Emmons Developments New Zealand Limited v Mitsui Sumitomo Insurance Co Limited

[2016] NZHC 1253

IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY

CIV-2014-409-000920 [2016] NZHC 1253

BETWEEN

EMMONS DEVELOPMENTS NEW

ZEALAND LIMITED Plaintiff

AND

MITSUI SUMITOMO INSURANCE CO LIMITED

First Defendant

VERO INSURANCE NEW ZEALAND LIMITED

Second Defendant

Hearing:	10 June 2016 (Determined on the papers)
Counsel:	P J Woods and L Taylor for Plaintiff G Macdonald and A Priaulx for Defendants
Judgment:	10 June 2016

COSTS JUDGMENT OF ASSOCIATE JUDGE MATTHEWS

[1]      In this proceeding the plaintiff sued its insurers for losses under its business interruption cover.  In April the parties settled the case.  The settlement required the insurers to take certain steps prior to 23 May 2016 and to pay the plaintiff ’s costs and disbursements.   If the latter were not agreed, they were to be fixed by the Court. They have not been agreed and, in accordance with a direction of the Court on

26 April  2016,  are  to  be  determined  on  the  papers.     Each  side  has  filed  a memorandum.   Counsel are agreed that costs are to be awarded in Category 3 in accordance with a minute issued by the Court on 8 July 2015.

[2]      The plaintiff claims costs for certain steps in the proceeding, amounting to

$58,236.     It  also  claims  disbursements,  principally  for  expert  witness  fees, amounting to $123,945.90.   The insurers accept liability for costs but say that the

EMMONS DEVELOPMENTS NEW ZEALAND LTD v MITSUI SUMITOMO INSURANCE CO LTD –

Proceeding 920 [2016] NZHC 1253 [10 June 2016]

sums claimed by the plaintiff should be reduced for three reasons.  First, they include claims for memoranda for which no award should be made.  Secondly, they include costs in relation to a summary judgment application brought by the plaintiff but then withdrawn.  Thirdly, the claim for expert fees should be reduced as they relate in part to the second cause of action introduced by the plaintiff in November 2015, but abandoned in March 2016 after service of briefs of evidence.

[3]      I take as the starting point the claim made by the plaintiff, and deal with the issues raised by the defendant, in turn:

(a)   Costs sought for memoranda. The plaintiff claims costs for a memorandum it filed dated 7 October, described as Memorandum re Timetable.   The insurers say that this memorandum was required because the plaintiff required more time to respond to issues the defendants had raised with the plaintiff’s discovery.   This led to the plaintiff filing a supplementary list of documents.   I agree with the insurers that the plaintiff should not receive an award of costs for this memorandum.

The second memorandum and the third memorandum with which issue is taken are dated 10 December and 21 December respectively.   The insurers say both these memoranda were prepared by their counsel. The first is less than one page long.  The defendants sought leave to file an amended statement of defence after the close of pleadings date, as a result of the plaintiff filing an amended statement of claim which included a new cause of action, the day before the close of pleadings date.  In this circumstance the insurers say the plaintiff should not have costs.  I agree.  On this point costs should lie where they fall, due to the filing of the amended statement of claim just one day before the close of pleadings date.  Although that was permitted, it was inevitable that a statement of defence would be required.  Neither side was to blame for there being a need for an extension of time for a statement of defence.

In the third memorandum the defendants sought an extension of time for serving briefs of evidence, to allow them time to consider new

issues raised in the plaintiff’s amended statement of claim.  In my view the plaintiff is entitled to costs on this memorandum, though as the insurers’ counsel prepared it, the plaintiff’s counsel’s attendances were minimal.   Given the complexity of the additional cause of action, its filing late in November, and the difficulties faced in responding to it with evidence in December, it was inevitable that the Court would extend the timetable as sought.  Little input was therefore required by counsel for the plaintiff.  I award to the plaintiff $250 in respect of this memorandum.

In the result, therefore, the plaintiff’s claim for costs is reduced in

relation to memoranda by the sum of $3,710.

(b)Application for summary judgment. The plaintiff initially applied for summary judgment.  The application was later dismissed by agreement, with costs reserved.  The plaintiff says that this was in the context of the insurers paying the plaintiff a further business interruption payment of $494,419 plus GST.   The defendants deny this payment was a response to the summary judgment application.   They say they made this additional payment as a result of expert advice that the amount of the plaintiff’s business interruption loss would exceed the minimum amount due to the plaintiff under the policy, and the additional payment brought the payments to the plaintiff up to the minimum amount.

In my opinion the plaintiff’s application for summary judgment was, at the very best, optimistic.  Summary judgment is provided for by r 12.2 of the High Court Rules.  To succeed it is necessary for a plaintiff to satisfy the Court that a defendant has no defence to a cause of action. Here, the plaintiff had brought a multi-million dollar claim on the basis of their expert witnesses’ assessments, and their interpretation of their entitlement under the policy.  To say there was scope for argument in relation to the claim would be an understatement.   In my opinion the claim was manifestly unsuitable for summary judgment, and the application should not have been filed.  The insurers have not applied

for costs on the application, but ask only that the plaintiff’s claim for

costs should be declined.  I agree.

As a result the plaintiff’s claim for costs is reduced by the claim in respect of the application and affidavits, the memorandum for the first call of the application, the synopsis and bundle prepared for the fixture, and the discontinuance.  The total deduction is $10,290.

(c)     Experts’ fees relating to the second cause of action. The disbursements claimed by the plaintiff include professional fees from an expert loss adjustor who prepared the business interruption claim and provided briefs of evidence, a registered valuer who provided evidence in respect of loss of rents, including advice in relation to likely rental increases and vacancy rates as tenancies expired, and a further valuer who provided evidence in respect of loss of income from Rydges Hotel, which operated from one of the plaintiff’s buildings.

In  the  ordinary  course  of  events  the  plaintiff  would  be  entitled  to recover all reasonable fees from these witnesses.

The insurers, however, call into question part of the fees charged by the experts, on the basis that they must relate to the second cause of action brought  by the plaintiff in November 2015,  but then abandoned in March 2016.   In the absence of detailed time records or other input from the witnesses themselves they have selected the invoices from these three witnesses which cover the period during which the second cause of action was under contemplation, and current, and reduce these fee accounts by half.

In  the  plaintiff’s  memorandum  for  the  present  application  counsel quotes from a joint memorandum filed on 9 March 2016 for a pre-trial conference explaining why the second cause of action was added, and the  consequence  of  it  in  monetary  terms.    The  memorandum  then records that as the insurers, in their amended defence dated 25 February

2016, had changed their approach to their defence of the first cause of

action, and now deny that the plaintiff’s loss should be calculated on

the basis pleaded in the second cause of action, contrary to an earlier stance, the plaintiff did not intend to pursue the second cause of action.

I infer from this that the plaintiff’s decision was a consequence of two changes of position by the insurers, first in relation to the amount which might be payable in relation to the first cause of action, and secondly in relation to whether the basis of a claim pleaded in the second cause of action was in fact the correct basis, as it had initially maintained.

This being the position, the plaintiff’s decision to withdraw the second cause of action appears to be a reasonable response.  I do not think any adverse inference can be drawn against the plaintiff for bringing the cause of action and then withdrawing it for the reasons jointly recorded by counsel.  It follows that I do not see any proper basis on which there should be a deduction from the claimed witness expenses on the basis that part of those expenses must relate solely to evidence for the second cause of action.

I  therefore  decline  to  deduct  any  part  of  the  claimed  witnesses’

expenses as the insurers contend.

Outcome

[4]      The defendants will pay to the plaintiff the sum of $44,236 for costs, and disbursements in the sum of $123,945.90.

J G Matthews

Associate Judge

Solicitors:

Anthony Harper, Christchurch. DLA Piper, Auckland.