EBR Holdings Ltd (in liq) v van Duyn

[2018] NZHC 1065

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2009-090-001560

[2018] NZHC 1065

BETWEEN

EBR HOLDINGS LIMITED (IN LIQUIDATION)

First Plaintiff

VIVIEN JUDITH MADSEN-RIES and HENRY DAVID LEVIN

Second Plaintiffs

AND

JOHANNES VAN DUYN (SENIOR) AND GERARDA JACOBA MARIA VAN DUYN

First Defendants

RENE MARINUS VAN DUYN
Second Defendant

JOHANNES VAN DUYN (JUNIOR)
Third Defendant

…./2 cont’d

Hearing:	(On the Papers)
Judgment:	16 May 2018

JUDGMENT OF VENNING J

This judgment was delivered by me on 16 May 2018 at 11.30 am, pursuant to Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar

Date……………

Solicitors:           Meredith Connell, Auckland

Forest Harrison, Auckland

Counsel:            I Hutcheson, Auckland

EBR HOLDINGS LIMITED (IN LIQ) v VAN DUYN [2018] NZHC 1065 [16 May 2018]

AND

JOHANNES VAN DUYN (SENIOR),

GERARD JACOBA MARIA VAN DUYN, RENE MARINUS VAN DUYN AND JOHANNES VAN DUYN (JUNIOR)

Fourth Defendants

MCLAREN GUISE ASSOCIATES LIMITED

Third Party

[1]        The first plaintiffs seek to review the decision of the Registrar in relation to costs on this file.1

[2]        In a substantive judgment delivered on 21 July 2017 Heath J entered judgment in favour of the first plaintiff against the first to third defendants on some, but not all, of the causes of action.2 The defendants had filed admissions of part at least of the claims. The first and second plaintiffs’ claim in relation to the third and fourth causes of action failed. The first plaintiff also failed in respect of the fifth and sixth causes of action and the first and second plaintiffs failed in respect of the seventh cause of action.

[3]Heath J made orders for costs in the following terms:3

One set of costs and disbursements are awarded in favour of [the plaintiff EBR], to be paid on a joint and several basis by Mr van Duyn senior, Mrs van Duyn, Mr van Duyn junior, and Mr René van Duyn. The costs shall be fixed on a 2B basis, with an uplift of 50%. All costs and disbursements that were the subject of the wasted costs order made on 25 May 2016 shall be deducted from the amount to be calculated. Costs and disbursements shall be fixed by the Registrar.

[4]        Previously, in a judgment delivered on 25 May with reasons following 1 June Heath J had granted an adjournment of the part-heard fixture and made a wasted costs order in favour of the plaintiffs.4 In the course of delivering the reasons for the wasted costs order at that time the Judge said:

[70] Counsel for the plaintiffs provided to me an estimate of the amounts that would be claimed on a 2B basis, in the event that full costs were ordered as a term of the adjournment and the grant of leave to amend. The amount totals about $88,000, excluding disbursements. I have no doubt that significance disbursements have been incurred, particularly in obtaining expert evidence. I decided that the sum of $65,000 should be awarded as a global amount to reflect costs and disbursements thrown away by the late amendment.

[5]        In the course of the substantive judgment and when addressing himself towards the issue of costs, the Judge said:5

1      Email dated 9 January 2018.

2      EBR Holdings Ltd (in liquidation) v van Duyn [2017] NZHC 1698.

3      At [248](e).

4      EBR Holdings Ltd (in liquidation) v van Duyn [2016] NZHC 1169.

5      EBR Holdings Ltd (in liquidation) v van Duyn, above n 2 (footnote omitted).

[190] I shall order one set of costs and disbursements to be paid on a joint and several basis by Mr van Duyn senior, Mrs van Duyn, Mr van Duyn junior and Mr René van Duyn. The costs shall be fixed on a 2B basis, with an uplift of 50%. All costs and disbursements that were the subject of the wasted costs order made on 25 May 2016 shall be excluded from the amount to be calculated. I consider that an uplift of 50% also takes account of the fact that the liquidators have not succeeded on all claims advanced by them. All costs and disbursements shall be fixed by the Registrar.

[6]        The Judge attached a footnote by way of explanation. In that footnote he recorded:6

That deduction shall be based on the estimate provided by counsel for the plaintiffs in support of a wasted costs order: see EBR Holdings Ltd (in liq) v van Duyn [2016] NZHC 1169 at para [70].

[7]        Counsel then exchanged memoranda with the Registrar regarding the issue of costs. In an email of 9 January 2018 the Registrar advised counsel:

I agree with counsel for the third defendants, that the costs and disbursements that were subject to the wasted costs order will be excluded from the calculation of costs (and in particular the 50% uplift). I think this is clear from paragraphs 190 and 248(e) [of the] 21 July 2017 Judgment of the Court. I note from footnote 161 in the judgment, that the sum excluded from the calculation and deducted, will be based on the estimate provided by counsel for the plaintiffs in support of the wasted costs order.

[8]        The Registrar also declined to make an award of costs for second counsel as sought by the plaintiffs and asked counsel for the first plaintiff to provide a schedule of costs and disbursements. He also directed an adjustment was to be made to the second to last item in the schedule of costs as agreed.

[9]        The first plaintiff now seeks to review the decision of the Registrar. Heath J has retired. The matter has been referred to me.

Decision

[10]      The Registrar’s email of 9 January 2018 was the Registrar’s decision on the issue of costs. In making that decision he was exercising his jurisdiction as Registrar. The decision is reviewable under HCR 2.11.

6      EBR Holdings Ltd (in liquidation) v van Duyn, above n 2.

[11]      The principal difference between the parties is the correct approach to the calculation of costs in light of the Judge’s order. The first plaintiff argues that costs should be assessed by calculating all the costs in both the District Court (before the proceedings was transferred to the High Court) and the High Court and then deducting the estimate provided in support of the wasted costs order of $88,000. On this approach the first plaintiff would be entitled to costs of $216,901.50. The defendants submit that the assessment should exclude any calculation of costs in relation to all steps in both the District Court and this Court before the making of the wasted costs order and should only include costs (and disbursements) properly incurred subsequent to that date. On that basis the first plaintiff assesses the costs payable at $88,642.50. The Registrar agreed with the first to third defendants’ approach.

[12]      The first plaintiff argues that the first to third defendants’ approach would render footnote 161 redundant. If all steps in the proceeding prior to 23 May 2016 were to be excluded from the costs award in the substantive judgment it would have been recorded in the judgment.

[13]      Resolution of the differing approaches lies in the nature of a wanted costs order and in the interpretation of Heath J’s costs judgment.

The wasted costs award

[14]      A wasted cost award is to compensate a party who has incurred costs that are wasted and for which any ultimate cost award will not compensate. It recognises that the issues will need to be revisited and some steps repeated. Hence the Judge’s reference to costs “thrown away”. There is generally no obligation to exclude the steps considered in the granting of the wasted costs award from the ultimate costs award made at the end of the trial. The two awards are distinct in nature. In some cases it may, however, be appropriate to deduct the amount of a wasted costs order from the sum ultimately payable. Heath J did so in the present case.

[15]      While there is a conceptual difference between a wasted costs order and a substantive costs order ultimately, as noted, resolution of the issue in the present case turns on the interpretation of the Judge’s orders. The Registrar considered the Judge’s orders required him, when fixing costs, to exclude the steps that were the subject of

the wasted costs order up to and including 25 May when calculating the costs order in the substantive judgment.

[16]      But in my judgment the determinative wording is the wording of the order at [248](e) of the substantive judgment:

All costs and disbursements that were the subject of the wasted costs order made on 25 May 2016 shall be deducted from the amount to be calculated.

[17]      While the Judge has used the words “to be calculated” in the substantive judgment in both [190] and later in the order itself at [248](e), I read those words as a reference to the process of applying the scale costs to the items claimed in schedule 3. The operative wording is however the phrase “shall be deducted”. As counsel for the first to third defendants accepts, the Judge has used both words “excluded” and “deducted”. The use of “deducted” in particular supports the first plaintiff’s argument. As I read [248](e) the Judge contemplated costs would be fixed on all steps in the High Court and then the sum of the wasted costs order would be deducted from the calculated result. If the Judge had meant to exclude the steps taken up to the abandonment of the trial he would have directed that the “steps” be excluded from the calculation. Further, while the Judge referred to “excluded” in [190], in the footnote to that paragraph he reverted to the use of “deduction”.

[18]      In fixing the substantive costs order in this case I conclude the Judge had in mind the background to the case and that those costs would be deducted from whatever overall sum was ultimately calculated. The Judge’s use of “deduction” sits more comfortably with that approach.

[19]      It follows that I disagree with the Registrar’s decision as to the correct approach to the calculation of costs. The costs are to be calculated for all steps taken in this Court on a 2B basis with a 50 per cent uplift and from the ensuing amount the sum of

$88,000 is to be deducted (in accordance with the Judge’s reference to the footnote).

[20]      The second challenge to the Registrar’s decision was as to his decision to decline to award costs for second counsel.

[21]      I accept the submissions for the first to third defendants on this point.. Item 58 in Schedule 3 to the High Court Rules provides “Second and subsequent counsel if allowed by court”. The Judge made no allowance. It was not open for the Registrar to make a direction for second counsel in the absence of any such direction by the Judge. The Court, as defined in the rules, does not include the Registrar.

[22]      Finally, the first plaintiff seeks disbursements which it says were not covered by the wasted costs order. It submits the Registrar was wrong not to allow those additional disbursements.

[23]      Again the matter comes down to the interpretation of the judgment. While the Judge said all costs and disbursements that were the subject of the wasted costs order made on 25 May 2016 were to be deducted from the amount calculated, in the footnote he did record that the deduction was to be based on the estimate provided by counsel for the plaintiffs in support of the wasted costs order. That estimate of $88,000 excluded disbursements.

[24]      In those circumstances in my judgment it was open for the Registrar and for the Court at this stage to direct that all disbursements reasonably incurred, even those incurred prior to the wasted costs order, should be included in the final calculation. The earlier disbursements in this Court sought by the first plaintiff should be included in the final figure settled by the Registrar for disbursements.

Result/orders

[25](a) The application to review the Registrar’s decision in relation to the  correct approach to the calculation of costs is allowed. The Registrar is directed to seal costs on the basis calculated by the plaintiff (excluding costs in the District Court).

(b)The application to review the Registrar’s decision in relation to the allowance for second counsel issue is dismissed.

(c)The Registrar is directed to include in the final costs award disbursements incurred in this Court prior to 23 May 2016.

[26]The first plaintiff is to have costs on a 2B basis for this review.

Venning J