred prior to the date of the relevant Calderbank offer. This is consistent with the purpose of the Calderbank regime, which is to encourage the settlement of disputes, and to impose costs consequences on those who fail to accept reasonable settlement offers prior to trial. Assessing the reasonableness of an offer requires the court to consider the position as at the time the offer was made. Factoring in additional costs, which would not have been incurred if the offer had been accepted, and interest beyond the date of the offer distorts the analysis. In assessing the reasonableness of a Calderbank offer, the usual course is therefore to disregard costs that the winning party had not yet incurred, and which it will never incur if the offer is accepted.

[16]              I do not accept the defendant’s counter-factual approach that an adjustment must be made to exclude GST from the sums awarded by Nation J. At [299] – [302] of the judgment, Nation J described how he treated GST. His Honour explained that sums were awarded on a GST inclusive basis because of concessions made by the defendant’s counsel. The defendant cannot now be heard to resile from those concessions and challenge the awards. His Honour noted:5

[299]     Each of the claims for damages made by the plaintiffs included GST. It may be the plaintiff suffered no loss as to the GST portion of purchase prices because of the way they would have been able to claim a GST input credit from the Inland Revenue Department. However, Rural made concessions in

4      Tower Insurance v Kilduff, above n 2, at [35].

5      Clark v Rural Livestock Ltd, above n 1, at [299] – [301].

its closing submissions relating to the quantum of damages, which have an impact on whether sums are awarded inclusive or exclusive of GST.

[300]     In terms of the award for the 176 cows, the $210,277.50 spent by the plaintiffs in purchasing the animals included GST. In its closing submissions, Rural submitted that, if there was liability, $210,277.50 would be the appropriate quantum, rather than the higher expectation measure claimed by the plaintiffs. In those circumstances, the $210,277.50 will be awarded in full.

[301]     Likewise, in submissions relating to the claim for the 40 cows, Rural submitted that it had no issue as to quantum. The plaintiffs’ claim was on a GST inclusive basis but for 40 cows. My judgment is for non-delivery of 32 cows. Given Rural’s conclusion, my judgment is for a GST inclusive amount, i.e. $29,440.

[17]              In addition, following the conclusion of the evidence, counsel asked for a delay for a further hearing when submissions could be presented to give them an opportunity to consider settlement (para [4]). The proceeding was not fully settled, but the claims before the Court were reduced, and this included an acknowledgement and payment by the defendant of one of the plaintiffs’ claims. The defendant has not included this in its assessment. In my judgment, it is clearly relevant to a “like for like” analysis as at the dates the defendant’s pre-trial offers were made.

[18]              My own analysis is that as at 28 April 2018 (when the first settlement offer was made) the amount owing to the plaintiffs in accordance with the judgment was

$355,733.18 made up as follows:

Judgment

(a)       $210,277.50 (plus interest at 5% from 1 August 2015) (b)                 $30,750.00

(c)           $1,000.00

(d)$29,440.00 (plus interest at 5% from 1 August 2016)

(e)$1,400.00 (plus interest at 5% from 12 October 2016)

$272,867.50  $272,867.50

Interest

Interest on $210,277.50 (1 August 2015-28 April 2018) $28,843.54

Interest on $29,440 (1 August 2016-28 April 2018)          $2,566.25

Interest on $1,400 (12 October 2016-28 April 2018)            $108.68

$31,518.47	$31,518.47
Costs (excluding the hearing)	$46,161.00
Disbursements (excluding hearing fees)	$5,186.21
Total	$355,733.18

[19]              The defendant’s two pre-trial offers fell well short of this sum and accordingly r 14.11(3) was not engaged.

[20]              It is therefore not necessary for me to consider the defendant’s explanations for its very late pre-trial offers, nor its post-hearing offers of 1, 8 and 25 June 2018, which were all significantly lower than the plaintiffs’ entitlement.

[21]              There remains the defendant’s offer of $420,000 of 1 August 2018. In my view, this offer can have no impact on the plaintiffs’ entitlement to costs. The offer was not stated to be a without prejudice except as to a costs offer so as to engage      r 14.10. Even if the rule had been engaged, the effect on the issue of costs of an offer remains at the Court’s discretion. This offer was made after the completion of the evidence, by which time both parties would already have incurred almost all of the costs of the proceeding. It was simply made too late to have costs implications.6 Furthermore, the offer required the plaintiffs to receive payment over a period of two years, whereas the plaintiffs’ entitlement is to immediate payment under the judgment. Given both the delay in payment and the risk associated with that, I am not satisfied that the offer can be considered more beneficial to the plaintiffs than their judgment.

Plaintiffs’ failure to engage after the May hearing

[22]              The defendant complains that following the hearing of the evidence it sought to settle but the plaintiffs would not engage. Certainly, there was a period when the defendant and its counsel expressed frustration at what was perceived to be the plaintiffs’ intransigent approach to settlement advances. However, context is important. During this period the defendant made offers that were at a similar level to

6      Strachan v Denbigh Property Limited HC Palmerston North CIV-2010-454-232, 3 June 2011.

offers the plaintiffs had rejected pre-trial but after they had incurred significant additional costs. It is also the case that the plaintiffs did ultimately engage, making an offer of 31 July 2018 to settle for $597,000. This led to the defendant’s final offer of 1 August 2018, which was not acceptable to the plaintiffs and, apparently no further offers were exchanged. There is insufficient before me to determine, within a discretionary assessment on costs, that the successful plaintiffs should be penalised because they failed to take a reasonable approach towards settlement negotiations.

Time spent on matters withdrawn that had failed

[23]                The defendant submits that during the course of the hearing the plaintiffs withdrew one of their claims and failed on their largest claim relating to 253 heifers, which claim took up a considerable amount of evidence and hearing time.

[24]The claim that was withdrawn was a minor matter (involving a sum of just

$4,180) and of no consequence in a costs setting.

[25]              It is the case that the plaintiffs claimed substantial losses arising out of the purchase of 253 heifers and that those claims were largely unsuccessful. However, it is not correct that those claims were rejected in their entirety (see [179] of the judgment). Nation J made an award in the plaintiffs’ favour of $30,730 in respect of losses on the sale of 123 of these heifers. The plaintiffs received considerably less than they sought in respect of this aspect of their claim, but they were still successful and for a not insignificant sum.7

[26]              Standing back and looking at all of the circumstances of the case, I am satisfied that it is just to make an award of costs as sought by the plaintiffs.

The result

[27]              The defendant is ordered to pay the plaintiffs costs of the proceeding on a 2B basis in the sum of $56,196 plus disbursements of $16,386.24 (a total of $72,582.24),

7      Weaver v Auckland City Council [2017] NZCA 330 at [26].

in accordance with the Schedule attached to the plaintiffs’ counsel’s memorandum of

15 May 2019.

O G Paulsen Associate Judge