Focus Construction Interiors Limited v Spaceworks Design Group Limited
[2019] NZHC 3296
•13 December 2019
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2016-404-2609
[2019] NZHC 3296
BETWEEN FOCUS CONSTRUCTION INTERIORS LIMITED
PlaintiffAND
SPACEWORKS DESIGN GROUP LIMITED
First Defendant
ELIZABETH MARY CHARLOTTE HINES (nee WHALEY)
Second Defendant
Hearing: On the papers Counsel
L Ponniah for the Plaintiff M Harris for the Defendants
Judgment:
13 December 2019
JUDGMENT OF GAULT J
(Costs)
This judgment was delivered by me on 13 December 2019 at 11:00 a.m. pursuant to r 11.5 of the High Court Rules 2016.
Registrar/Deputy Registrar
……………………………………
Solicitors:
Mr L Ponniah, Corban Revell, Henderson, Auckland Mr M Harris, Gilbert Walker, Auckland
FOCUS CONSTRUCTION INTERIORS LTD v SPACEWORKS DESIGN GROUP LTD [2019] NZHC 3296
[13 December 2019]
[1] Following my judgment of 5 September 2019 dismissing Focus’ claim,1 the defendants claim costs and disbursements. In my judgment I directed the filing of memoranda, if costs could not be agreed, and indicated I would deal with costs on the papers.
[2] The defendants submit that the case justifies a band C allowance for preparation of briefs and trial preparation and also seek increased costs of 50 per cent above scale.
[3]Focus submits scale costs on a 2B basis are appropriate.
Band B or C
[4] I agree that band 2B is appropriate for the proceeding generally, but I accept Mr Harris’ submission that band C is appropriate in respect of preparation of briefs and trial preparation. Given the way Focus proceeded with its case and its actual legal and expert costs pre-trial, I consider that a comparatively large amount of time for preparation of briefs and trial preparation was required and therefore band C is appropriate for those steps. This increases scale costs from $55,304 to $65,339.
Increased costs
[5] The defendants seek increased costs of 50 per cent above scale, relying on the following limbs of r 14.6(3):2
(b)(iii) failing, without reasonable justification, to admit facts, evidence, documents, or accept a legal argument; or
…
(b)(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
…
(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.
1 Focus Construction Interiors Ltd v Spaceworks Design Group Ltd [2019] NZHC 2211.
2 High Court Rules 2016.
[6] The essence of the defendants’ position in relation to increased costs is that Focus failed to accept the defendants’ reasonable settlement offers.
[7] The context is a claim for breach of a ‘reasonable endeavours’ clause in a settlement agreement, initially seeking over $650,000, which was reduced to approximately $536,000 by trial. In my judgment, I did not accept Focus’ interpretation of the clause, and Focus failed to establish breach. I concluded that even if Focus had established a breach, I would have calculated its loss as $172,573.20. So the claim failed entirely and, at the very least, was overstated.
[8] The defendants offered to pay $50,000 on a without prejudice save as to costs basis in November 2017. The defendants’ letter of offer ultimately proved correct insofar as it predicted that the claim was based on an incorrect interpretation of the settlement agreement, Focus would fail to prove breach and identified quantum of loss difficulties. But I do not consider that Focus necessarily acted unreasonably in not accepting this early settlement offer in November 2017. Its response indicated that discovery was an issue at that early stage.
[9] In April 2019, after receipt of Focus’ briefs of evidence and a little more than a month before trial, the defendants offered to pay $160,000 in eight monthly instalments. The letter of offer accurately predicted the outcome as to the scope of the ‘reasonable endeavours’ obligation, whether the defendants were in breach, and loss. In response, Focus said it would accept $385,000 plus GST, if applicable, and insisted on a lump sum payment. The counter-offer was open for only two days. In all the circumstances, I consider that Focus’ failure to accept the defendants’ offer was unreasonable and warrants increased costs.
[10] Mr Harris acknowledged that whether costs are increased for all steps, or only after the offer was made, is in the discretion of the Court. Relevant factors may include the timing and nature of the settlement offer(s), the response(s) and whether the claim was always bound to fail or misconceived. The time and other pressures on Judges
leave room for robust judgment as to the costs considered reasonable in all the circumstances.3
[11] I consider the claim was always overstated and Focus had unreasonable settlement expectations. As I said in my judgment, pursuing the case on the basis that it was for Spaceworks to prove the reasonableness of its conduct in relation to every project not referred to Focus was misconceived. While this may justify increased costs for all steps, I accept to some extent Mr Ponniah’s submission that the key evidence (at least in relation to breach) was only available after Ms Whaley had given evidence and been cross-examined. Even so, Focus took the high risk that it could not make out its case and indicated it was unwilling to settle for less than $385,000.
[12] Overall, I consider that in the interests of justice the appropriate uplift is 50 per cent for only the cost items after the April 2019 Calderbank offer, that is from preparation of briefs onwards. Those items total $40,140. A 50 per cent uplift results in total costs of $85,409.
[13]The defendants claim disbursements of $14,358, which are not disputed.
Result
[14]The defendants are entitled to costs of $85,409 plus disbursements of $14,358.
Gault J
3 Frater Williams & Co Ltd v Australian Guarantee Corp (NZ) Ltd (1994) 2 NZ ConvC 191,873 (CA) at 191,887.
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