Extreme Communications Limited v Osl Systems Limited HC Wellington CIV 2010-485-627

[2010] NZHC 1399

IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY

CIV-2010-485-627

BETWEEN  EXTREME COMMUNICATIONS LIMITED

Plaintiff

ANDOSL SYSTEMS LIMITED Defendant

Hearing:         26 July 2010

Appearances: J.D. Haig - Counsel for Plaintiff

S. Meikle - Counsel for Defendant

Reasons for Decision:            28 July 2010

REASONS FOR DECISION OF ASSOCIATE JUDGE D.I. GENDALL

Solicitors:           Greg Kelly Law, Solicitors, PO Box 25-243, Wellington 6146

Lawler & Co, Solicitors, PO Box 105212, Auckland

EXTREME COMMUNICATIONS LIMITED V OSL SYSTEMS LIMITED HC WN CIV-2010-485-627  28

July 2010

Introduction

[1]       On 26 July 2010, I made an order for summary judgment in favour of the plaintiff against the defendant in this proceeding.  It was for the sum of $140,138.40, representing part of the amount claimed by the plaintiff in the proceeding. I also ordered a sum for interest on this amount of $19,769.88 to be paid by the defendant and made an order transferring the proceeding, concerning the balance of the total amount claimed by the plaintiff, to the District Court.  My decision as to costs was reserved.  In addition, I indicated on 26 July 2010 that my detailed reasons for the summary judgment decision would follow.  I now set out those reasons and my costs decision.

Background Facts

[2]       In December 2007 the parties entered into an agreement (“the agreement”) for the installation by the plaintiff of communications wiring and hardware. The plaintiff claims that, by 31 October 2008, the defendant owed it $284,962.09 for services provided under the agreement. Due to a subsequent payment of $13,360.14 by the defendant, the alleged debt was reduced to $271,601.95 as at 12 February

2010.

[3]       On  12  April  2010,  the  plaintiff  filed  the  present  summary  judgment application seeking the sum of $271,601.95 as monies outstanding to it under the agreement  or,  alternatively,  for  judgment  as  to  liability.  A  formal  notice  of opposition to this application was filed by the defendant on 26 May 2010, together with supporting affidavits. Based on the affidavit of Mr Osborne, who is the sole director of the defendant company, it became apparent that the defendant did not dispute that it owed the plaintiff the sum of $140,138.40 as part of the total claimed amount.

The “Undisputed Amount”

[4]       The  summary  judgment  application  before  me  was  for  this  sum  of

$140,138.40, only, referred to by the plaintiff as the “undisputed amount”. The plaintiff also however claimed interest on this sum and costs. Counsel for the defendant  who  appeared  before  me  indicated  quite  clearly that  he  did  not  hold instructions to oppose the application before the Court with respect to this “undisputed amount”, or to present submissions in opposition with regard to the plaintiff’s claims for interest and costs.   His instructions related solely to a final transfer of this proceeding to the District Court which I will address later.

[5]       On the present summary judgment application, pursuant to r 12.2, the Court may give judgment against a defendant if the plaintiff satisfies the Court that the defendant has no defence to a cause of action in the statement of claim, or to a particular part of any such cause of action. In Australian Guarantee Corp (NZ) Ltd v McBeth [1992] 3 NZLR 54, the Court of Appeal considered giving judgment for part of the amount of a claim, stating at 61 that:

We  see  no  reason  to  prevent judgment  being  given  for  an  amount  which is indisputably due and owing but which is only part of the claim and therefore not the whole of the relief sought under the particular cause of action. This is not to say that  Courts  are  to  strive  to  find  some  indisputable amount  and  then  to  give judgment for it. It is not suggested that, in unliquidated claims, it would be right to say the plaintiff will eventually recover some quantifiable sum and then give judgment, as if on account. Rather this recognises the right to judgment, in the words of Lane LJ in Associated Bulk Carriers Ltd v Koch Shipping Inc at p 265:

".  .  .  where  the  amount  ordered  to  be  paid  has  already  been ascertained or is capable of being ascertained by mere calculation without further investigation, or is admittedly due."

There will be other cases where it would be unjust to give summary judgment, even on part of the claim, without allowing the cross-claim, set-off or counterclaim to be brought into account.

[6]       In Raptorial Holdings Ltd (in rec) v Elders Pastoral Holdings Ltd (2000) 14

PRNZ 663, the Court of Appeal also held that summary judgment on part of a claim is discretionary and requires close consideration of the circumstances of the case:

In our view the discussion in Australian Guarantee Corp (NZ) Ltd v McBeth demonstrates that whether it is appropriate to enter summary judgment in relation to part of a claim involves the exercise of a discretion. There can be no fixed rules. The circumstances of  the  particular case  must  be  closely considered. In  the  end  the interests of justice will be determinative.

[7]       Before me, Mr Haig for the plaintiff submitted that it was just in this situation for judgment to be given on the “undisputed sum”, being part of the plaintiff’s claim to which the defendant accepted it had no defence. Mr Haig here referred to correspondence between the plaintiff and the defendant in relation to the undisputed sum, and the affidavit by Mr Osborne.   That affidavit states at para 53 that the defendant has completed a reconciliation of payments and:

“According to our calculations, we believe the balance owing to Extreme is $140,138.40”.

[8]       Based  on  this  and  other  evidence  before  me,  I  am  satisfied  that  the  sum  of

$140,138.40 was in fact undisputed and that it would be in the interests of justice that summary judgment be granted in respect of that amount.

Interest

[9]       The  plaintiff  then  sought  interest  on  this  sum  of  $140,138.40  at  the prescribed rate of 8.4 per cent per annum under s 87 of the Judicature Act 1908 for the period from 21 November 2008 to 26 July 2010. Mr Haig submitted that the plaintiff’s claim arises from unpaid invoices rendered prior to 22 October 2008, and that the invoices were payable on the 20th day of the month following invoice.  There is no dispute as to this aspect by the defendant.   The commencement date of 21

November 2008 was therefore one day after the due date for payment of this amount said to be at least $140,138.40. It appears also that these calculations were not disputed by the defendant.

[10]      Mr Haig submitted that, in terms of s 87 Judicature Act 1908, this was a proper  matter  for  interest  to  be  paid  by  the  defendant.  Section  87  provides  as follows:

87 Power of Courts to award interest on debts and damages

(1)  In any proceedings in [[the High Court[, the Court of Appeal, or the Supreme Court] ]] for the recovery of any debt or damages, the Court may, if it thinks fit, order that there shall be included in the sum for which judgment is given interest at such rate, not exceeding [[the prescribed rate]], as it thinks fit on the whole or any part of the debt or damages for the whole or any part of the period between the date when the cause of action arose and the date of the judgment

[11]     Mr Haig argued that, despite repeated requests by the plaintiff for the “undisputed amount” or any other due sums to be paid, the defendant “unfairly and unjustly” failed to pay any reasonable sum to the plaintiff, keeping the plaintiff from money it was properly owed. Moreover, Mr Haig submitted that the defendant has had the benefit of at least the total of the undisputed sum for the period for which interest was sought because the defendant was itself paid as a contractor for the plaintiff’s work.

[12]      The purpose of awarding interest under s 87(1) is to compensate the plaintiff for its loss, namely the lost opportunity to use money which should have been available to it to use and enjoy: Day v Mead [1987] 2 NZLR 443. In terms of the period for which interest is payable, it will often be appropriate to order interest from when the cause of action arose to the date of judgment: see, for example, Short v Gray HC Auckland CIV-2008-404-2232, 9 June 2010, where the Court ordered interest from the date on which the cause of action for repayment of a loan arose (at [38]); and Kirk v Vallant Hooker & Partners CA 169/00, 27 November 2000, where the Court of Appeal stated that the date when the cause of action arose “is the date

from which interest should have run, unless there was some other justifiable ground for a different approach”: at [14].

[13]      In my view, it is entirely proper that the defendant should pay interest for the whole of the period it had the use of the plaintiff’s money. I therefore made the order for payment of interest totalling $19,769.88.  This represented interest at 8.4 per cent on the “undisputed sum” of $140,138.40 from 21 November 2008 to 26 July 2010 (613 days at $32.25 per day).

Transfer to the District Court

[14]     Before me, the plaintiff also applied for the remaining proceeding to be transferred to the District Court pursuant to s 46 of the District Courts Act 1947. Having granted summary judgment on the “undisputed amount”, the proceeding now relates to an amount claimed and disputed by the defendant of $131,463.55.  This amount is clearly within the jurisdiction of the District Court. Counsel for the defendant confirmed he did hold instructions with respect to this matter, and these were not to oppose the transfer application.

[15]      I saw no reason why, given effectively the consent of the parties and the nature of the remaining claim why this matter needed to remain in the High Court. The application for transfer to the District Court was granted accordingly.

Costs

[16]     Finally, Mr Haig sought costs for the plaintiff with regard to the summary judgment application, in part on an indemnity costs basis and in part on a Category

2B basis. Although Mr Meikle for the defendant did not hold specific instructions with regard to the costs question, in response to an invitation from the bench he indicated that scale costs would be appropriate here.

[17]      Mr Haig submitted that indemnity costs should be awarded in favour of the plaintiff because, at least by 4 June 2010 some 2 weeks after Mr Osborne’s affidavit had been filed, the defendant did not dispute and in fact accepted that part of the plaintiff’s claim in question here.  Had the defendant paid the undisputed sum, the additional appearances following 4 June 2010 and all legal costs of the plaintiff incurred in that time could have been avoided. I was referred to correspondence between the parties which evidences the plaintiff’s repeated attempts to resolve the matter. Once the plaintiff became aware that the sum of $140,138.40 did not appear to be disputed (based on Mr Osborne’s 25 May 2010 affidavit), Mr Haig informed

the defendant’s solicitor that the plaintiff would seek judgment for the undisputed amount and that, upon payment, it would consent to the proceeding being removed to the District Court. This letter was dated 4 June 2010.

[18]     The  defendant’s  solicitor  responded  on  8  June  2010,  stating  that  the defendant had no opposition to paying the undisputed sum, on the condition that the sum be paid to a solicitor’s trust account and held in the account until the parties agreed on the total amount owing by the defendant. On 9 June 2010, Mr Haig replied to the defendant’s solicitor that there did not appear to be any reason why the sum should be paid into a solicitor’s trust account. Further requests for payment were made on 17 June 2010 and 6 July 2010. On 13 July 2010, Mr Haig informed the defendant’s solicitor that submissions were due for filing by 16 July 2010, and that the plaintiff would seek solicitor/client costs “for all time incurred following the defendant’s admission that it was liable for the undisputed sum” if the undisputed amount was not paid by the following day.

[19]      As I have noted, the plaintiff seeks indemnity costs from 4 June 2010 up to the hearing date and Category 2B costs from 13 April 2010 up to 4 June 2010 in relation to the filing of the summary judgment application.   The general starting point principle applicable to the determination of costs is that the party who fails with respect to a proceeding or an interlocutory application should pay costs to the party who succeeds: r 14.2. The situations in which indemnity costs may be awarded are outlined in r 14.6 of the High Court Rules, which provides as follows:

14.6      Increased costs and indemnity costs

...

(4) The court may order a party to pay indemnity costs if—

(a)  the party has acted vexatiously, frivolously, improperly, or unnecessarily in commencing, continuing, or defending a proceeding or a step in a proceeding; or

(b)  the  party  has  ignored  or  disobeyed  an  order  or  direction of  the  court  or breached an undertaking given to the court or another party; or

(c)  costs are payable from a fund, the party claiming costs is a necessary party to the  proceeding affecting the  fund,  and  the  party claiming costs  has  acted reasonably in the proceeding; or

(d)  the person in whose favour the order of costs is made was not a party to the proceeding and has acted reasonably in relation to it; or

(e)  the party claiming costs is entitled to indemnity costs under a contract or deed;

or

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

[20]      It appears that the plaintiff’s claim here would most appropriately fall within para (a) of r 14.6.  Claims for indemnity costs will only succeed  in rare  cases, “generally  entailing  breach  of  confidence  or  flagrant  misconduct”:  Prebble  v Awatere Huata (No 2) [2005] 2 NZLR 467 at [6]. Accordingly, indemnity costs are not to be awarded in the case of mere unreasonableness, but require exceptionally and distinctly bad behaviour: Bradbury v Westpac Banking Corporation [2009] 3

NZLR 400 at [26] and [28].

[21]      In  my view,  the  defendant’s  conduct  in  the  present  case  could  be  more appropriately described as being “merely unreasonable” rather than “exceptionally and distinctly bad”.   It is a case involving mere inaction, as opposed to conduct unduly prolonging a proceeding by raising groundless defences. However, clearly here, the defendant did concede that part of the sum claimed was undisputed, and the plaintiff was put to the expense of pursuing its summary judgment application for that amount rather unnecessarily. An order for increased costs would therefore be appropriate in my view.

[22]     A court may order increased costs where the party opposing costs has contributed unnecessarily to the time or expense of the proceeding (r 14.6(3)(b)), or where there is some other reason “which justifies the court making an order for increased costs despite the principle that the determination of costs should be predictable and expeditious” (r 14.6(3)(d)). Given that the plaintiff’s complaint is not based on actions by the defendant, as it is the failure to pay the undisputed amount rather than the filing of a notice of opposition which is at issue, it might be more appropriate to rely on  para (d) here: see The  Hong Kong  & Shanghai Banking Corporation Limited v Rick Dees Limited HC Auckland CIV-2006-404-5278, 21

September 2006 at [18] to [19].

[23]      Having regard to the defendant’s admission that the sum was not disputed, the defendant must have been aware that summary judgment for the undisputed amount  would  be  granted.  In  addition,  the  defendant  was  made  aware  that  the plaintiff would raise the issue of indemnity costs in case of non-payment. In these circumstances, I consider that it would be just to make an order for increased costs for all steps taken in the application from 4 June 2010. An uplift of 50 per cent on costs calculated on a 2B basis seems appropriate.

Conclusion

[24]     The plaintiff’s claim for indemnity costs is declined.   However, increased costs (in part) are awarded.  Costs are awarded to the plaintiff on a 2B scale basis only up to 4 June 2010.  Increased costs calculated on a Category 2B scale basis plus

50 per centum are to be paid for all work undertaken from 4 June 2010 up to the date summary judgment was granted.   In addition disbursements as approved by the Registrar are awarded to the plaintiff.

[25]      In the event the parties are unable to agree calculation of the costs amounts to be paid under para [24] above, the Registrar is to determine this following submissions from each party.

‘Associate Judge D.I. Gendall’