Gillibrand v Swanepoel
[2018] NZHC 1376
•12 June 2018
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA WHANGĀREI TERENGA PARĀOA ROHE
CIV-2014-488-129
[2018] NZHC 1376
BETWEEN CHRISTIAN JOHN GILLIBRAND AND MARY CAECILIA GILLIBRAND AS TRUSTEES OF THE CHRIS AND MARY GILLIBRAND FAMILY TRUST
First Plaintiffs
CHRISTIAN JOHN GILLIBRAND
Second PlaintiffAND
GEORGE PETER SWANEPOEL
First Defendant
ANDREW PETER HOLGATE
Second DefendantCHRISTIAN JOHN GILLIBRAND AND MARY CAECILIA GILLIBRAND
Third Parties
Hearing: On the papers Appearances:
C T Patterson and H P Holland for the First and Second Plaintiffs and Third Parties
H M Twomey and S M Watson for the First Defendant Second Defendant in person
Judgment:
12 June 2018
JUDGMENT OF WOODHOUSE J (COSTS)
This judgment was delivered by me on 12 June 2018 at 2:00 p.m. pursuant to r 11.5 of the High Court Rules 2017.
Registrar/Deputy Registrar
……………………………………
GILLIBRAND v SWANEPOEL [2018] NZHC 1376 [12 June 2018]
[1] This judgment determines applications for costs following judgment on the substantive claim.1
[2] Mr and Mrs Gillibrand, as trustees, and Mr Gillibrand in his personal capacity, brought separate claims of negligence against Mr Swanepoel and Mr Holgate. There were claims for special damages ranging from (in round figures)
$119,000 to $135,000, general damages totalling $60,000, and wasted costs in a sum to be proved, but which was not proved.
[3] All of the claims against Mr Swanepoel were dismissed and Mr Swanepoel now seeks costs against the plaintiffs.
[4] Mr and Mrs Gillibrand, as trustees, succeeded in part in their claim against Mr Holgate, obtaining judgment for special damages in a sum of $63,950, plus interest, and general damages of $5,000 each. There were counterclaims by Mr Holgate and a cross-claim against Mr and Mrs Gillibrand in their personal capacities (not as trustees). Those claims were dismissed. Mr and Mrs Gillibrand seek costs against Mr Holgate.
Mr Swanepoel’s costs claim
[5] Mr Swanepoel seeks indemnity costs either from 4 July 2015, the day after a Calderbank offer from Mr Swanepoel expired, or from 3 December 2015, the day after an increased Calderbank offer expired, and costs on a 2B basis for the preceding period.
[6] The plaintiffs accept that there should be an order for costs in favour of Mr Swanepoel, but submit it should be on a 2B basis for the entire proceeding.
Indemnity costs: principles
[7]Mr Swanepoel’s claim for indemnity costs is made pursuant to the following
provisions in r 14.6 of the High Court Rules 2016:
1 Gillibrand v Swanepoel [2017] NZHC 1209.
(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
…
(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.
[8] The Calderbank offers made by Mr Swanepoel are an important part of the claim for indemnity costs, coming within sub-paragraphs (a) and (f) of r 14.6(4), but the claim for indemnity costs is made on additional grounds of substance.
[9]It was submitted for Mr Swanepoel that the following examples from the
Court of Appeal’s decision in Bradbury v Westpac Banking Corp are applicable:2
(a)Commencing or continuing proceedings for some ulterior motive, or doing so in wilful disregard of known facts or clearly established law.
(b)Making allegations which ought never to have been made, or unduly prolonging a case by groundless contentions, summarised in French J’s “hopeless case” test.
(c)Particular misconduct that causes loss of time to the Court and to other parties.
[10]Justice French’s “hopeless case” test was discussed by the Court of Appeal in
Ben Nevis Forestry Ventures Ltd v Commissioner of Inland Revenue, as follows:3
The reference to French J's “hopeless case” test is to an observation made by French J (now Chief Justice of Australia) in J Corp Pty Ltd v Australian Builders Labourers Federation Union of Workers (WA Branch) (No 2) that indemnity costs may be awarded where “a party persists in what should on proper consideration be seen as a hopeless case”.4 French J relied on an
2 Bradbury v Westpac Banking Corp [2009] NZCA 234, [2009] 3 NZLR 400 at [29].
3 Ben Nevis Forestry Ventures Ltd v Commissioner of Inland Revenue [2014] NZCA 348, (2014) 22 PRNZ 322 at [17].
4 J Corp Pty Ltd v Australian Builders Labourers Federation Union of Workers (WA Branch) (No 2) (1993) 46 IR 301 at 303.
earlier decision in which Woodward J said that it was appropriate to consider awarding indemnity costs “whenever it appears that an action has been commenced or continued in circumstances where the applicant, properly advised, should have known that he had no chance of success”.5 Woodward J added that such a case must be presumed to have been commenced or continued for an ulterior motive or because of some wilful disregard of the known facts or the clearly established law. In that case the presumed ulterior motive was to pressure the respondents to settle. The other possibility was that the proceeding was pursued for no good purpose at all, due to inertia and carelessness.
[11]There was the following submission for Mr Swanepoel:
While the first defendant accepts that there were discrete elements of the plaintiffs’ case which may not meet the “hopeless case” test, he considers that sufficient of the claims made were so clearly incorrect as to demonstrate that the proceedings were commenced and continued with a wilful disregard of known facts and, in some respects, established law.
[12] For the plaintiffs, Mr Patterson submitted that this was an acknowledgement that the plaintiffs’ case does not meet the threshold for a hopeless case. I do not agree. It is not necessary for every element of a case to be untenable for there to be a hopeless case. Depending on the particular circumstances, to persist with particular allegations which are untenable, in fact or in law, may amount to persisting with a hopeless case. In addition, and importantly in this proceeding, the question whether there is a hopeless case is not to be determined solely by assessment of the merit of the claims advanced by the plaintiff, but also by reference to any settlement offers of the defendant. Both aspects apply in this proceeding.
Indemnity costs: evaluation
[13] The following chronology provides a broad procedural framework for evaluation of the indemnity costs claim:
6 August 2014 Proceeding commenced. 10 June 2015 Unsuccessful judicial settlement conference. 15 June 2015 Calderbank offer from plaintiffs to settle all claims against both defendants, and Mr Holgate’s claims, for $190,000.
5 Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd (1988) 81 ALR 397 (FCA) at 401.
19 June 2015 Calderbank offer from Mr Swanepoel of $100,000 to settle all claims against him and against Mr Holgate, Mr Holgate’s claims against the plaintiffs, and any complaints of the plaintiffs. 25 October 2015 Calderbank offer from plaintiffs to settle all claims for
$295,000.
29 October 2015 Renewal of the Calderbank offer from Mr Swanepoel for himself and Mr Holgate of $100,000. 23 November 2015 Calderbank offer from plaintiffs, to settle all claims for
$305,000.
24 November 2015 Calderbank offer from Mr Swanepoel to pay $120,000 to settle all claims against him and Mr Holgate, and Mr Holgate’s claims, and any complaints of the plaintiffs. 2 December 2015 Calderbank offer for plaintiffs to settle all claims for
$280,000.
29 February 2016 Trial commenced: hearing over seven days and subsequent written submissions
[14] For the reasons that follow, I have concluded that Mr Swanepoel is entitled to indemnity costs from 4 July 2015.
[15] The substantive judgment makes clear that a substantial part of the plaintiffs’ case against Mr Swanepoel did fall clearly within one or more of the elements of the indemnity costs rules and principles on which Mr Swanepoel relies. For present purposes it will be sufficient to reproduce what is an accurate summary in the submissions for Mr Swanepoel of some aspects of the substantive judgment:
Counsel does not wish to burden the Court with a recap of the lengthy and convoluted factual narrative underlying the numerous allegations made by the plaintiffs. However, some of the most egregious instances include:
aMaking 59 allegations of breach against the first defendant, and raising further allegations in cross-examination, in respect of which it was held that aside from three topics there was no reasonably arguable grounds for establishing liability on the part of either the first defendant or Mr Holgate (at [90] to [102]);
bRaising a multitude of factual issues and maintaining the need for those issues to be considered as part of the overall claim, despite being advised by the first defendant that many of the issues (including some referred to below) were irrelevant, a view which was shared by the Court (e.g. at [9] and [29]);
cAlleging that the plaintiffs held the first defendant on a “general retainer” where there was no basis, in fact or in law, for such an allegation, and subsequently resiling from that allegation in closing submissions (at [126]);
dMaking the “untenable” contention that negligent advice was given regarding the Trust Debt prior to Gordon Gillibrand’s death, to the extent that it was found that the allegation should not have been made (at [169]);
eAlleging (in a late amendment to the statement of claim) that Mr Holgate acted as the first defendant’s agent throughout his involvement in the matter, where no factual foundation for such a claim existed (at [229]);
fGiving evidence that they did not approve Mr Holgate’s engagement as counsel in relation to the Removal Application when they in fact engaged him themselves and were enthusiastic to have him in charge of the matter (at [46]);
gGiving “patently false” evidence regarding whether the first defendant advised Mr Gillibrand that he was in a conflict of interest position as executor (being only a small part of the evidence given by the plaintiffs which the Court was unable to accept) (at [143] and [146]);
hMr Gillibrand giving “disingenuous” evidence in an attempt to distance himself from affidavits he admitted to having sworn, including affidavits which he accepted he had read prior to swearing (at [148]) and making “disingenuous” claims that they were not aware of the Mistreatment Allegations (at [211]);
iIn respect of his second affidavit Mr Gillibrand’s brief of evidence was found to be “at the least, intentionally misleading or evasive”, and was contradicted by his evidence in cross-examination (at [151]);
jFailing to address the issue of what loss, if any, was caused by the negligence in anything other than broadest terms (e.g. at [237]).
[16] The issues raised in the plaintiffs’ claims against Mr Swanepoel (apart from the agency allegation noted in the above summary at (e)) were persuasively rebutted in a lengthy letter from Mr Swanepoel’s solicitors to the plaintiffs’ solicitors of 19 June 2015. This is the letter containing the first Calderbank offer for Mr Swanepoel. This was the offer that expired on 3 July 2015.
[17] In the letter of 19 June, Mr Swanepoel’s solicitors also challenged the quantum of the claim. On special damages, they contended that, if Mr Swanepoel had liability, the maximum damages recoverable from him, aside from the claim for general damages, was $51,071.50. Given my findings on quantum in respect of Mr Holgate’s liability, which are findings founded on facts which were known to the plaintiffs when Mr Swanepoel’s offer was made, this was a realistic assessment at the time. The claims for general damages – $30,000 for each of Mr and Mrs Gillibrand – were grossly inflated. These claims were also addressed in the letter of 19 June, concluding with an observation that it “may be that a Court would consider that a nominal award of damages is appropriate, but in our view this would require that your plaintiffs prove the claim in its entirety”. That was a realistic proposition based on principles and facts known or available to the plaintiffs at the time. The plaintiffs had a third claim, pleaded as wasted costs in a sum to be proved. There was no evidence in support of this alleged loss.
[18] Copies of the letters between the lawyers with the Calderbank offers on both sides were produced, together with other relevant correspondence. The letters from Mr Swanepoel’s solicitors contained carefully articulated arguments for Mr Swanepoel (and in substance, in material respects, for Mr Holgate). These arguments were not addressed in any substantial way in responses for the plaintiffs.
[19]Mr Patterson submitted:
[The Calderbank offers] are not qualifying Calderbank offers, principally because the terms of settlement proposed did not relate just to Mr Swanepoel, but also to Mr Holgate, and included terms to restrict the plaintiffs’ ability to pursue professional complaints against either defendant after a settlement”
[20] What is conveniently referred to as a “Calderbank offer”, is an offer which comes within the terms of r 14.10. Both offers from Mr Swanepoel come within the definition in r 14.10. The submission that the inclusion of Mr Holgate in the offer means it is not a Calderbank offer has no merit.6 The offer also amounted to a Calderbank offer notwithstanding the proposed term of settlement that the plaintiffs
6 It may also be assumed that at least one reason for including Mr Holgate in the proposed settlement was to avoid the possibility that, if there was settlement with Mr Swanepoel alone, Mr Holgate might seek to join Mr Swanepoel as a third party.
should not pursue complaints of professional misconduct. The plaintiffs also argue that this proposed term of settlement justified the plaintiffs’ rejection of the offer, an argument addressed in the following paragraphs.
[21] Mr Patterson submitted that the plaintiffs were justified in rejecting both of the Calderbank offers for the following reasons:
(a)They would have foregone their successful claim and costs entitlement against [Mr Holgate], totalling at least $166,608.70.
(b)They would have incurred sunk costs to that point in advancing their claims without any allowance in the settlement figure for those costs.
(c)They would have foregone the ability to continue any existing professional complaint, or initiate any future professional complaint in relation to either of the defendants by operation of clause 6 of the draft settlement deed.
[22]The total of $166,608.70 was calculated as follows:
Judgment sum (special damages) 63,950.00 Interest from 17 December 2013 to the date of judgment 11,099.29 General damages 10,000.00
Costs on a 2B basis 73,367.00
Disbursements 8,192.41$166,608.70
[23] That calculation provides only a part of the picture. It is necessary also to consider what the plaintiffs’ position would have been had they accepted the offer by 3 July 2015 and then to compare that with the actual outcome, including an award of costs to Mr Swanepoel.
[24] If the plaintiffs had accepted the offer by 3 July 2015 the figures on a broad brush basis would be as follows:
Settlement payment 100,000.00 Less actual costs to 3 July 2015, say: (30,000.00) 7 70,000.00
Interest on $70,000 at 5 per cent per annum from 3 July 2015 to judgment (rounded) 6,740.00
Plaintiffs’ net recovery $76,740.00
[25] The actual result for the plaintiffs, including the costs award to Mr Swanepoel (recorded below), is as follows, but again, of necessity, using an estimated figure for the plaintiffs’ actual costs:
Judgment for the plaintiffs against Mr Holgate, and costs 166,608.00 Less estimate of plaintiffs’ actual costs and disbursements for the entire proceeding (190,000.00) 8
Less costs and disbursements awarded to Mr Swanepoel (176,139.00) (199,531.00) [26]
On these figures, by rejecting the first Calderbank offer,
the plaintiffs are
worse off by $276,271.
[27] As noted, some of these figures are simply estimates. And allowances for some other items might be brought into account. But a precise accounting is not required to demonstrate that it was not reasonable for the plaintiffs to reject the offer because they would have foregone their successful claim and costs entitlement against Mr Holgate (and quite apart from the fact that in July 2015 the plaintiffs faced a risk that they would not recover against either defendant).
[28]
The preceding assessment involves the application of hindsight, not only in relation to the plaintiffs’ successful claim against Mr Holgate, but also in relation to the fact that they did not succeed against Mr Swanepoel and they are now required to7 This is an estimate of actual costs incurred by the plaintiffs to that date, because the plaintiffs have not provided evidence of their actual costs in the proceeding, notwithstanding the fact that there is an increased costs claim against Mr Holgate. However, Mr Patterson acknowledged in his submissions that, at around the time of the judicial settlement conference, which was only nine days before Mr Swanepoel’s first Calderbank offer, the plaintiffs had not incurred “significant costs”.
8 The actual costs incurred by Mr Swanepoel from 4 July 2015 to conclusion of the hearing, and therefore not for the entire proceeding, were $138,150. The plaintiffs’ actual costs, suing two defendants, would have been higher – say $160,000. Adding the estimate of $30,000 to 3 July 2015 of $30,000 produces the total of $190,000.
pay a substantial sum for his costs. But this also does not have a material bearing on the response to the argument that the plaintiffs were justified in rejecting the 19 June offer on the grounds they would then have “foregone their successful claim” against Mr Holgate. Assessed in light of all information available to the plaintiffs in June 2015, their rejection of the offer was not reasonable.
[29] The information I am satisfied was available to the plaintiffs in June 2015 means that they and their advisers had an ability to make a realistic assessment of costs that would be awarded to Mr Swanepoel if the claim against him failed, as well as a realistic assessment of recoverable damages if the claim succeeded. It is apparent that, when Mr Swanepoel’s first Calderbank offer was received, the plaintiffs disregarded facts they knew. A propensity on the part of Mr and Mrs Gillibrand to close their minds to facts which did not fit with their own preconceptions, and to reconstruct events to support their case in the face of facts they were well aware of, were matters demonstrated by them in their evidence and in the case that was advanced on their behalf.9 This was compounded by Mr and Mrs Gillibrand advancing claims that were not tenable as a matter of law. In essence, in my opinion, the plaintiffs’ risk assessment was materially flawed.
[30] Mr Patterson’s second point was that it was reasonable to reject the offer because it made no allowance for the plaintiffs’ costs up to the date of the offer. Analysis in those terms, when the first offer was made, would be correct only by adopting a plainly unrealistic assessment of the likely recovery by the plaintiffs. As discussed in the substantive judgment, a substantial part of the plaintiffs’ claims for special damages was untenable given facts known to the plaintiffs, including:
·The trust was indebted to the estate of Gordon Gillibrand.
·Immediately following Gordon Gillibrand’s death, the liability of his estate to Bupa was only $40,191.10
9 See the substantive judgment, Gillibrand v Swanepoel, above n 1, at [140]-[152], recording my general findings on credibility against Mr and Mrs Gillibrand, the observations at [257] in relation to Mr and Mrs Gillibrand’s entrenched antipathy towards Bupa, as well as observations throughout the judgment, some of which are summarised in this judgment from the submissions for Mr Swanepoel.
10 Gillibrand v Swanepoel, above n 1, at [104].
·The reason Bupa was not paid soon after Gordon Gillibrand’s death was because Mr and Mrs Gillibrand, personally or as trustees of the family trust, were both unwilling and unable to make any payment to the estate to clear the Bupa debt following Gordon Gillibrand’s death.11
[31] The contention of Mr Swanepoel’s solicitors in the letter of 19 June 2015 that general damages could not exceed $51,071.50 was entirely realistic. The offer from Mr Swanepoel of $100,000 therefore included a substantial allowance for the plaintiffs’ costs incurred to the date of the offer.
[32] Mr Patterson’s third point was that it was reasonable for the plaintiffs to reject the Calderbank offers because they would not have been able to make or continue any complaints of professional misconduct against Mr Swanepoel and Mr Holgate. A draft deed of settlement, sent with Mr Swanepoel’s first offer, contained the following provision:
Completion of the obligations … will be accepted by the Parties in full and final settlement of all claims, actions, demands in the Proceeding and any other proceedings, claims, and/or complaints whatsoever which have been raised (or could be raised) by and between the Parties in any way arising out of, or relating to (directly, indirectly or in any way whatsoever) the subject matter of the Proceeding or otherwise.
(emphasis added)
[33] If the words given emphasis were of concern to the plaintiffs, they could have sought to have them removed. But there was no advice for them that the condition relating to complaints was of concern. There was in fact no attempt by Mr Patterson, on behalf of the plaintiffs (with all of the relevant communications for the plaintiffs having been from Mr Patterson), to seek to negotiate variations of the terms of settlement. The only matter of concern to the plaintiffs in relation to settlement, as indicated by the correspondence for the plaintiffs, was the amount of the settlement sum.
[34] There are two further considerations. The first is that there had been a complaint by Bupa against Mr Swanepoel and Mr Holgate relating to allegations
11 At [231]-[237].
against Bupa recorded in the second and third notices of opposition to the mistreatment claim. Having heard and read a great deal of evidence, and I expect a great deal more than would have been heard by the Disciplinary Committee of the New Zealand Law Society, I am satisfied that there was no conduct by Mr Swanepoel, or by Mr Holgate, which could properly have justified complaints of professional misconduct against them for any matter that was not already covered by the complaint by Bupa. A repetition of the same complaint by Mr and Mrs Gillibrand does not provide any foundation for the argument now being advanced. It is also open to question whether the provision in the settlement deed, if settlement had been reached, would have prevented a complaint of professional misconduct.
[35] I am not persuaded that this provision in the offer had any bearing on the plaintiffs’ decision to reject the offers and would not have made rejection reasonable even if it were a factor in the decision.
[36] I am satisfied, in terms of r 14.6(4)(a), that the plaintiffs, having received the first Calderbank offer, unnecessarily continued the proceeding rather than accepting the offer. On the overall question whether there should be an award of indemnity costs, I am satisfied that the rejection of this offer, coupled with the untenable nature of many of the substantial allegations against Mr Swanepoel, being untenable in fact or in law, and the fact that the plaintiffs made some allegations which ought never to have been made, combine to justify an order that the plaintiffs pay indemnity costs to Mr Swanepoel for the period from 4 July 2015 to the conclusion of the trial.
Were the actual costs claimed by Mr Swanepoel “reasonably incurred”
[37] Indemnity costs are defined in r 14.6(1)(b) as “the actual costs, disbursements, and witness expenses reasonably incurred by a party”. The plaintiffs contend that, if there is liability for indemnity costs, Mr Swanepoel has not established that the costs were reasonably incurred. In this section I consider whether the sum claimed for costs charged by Mr Swanepoel’s solicitors were costs reasonably incurred. I will deal separately with disbursements.
[38]The sum originally sought for solicitor’s costs, from 4 July 2015, was
$159,031.38. Mr Patterson submitted that the information provided in the costs
memorandum for Mr Swanepoel was inadequate to determine whether those costs were reasonably incurred. Copies of the invoices from Mr Swanepoel’s solicitors were produced, but, as Mr Patterson noted, the narration was simply “Our fee” with a dollar amount plus GST (and, in some cases, disbursements).
[39] Subject to uncertainty as to whether the sum sought should have included GST, the sum appeared to be reasonable. That provisional conclusion was based on two matters in particular. One was knowledge of the amount of work that would have been required properly to conduct a defence for Mr Swanepoel, given the nature of the claims advanced for the plaintiffs and the way in which those claims were advanced. The other was that there were allegations against Mr Swanepoel which amounted to allegations of serious dereliction of his duties of care as a solicitor. This justified substantial resources being put into his defence. Both of those considerations bear on the discussion that follows.
[40] I nevertheless agreed with Mr Patterson’s submission that Mr Swanepoel’s solicitors should have provided more detail. I issued a minute granting leave to the plaintiffs to provide further particulars with provision for a response for the plaintiffs. Further memoranda were filed for Mr Swanepoel and the plaintiffs.
[41] Mr Swanepoel’s counsel accepted that the costs claim should not have included GST. The plaintiffs advised that this reduces the actual costs to $138,150.12 This claim was supported by a schedule containing substantially more detail than had been provided with the original application. A copy of the schedule is reproduced as appendix 1 to this judgment.
[42] Mr Patterson accepted that the further information “advances matters”. But he submitted that there was not “sufficient information to allow a review of each attendance to determine whether it satisfies the reasonable fee factor set out at r 9.1 of the Lawyers and Conveyancers Act (Lawyers: Conduct and Client Care) Rules 2008”. Rule 9.1 lists 13 factors to be taken into account in determining the reasonableness of a fee in respect of any service provided by a lawyer to a client.
12 An arithmetical reduction from the GST inclusive figure produces a net sum of $138,288. It is appropriate to use the lower figure.
Mr Patterson submitted that any attendance not reasonably required, or failing to satisfy the reasonable fee factors in r 9.1 of the Lawyers and Conveyancers Rules, should be excluded or reduced.
[43] The “reasonable fee factors” in r 9.1 are factors for determining whether the fee is reasonable as between lawyer and client. Many of the factors have no relevance to a claim for indemnity costs under r 14.6 of the High Court Rules. In some cases some of the factors listed in r 9.1 may assist in deciding whether actual costs claimed are costs reasonably incurred. But in this case I do not consider it necessary to assess the matter by reference to r 9.1. In addition, the approach advocated by Mr Patterson would also require an analysis at a level of detail which is not be necessary or appropriate.13
[44] In Bradbury v Westpac Banking Corp, Harrison J suggested the following steps in determining what actual costs were reasonably incurred:14
(a)Determine whether a particular item of expenditure is reasonably incurred – for example, preparation of a statement of defence.
(b)Fix what would be a reasonable allocation of actual costs, measured by reference to an appropriate time taken and allowing for the significance and complexity of the category of work.
(c)Quantify the costs by reference to a median hourly rate reasonably applicable to it.
[45]
That is a useful guide, although the precise approach may vary from case to case. In this case, using the schedule provided by Mr Swanepoel’s solicitors, some further detail can be extrapolated. This is recorded in a further schedule produced as appendix 2 to this judgment. As may be seen, there are additional calculations of total hours for each of the 13 activities, the total hours overall (from 4 July 2015 to 30 March 2016), the average hourly rate for each of the 13 activities, and the average hourly rate for all costs over the entire period from 4 July 2015.13 See Bradbury v Westpac Banking Corp (2008) 18 PRNZ 859 (HC) at [207].
14 At [209].
[46] This additional information in appendix 2, read as it must be with the narration in appendix 1, is sufficient, in conjunction with my knowledge of the case, to conclude that the costs claimed are costs reasonably incurred.
Plaintiffs’ challenge to particular items
[47] The plaintiffs challenged a claim for costs for second counsel for Mr Swanepoel. I am satisfied that this is a case where engagement of a junior was justified and I certify for second counsel.
[48] The plaintiffs contend that costs on any basis should not be allowed for Mr Swanepoel’s interrogatories to the plaintiffs, or for Mr Swanepoel’s opposition to the plaintiffs’ application for an order to examine Oliver Gielem. I am satisfied that both steps were properly taken on behalf of Mr Swanepoel.
[49] Some claims for particular steps were objected to on the basis that they are not specifically allowed for in sch 3 of the High Court Rules. That submission appears to ignore r 14.5(1)(b) which makes provision for determining time by analogy with sch 3 if that schedule does not apply. The particular steps, objected to are properly allowed for by analogy.
[50] Mr Swanepoel seeks to recover $16,700.85 as a disbursement, being the total charged by Mr Christopher Darlow, a solicitor. Mr Darlow was consulted by Mr Swanepoel’s solicitors as an expert on the responsibilities and conduct of a solicitor instructing counsel in litigation.
[51] The plaintiffs challenged the quantum of this claim on three principal grounds, which I consider in the following paragraphs.
[52] The first ground was that a proper assessment whether the expense was reasonably incurred could not be made because there was no breakdown of Mr Darlow’s fees. The total disbursement claimed for Mr Darlow’s services arose from four invoices. The invoices were produced. These covered a period from 10 December 2014 to 3 March 2016, the last date being when Mr Darlow gave evidence. The invoices are not itemised, like a timesheet, but they do have
narrations. The narrations are sufficient to determine whether the total disbursement claimed for Mr Darlow’s invoices is an expense reasonably incurred, or whether there should be some reduction.
[53] A second ground of objection was that Mr Darlow’s fee included the cost of “in-house” research done to provide his opinion. This was recorded in the narration for the first invoice, which includes “researching in relation to a solicitor’s obligations for barrister’s advice”. The other matters covered were “receiving instructions, initial discussions with Sophie Watson [one of Mr Swanepoel’s counsel] and reviewing brief, meeting with Helen [Twomey, the responsible partner] and Sophie … and writing to you on 17 December 2014”. The fee for all activities, excluding GST, was $4,950. I consider that the total cost is reasonable, and Mr Patterson did not argue otherwise. Mr Patterson’s submission was that the cost of the research should not have been included in the costs sought to be recovered from the plaintiffs. The essential reason for this, in Mr Patterson’s submission, was that “legal authorities are properly for submissions by Counsel or for the Court to consider”.
[54] I do not accept this argument. This invoice from Mr Darlow was for his original opinion to the plaintiffs’ solicitors. Given the nature of the opinion being sought from Mr Darlow it was reasonable for him to undertake, or have others undertake on his behalf, legal research on solicitors’ obligations for advice given by barristers. This enabled him to provide an opinion combining two elements frequently informing opinions from experts – experience and established principles, or established conclusions, recognised by experts in the area. Mr Darlow was justified in providing an opinion which was based on his own experience coupled with principles developed in the leading cases of relevance.
[55] The third ground was that, in addition to Mr Darlow’s fees, there was also a claim by Mr Swanepoel’s solicitors for their costs for attendances on Mr Darlow, or in relation to Mr Darlow’s evidence. This is item 9 in appendix 1 to this judgment. The separate claim in respect of the attendances of Mr Swanepoel’s solicitors does not have any bearing on the question whether the disbursement claimed for Mr Darlow’s fee is a disbursement reasonably incurred.
[56] The total claimed for Mr Darlow’s fees needs to be reduced because the total includes GST. The net sum is $14,522. I am satisfied that this sum was reasonably incurred. The principal consideration in this regard relates to the reasons why an opinion and then evidence was sought from Mr Darlow. Mr Swanepoel, given the nature of the claims against him, was entitled to call expert evidence from a person properly qualified to express an opinion relating to the way in which a solicitor instructing a barrister should and could meet his responsibilities to the client in the circumstances of this case, as those circumstances were understood by the expert. Mr Darlow was eminently qualified, from years of experience as a solicitor instructing counsel in a broad range of cases. Mr Darlow was further qualified as a former president of the New Zealand Law Society, and on other grounds set out in Mr Darlow’s evidence. Mr Patterson acknowledged that Mr Darlow is a highly experienced and respected practitioner.
[57]The sum claimed, assessed overall, is an expense reasonably incurred.
Mr Swanepoel’s costs up to 3 July 2015
[58] For the period from the commencement of the proceeding up to 3 July 2015 Mr Swanepoel claimed costs on a 2B basis totalling $23,084. There was an alternative calculation for this period, in a schedule, of costs on a 2B basis increased by 75 per cent. It was a little unclear from the schedule whether this was an alternative claim, but the body of the submission indicates that the primary claim, if the indemnity costs claim was allowed, was for basic 2B costs. In any event, I am satisfied that there is no justification for increased costs for the period before 4 July 2015. The claim of $23,084 is allowed.
Result on Mr Swanepoel’s costs claim
[59] The costs and disbursements payable by the plaintiffs to Mr Swanepoel are as follows:
Scale 2B costs from 5 August 2014 to 3 July 2015 23,084.00
Indemnity costs from 4 July 2015 to 30 March 2016 138,150.00
Disbursements 14,905.00 15
$176,139.00
[60] There is an order that the plaintiffs pay costs and disbursements to Mr Swanepoel in a total sum of $176,139.
First plaintiffs’ costs claim against Mr Holgate
[61] The first plaintiffs succeeded in their claim against Mr Holgate, recovering special damages of $63,950, with interest, and general damages totalling $10,000.
[62] As recorded in the introduction, there were also counterclaims and cross- claims by Mr Holgate against Mr and Mrs Gillibrand. I will refer to these compendiously as “cross-claims”. All of the cross-claims were dismissed.16
[63] The first plaintiffs seek costs against Mr Holgate in a sum of $93,898.61, being costs on a 2B basis increased by 33 per cent, together with disbursements of
$8,192.41.
[64]Mr Holgate contends that there should be an order for costs in his favour of
$50,000.
The first plaintiffs’ claim
[65] The first plaintiffs provided an itemised schedule for costs on a 2B basis. This totals $73,367.
[66] Mr Holgate did not challenge the schedule. However, one adjustment is required. The daily rate from commencement of this proceeding on 6 August 2014 to 30 June 2015 is $1,990 for category 2. The daily recovery rate from 1 July 2015 is $2,230. However, the plaintiffs have applied the increased daily rate to all items
15 The sum of $14,905 for disbursements is for Mr Darlow’s net fee of $14,522, and some further
disbursements not in issue.
16 The nature of the cross-claims, and the reasons for dismissing them, are set out in the substantive judgment Gillibrand v Swanepoel, above n 1, at [259]-[266].
from commencement of the claim. The first plaintiffs’ schedule does not record the dates of the various steps taken. But a reasonable assessment of the items for which the rate needs to be reduced can be made, with this aided by reference to the 2B schedule for Mr Swanepoel for broadly similar steps taken up to 30 June 2015. On this basis I am satisfied that the lower daily rate should be applied to steps 1, 2, 3, 10 and 20 in the first plaintiffs’ schedule, and for two of the repeated activities for steps 11 (five repeated activities) and 13 (four repetitions). That reduces the scale total to
$70,943.
[67] The first plaintiffs seek an increase of 33 per cent on the 2B scale. The grounds for this claim are, in essence, that Mr Holgate’s cross-claims had no prospect of success or, in terms of r 14.6(3)(b)(ii), Mr Holgate took an unnecessary step or pursued an argument that lacked merit.
Mr Holgate’s submissions
[68] The essence of Mr Holgate’s submissions in support of his claim for an award of costs against the first plaintiffs of $50,000, and my conclusions, are as follows:
(a)Mr Holgate submitted that he was entitled to costs from July 2015 because of the first Calderbank offer of Mr Swanepoel. I do not agree. Had Mr Swanepoel’s offer been accepted, on the terms it was made, the claim against Mr Holgate would have been at an end. But Mr Holgate is not entitled to take advantage of the offer from another party.17 The fact that acceptance of the offer would have brought the claim against Mr Holgate to an end would not have been a consequence of any offer that Mr Holgate made. The relevant facts are that Mr Holgate did not settle the claim against him, judgment has been entered against him on the first plaintiffs’ claim, his cross-claims have been dismissed, and subject to the further submissions, costs should follow the events.
17 This is reinforced by r 14.10: “A party … may make a written offer”.
(b)Mr Holgate submitted that the first plaintiffs had made false allegations that he “had suborned perjury by procuring a completely false affidavit”. For reasons recorded in the substantive judgment, the substance of Mr Holgate’s complaint is correct, but I am not persuaded that this provides grounds, in terms of the rules, to reduce costs in favour of the first plaintiffs, let alone to award costs in Mr Holgate’s favour.
(c)Mr Holgate contested the first plaintiffs’ argument that the counterclaims were without merit and should not have been advanced. For the reasons recorded in the substantive judgment, I agree with the substance of the first plaintiffs’ submission.18
(d)Mr Holgate had a cross-claim against the first plaintiffs in their personal capacities, not as trustees. On this basis, Mr Holgate argued that the first plaintiffs could not seek costs in respect of that particular cross-claim. That is correct, but Mr and Mrs Gillibrand in their personal capacities are parties to this proceeding, having been joined by Mr Holgate and, having succeeded, are entitled to costs on the claim against them. For that purpose it is quite unnecessary to draw a technical distinction between a costs award to the first plaintiffs and a costs award to Mr and Mrs Gillibrand in their personal capacities.
(e)The remaining submission requiring consideration was that any costs claim against Mr Holgate needs to take account of the fact that there were two defendants. I consider that there is some merit in this argument, which raises a question of proportionality. It is more fully considered in the following paragraphs.
[69]In Hong v Deliu the Court of Appeal said:19
18 Gillibrand v Swanepoel, above n 1, at [259]-[266]..
19 Hong v Deliu [2016] NZCA 75, [2016] NZAR 667 at [24].
[Where] there is more than one defendant a Court will need to consider how costs should be allocated between them. While the default position under r 14.14 of the High Court Rules is joint and several liability among defendants, that is subject to the Court's overriding discretion. In our view, where the case is out of the ordinary in some significant way, consideration must be given to whether to alter that burden.20
[70] Mr Holgate noted that the trial took 6.5 days and then submitted that his “portion” was only 0.5 days or 7.6 per cent. I do not agree with that sort of analysis. The main focus was undoubtedly the claim against Mr Swanepoel, and with a substantial amount of time also spent on evidence from and for Mr Swanepoel. But a reasonable proportion of that evidence, and submissions in relation to it, also had a direct bearing on the plaintiffs’ claims against Mr Holgate.
[71] There was, however, another substantial part of the case advanced by the plaintiffs which had nothing to do with Mr Holgate. This can be seen in the factual narrative in the substantive judgment.21 In my judgment this aspect of the case warrants an adjustment in Mr Holgate’s favour of costs that would otherwise be awarded against him.
Evaluation
[72] Were it not for the proportionality point, in my judgment the first plaintiffs would be entitled to full 2B scale costs with an appropriate increase. To take account of proportionality I consider that the 2B scale sum of $70,943 should be reduced by 15 per cent, to $60,302.
[73] That sum is to be increased by 20 per cent, not 33 per cent. The first plaintiffs sought the 33 per cent increase because of the cross-claims. However, the cross-claims represented only a very small part of the proceeding as a whole. The 20 per cent increase takes the recoverable sum for costs to $72,362.
20 Gino Dal Pont Law of Costs (3rd ed, LexisNexis Butterworths, Australia, 2013) at [11.2]-[11.9]. See as examples Narayan v Arranmore Developments Ltd [2011] NZCA 681, (2011) 13 NZCPR 123 at [53]-[54]; Commissioner of Inland Revenue v Muir [2015] NZHC 1573, (2015) 27 NZTC 22-014 at [16]-[18]; Walker v Gibbston Water Services Ltd [2014] NZHC 2250 at [16]; and Pegasus Group Ltd v QBE Insurance (International) Ltd HC Auckland CIV-2006-404-6941, 24 September 2010 at [46].
21 Gillibrand v Swanepoel, above n 1, at [9]-[44].
[74]The disbursements sought to be recovered by the plaintiffs, totalling
$8,192.41, were fully itemised in a schedule sent in advance to Mr Holgate, with the schedule of costs on the 2B scale, to see whether agreement could be reached. Mr Holgate did not raise any issue in relation to the scale sum or the disbursements (and which in the schedule originally sent to him in fact totalled almost $11,000 – some items have been removed in the schedule filed with the plaintiffs’ memorandum). Given the fact that there was no objection from Mr Holgate, there will be an order that Mr Holgate pay these disbursements as well as the costs.
Result on the costs claim against Mr Holgate
[75] There is an order that Mr Holgate pay Mr and Mrs Gillibrand, jointly, a sum of $80,554.41 for costs and disbursements.
Orders in summary
[76] As recorded at [60], there is an order that the plaintiffs pay costs and disbursements to Mr Swanepoel in a total sum of $176,139.
[77] As recorded at [75], there is an order that Mr Holgate pay Mr and Mrs Gillbrand, jointly, a sum of $80,554.41 for costs and disbursements.
Woodhouse J
Solicitors / Counsel:
Mr C T Patterson, Barrister, Auckland
Ms H Twomey, Robertson, Solicitors, Auckland Mr A Holgate, Barrister, Whangarei
APPENDIX 1
Activity Narration Total Fees: Time spent by each lawyer (hours) 1 Amended statement of defence Reviewing amended statement of claim and comparison to previous pleading; drafting amended defence including review of relevant
documents; reviewing client’s comments and further amendments; review of second defendant’s amended pleading; review of
plaintiffs’ replies
$3,890 Partner 2.9
Intermediate solicitor 21.6
Junior solicitor 3.1
2 Judicial conferences Preparation for and attendance at judicial conferences (where not related to specific issues listed below), including review of other parties’ memoranda and drafting memoranda on behalf of first defendant $2,180 Partner 2.5
Senior solicitor 3.8
Intermediate solicitor 1.0
Junior solicitor 1.5
3 Supplementary discovery Attendances relating to further discovery by first defendant, ongoing requests by the plaintiffs for further discovery, including uplift of numerous irrelevant files, review of all files for discovery, inclusion of files in the common bundle for trial and further review $3,400 Partner 1.2
Intermediate solicitor 3.9
Junior solicitor 20.2
4 Communications Correspondence, discussions, meetings (where not related to specific issues listed below) between counsel, with witnesses/potential witnesses and the first defendant; with the Court and counsel; with other parties $10,060 Partner 18.5
Senior solicitor 0.4
Intermediate solicitor 21.2
Junior solicitor 1.2
5 Confidential documents Attendances relating to ongoing dispute between plaintiffs and first defendant regarding the provision and use of confidential documents, including dispute regarding status of Standards Committee documents; attendances relating to inclusion of confidential documents in bundle; review of same and ongoing communications regarding status of those documents at trial $4,670 Partner 2.9
Senior solicitor 8.6
Junior solicitor 2.5
6 Evidence Review of plaintiffs’ briefs of evidence including reply briefs and witness affidavit, comparison to previous evidence and documents held; attendances regarding documents not discovered by the plaintiffs but referred to in briefs
and seeking disclosure of same; review of further disclosure and
$9,230 Partner 6.7
Intermediate solicitor 4.0
Junior solicitor 49.3
Activity Narration Total Fees: Time spent by each lawyer (hours) comparison to documents and evidence held; assessment and
analysis of plaintiffs’ evidence and documents to assess evidence, review of all evidence and general preparation for witness briefing; review of second defendant’s
evidence as against plaintiffs’
evidence
7 Interlocutory application for examination order Reviewing application; research; correspondence regarding application with parties and the Court; review of documents filed in support; drafting opposition and supporting documents; timetabling and other attendances between parties and client; attendances relating to costs and conferences regarding the same $5,860 Partner 3.5
Senior solicitor 11.7
Junior solicitor 0.6
8 Witness briefing
– George Swanepoel
Preparation of relevant material; drafting brief on basis of instructions to date; meetings and discussions regarding amendments to brief, revising brief; ongoing discussions regarding further information received including amended pleadings and further analysis/amendments to brief $11,590 Partner 23.0
Junior solicitor 23.6
Law clerk 8.5
9 Witness briefing and admissibility dispute – Chris Darlow Preparation of relevant material; drafting brief on basis of instructions to date; meetings and discussions regarding amendments to brief; revising brief; ongoing discussions regarding further information received including amended pleadings and further analysis/amendments to brief; attendances relating to plaintiffs’ challenge to admissibility of evidence $8,940 Partner 8.1
Senior solicitor 12.9
Intermediate solicitor 4.0
Junior solicitor 5.8
Law clerk 7.3
10 Trial preparation Common bundle of documents including bundle references in briefs; bundles for briefs of evidence; drafting opening submissions; drafting closing submissions; finalising submissions on discrete issues; preparation for cross examination of witnesses; ongoing communications with all parties and the Court; general attendances to update position for trial as issues shift including in particular following receipt of second amended statement of claim $52,000 Partner 77.8
Senior solicitor 3.3
Intermediate solicitor 127.8
Junior solicitor 38.1
Law clerk 25.5
Activity Narration Total Fees: Time spent by each lawyer (hours) 11 Research Various research on issues not specifically related to the above $2,500 Partner 0.8
Intermediate solicitor 10.0
Junior solicitor 4.0Law clerk 42.9
12 Trial Attendance at trial 29 February to 8 March 2016 including various attendances relating to developments during the course of the hearing $22,610 Partner 56.6
Intermediate solicitor 57.8
13 Post-trial Attendances following final day of trial regarding memoranda on quantum issues and transcript; email correspondence with counsel and the Court $1,220 Partner 1.9
Intermediate solicitor 5.6
TOTAL CLAIMED $138,150
APPENDIX 2
Extrapolations from first defendant’s schedule of costs
Activity Time per lawyer Total Fee Total Hours Average Hourly Rate 1 Amended Partner: 2.9 $3,890 27.6 $141 statement of Int Solicitor: 21.6 defence Jnr Solicitor: 3.1 2 Judicial Partner: 2.5 $2,180 8.8 $248 conferences Snr Solicitor: 3.8 Int Solicitor: 1.0 Jnr Solicitor: 1.5 3 Supplementary Partner: 1.2 $3,400 25.3 $134 discovery Int Solicitor: 3.9 Jnr Solicitor: 20.2 4 Communications Partner: 18.5 $10,060 41.3 $244 Snr Solicitor: 0.4 Int Solicitor: 21.2 Jnr Solicitor: 1.2 5 Confidential Partner: 2.9 $4,670 14.0 $334 documents Snr Solicitor: 8.6 Jnr Solicitor: 2.5 6 Evidence Partner: 6.7 $9,230 60.0 $154 Int Solicitor: 4.0 Jnr Solicitor: 49.3 7 Interlocutory Partner: 3.5 $5,860 15.8 $371 application for Snr Solicitor: 11.7 examination order Jnr Solicitor: 0.6 8 Witness briefing – Partner: 23.0 $11,590 55.1 $210 George Swanepoel Jnr Solicitor: 23.6 Law clerk 8.5 9 Witness briefing Partner: 8.1 $8,940 38.1 $235 and admissibility Snr Solicitor: 12.9 dispute – Chris Int Solicitor: 4.0 Darlow Jnr Solicitor: 5.8 Law Clerk: 7.3 10 Trial preparation Partner: 77.8 $52,000 272.5 $191 Snr Solicitor: 3.3 Int Solicitor: 127.8 Jnr Solicitor: 38.1 Law Clerk: 25.5 11 Research Partner: 0.8 $2,500 57.7 $43 Int Solicitor: 10.0 Jnr Solicitor: 4.0 Law clerk 42.9 12 Trial Partner: 56.6 $22,610 114.4 $198 Int Solicitor: 57.8 13 Post-trial Partner: 1.9 $1,220 7.5 $163 Int Solicitor: 5.6 $138,150 738.1 $187
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