Craig v Donaldson

[2012] NZHC 3100

IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY

CIV-2011-409-811 [2012] NZHC 3100

BETWEEN  DAVID LEONARD CRAIG Plaintiff

ANDJOANNE MARGARET DONALDSON Defendant

Hearing:         On the papers

Appearances: M J Wallace for Plaintiff

C A Corlett for Defendant

Judgment:      21 November 2012

COSTS JUDGMENT OF FOGARTY J

[1]      In the judgment of this Court delivered by me on 31 August last, the plaintiff was awarded  the sum  of $7,230.   The balance of the claim ($414,375.86) was dismissed.  Costs were reserved.

[2]      Before these proceedings were commenced in May of 2011, the defendant’s

solicitor sent a letter without prejudice, except as to costs, offering the plaintiff

$7,230.  Saying:

The rationale for the offer is that this was the first sum Dave paid to the South African family, prior to Joanne travelling there, after which he was involved on a regular basis.

[3]      The  letter  also  advised  that  the  defendant  and  her  husband’s  company, Hanmer Refuse Services Ltd, was facing insolvent liquidation with the probable call up of personal guarantees:

They are meeting with the bank and an insolvency practitioner next week. As you can therefore appreciate, time is of the essence.

CRAIG V DONALDSON HC CHCH CIV-2011-409-811 [21 November 2012]

[4]      The offer was not accepted.

[5]      After  the  proceedings  were  issued,  on  15  February  2012,  the  defendant offered to forego her entitlement for costs if the plaintiff discontinued.  This offer was renewed on 30 April, together with advice that the defendant had virtually no assets and the plaintiff would be unable to recover any judgment sum.  This letter was also without prejudice save as to costs.  The defendant’s entitlement to costs as at that date was assessed on a Catergory 2B basis to be approximately $15,040.

[6]      On 7 June, the plaintiff proposed a judicial settlement conference which was rejected by the defendant on the basis that there “is little litigation risk”.

[7]      The defendant was billed privately for the proceedings up until 21 June 2012. During this period she incurred fees of $11,708.75 inclusive of GST and disbursements.   These fees were all incurred after the first Calderbank letter was sent.   On a 2B basis, she would have been entitled to claim $15,792 plus disbursements.  Acknowledging that the order costs should not exceed actual costs, she therefore limits her claim for costs to $11,708.75 for the period when she was not legally aided.

[8]      The defendant was granted legal aid on 1 August 2012, and invoices of

$9,206.90 including GST and disbursements have been rendered to the Ministry of Justice.  The 2B costs for the period the defendant was legally aided far exceed the amount invoice.  On the schedules, the costs would be $19,303.  Again, pursuant to r 14.2(f), she limits her claim to the actual invoices. Therefore, she seeks costs in the sum of $20,915.65.

[9]      The plaintiff opposes an order for costs.  His counsel relies on r 14.2(a) of the High Court Rules, which provides that a party who fails should pay costs to the party who succeeds.   Second, he argues that the Calderbank offer of the judgment sum before the proceedings started does not deprive the plaintiff of costs because the defendant had not offered a sum of money that exceeded the amount of the judgment obtained by the plaintiff.  See r 14.11(3)(a).

[10]     Counsel accepted, however, that the plaintiff’s failure to succeed on “certain of the pleaded loans” must be taken into account.  He submits that costs should lie where they fall.  That to try to apportion costs would contravene the principle under r 14.2(g) that costs should be predictable and expeditious.

[11]     There is no doubt that the defendant’s offer may be taken into account by this Court.  This is because of r 14.11(4)(b).  For the offer is close to the value or benefit of the judgment obtained [by the plaintiff].  The defendant’s subsequent conduct, set out above, was in my view reasonable.

[12]     I  do  not  think  there  is  any merit  basis  for  the  plaintiff  obtaining  costs. Counsel for the plaintiff was correct in not pursuing an order beyond costs lie where they fall.

[13]     The critical issue is whether or not the defendant should get costs.

[14]     The plaintiff’s invocation of r 14.2(g) invokes also the line of the Court of Appeal authority which confines the application of r 14.1(1), “all matters are at the discretion of the Court if they relate to costs”.  Rule 14.1(2) reads:  “Rules 14.2 and

14.10 are subject to subclause (1).”   However, the Court of Appeal in Glaister v

Amalgamated Dairies Ltd reiterated that although sub-rule 2 (originally numbered r

46.2) provides that operation of the preceding rules is subject to the overriding discretion in r 46(1): [1]

That discretion is generally to be exercised in accordance with specific rules, which follow.

[1] Glaister v Amalgamated Dairies Ltd [2004] 2 NZLR 606 at [19] citing Body Corporate 97010 v Auckland City Council (2001) 15 PRNZ 372 and  Mansfield Dry Cleaners Ltd  v  Quinny’s Drycleaning (Dentice Drycleaning Upper Hutt) Ltd (2002) 16 PRNZ 622 at 668.

[15]     The  structure  of  14.11  is  similar  to  the  structure  of  r 14.1.    Rule  14.1 provides:

14.1     Costs at discretion of court

(1)      All matters are at the discretion of the court if they relate to costs—

(a)      of a proceeding; or

(b)      incidental to a proceeding; or

(c)      of a step in a proceeding.

(2)      Rules 14.2 to 14.10 are subject to subclause (1).

(3)      The provisions of any Act override subclauses (1) and (2).

Rule 14.11 provides:

14.11   Effect on costs

(1)      The effect (if any) that the making of an offer under rule 14.10 has on the question of costs is at the discretion of the court.

(2)      Subclauses (3) and (4)—

(a)      are subject to subclause (1); and

(b)      do not limit rule 14.6 or 14.7; and

(c)       apply to an offer made under rule 14.10 by a party to a proceeding (party A) to another party to it (party B).

(3)      Party A is entitled to costs on the steps taken in the proceeding after the offer is made, if party A—

(a)       offers a sum of money to party B that exceeds the amount of a judgment obtained by party B against party A; or

(b)       makes  an  offer that  would  have  been  more  beneficial  to party B than the judgment obtained by party B against party A.

(4)      The offer may be taken into account, if party A makes an offer that—

(a)      does not fall within paragraph (a) or (b) of subclause (3); and

(b)       is close to the value or benefit of the judgment obtained by party B.

[16]     There is, however, no similar judicial interpretation to r 14.11 as there is to r 14.1.  The limited case law that exists is directed to cases as to whether or not the plaintiff’s successful costs should be reduced in the event of a lower recovery.  There is no doubt that there is a policy decision embedded in 14.11(3)(a) not to entitle party A, the defendant, to costs if it offers a sum of money to party B that equals the amount of the judgment obtained by party B against party A.   I treat the higher threshold exceeds as deliberate.   That must reflect thinking that when it comes to fixing costs against party B recovering only the amount offered, but nonetheless recovering that sum, that party B, the plaintiff, is not disentitled to costs.

[17]     Sub-rule 3 defines when an unsuccessful defendant can obtain  costs and limits it to the two sets of circumstances specified in clauses (a) and (b).  Sub-rule 4 enables the Court to take into account when awarding costs to the plaintiff the fact

that the plaintiff has obtained judgment close to the value or the benefit of the offer made by the defendant.  The costs that the plaintiff would otherwise be entitled to under  the  costs  regime  can  be  discounted  to  reflect  this  fact,  or  may  even  be cancelled out by the offer.

[18]     Such a construction of r 14.11 gives full effect to the language in sub-rules 3 and  4  and  downplays  the  more  general  discretion  in  sub-rule  1.     Such  an interpretation is,  I think, consistent with the Court of Appeal’s  interpretation  in Glaister v Amalgamated Dairies of the similar r 14.1(2).

[19]     In my view, the original and subsequent offers, without prejudice except as to costs, justify not awarding any costs of the plaintiff.   Accordingly, the plaintiff’s submission that costs lie where they fall is appropriate.

[20]     Costs shall lie where they fall.

Solicitors:

Rhodes & Co, PO Box 13-444, Christchurch

Parry Field Lawyers, PO Box 1725, Christchurch Mail Centre, Christchurch 8140