Devich v AMI Insurance Limited HC Auckland CIV 2009-404-5567

[2010] NZHC 1864

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2009-404-5567

BETWEEN  PR DEVCICH & ORS AS TRUSTEES OF THE PAUL DEVCICH FAMILY TRUST AND JJ DEVCICH & ORS AS TRUSTEES OF THE JANICE DEVCICH FAMILY TRUST

First Plaintiffs

ANDPR DEVCICH AND JJ DEVCICH Second Plaintiffs

ANDAMI INSURANCE LIMITED Defendant

Hearing:         By memoranda

Appearances: Ms C Brick for plaintiffs

Mr C R Johnstone for defendant

Judgment:      12 October 2010 at 2.30 pm

JUDGMENT OF LANG J [re costs]

This judgment was delivered by me on 12 October 2010 at 2.30 pm, pursuant to Rule

11.5 of the High Court Rules.

Registrar/Deputy Registrar

Date……………

Solicitors:
Jones Fee, Auckland
Wynn Williams & Co, Christchurch
Counsel:

Mr P J Dale, Auckland

DEVCICH & ORS V AMI INSURANCE LIMITED HC AK CIV-2009-404-5567  12 October 2010

[1]      On 20 July 2010 I delivered a judgment in which I determined the issue of liability in favour of the plaintiffs.  The issue of quantum is yet to be resolved.  It is now necessary for me, however, to fix costs in respect of the trial in relation to liability.

[2]      This requires me to determine the following issues:

1.     Should the plaintiffs be awarded indemnity or increased costs?

2.If not, should the plaintiffs be treated as if they were defendants in relation to the costs to be awarded for preparation of briefs of evidence and lists of authorities?

3.     Should Band C be applied to preparation of briefs of evidence?

4.Should the daily rate be increased to reflect extending sitting hours during trial?

5.Are  the  plaintiffs  entitled  to  all  of  the  disbursements  they  have claimed?

1.       Should the plaintiffs be awarded indemnity or increased costs?

[3]      The proceeding has already been categorised as a Category 2 proceeding.  No issue is taken by either party with that categorisation.   As a result, the plaintiffs would normally be entitled to costs on a Category 2 basis and having regard to the appropriate band to be applied in respect of each step taken in the proceeding.

[4]      In the present case, however, the plaintiffs contend that they are entitled to an award of indemnity or increased costs because of offers of settlement that the defendant rejected prior to, and during, the trial.  The actual costs that the plaintiffs have incurred amount to $111,479.

[5]      The plaintiffs point out  that on 20 May 2010,  two days before the trial commenced, their solicitors wrote to the defendant on a “without prejudice save as to

costs” basis offering to compromise their claim on specified terms.  These included a contribution to their costs, together with a formal withdrawal of the allegations that the defendants made against Mr Devcich.

[6]      The plaintiffs also point out that, by the time their solicitors sent this letter to AMI’s solicitors, they had provided AMI with the brief of evidence of Dr Lavendar. He had identified signs of forced entry to a window in the family room, and had also noted that photographs taken shortly after the fire showed that this particular window was open after the fire personnel had attended the fire.  AMI’s briefs of evidence had not adverted to, or provided any explanation for, either of those facts.

[7]      AMI did not formally respond to the plaintiff’s settlement proposal, and it declined to participate in any negotiations designed to settle the proceeding.  Instead, AMI elected to proceed to trial in an endeavour to persuade the Court that Mr Devcich was responsible for lighting the fire that partially destroyed the plaintiffs’ house.  It did so, the plaintiffs say, in circumstances where it knew that it would have no prospect of meeting the high evidential burden that it was required to assume.

[8]      The  plaintiffs  contend  that,  in  electing  to  proceed  to  trial  in  those circumstances, AMI acted “vexatiously, frivolously, improperly or unnecessarily” in continuing to defend  the proceeding.   On that basis they contend that they are entitled to an award of indemnity costs under r 14.6(4).   Alternatively, they argue that they are entitled to an award of increased costs under r 14.6(3) which provides:

(3)The court may order a party to pay increased costs if— (a)   …

(b)    the party opposing costs has contributed unnecessarily to the time or expense of the proceeding or step in it by—

(i)     …

(ii)    taking or pursuing an unnecessary step or an argument that lacks merit; or

(iii)    failing, without reasonable justification, to admit facts, evidence, documents, or accept a legal argument; or

(iv)    ….

(v)    failing, without reasonable justification, to accept an offer of settlement whether in the form of an offer under rule

14.10  or  some  other  offer  to  settle  or  dispose  of  the proceeding; or

(c)     ….

(d)    some other reason exists which justifies the court making an order for increased costs despite the principle that the determination of costs should be predictable and expeditious.

[9]      The plaintiffs renewed their offer of settlement at the beginning of the second week of the trial, but again it drew no response from AMI.

[10] I do not consider that an award of indemnity or increased costs is appropriate on the basis that the plaintiffs advance. The plaintiffs made their initial offer contemporaneously with the service of Dr Lavendar’s brief. That brief identified for the first time the two factors to which I have referred at [6]. AMI could not have been expected to properly assess the likely significance of those factors in the extremely limited timeframe available to it prior to the commencement of the trial. By that stage, too, both parties were in the final throes of preparing for trial. It is not surprising that AMI’s focus remained on the imminent trial and not on the issue of settlement. That is particularly so given the fact that AMI was required to present its case first. Moreover, by that stage both parties had incurred all of their costs other than those directly associated with the conduct of the trial.

[11]     As will be clear from my judgment, this case was finely balanced.  Had it not been for the evidence that emerged just before trial, it is likely that AMI would have succeeded in defending the plaintiffs’ claim.   Although that evidence ultimately tipped the scales in favour of the plaintiffs, I accept that it emerged so late in the piece that AMI could not reasonably have been expected to appreciate that that would  be  the  case.    I  am  satisfied  that  AMI  was  fully  entitled  to  defend  the proceeding and that it would not be appropriate to make an award of indemnity or increased costs.  The fact that the plaintiffs renewed their offer during the course of the trial does not alter my conclusion on this point.

2.Should the plaintiffs be treated as if they were defendants in relation to the preparation of briefs of evidence and lists of authorities?

[12]     This issue arises because AMI was required to present its case first.  It says that this means that the plaintiffs should be treated as if they were defendants, and that the costs to be allowed in relation to the preparation of briefs of evidence and lists of authorities (Steps 7.1 and 7.2) should therefore be reduced to those that would ordinarily be awarded to a successful defendant.   On a Band B basis that would reduce the allowance from 2.5 days to 2 days for each step.  On a Band C basis it would reduce the allowance from 5 days to 4 days.

[13]     The difference between the costs to be awarded to a plaintiff and a defendant in relation to these steps reflects the fact that the plaintiff ordinarily bears the onus of proof in a civil proceeding.  It may also reflect the fact that the defendant is better placed than the plaintiff to limit the material that it is required to prepare so that it relates only to the issues that are truly in dispute.

[14]     In  this  case  AMI assumed  the  onus  of proof  in  relation  to  the  issue  of liability.   On that basis it was to all intents and purposes the plaintiff in the proceeding.   It should therefore be treated as the plaintiff for the purposes of the costs to be awarded in relation to these steps.  I therefore accept the argument for AMI on this point.

3.       Should Band C be applied to preparation of briefs of evidence?

[15]     Treating the plaintiffs as defendants, they would be entitled under Band B to costs calculated on the basis of 2 days for the preparation of their briefs of evidence. Under Band C, they would be entitled to an allowance of 4 days.

[16]     Counsel for the plaintiffs prepared five briefs of evidence for use at the trial. These comprised very lengthy briefs of evidence for Mr Devcich and Dr Lavendar. Shorter  briefs  of  evidence  were  prepared  in  respect  of  Mrs  Devcich,  Bradley Devcich, David Newport and Martin Bamford.  Ultimately, the plaintiffs elected not to call Mrs Devcich and Bradley Devcich to give evidence at trial.  The evidence of

Mr  Devcich  and  Dr  Lavendar  was,  however,  critical  to  the  outcome  of  the proceeding.

[17]     The sheer number and complexity of the issues that the plaintiffs needed to traverse in the briefs of evidence of Mr Devcich and Dr Lavendar mean that an allowance of 2 days would provide the plaintiffs with recompense that is manifestly inadequate.  For that reason I accept that Band C should be applied in relation to the preparation of briefs of evidence.

4.Should the daily rate for the trial be increased to reflect extending sitting hours during the trial?

[18]     Of necessity, the sitting hours of the Court were extended during the course of the trial.  For the most part the hearing commenced each day at 9 am or 9.30 am and the luncheon adjournment was often reduced by 15 minutes to make further hearing time available.   As against that, however, there were occasions when the Court was not able to start early and other breaks were also taken during the course of the day to compensate for the extended sitting hours.  For these reasons I do not consider it appropriate to increase the costs to reflect the extending sitting hours.

5.       Should the plaintiffs be entitled to recover all of their disbursements?

[19]     AMI accepts that the plaintiffs have incurred Court fees totalling $27,830 and that these are properly claimable.  It also accepts that the invoice from Mr Gibson in the sum of $2,835 should be allowed.   It says, however, that an invoice for Dr Lavendar dated 7 September 2009 for $1,959.47 should not be allowed because those attendances did not relate to trial preparation.  It also says that Dr Lavendar’s invoice dated 18 June 2010 for $36,282.03 should be reduced to reflect the fact that Dr Lavendar did not need to be present throughout the trial.  Finally, it disputes that all of Dr Lavendar’s disbursements are properly claimable.

[20]     I reject the defendant’s submission so far as  it relates  to Dr  Lavendar’s invoice  dated  7 September  2009.    These  attendances  occurred  shortly  after  the proceeding commenced.  They involved Dr Lavendar’s attendance at the premises in

order to take photographs before the fire debris had been removed.  The observations that Dr Lavendar made at that time were undoubtedly important factors when he came to prepare his brief of evidence before trail.   The photographs that he took during this visit were also very important.   I consider that it would be artificial to exclude Dr Lavendar’s initial attendances solely on the basis that they did not relate directly to the preparation of his evidence for trial.  I therefore propose to allow that invoice in full.

[21]     I agree, however, that it was not strictly necessary for Dr Lavendar to remain in Court whilst Mr Devcich and Mr Newport gave their evidence.  By that stage Dr Lavendar had already given his evidence.  Neither Mr Devcich nor Mr Newport gave technical evidence that Dr Lavendar needed to hear in order to provide advice to counsel.  For that reason I agree that a small adjustment is appropriate to recognise this fact.  The defendant suggests that an adjustment of five hours at $160 per hour is appropriate ($900) and I consider that that is reasonable.

[22]     The defendant objects to disbursements claimed by Dr Lavendar, including “travel expenses and parking” in the sum of $793.70 and “miscellaneous/incidentals” totalling $70.  In the absence of documentary evidence to substantiate those claims, I propose to disallow them.  Dr Lavendar would, however, be entitled to recover his reasonable travel costs together with parking expenses.  I would expect counsel to be able to reach agreement regarding these claims, together with the claim for $70, without the need for further intervention by the Court.  In the event that agreement cannot be reached, counsel may file further brief memoranda at seven day intervals to address these issues.

[23]     The plaintiffs have also sought to recover photocopying costs of $208.80 that they were required to pay to AMI’s solicitors following their inspection of AMI’s documents.   AMI has not expressly accepted that these are claimable, but has not made any submissions to the contrary.  Like the plaintiffs, I propose to treat that as an oversight by AMI.   The disbursement was clearly incurred in the course of the litigation and I allow it accordingly.

Summary

[24]     The plaintiffs are entitled to costs on a Category 2 Band B basis in respect of all steps taken in the proceeding (including an allowance for second counsel) other than in relation to the preparation of briefs of evidence.  In respect of that step they are entitled to costs on a Band C basis.   They are to be treated as if they were defendants in relation to steps 7.1 and 7.2.

[25]     The  amount  to  be  awarded  in  respect  of  Dr  Lavendar’s  invoices  is provisionally reduced in accordance with the conclusions set out at [21] and [22].

Lang J