Hall's Group Limited v Rowe
[2018] NZHC 3302
•13 December 2018
IN THE HIGH COURT OF NEW ZEALAND WHANGANUI REGISTRY
I TE KŌTI MATUA O AOTEAROA WHANGANUI ROHE
CIV-2017-483-003
[2018] NZHC 3302
BETWEEN HALL’S GROUP LIMITED
First Plaintiff
AND
P & T TRUCKING LIMITED
Second Plaintiff
AND
GAVIN ROWE AND GWEN ROWE
Defendants
Hearing: On the papers Counsel:
C J Shannon and A B Weal for the Plaintiffs
R M Flinn and A E Goodall for the Defendants
Judgment:
13 December 2018
JUDGMENT OF CLARK J (COSTS)
Introduction
[1] Following a collision with the defendants’ cattle which had strayed one evening onto State Highway 4, the plaintiffs sued the defendants for their negligence. In a judgment delivered on 31 October 2018 I determined the defendants breached their duty of care by failing to take adequate measures to keep their cattle secured and, by their failure, had caused the plaintiffs loss.1 The consequential damages outcome was expressed as follows:
[107] The defendants do not dispute the plaintiffs’ claims for their respective heads of loss. Accordingly, the first plaintiff is awarded $86,160.24 in compensatory damages. The second plaintiff is awarded $187,096.32 in compensatory damages. The plaintiffs succeed in their total claim of
1 Hall’s Group Ltd v Rowe [2018] NZHC 2819.
HALL’S GROUP LIMITED v ROWE & ROWE [2018] NZHC 3302 [13 December 2018]
$273,256.32, plus interest. Interest is payable at a rate of 5 per cent per annum from 22 April 2014 to the date of this judgment.
Parties’ respective positions
Plaintiffs’ position
[2] In broad terms, and on the basis the defendants unreasonably failed to accept a settlement offer, the plaintiffs seek an uplift of the costs to which, as successful parties, they are entitled.
[3] On 2 March 2018 the plaintiffs, considering their litigation risk to be minimal, offered to accept from the defendants $282,820 in full and final settlement of the claim. The offer was expressed to remain open for acceptance for seven days from 2 March 2018, following which it would be withdrawn and no longer capable of acceptance.
[4] The defendants neither accepted, nor responded to, the offer. The plaintiffs say the offer should have been accepted: when costs and disbursements are added to the judgment sum which amounts to approximately $335,000 the final judgment sum exceeds $400,000. The plaintiffs, therefore, seek an uplift of 50 per cent for all attendances incurred after the expiry of the offer on 9 March 2018.
[5]Scale costs are sought in the sum of $62,663 but uplifted by 50 per cent to
$78,050.
Defendant’s position
[6] The defendants dispute the uplift and challenge also other aspects of the costs claimed by the plaintiffs.
[7]In summary the defendants’ position is that:
(i)They had reasonable justification for not accepting the plaintiffs’ settlement offer expiring 9 March 2018 and no uplift for steps taken beyond that date is warranted.
(ii)Costs on a 2B basis are appropriate for most steps in these proceedings but some steps costs on a 2A basis are appropriate.
(iii)The plaintiffs should not be entitled to the costs of their application to adduce the last-minute evidence of Dr Laven.
(iv)The plaintiffs should not be entitled to the costs for second counsel.
(v)It was not reasonably necessary for the plaintiffs to instruct out-of-town counsel so the resulting disbursements should not be claimable.
(vi)One expert’s disbursement was incurred prior to commencement of the proceeding and should be excluded.
[8]The defendants calculation of the plaintiffs’ costs and disbursements totals
$58,754.87 comprising disbursements of $15,938.87 and High Court scale costs of
$42,816.00.
Uplift
Respective arguments
[9] The plaintiffs’ position is that, in the circumstances, the defendants’ rejection of the offer was unreasonable and an uplift is warranted. When the settlement offer was made:
(a)Discovery had taken place.
(b)The defendants had Mr Cathcart’s photographs of the gateway which he had taken approximately three weeks after the accident.
(c)The defendants had Mr Cathcart’s report and the footage recorded on the truck’s cab camera.
(d)Leaving aside Associate Professor Laven’s views, as a matter of commonsense a defence that had a procession of 17 steers vaulting a
gate one night, with no prior history of doing so, “was always an unlikely account”.
[10] In resisting an uplift, the defendants argue their rejection of the settlement offer was not unreasonable because:
(a)The proceeding was always going to turn on the Court’s assessment of the factual evidence at trial. The defendants were convinced of the truth of their case and the defence was not hopeless from a legal stand-point.
(b)At the time the offer was made the only evidence presented by the plaintiffs to counter the defendants’ case that the steers had vaulted the gate was the report from Mr Cathcart which recorded his observation of the site three weeks after the event.
(c)Dr Laven’s evidence was served very late. The parties may have settled had that evidence been filed earlier.
Assessment
[11] Where a party has contributed unnecessarily to the time or expense of a proceeding by failing, without reasonable justification, to accept an offer of settlement, that rejection may become relevant to a claim for uplifted costs.2 The rationale, as the courts have emphasised, is that scarce judicial resources should not be burdened by litigants who reject reasonable settlement offers, proceed with litigation and then fail to achieve any more than was previously offered.3 And, as the Court of Appeal has observed, a “steely” approach is required.4
[12] Whether an offer of settlement was refused “without reasonable justification” is to be assessed by reference to the timing of the offer, its size, the reasonable
2 High Court Rules 2016, r 14.6(3)(b)(v).
3 BlueStar Print Group (NZ) Ltd v Mitchell [2010] NZCA 385, (2010) 9 NZELC 93,588 at [20].
4 At [20].
expectations of the party who refuses the offer and whether the party or parties were in a position to assess the merits of the offer when it was received.5
[13] In this case there is no evidence as to the defendants’ reaction to the settlement offer when it was made. There was no response to the offer. The defendants now offer an explanation for their rejection of the offer. I accept the explanation. As at March 2018 it could not be said their defence was without merit. Mr Cathcart’s report, and his evidence, were primarily directed to the state of the gates over which the defendants maintained the cattle had vaulted. His evidence was important but, ultimately, it was the evidence of Dr Laven (which I described as “compelling”) that sealed the plaintiffs’ case. The defendants maintained the cattle vaulted closed gates thereby damaging them. In the end, and with the assistance of Dr Laven’s evidence about the behaviour of cattle, I found that scenario to be “highly improbable”.
[14] At the stage when the settlement offer was made the defendants were not privy to Dr Laven’s evidence which became pivotal. While the settlement offer, had it been accepted, would have resulted in a more favourable outcome for the defendants than the judgment produced for them, the factual assessment was not straightforward and the defendants had a reasonable basis for their expectation of a successful outcome. The defendants also had available to them a tenable, if unsuccessful, claim for contributory negligence.
Scale costs
[15] The defendants accept scale costs on a 2B basis is appropriate except for the following four steps in the proceeding:
List of documents on discovery
(a)The plaintiffs claim a total of five days in respect of two lists of documents. The defendants do not dispute that two affidavits of documents were prepared but they note the affidavits listed the same 47 documents; that band A represents a reasonable amount of time for
5 Andrew Beck and others McGechan on Procedure (looseleaf ed, Brookers) at HR14.6.02(2)(a)(iii).
this step, and the plaintiffs should be entitled to claim only once. I do not think it is right to assess the content of the affidavit of documents and deem it as falling into a lesser costs category by reason only that a certain number of documents has been discovered. The discovery task had to be undertaken and an affidavit prepared and sworn. But I do accept that the exercise should be claimed only once, not twice, given the lists were identical. The time allocation should be 2.5 and not 5.0 days.
Inspection of documents
(b)I accept the defendants’ proposition that, having produced only 21 documents by way of discovery, a comparatively small amount of time would be needed to inspect the 21 documents. I have had regard for the nature of those documents which were primarily emails and invoices. Included also was the traffic crash report and the drive cam footage (which, as I noted in the judgment, ran to no more than 15 seconds). Accordingly, the time allocation for inspection is 0.5 days.
Plaintiffs’ preparation of briefs or affidavits
(c)The defendants submit that a relatively small amount of time would have been required to prepare the plaintiffs’ evidence which, they say, “totals 36 type-written pages dealing with relatively straight-forward issues and factual matters”. I am reluctant to assess the reasonableness of the time taken to prepare a party’s evidence for trial by reference only to the number of pages ultimately produced. Indeed, such an approach could have the unintended consequence of penalising a party for counsel’s efficiency and adherence to the requirements of the rules of evidence. In that regard I was struck by the impressive economy and efficiency with which the plaintiffs’ case was presented. I see no basis for reducing the time allocation claimed.
Preparation for hearing
(d)It is said the proceeding dealt with a relatively straightforward legal issue. Two of the plaintiffs’ witnesses were not required to give evidence in person at the trial and the remaining four witnesses gave straightforward evidence. The defendants note they called only three witnesses. I have considered the points but take the view band B is appropriate and the plaintiffs’ claim under this band is reasonable.
Second counsel
[16] The plaintiffs seek certification for second counsel. Both the plaintiffs and defendants were represented by senior and second counsel, all from out of town. The defendants submit the nature and complexity of the proceeding does not justify an allowance for second counsel. Further, the defendants contend their second counsel appeared for part of the trial only and at no cost. Citing Nomoi Holdings Ltd v Elders Pastoral Holdings Ltd the defendants submit the courts have recognised that in the majority of cases there is little need for second counsel.6
[17] I appreciate that category 2 cases span a wide range of proceedings and that there is no general rule as to when the court will certify for second counsel. I have decided not to so certify. Although a claim in negligence might be thought to automatically raise complexities and warrant a legal team in court, in this case the defendants accepted they owed a duty of care and the single issue was whether it was breached. That issue was determined after hearing from five witnesses called on behalf of the plaintiffs and three called for the defendants. The briefs of evidence were exchanged in advance and the trial proceeded over three days with closing arguments being delivered on the fourth day. In declining to certify for second counsel I bear in mind the observations which Chambers J made in Nomoi Holdings Ltd about contemporary trial practice. Counsel has knowledge of the legal issues and evidence well in advance of trial.7 This creates both an ability and an obligation to prepare in
6 Nomoi Holdings Ltd v Elders Pastoral Holdings Ltd (2001) 15 PRNZ 155 (HC).
7 At [17](a).
advance. And, as his Honour observed, the pre-trial work is reflected in the time allowances in the costs regime.8
[18] Declining to certify for second counsel does not in any sense reflect adversely on the obvious contribution made by Mr Weal who was second counsel for the plaintiffs. The question though is whether the nature of the particular trial justifies requiring the defendants to contribute to the costs of junior counsel appearing for the plaintiffs. In my view, the nature of this particular trial does not warrant certification for second counsel.
Dr Laven’s evidence
[19] On the morning of the first day of trial the plaintiffs’ interlocutory application to adduce the evidence of Associate Professor Laven was argued. I ruled that the brief could be admitted and I provided my reasons on 3 May 2018.9 I accepted Professor Laven’s brief was reply evidence. Critically, it dealt with a central issue in the case. I considered the Court would be assisted in having Mr Rowe’s explanation for the cattle vaulting the gate explored by the experts. Although the plaintiffs’ application was successful costs were reserved. I observed that the extra work required to respond to Dr Laven’s evidence might be appropriately recognised by an order for costs.10
[20] The defendants are entitled to have their costs of responding to Dr Laven’s evidence offset against the plaintiffs’ claim for costs in respect of their interlocutory application for leave to adduce Dr Laven’s evidence.
Disbursements
[21] The plaintiffs’ lead and junior counsel were based in Christchurch and Auckland respectively. Counsel for the defendants submits the cost of counsels’ travel and accommodation was not “reasonably necessary” for the conduct of the proceeding
8 At [18].
9 Hall’s Group Ltd v Rowe HC Whanganui CIV-2017-483-3, 3 May 2018.
10 At [18].
under r 14.12(2). There was no special justification for instructing out-of-town counsel.
[22] I am not aware of any principle supporting the proposition that when out of town counsel are instructed their travel and accommodation expenses are regarded as an improper disbursement. The question is whether the expenses claimed are reasonable. I have reviewed the schedule of the expenses claimed for travel and accommodation and associated costs. They appear entirely reasonable.
[23] As I have declined to certify for second counsel only the out of town expenses incurred by senior counsel are recoverable.
Mr Cathcart’s costs
[24] The plaintiffs seek reimbursement of three invoices tended by Investigation Services Ltd for attendances by Mr Cathcart. The invoice for $95.00 rendered on 5 October 2015 is disallowed. It is not obvious that the disbursement was incurred “for the purposes of the proceeding”. Mr Cathcart visited the Rowes farm on 15 May 2014, three weeks after the accident. The statement of claim was filed on 21 February 2017. No explanation was provided as to the nature of Mr Cathcart’s attendance on 5 October 2015. On its face, it does not qualify as a disbursement properly included in a claim for costs.
Interest
[25] A final matter was raised by the defendants. Issue is taken with my award of interest payable at a rate of five per cent per annum from 22 April 2014 to 31 October 2018, the date of the judgment. Mr Flinn, counsel for the defendants, makes the point that the proceeding was commenced prior to the coming into force of the Interest on Money Claims Act 2016. Therefore, the prior regime for calculation of interest applies. The repair costs claimed were incurred some six months after the date of the accident. Some of the other claims were in respect of costs incurred over a period of time from the date of the accident to the date of repair. Mr Flinn submitted “on the repair costs alone, this makes a difference of $4,646.27”. The suggestion is that I may take the pragmatic step of reducing the costs ordered by an equivalent amount or recall
the judgment to reflect that interest runs from the various dates of loss rather than the date of the accident.
[26] Before addressing the substance of the defendants’ submission, I make this preliminary point. At trial the defendants did not dispute the plaintiffs’ claims for their respective heads of loss. Mr Shannon, counsel for the plaintiffs, addressed in closing the issue of interest. Specifically, the plaintiffs sought interest at the prescribed rate from 22 April 2014. Mr Shannon submitted the alternative would be to award interest from the point when the plaintiffs incurred the expenditure or losses as a result of the accident. No submission concerning interest was made on behalf of the defendants. Yet the defendants would have the judgment recalled or that part of the judgment (if it is not recalled) addressing interest rendered ineffectual by taking at this point pragmatic steps to redress, presumably, a perceived imbalance.
[27] An award of interest is compensatory.11 In this case the award of damages was not simply to compensate the first plaintiff for the damage to its trailer or the second plaintiff for damage to its truck. The heads of loss claimed by the second plaintiff included replacement truck rental costs, recovery and towing costs, dumping and disposal costs of the products in the trailer, loss of income and increased road user charges. While some of the second plaintiffs’ losses were covered by the insurance policy it held at the time it also suffered significant losses that were uninsured, for example, the lost income for the run on 22 April 2014 in which it was engaged at the time of the accident and the cost of renting a replacement truck as well as increased road user charges.
[28] In the end, the award of interest comes down to what the justice of the case requires.12 P & T Trucking Ltd is a small company. Paul Farquhar and his wife own 100 per cent of the shares in P & T. Mr Farquhar deposed to the fact the uninsured losses of nearly $25,000 that P & T suffered as a result of the accident nearly put the business under. The overdraft had to be extended to cover the loss and Mr Farquhar described it as a time when he and his wife were “pretty close to pulling the pin on the business and giving up”. Instead they worked hard and spent the next three years
11 Day v Mead [1987] 2 NZLR 443 (CA) at 464.
12 At 464.
trying to dig themselves out of the hole Mr Farquhar described themselves as being in.
[29] I consider the justice of the case is served by the interest award that I have made.
Result
[30] The plaintiffs are entitled to the costs set out in sch B to Mr Shannon’s submissions except that:
(a)The time allocation for list of documents on discovery (Item 20) is reduced from 5.0 days to 2.5 days.
(b)The time allocation for inspection of documents (Item 21) is reduced from 1.5 days to 0.5 days.
(c)Appearance of second counsel (Item 35) is not certified.
(d)Costs and disbursements of second counsel are disallowed.
(e)Mr Cathcart’s fee of $95.00 is disallowed.
(f)I have ruled that the defendants are entitled to have their costs of responding to Dr Laven’s evidence offset against the plaintiffs’ claim for that interlocutory step. I would hope the specific calculation can be agreed between counsel without recourse to the Court.
Karen Clark J
Solicitors:
Duncan Cotterill, Auckland for Plaintiffs Wotton Kearney, Wellington for Defendants
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