GHP Piling Limited v Leighton Contractors Pty Limited

[2012] NZHC 2317

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2010-404-003231 [2012] NZHC 2317

BETWEEN  GHP PILING LIMITED Plaintiff

ANDLEIGHTON CONTRACTORS PTY LIMITED

First Defendant

ANDDOWNER EDI WORKS LIMITED Second Defendant

Hearing:         11-15 June 2012

Counsel:         SJB O'Brien and RP Chandra for Plaintiff

CJ Booth and ACF Lee for Defendants

Judgment:      10 September 2012

JUDGMENT OF ASHER J (Costs)

This judgment was delivered by me on Monday, 10 September 2012 at 11am pursuant to r 11.5 of the High Court Rules.

Registrar/Deputy Registrar

Solicitors/Counsel:

Fortune Manning, DX CP 21503, Auckland 1140.

Email:  [email protected] and  [email protected]

Kensington Swan, DX CP 22001, Auckland 1142.

Email:  [email protected] and  [email protected]

GHP PILING LTD V LEIGHTON CONTRACTORS PTY LTD HC AK CIV-2010-404-003231 [10 September

2012]

Introduction

[1]      In a decision delivered on 13 July 2012 I gave judgment to the defendants in a claim based on an alleged tender contract.   The plaintiff effectively lost on all points and I observed:[1]

[1] GHP Piling Ltd v Leighton Contractors Pty Ltd [2012] NZHC 1695 at [107].

There seems to be no reason why costs should not follow the event and be at a 2B basis.   However, in case there are factors that I am not aware of, I reserve the issue of costs.   If necessary parties are to file submissions on costs, the defendants within 14 days and the plaintiff within a further 14 days.

[2]      The defendants have filed a memorandum seeking costs in excess of the 2B scale.   The memorandum helpfully sets out the defendants’ 2B calculation in full. Expert  witness  fees  for  John  Cregten,  an  expert  accountant,  of  $13,606.95  for

22 May 2012, and $6,750.17 for 15 June 2012 are claimed.  Further expert expenses of $15,681.03 for 30 May 2012, $29,362.63 for 12 June 2012, and $1,391.00 for accommodation in June 2012 are claimed for an Australian piling expert, Mark Johnson of Manderton Pty Ltd.

[3]      The total costs claimed in relation to the 2B scale are $55,371.75 together with $337.76 of disbursements.  The total expert fees claimed are $66,791.78.  This latter sum for experts’ fees is a reduction on the amount originally claimed following the acceptance by the defendants of some of the plaintiff’s comments.

[4]      The defendants also claim increased costs under rr 14.6(3)(b) and 14.11 of the High Court Rules on the ground that the plaintiff unreasonably rejected two offers of settlement of the defendants, the first on 1 July 2011 for $31,100 (including GST) and the second on 23 May 2012, seven working days before the trial, for

$100,000 plus GST if any, interests and costs on a 2B scale.

[5]      The plaintiff in reply accepts that 2B costs are payable.  However, it contests aspects of the fees claimed on a 2B basis pointing out that the plaintiff had a measure of success on some of the interlocutory applications.  The expert fee for Mr Johnson

of Manderton Pty Ltd is contested.  It is submitted that the defendants could have

briefed a New Zealand expert, which would have been much cheaper.   It is also argued that the hours spent by Mr Johnson were excessive and that his hourly rate is unreasonably high.   The claim for increased costs is also contested.   Detailed comments are made on the Calderbank offers and it is submitted that in the circumstances the proceeding was not vexatious or frivolous, and that there is no warrant for increased costs.

Discussion

The 2B costs

[6]      I am satisfied that the 2B costs as set out in the defendants’ submission of

27 July 2012, together with the disbursements set out at page 3 of the cost claim

marked “A” are properly payable, with the exception of step 36 on 17 December

2010 which should be for an amount of $597 and not $796.   I do not accept the plaintiff’s argument that the defendants are not entitled to costs in relation to the interlocutory application for leave to file and serve an amended statement of claim and to administer interrogatories after the setting down date.  I do not consider either of these steps by the defendants to have been unnecessary or spurious.   The defendants,  having  succeeded  entirely  on  the  substantive  issue,  are  entitled  to recover all its costs, including all interlocutory costs.

Expert witness fees

[7]      I accept the broad thrust of the submission of the plaintiff in relation to Mr Johnson’s fee.   As I indicated in the judgment, I found Mr Johnson a helpful witness.  However, the plaintiff has referred to a number of New Zealand experts that could have been briefed.  I am not satisfied that it was necessary for the defendants to go out of New Zealand to brief an expert.

[8]      I also consider Mr Johnson’s daily rate of NZ$5,027.64 at the exchange rate on 9 August 2012 to be excessively high.  It amounts to approximately $500 per hour for a 10 hour day.  In contrast, the plaintiff’s quantity surveying expert, Mr Anthony Dean, charged $285 per hour.  Further, the amount of time Mr Johnson spent during

the trial appears to me to be very high.  I am far from certain that it was necessary for Mr Johnson to attend in the earlier days of the trial.  He could have read the notes of evidence. The last two days of the trial were not full days in court.

[9]      Under r 14.12(3) the Court may reduce a disbursement.  I consider that the appropriate step to take in this case.  In my view a fee along the lines of that charged by  the  defendants’ other  expert,  Mr  Cregten,  would  have  been  appropriate  for Mr Johnson.  I therefore, by a process of loose equivalence, allow a disbursement of

$20,000 for Mr Johnson.  I understand that there are no outstanding GST issues.

[10]     I do not allow the disbursement for accommodation in full, but I am prepared to allow for two nights’ accommodation in Auckland.  I do this on the basis that a New Zealand expert also may well have charged for accommodation.

Increased costs

[11]     The  defendants’ Calderbank  proposals  were  a  sensible  engagement  in  a settlement process.  The last offer of $100,000 seven days before trial was, given my findings, a generous offer.  However, this is not a classic Calderbank situation where a defendant who has made a Calderbank offer and has been subsequently ordered to pay a sum of damages less than the amount offered, is able to avoid the burden of costs even though it was the losing party.   In this case, the defendants gain the benefits of costs albeit on the scale in any event.

[12]     While the offer by the defendants was not a “walk away” offer, I note the

comment in Hira Bhana & Co Ltd v PGG Wrightson Ltd:[2]

... where the nature of the offer made is simply a “walk away” proposition, made early in the proceedings, it cannot be the case that the mere fact that the party which rejected the offer subsequently loses means that party is required to pay indemnity costs or increased costs.  If that were so, it would mean that the costs regime set out in rr 46 – 48G would be effectively bypassed in almost all cases where the defendant succeeds, because defendants would routinely make “walk away” offers of the kind made in this case, and then claim indemnity costs if they subsequently succeed at trial.

[2] Hira Bhana & Co Ltd v PGG Wrightson Ltd [2007] NZCA 342 at [26].

[13]     The same could be said of modest offers, which although not on a “walk away” basis, are unlikely to ever be accepted.  The offer of $31,100 comes within that category.  However, the offer of $100,000 seven days before trial is in a different category. This was a significant amount of money.

[14]     I am satisfied that there were Calderbank offers made in terms of r 14.10 of the High Court Rules.  Under r 14.11 the effect that the making of a Calderbank offer has on the question of costs is at the discretion of the Court.  Under r 14.11(3) a party is entitled to costs on steps taken in the proceeding and after an offer is made when accepting that offer would have been more beneficial to the other party than the judgment obtained by the costs claimant against the other party.

[15]     Some encouragement should be offered to parties to engage in a meaningful settlement process.   There is a sound policy basis for directing that an ultimately unsuccessful party that has turned down a reasonable offer to settle by payment of a significant sum should face some increase in the costs burden as a consequence.

[16]     Rule 14.6(3)(b)(iii) provides that increased costs may be ordered if a party fails without reasonable justification to admit facts, evidence, documents or accept a legal argument.  Rule 14.6(3)(b)(v) provides that increased costs may be ordered if a party fails, without reasonable justification, to accept an offer of settlement whether in the form of an offer under r 14.10 or some other offer to settle or dispose of the proceeding.   Rule 14.6(3)(d) gives the Court a broad discretion as to the circumstances in which an order for increased costs might be made.

[17]     I accept the plaintiff’s submission that the claim it brought was not spurious or vexatious.  I do not think that a failure to accept what was still a relatively modest offer of $100,000 in comparison to the sum claimed, should mean that following refusal the 50 per cent  uplift sought  should be ordered.   I do not  consider the rejection of the offers to be so unreasonable as to warrant such a significant increase in costs.   However, I am persuaded that to encourage the realistic assessment of chances of success, and the serious consideration of significant offers of settlement, there is a policy justification for ordering some increased costs in circumstances such as these. This is consistent with the listing of it as a particular in r 14.6(3)(b)(v).

[18]     I  propose  increasing  costs  by  $10,000  to  take  into  account  the  rejected

Calderbank offers.

Result

[19]     Costs  and  disbursements  on  a  2B  basis  as  set  out  in  the  defendants’

submission of 27 July 2012 are to be paid, with the adjustment referred to at [6]. [20] The defendants’ experts costs are payable on the following basis:

(a)       John Cregten:  $20,357.12

(b)      Mark Johnson:  $20,000, together with disbursements for two nights’

accommodation.

[21]     In addition to the costs mentioned an additional sum of $10,000 is added to the costs award on account of the refused Calderbank offers.

……………………………..

Asher J