Daisley v Ark Contractors Limited
[2021] NZHC 2780
•18 October 2021
IN THE HIGH COURT OF NEW ZEALAND WHANGAREI REGISTRY
I TE KŌTI MATUA O AOTEAROA WHANGĀREI-TERENGA-PARĀOA ROHE
CIV-2015-404-002799
[2021] NZHC 2780
BETWEEN M J DAISLEY
First Plaintiff
SDD LIMITED
Second PlaintiffAND
ARK CONTRACTORS LIMITED
First Defendant
P G & K E KELLER
Second DefendantsTHOMSON WILSON LAW (a firm)
Third Defendant
Continued overleaf…
Hearing: On the papers Appearances:
E Smith for MJ Daisley, SDD Limited, Action Fencing Limited and HPL Distribution Limited
J Browne for Ark Contractors, PG and KE Keller, PG Keller and KE Keller and TW Trustees 2008 Limited
Judgment:
18 October 2021
COSTS JUDGMENT OF WALKER J
This judgment was delivered by me on 18 October 2021 at 3 pm Pursuant to Rule 11.5 High Court Rules
Registrar/Deputy Registrar
M J DAISLEY v ARK CONTRACTORS LIMITED [2021] NZHC 2780 [18 October 2021]
CIV-2016-488-000041 BETWEEN
ARK CONTRACTORS LIMITED
PlaintiffAND
M J DAISLEY
First Defendant
ACTION FENCING LIMITED
Second Defendant
HPL DISTRIBUTION LIMITED
Third Defendant
CIV-2016-404-002176 BETWEEN
ACTION FENCING LIMITED
First PlaintiffHPL DISTRIBUTION LIMITED
Second Plaintiff
M J DAISLEY
Third PlaintiffAND
ARK CONTRACTORS LIMITED
First Defendant
P G & K E KELLER
Second Defendant
P G KELLER, K E KELLER & T W TRUSTEES 2008 LIMITED
Third Defendants
Introduction
[1] This judgment determines costs in respect of three proceedings between the Daisley interests on the one hand and the Keller interests on the other.1 The backdrop to all three proceedings was a failed business arrangement between Mr Daisley and the Kellers interests. The fall out between the parties led to acrimonious disputes over the course of a decade which finally reached trial in 2019 and 2020.
[2] In the first proceeding (CIV-2015-404-2799), Mr Daisley and SDD Limited claimed against Ark Contractors Limited (Ark), the Kellers and the law firm, Thomson Wilson.2 I refer to these as the Daisley proceedings. Mr Daisley succeeded in the High Court against Ark and the Kellers on some causes of action. The judgment was overturned by the Court of Appeal.3
[3] In the second proceedings (CIV-2016-488-41), Ark succeeded in all but a minor aspect of its claims against Mr Daisley, HPL Distribution Limited and Action Fencing Limited (Action Fencing). I refer to these as the Ark proceedings.
[4] In the third proceeding (CIV-2016-404-2176), Action Fencing’s claims were dismissed save for a relatively small sum of just over $14,000 against one of the three defendants. All of the claims by Mr Daisley and HPL Distribution Limited were dismissed. I refer to these as the Action Fencing proceedings.
[5] An appeal by the Daisley interests in the Action Fencing proceeding was dismissed by the Court of Appeal in its entirety. The Court of Appeal allowed the appeal by the Daisley interests in the Ark proceeding to a trifling extent, namely in the sum of $577.50.4
1 The Daisley interests comprise Mr Daisley, SDD Limited, Action Fencing Limited, and HPL Distribution Limited. The Keller interests comprise the Kellers in their personal capacity, Ark Contractors Limited and the trustees of the Keller Family Trust.
2 Costs as between the Daisley interests and Thomson Wilson have already been determined.
3 Keller v Daisley [2021] NZCA 351.
4 Notably, although allowing the appeal to this extent, the Court of Appeal awarded costs to the Keller interests at 90 per cent of the usual award.
Cost claims
[6] The Keller interests claim costs and disbursements in all three proceedings on the basis that they are the successful party in substance. They seek an uplift of 10 per cent in the Daisley proceeding and an uplift of 50 per cent in the Action Fencing proceeding.
[7] The Daisley interests argue that costs should lie where they fall in respect of the Daisley proceeding. Ms Smith refers to Mr Daisley’s unresolved entitlement to shares in Ark. She submits that efforts by the Daisleys to resolve all matters between the parties were resisted and suggests that the correspondence referred to by Mr Browne is but a subset of the relevant correspondence directed toward resolution. She refers to additional settlement correspondence. Mr Browne in reply points out that some of the further correspondence was expressly “without prejudice”. There was no reference to a ‘save as to costs’ exception. It is not appropriate to rely on without prejudice correspondence when there is no reservation on costs issues. I put the additional without prejudice correspondence to one side but observe that it would not make any difference to the exercise of my discretion on costs in any event.
[8] Ms Smith submits that an offer of settlement by the Keller interests dated 20 August 2019 was less than three weeks before trial and was an attempt to narrow the issues for trial rather than a genuine offer of settlement which should bear on costs. She submits further that the Daisley proceeding indirectly resolved matters to clear the way for the issue of shares so, by this measure, had some success. She contends that the duress arguments advanced by the Kellers seeking to vitiate an agreement reached in January 2010 was the real obstacle to resolution and, on this issue, the Daisley interests succeeded.
[9] Ms Smith challenges a purported claim to indemnity costs but no such claim has in fact been made.
[10] In respect of the Ark proceedings, Ms Smith acknowledges that this was effectively a “counterclaim” although she is critical of the fact that it was issued as a separate proceeding. She accepts that Ark was ultimately successful but for a reduced sum. She points out the original claim was in excess of $120,000 with a claim to
contractual interest at the rate of 11.75 per cent. The contractual interest claim was reduced to statutory interest on 20 August shortly before the trial of the Ark proceeding was scheduled to be heard. Ms Smith submits that Ark’s claims were tactical, to hold Mr Daisley to ransom in respect of the issue of his shares in Ark, a contention emphatically denied by the Keller interests.
[11] Despite these submissions, Ms Smith does not appear to contest the claims by the Keller interests for scale costs in the Ark proceeding, excluding any claim for second counsel costs.
[12] In respect of the Action Fencing proceeding, Ms Smith submits that the Daisley interests succeeded, albeit for a significantly reduced sum. She asserts that costs are therefore rightfully due to the Daisley interests. Again, she challenges the characterisation of correspondence in August 2019 as an effective Calderbank offer.
[13] In all three proceedings, Ms Smith challenges the claim to costs for second counsel.
Scale costs
[14] Ms Smith has not challenged the accuracy of steps set out in the schedules provided by Mr Browne. Scale costs and disbursements on a 2B basis total
$185,408.50. Disbursements claimed by the Keller interests total $11,330.25 exclusive of GST. Those scale costs are made up of the following amounts:
(a)Daisley proceedings: costs of $104,129.50 and disbursements of
$1,001.56 (plus GST).
(b)Ark proceedings: costs of $28,898 and disbursements of $6,801.51 (plus GST).
(c)Action Fencing proceedings: costs of $52,381 and disbursements of
$3,527.18 (plus GST).
GST and disbursements
[15] The Keller interests advise that Ark and the Keller Family Trust are GST registered. The Kellers are not. It follows that disbursements recoverable by the Kellers include GST while the GST registered parties receive the GST exclusive sum. It is not presently apparent which of the disbursements were paid by which entity.
Uplift
[16] The Keller interests seek increased costs for two of the three proceedings. They seek an uplift of 10 per cent in the Daisley proceedings and an uplift of 50 per cent in the Action Fencing proceedings (but excluding any uplift for second counsel).
[17] Mr Browne confirms that actual costs incurred by the Keller interests exceed the amounts claimed, even with the contended for uplifts.
[18] The grounds on which increased costs are claimed in respect of the Daisley proceedings are:
(a)the pursuit of unpleaded arguments;
(b)persisting with arguments lacking in merit;
(c)failing to properly undertake discovery; and
(d)creation of additional work in relation to the case bundle and cross referencing of briefs which was said to have absorbed unnecessary time pre-trial.
[19] The grounds on which the Keller interests seek a 50 per cent uplift in respect of the Action Fencing proceedings are a failure to accept settlement offers; presentation of ‘invented’ documentary evidence which the Kellers were forced to
spend time and money investigating and the pleading of a fraud claim without an adequate basis.5
Discussion
[20] As far as I can assess, the scale costs and disbursements set out in the schedule to the cost memorandum are properly and appropriately claimed. They have not been challenged.
[21] I am not persuaded by any of the grounds argued by the Daisley interests in respect of the Daisley proceeding. The Kellers did not deny that Mr Daisley is entitled to a shareholding. The Daisley interests did not pursue a claim for shares but launched proceedings of a completely different flavour and argued that it would be commercially unreal to now receive a shareholding. The other matters raised by Ms Smith are distractions which do not provide any reason to depart from the usual principle of awarding costs to the successful party. The Daisley interests’ position is, with respect, unrealistic.
[22] A core principle of the costs regime is that costs should be predictable, and the court should only depart from the rules on a principled basis. Increased costs can be ordered where a party has contributed unnecessarily to the time or expense of the proceeding or any step in it by taking or pursuing an argument that lacks merit, failing to comply with an order for discovery, and failing to accept a settlement offer. As a general rule of thumb, an uplift will normally be no more than 50 per cent of scale costs.
[23] The Keller interests claim a modest uplift of 10 per cent for the Daisley claim. In my assessment, this is justified by a wide margin. There are many reasons for this. I am influenced most by the unpleaded arguments, the shape shifting and denials which clearly lacked merit along with the issues associated with producing the case bundle which led to increased time and attendance cost. For example, in terms of denials lacking merit, Mr Daisley obstinately denied that Chris Jackson was his lawyer
5 The documentary evidence referred to was an invoice from Far North Plant and Machinery which I found to have the hallmarks of recent invention which were not adequately explained in the evidence.
and even that he was a lawyer at all. Those matters are themselves sufficient to award an uplift in costs. It becomes unnecessary to discuss any of the other grounds relied on by the Keller interests.
Result for Daisley proceedings
[24] I certify for second counsel. The volume of material and wide-ranging issues justify the assistance of second counsel. I award the Keller interests 2B costs against the plaintiffs jointly and severally with a 10 per cent uplift on all steps bar costs for second counsel (as per the schedule attached to Mr Browne’s costs memorandum). The Keller interests are also entitled to disbursements, on a GST inclusive basis for those disbursements met by the Kellers personally and on a GST exclusive basis for disbursements paid by either the Keller Family Trust or Ark.
Result for Ark proceedings
[25] There is no disagreement that Ark should have scale costs. No issue is raised with their calculation save for second counsel. I certify for second counsel. Although this was ultimately a one day hearing tacked to the end of the hearing on the Action Fencing claim, all the case bundles were shared across all three proceedings, justifying second counsel.
[26] While the sums involved are within the jurisdiction of the District Court, I am satisfied that this claim was so interrelated with the Daisley claim that it is properly treated as a counterclaim. I accept it was more efficient to bring it as part of the wider litigation to avoid duplication and inefficiency.
[27] I award Ark costs of the Ark proceeding on a 2B basis and disbursements on a GST exclusive basis as per the schedule attached to Mr Browne’s cost memorandum.
Result for Action Fencing proceedings
[28] The outcome of the Action Fencing proceedings is more nuanced than Ms Smith suggests when she submits that the Daisley interests were the successful party. Mr Daisley and HPL Distribution Limited failed in their claims of conversion
of various items of property. It was only Action Fencing Limited which succeeded and in an insignificant amount against one of the three defendants.
[29] The ultimate, limited, success of Action Fencing Limited and its claim to costs is potentially complicated by the further information that the company was removed from the register of companies on 23 July 2021.
[30] A decision on costs involves the exercise of judicial discretion but it must be exercised in accordance with the relevant rules which underpin the regime. The Court of Appeal has observed that success on more limited terms is still success.6 In Water Guard NZ Ltd v Midgen Enterprises Ltd the Court of Appeal made clear that an unsuccessful party is one adjudged liable to pay money to the other; the successful party does not lose that status because it fails on most of its claims even if the other claims occupied most of the trial.7 The Court said:8
That factor can be properly recognised in other ways, such as reducing costs otherwise payable or ordering costs to lie where they fall. However, the final result must ordinarily be given primary weight when exercising the r 14.1 discretion.
[31] The success in this case is much less significant than the success achieved in Water Guard or in Weaver v Auckland Council.9 Any realistic appraisal of the end result in this proceeding suggests that the candle was not worth the wick. That Action Fencing recovered only six per cent of the total claim in the Action Fencing proceeding and the recoverable amount was only $14,000 (a sum within the jurisdiction of the Disputes Tribunal) informs my approach to costs. It is a material factor when combined with the other material considerations set out below.
[32] One of those considerations is that the Daisley interests pleaded that the trustees of the Keller Family Trust committed fraud under the Land Transfer Act 1952 in relation to the sale and purchase of the property at 1 Maungakaramea Road. Although styled as Land Transfer Act fraud, it is still an allegation of fraud. This
6 Weaver v Auckland Council [2017] NZCA 330, (2017) 24 PRNZ 379 at [26].
7 Water Guard NZ Ltd v Midgen Enterprises Ltd [2017] NZCA 36 at [13].
8 At [13].
9 Note 6.
argument failed; there was no evidence of fraud or evidence of an intention to defeat a claim; it was massively disproportionate to the issues of substance and unnecessary.10
[33] Another consideration was the plaintiffs’ production of a suspicious Far North Plant and Machinery invoice, characterised by Mr Browne as an “invented” document.
[34] The Calderbank offer in August 2019 means that costs after this date, regardless of liability, are payable by the plaintiffs to the defendants because the offer exceeded the amount ultimately awarded. The offer was made with a full rationale for its basis. It was reasonable, particularly in circumstances where the plaintiffs had provided no valuation evidence. The offer included the following terms:
As to payment, Ark will pay the money into our trust account (where it may be held on IBD) on an undertaking that it be held until final disposition of the three proceedings (and any appeals) and that the sum plus any interest will be applied first to any costs award or damages award that Ark is entitled to, with the balance being paid to your trust account.
[35] This condition does not undermine the character of the offer in any respect in the circumstances of these disputes. The offer was severable from the other proceedings. In short, the Daisley interests were able to elect to accept one, some or all of the offers as they wished.
[36] I consider that the defendants in the Action Fencing proceeding are entitled to costs on a 2B basis for all steps after 19 August 2019. The other factors already referred to justify an uplift of 50 per cent in respect of those steps excluding the costs of second counsel. The steps in question are those numbered 33 (if the briefs were finalised and served after 19 August 2019), 33B, 34, 35 (second counsel) and 35 (for closing submissions on 23 October 2021) amounting to a time allocation of 11 days.
[37] I next look at where costs should lie in respect of steps before 19 August 2019. Taking all the mentioned factors into consideration, I have concluded that the plaintiffs are not entitled to costs in respect of the one party they succeeded against. Their entitlement is displaced by their conduct.
10 The fact that an application by the trustees of the Keller Family Trust for summary judgment against the claim failed is neither here nor there.
[38] I consider that the trustees of the Keller Family Trust are entitled to an award of costs having successfully defended the claims. 11 This outcome also distinguishes the authorities such as Weaver. Having already uplifted costs for steps post-Calderbank, I do not propose to apply any uplift to the earlier steps but rather to view the cost exercise in the round to do justice between the parties. This more holistic approach takes into account apportionment in respect of all the issues in the trial in that the issues against the Keller Family Trust did not absorb the whole trial. It also reflects that the same counsel represented all defendants.
[39] In conclusion, the Keller Family Trust is entitled to costs on a 2B basis for steps before 19 August 2019.
Conclusion
[40]In summary, I make the following orders/directions:
(a)I certify for second counsel in each proceeding.
(b)For 2B costs against the plaintiffs jointly and severally in the Daisley proceeding (as per Mr Browne’s costs schedule) with a 10 per cent uplift on all steps bar costs for second counsel plus the disbursements claimed in that schedule.
(c)For 2B costs against the defendants jointly and severally in the Ark proceeding (as per Mr Browne’s cost schedule) plus the disbursements claimed in that schedule.
(d)For 2B costs in favour of all the defendants against the plaintiffs jointly and severally in the Action Fencing proceeding for steps after 19 August 2019 (as per Mr Browne’s costs schedule) with a 50 per cent uplift on those steps bar costs for second counsel.
11 I treat Ark and the Kellers as one party in this analysis because of the overlapping issues they faced.
(e)For 2B costs in favour of the trustees of the Keller Family Trust against the plaintiffs jointly and severally in the Action Fencing proceedings (in accordance with Mr Browne’s schedule) plus the claimed disbursements.
(f)I direct that any security for costs held by the Court in favour of the Keller interests be paid out to the Keller interests in part payment of these orders.
[41] I anticipate that this judgment provides the parties with sufficient guidance to finalise quantum. If there is any ongoing dispute, it may be referred to the Registrar.
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Walker J
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