Fisk v Fargher Construction Limited (in liquidation)

[2018] NZHC 2498

IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY

I TE KŌTI MATUA O AOTEAROA TE WHANGANUI-A-TARA ROHE

CIV-2018-485-353

[2018] NZHC 2498

UNDER

Section 284(1) of the Companies Act 1993

IN THE MATTER

of the liquidation of Fargher Construction Limited (in liq)

BETWEEN

JOHN HOWARD ROSS FISK and MARCUS JAMES MCMILLAN

Applicants

AND

FARGHER CONSTRUCTION LIMITED

(in liq)
First respondent

NAVILLUSO HOLDINGS LIMITED

Second respondent

Counsel:	R J Gordon for applicants T W Sage for respondents
Judgment:	24 September 2018

COSTS JUDGMENT OF ASSOCIATE JUDGE JOHNSTON

[On the papers]

[1]    Following my judgment in this matter dated 29 August 2018 the parties have been unable to resolve costs. As a result, I have received memoranda from Mr Gordon for the applicants and Mr Sage for the respondents concerning costs. As I foreshadowed in my judgment I am dealing with costs on the papers.

[2]The parties agree:

(a)that the applicants as the successful parties are entitled to costs;

FISK AND MCMILLAN v FARGHER CONSTRUCTION LIMITED (in liq) [2018] NZHC 2498

[24 September 2018]

(b)that the starting point is scale costs on a 2B basis;

(c)that the issue is whether or not there should be an upward adjustment to costs on account of the fact that the applicants made three settlement proposals to the respondents that were all rejected, all of which would have provided the respondents with an outcome superior to that which it ultimately achieved.

[3]In my judgement, this is not a case in which an uplift would be justified.

[4]    The costs regime contained in the High Court Rules 2016 was intended and designed so that in the generality of cases the successful litigant is able to recover a predictable amount on account of its costs. From its introduction the courts made it clear that the scales themselves are the measure of a fair quantum of costs other than in exceptional circumstances.

[5]    Primarily as a means of encouraging the settlement of litigation, and to ensure that parties do not take wholly unreasonable positions, the rules go on to provide that where a party (generally a defendant) makes a formal settlement proposal which is rejected by the other party (generally a plaintiff), and the outcome of the litigation is less favourable to the latter than the offer, the former party may seek an uplift in costs incurred from the point of the rejection of the offer. As McKenzie J said in BFMG Ltd v Speirs [2014] NZHC 3361, the usual consequence is to protect the unsuccessful party from an award of costs where the successful party achieved an outcome less favourable to it than the formal offer it rejected. As a rule, that exception to the setting of costs according to scale will not operate in reverse where the offer is made by the party that is ultimately successful. McKenzie J indicated that that would only happen “… if the failure to accept the settlement offer was without reason or justification…”.

[6]    The issue here, then, is whether Navilluso acted unreasonably in rejecting the offers made by the plaintiffs. It goes without saying that the fact that Navilluso was unsuccessful in the litigation is not itself the measure of reasonableness. In my view, Navilluso’s position in the case was not obviously hopeless. It had a credible argument which it was entitled to advance. It did so in a measured and careful way.

[7]    In those circumstances, I am not prepared to accede to the application for an uplift of the scale costs which, as I have already said, are intended by the rules to reflect a reasonable measure of costs recovery.

[8]    The applicants as the successful party are entitled to their costs on a 2B basis, together with disbursements which may be fixed by the Registrar.

Associate Judge Johnston

Solicitors:

Minter Ellison Rudd Watts, Wellington for plaintiffs Sainsbury Logan & Williams, Napier for respondents