Harrington v Wilding
[2019] NZCA 605
•3 December 2019 at 9.30 am
| IN THE COURT OF APPEAL OF NEW ZEALAND I TE KŌTI PĪRA O AOTEAROA |
| CA412/2018 [2019] NZCA 605 |
| BETWEEN | JONATHAN OWEN HARRINGTON |
| AND | TIMOTHY WILDING |
| Hearing: | 11 September 2019 |
Court: | Gilbert, Venning and Woolford JJ |
Counsel: | I G Hunt and C Light for Appellant |
Judgment: | 3 December 2019 at 9.30 am |
JUDGMENT OF THE COURT
AThe appeal is dismissed.
BThe cross-appeal is dismissed.
CWe make no order for costs.
____________________________________________________________________
REASONS OF THE COURT
(Given by Gilbert J)
Table of Contents
Introduction [1]
Mr Harrington’s appeal [10]
Mr Wilding’s cross-appeal [11]
Applicable principles [14]
Did Mr Wilding fail, without reasonable justification,
to accept settlement offers? [15]
Did the Judge err in assessing comparative success? [24]
Submissions [25]
Analysis [30]
Did the Judge err in disregarding the hacking of
Mr Harrington’s emails in assessing costs? [36]
Should the Judge have made a Sanderson order? [41]
Should the Judge have awarded costs to Mr Harrington
on his application for costs? [43]
Should the Judge have increased the costs award to
compensate Mr Harrington for the delay in issuing
the judgment? [46]
Conclusion [49]
Result [51]
Introduction
This appeal and cross-appeal are against a comprehensive costs judgment (comprising 82 pages including three schedules) delivered by Nicholas Davidson J on 22 June 2018.[1] In making his assessment as to how costs should be dealt with, the Judge had the unique advantages of having: presided over the 32-day trial; painstakingly analysed the many contested issues involved in the claims and counterclaims in the course of producing an interim results judgment on 5 April 2017[2] and a comprehensive (153 page) reasons judgment on 12 April 2017;[3] presided over a one‑day hearing of submissions on the various costs applications made on behalf of all parties; and grappled with the competing arguments about every conceivable aspect of costs in the course of preparing his lengthy and detailed costs judgment. This is an unpromising backdrop for a successful appeal against the exercise of a discretion in awarding costs.
[1]Wilding v Te Mania Livestock Ltd [2018] NZHC 1506 [Costs judgment].
[2]Wilding v Te Mania Livestock Ltd [2017] NZHC 649 [Interim judgment].
[3]Wilding v Te Mania Livestock Ltd [2017] NZHC 717 [Reasons judgment].
The Judge described the principal issue in the substantive litigation as being whether Mr Wilding (the first plaintiff in the High Court and the respondent in this Court) should have the opportunity to acquire the shares of the other defendant shareholders in Te Mania Livestock Ltd (the company) or whether the company should be liquidated, as sought by Mr Harrington (the third defendant in the High Court and the appellant in this Court). This was in the context of claims and counterclaims alleging oppressive and unfairly prejudicial conduct under s 174 of the Companies Act 1993. The Judge decided that Mr Wilding should be given the opportunity to purchase the defendants’ shares rather than making an order to wind up the company. Mr Wilding subsequently elected to purchase the shares at fair value as assessed by the Court. Various other claims and counterclaims failed. The Judge attributed the cause of the underlying dispute to a falling out between Mr Harrington and Mr Wilding which “descended into acrimonious recrimination”.[4]
[4]At [522].
The Judge concluded that neither Mr Harrington nor Mr Wilding achieved success on all issues. Mr Wilding succeeded on the share purchase/liquidation contest and in defeating Mr Harrington’s malicious prosecution and abuse of process claims. On the other hand, Mr Wilding failed on his monetary claims. Success on the share valuation issues was shared.
The Judge ordered Mr Wilding to pay Mr Harrington $103,500 costs and $27,500 disbursements. This award was based on the following broad analysis:
(a)Because success overall was shared, neither received costs for any steps taken before 28 June 2016.
(b)Mr Wilding ought to have accepted (on 28 June 2016) a global offer made by the defendants. This was better than the outcome he achieved following trial.
(c)Taking this into account, Mr Wilding was ordered to pay scale costs to Mr Harrington, uplifted by 50 per cent, after 28 June 2016.
(d)These costs were reduced by one third to allow for the time that would have been required in any event to resolve the share valuation issues. This reflected the Judge’s assessment that two of the six weeks of trial time would have been required for this purpose.
(e)Mr Harrington was awarded 50 per cent of his disbursements, consistent with the Judge’s overall assessment of relative success.
Mr Wilding was ordered to pay to the other defendants costs of $201,000 and $30,000 disbursements. The Judge considered these defendants were in a different category. In summary, the Judge said that Mr Wilding “had less and limited success against these defendants, and they had undoubted success against him”.[5] Those defendants do not challenge this award and they are not involved in this appeal.
[5]Costs judgment, above n 1, at [206].
Mr Harrington complains that he should have received: a significantly higher costs award (comparable to the other defendants); costs on the application for costs; and interest on the award to take account of the time the costs judgment was reserved. Mr Harrington lists 13 grounds of appeal in his notice of appeal, two of which are no longer pursued.
For his part, Mr Wilding complains that the Judge should have directed that costs lie where they fall as between him and Mr Harrington. Further, he says the Judge should have made a Sanderson order requiring Mr Harrington to pay the costs awarded to the other defendants instead of him.[6] Mr Wilding lists six grounds of appeal in his notice of cross-appeal. He also gives notice to support the judgment on other grounds.
[6]Sanderson v Blyth Theatre Co [1903] 2 KB 533 (CA).
The parties’ approach to costs — leave no stone unturned and never say die — is a continuation of the way they conducted the underlying litigation. The Judge described their approach in the following way in the Reasons judgment:
[6] Along the way a commercial approach to resolution was lost. These Reasons address multiple allegations and counter allegations played out over 32 days of hearing, with prior and subsequent litigation attendances, more than 1,300 pages of evidential transcript, and several thousand documentary exhibits. The value of the shares in dispute is out of all proportion to the costs of this litigation, which has unfolded with excruciating detail and contest on every conceivable issue.
The Judge made similar comments in his Costs judgment under the heading “An exhaustive approach”:
[23] The determination to pursue every issue to the last evidential vestige greatly stretched the trial, because at heart each of the multiple issues was relatively straightforward at law. … It is no exaggeration to say the way the litigation was conducted stretched the parties’, counsel’s, and the Court’s resources. It was excessive in its reach, but as discussed further, there was a good opportunity to avoid all but the valuation issues, which opportunity was not seized.
Mr Harrington’s appeal
Mr Harrington appeals against the award of costs made in his favour on the following grounds:
(a)The Judge should have assessed the proceeding as being category 3, not category 2. (Not pursued).
(b)The Judge should have awarded Mr Harrington costs on Mr Wilding’s unsuccessful monetary claims although he acknowledges these would have to be offset by costs on the claims on which he failed (malicious prosecution/abuse of process and his application to put the company into liquidation).
(c)The Judge failed to take account of earlier written offers made without prejudice except as to costs (rr 14.10 and 14.11 of the High Court Rules 2016).
(d)The Judge failed to take account of “collateral attacks and abuse of process” by Mr Wilding (rr 14.6(3)(b)(ii) or 14.6(3)(d)).
(e)The Judge failed to take account of “egregious misconduct” by Mr Wilding in the hacking of Mr Harrington’s confidential and legally privileged emails for litigation advantage (r 14.6(3)(d)).
(f)The Judge failed to take into account that Mr Wilding’s allegations of animal neglect by Mr Harrington failed because no loss was proved and these allegations were in any event irrelevant to Mr Wilding’s pleaded claims under s 174 of the Companies Act.
(g)The Judge erred in concluding that the animal neglect allegations were relevant to remedy, namely whether Mr Wilding should be given the right to purchase the shares or whether the company should be liquidated.
(h)The Judge erred in reducing costs to Mr Harrington to take account of a notional two-week valuation trial.
(i)The Judge erred in applying an uplift of 50 per cent on the costs awarded to Mr Harrington after having reduced costs on a notional two‑week valuation trial. The reduction in costs (otherwise correct) should have been applied to the uplifted level of costs. (Not pursued).
(j)The Judge erred in differentiating between the costs awarded to Mr Harrington and the costs awarded to the other defendants.
(k)The Judge erred in failing to award the full amount of disbursements incurred by Mr Harrington.
(l)The Judge erred in failing to award costs to Mr Harrington on his application for costs.
(m)The Judge erred by failing to take account of Mr Harrington’s loss of use of money caused by the delay in giving judgment on costs.
Mr Wilding’s cross-appeal
Mr Wilding cross-appeals on the following grounds:
(a)The Judge erred in finding that Mr Wilding should have accepted an offer made on 26 June 2016, shortly after the commencement of the trial.
(b)The Judge erred in failing to take into account that Mr Wilding proved actual oppression by Mr Harrington, including animal neglect.
(c)The Judge erred in failing to place sufficient weight on Mr Harrington’s conduct leading to the breakdown in the relationship between the shareholders.
(d)The Judge erred in failing to take account of Mr Harrington’s conduct (theft of hay) and his subsequent claims for malicious prosecution and/or abuse of process (arising out of this) were wholly lacking in merit.
(e)The Judge erred in not making a Sanderson order requiring Mr Harrington (rather than Mr Wilding) to pay the costs awarded to the successful defendants.
(f)The Judge erred in failing to take into account that Mr Wilding had not committed any acts of oppression or any other conduct falling within the ambit of s 174 of the Companies Act.
Mr Wilding supports the judgment on other grounds. These are the grounds set out at [11(a)] and [11(b)] above and two further grounds. The two further grounds are that the Judge:
(g)erred in concluding that Mr Wilding was responsible for hacking Mr Harrington’s emails; and
(h)ought to have concluded Mr Harrington was “liable” under s 174 of the Companies Act for animal neglect.
For convenience, we have assembled these grounds into groups and will address them under the following headings:
(a)Did Mr Wilding fail, without reasonable justification, to accept settlement offers?
(b)Did the Judge err in assessing comparative success?
(c)Did the Judge err in disregarding the hacking of Mr Harrington’s emails in assessing costs?
(d)Should the Judge have made a Sanderson order?
(e)Should the Judge have awarded costs to Mr Harrington on his application for costs?
(f)Should the Judge have increased the costs award to compensate Mr Harrington for the delay in issuing the judgment?
Applicable principles
A decision on costs involves the exercise of a discretion. The discretion is not unfettered and must be exercised in accordance with the principles set out in pt 14 of the High Court Rules. An appeal against the exercise of such a discretion cannot succeed unless it can be shown that the Judge acted on a wrong principle, failed to take account of relevant considerations, factored in the irrelevant or was plainly wrong.[7]
Did Mr Wilding fail, without reasonable justification, to accept settlement offers?
[7]May v May (1982) 1 NZFLR 165 (CA); and Manukau Golf Club Inc v Shoye Venture Ltd [2012] NZSC 109, [2013] 1 NZLR 305.
Under this head we will address ground (c) of the appeal and ground (a) of the cross-appeal.
As noted, the Judge considered that Mr Wilding should have accepted an offer made by Mr Harrington on 23 June 2016, which was endorsed by the other defendants on 26 June 2016, shortly after the trial commenced.[8] Under this global settlement proposal Mr Wilding would purchase the defendants’ shares including those of Mr Harrington, the parties would walk away from all their claims and counterclaims, and costs would lie where they fall. The only issue that would remain to be resolved at the trial would be the price to be paid, namely the fair value of the shares. The Judge described this as a “thoroughly sensible proposal”.[9]
[8]Costs judgment, above n 1, at [198]–[199].
[9]At [198] (emphasis in original).
The Judge estimated that two weeks of trial time would have been sufficient to dispose of the valuation issues.[10] Thus, acceptance of the offer would have saved four weeks of the total trial time.[11] For that reason, the Judge ordered Mr Wilding to pay two-thirds of the costs claimed by Mr Harrington (subject to other adjustments) from 28 June 2016, the date the offer should have been accepted.[12]
[10]At [199].
[11]At [213(d)].
[12]At [213(d)].
Mr Hunt, for Mr Harrington, submits that Mr Wilding ought to have accepted earlier settlement offers and the costs award should have been extended to cover costs incurred between the date of those offers and 28 June 2016. Mr Dale QC, for Mr Wilding, takes the opposite position. He submits that all parties made reasonable efforts to achieve a settlement and the defendants’ global offer on 23/26 June 2016 came too late. He contends that all settlement offers should have been disregarded in assessing costs.
The first offer Mr Harrington relies on is dated 24 July 2015. This was an offer on behalf of three of the defendants, Mr Harrington, WH Holdings Ltd (the second defendant) and Wong Chun Win (the fifth defendant) to sell their shares to Mr Wilding at $5.08 each, a total of $1,523,949. It was a condition of the offer that the company pay Mr Harrington an amount of $186,795 plus interest in accordance with an order made by the Employment Relations Authority. Like the Judge, we do not consider this offer has any relevance to costs. First, the amount stipulated for the shares far exceeded the amount subsequently assessed as the fair value — $3.43 per share. Secondly, acceptance of the offer would not resolve the litigation because it related to only 44.43 per cent of the total shares and was made on behalf of only three of the six defendants.
The second “offer” relied on is a letter from Mr Harrington’s solicitors to counsel for Mr Wilding and is dated 8 October 2015. This lengthy letter is also not relevant to costs. It records:
32.This letter is therefore not, as such, a Calderbank proposal. Nor is it a proposal to settle on any terms other than on terms similar to those proposed in the offer of 24 July 2015. This is not a renewal of that offer, but an indication that, were your client to accept that a solution similar to that proposed should be negotiated, when the door was open for him to approach his fellow shareholders with positive intent to resolve matters in a realistic and economic basis (sic).
The third “offer” relied on is a letter dated 11 May 2016. This letter is also irrelevant to the issue of costs because it does not contain any offer. It records Mr Harrington’s view that “an acceptable outcome would be a transfer of shares to [Mr Wilding]”. However, the solicitors acknowledged that the “proposal did not presume that such transfer should be at any particular value — whether liquidation, fair value, fair market value, or some other basis”. Mr Harrington’s solicitors agreed with counsel for Mr Wilding’s “suggestion that there should be agreement as to the basis upon which the shares are valued, and what is required to achieve this”. The letter concludes on this aspect by seeking “clarification of your client’s intentions” and whether he has “any alternative proposals to make, to settle these proceedings”.
Finally, Mr Harrington refers to an offer made on 3 June 2016, some three weeks prior to the offer the Judge regarded as decisive. The problem with this offer was that, although the share price offered was below that set following the trial (average share price of $3 per share cf $3.43), the offer was conditional on transfer to the second defendant of a grazing licence of land owned by the Department of Conservation.[13] The Judge found that this licence was held by Mr and Mrs Wilding on behalf of the company, as Mr Wilding asserted, not for the second defendant. Taking that into account, the Judge considered it was not unreasonable for Mr Wilding to reject this offer.[14] The Judge considered the rights to this land were properly regarded as important in the context of the farming operation.
[13]At [194].
[14]At [197].
We are not persuaded that the Judge made any appealable error in placing no weight on this letter, rather on the offer made three weeks later. We agree with the Judge’s assessment that the 23/24 June 2016 global offer was a very constructive proposal that ought to have been accepted. Though it came late, it would have saved considerable court time and substantial costs for all parties. We are not persuaded the Judge was wrong to take Mr Wilding’s rejection of this offer into account in fixing costs.
Did the Judge err in assessing comparative success?
It will be convenient to address grounds (b), (d), (f), (g), (h), (j) and (k) of the appeal and grounds (b), (c), (d), (f) and (h) of the cross-appeal/supporting grounds under this general heading.
Submissions
Mr Hunt submits the Judge was wrong to conclude that there was some equality of success between Mr Harrington and Mr Wilding such that Mr Harrington should not receive any costs prior to 28 June 2016 and only half of his disbursements. As noted, that was the date the Judge considered Mr Wilding should have accepted the defendants’ global offer. Mr Hunt notes that Mr Wilding failed on all his claims against Mr Harrington, including the stock neglect claim which took up significant hearing time. As to Mr Wilding’s success on the share sale/liquidation contest, Mr Hunt relies on the pre-trial offers made by Mr Harrington to sell his shares to Mr Wilding (referred to above) to support his contention that Mr Wilding achieved nothing more by going to trial than what he had already been offered.
Mr Hunt argues that the only discrete issues on which Mr Harrington failed were his malicious prosecution/abuse of process claims. Assuming costs calculated on a category 2, band B basis on those claims, Mr Hunt calculates that Mr Wilding was entitled to costs of $13,491, assuming one and a half days of hearing time to dispose of them. In addition, Mr Hunt says Mr Wilding was entitled to $14,481, being the agreed costs in separate proceedings in which Mr Harrington unsuccessfully attempted to liquidate the company.[15] On that basis, Mr Hunt contends the Judge ought to have awarded costs to Mr Harrington from the commencement of the proceeding, offset only by these two amounts. Mr Hunt says that because the liquidation costs had been agreed prior to the commencement of the trial, these should not have been relevant to the Court’s assessment of the parties’ comparative success or failure in the present proceeding.
[15]Harrington v Te Mania Livestock Ltd [2016] NZHC 785.
Mr Hunt argues that the Judge failed to take adequate account of the significant hearing time consumed in addressing Mr Wilding’s claims, particularly the stock neglect claim. Mr Hunt says these claims were always doomed to fail and some were so hopeless they were abandoned by Mr Wilding in closing submissions.
Mr Dale realistically acknowledges that this Court will be reluctant to interfere with the Judge’s assessment of the overall merits, especially given there were successes and failures on both sides. However, he says that if this Court is minded to interfere with the Judge’s assessment, then it should do so in favour of Mr Wilding because he succeeded in proving misconduct by Mr Harrington, whereas Mr Harrington did not establish any conduct relevant to the analysis under s 174 of the Companies Act on the part of Mr Wilding.
In developing this submission, Mr Dale refers to three issues in particular. These are: the animal neglect issue; Mr Harrington’s attempt to wind up the company in the separate proceedings for non-payment of holiday pay (a debt that had been satisfied); and a proposal by the defendants to lease grazing land to a competitor contrary to the company’s interests. Mr Dale claims there was overwhelming evidence that Mr Harrington deliberately starved the livestock and the Judge should not have exonerated Mr Harrington on a basis of extreme stress from the breakdown in relationships. This was not pleaded, was not supported by the evidence and was not dealt with in submissions. Mr Dale points out that the pleaded defences — a wet winter, selenium deficiency and hard farming — all failed. Further, Mr Dale says Mr Wilding was forced to intervene and defend the separate winding-up proceedings initiated by Mr Harrington against the company. Although this was based on a statutory demand for holiday pay that had been paid, Mr Harrington and the second and third defendants voted against the company being allowed to instruct solicitors or file a defence. Mr Dale says this was a plain breach by the defendants, including Mr Harrington, of their obligations to the company. Mr Dale also refers to Mr Harrington’s proposal to lease land to a competitor, rather than renewing the company’s lease of this land, in circumstances where Mr Wilding considered the land was important to the company’s continued success.
Analysis
There can be no real dispute that the Judge was correct to conclude that overall success was shared. As the Judge observed, Mr Wilding succeeded on remedy, which was the primary contest under s 174 of the Companies Act. Mr Wilding was given the option to purchase the defendants’ shares at fair value; Mr Harrington failed to obtain an order winding the company up. Mr Wilding failed on his claims against Mr Harrington. Mr Harrington failed on his claims against Mr Wilding.
We have already explained why we reject Mr Hunt’s submission that Mr Wilding was not justified in rejecting earlier “offers”. It follows that one of the principal premises of Mr Hunt’s overall success submission — that Mr Wilding achieved nothing more by proceeding to trial than he had been offered much earlier — falls away. The earlier offers were not relevant to the assessment of costs up to 28 June 2016.
We agree with the Judge that the parties’ conduct underpinning the discrete claims was also relevant to the claim under s 174 of the Companies Act, including the appropriate remedy. The Judge was entitled to take this into account in assessing comparative success broadly, rather than attempting to calculate costs for each party based solely on the time required to deal with each of their discrete claims. Indeed, in a case such as this where the conduct giving rise to the discrete claims was also relevant to whether there had been oppressive or unfairly prejudicial conduct and the appropriate remedial response, a broad assessment was required to produce a just outcome on costs. The animal neglect claim is a good example. While Mr Wilding failed on his claim for loss on the animal neglect issue, Mr Harrington did not by any means escape criticism for his care of the animals. The Judge commented on this issue in his Costs judgment as follows:
Stock management/neglect
[17] I found that something went seriously wrong with the stock management, which justifiably alarmed Mr Wilding. This may have been associated with the extreme stress on Mr Harrington arising from the breakdown in relationships. I concluded that Mr Harrington did not deliberately neglect or starve the animals, but his high standards fell away and rational decision making was compromised. [The company’s] fine reputation was put at risk by this. It was not deliberate but the mismanagement was a “serious and unusual circumstance”, which occupied a great deal of the hearing, as did the circumstances in which the [Department of Conservation land] was withdrawn from [the company’s] occupation. These were each in different ways manifestations of the breakdown in relationships and the parties’ different aspirations for the future of [the company], and they deepened distrust, which was already embedded.
(Emphasis in original).
Later in his analysis, the Judge again commented on the merits and relevance of this issue:[16]
Mr Wilding’s stock neglect claim was not factually hopeless as the evidence of neglect was stark and troubling. It was not viable as an action in damages or compensation under s 174, but it bore on the contest for [the company’s] shares and the liquidation.
[16]Costs judgment, above n 1, at [184].
The Judge found that Mr Harrington had wrongfully attempted to liquidate the company in the separate proceedings we have referred to. While costs for those proceedings were settled prior to the commencement of the trial in this proceeding, Mr Harrington’s conduct remained relevant for the reasons the Judge briefly explained in his Costs judgment:
Liquidation of [the company]
[19] In proceedings antecedent to trial, Mr Harrington had wrongfully continued his attempt to liquidate [the company], even though its employment liability to him had been met. This incensed Mr Wilding, whose actions alone saved the company from liquidation. Mr Harrington’s conduct and the at least tacit support of other defendants was in my view not just ill founded, but antithetical and harmful to the interests of [the company].
(Emphasis in original).
The Judge was uniquely placed to make the required assessment of comparative success overall. He took great care in doing so. We are far from persuaded that he made any appealable error in his careful assessment of this issue after considering all matters urged upon him. In short, the Judge made no error of principle, he took account of all relevant considerations, put to one side irrelevant considerations, and was not “plainly wrong”. There is no basis for us to interfere with his assessment.
Did the Judge err in disregarding the hacking of Mr Harrington’s emails in assessing costs?
Here we address ground (e) of Mr Harrington’s appeal and ground (g) of Mr Wilding’s supporting grounds.
The Judge explained the background to this issue in his Reasons judgment.[17] Mr Wilding’s brother-in-law, Mr Heyward, had set up a cloud‑based email system for the company and he knew the password for Mr Harrington’s email address. When the relationship between Mr Wilding and Mr Harrington deteriorated, Mr Heyward passed on to Mr and Mrs Wilding emails sent or received by Mr Harrington (or his partner) he thought might be helpful. These documents were in a date range from 2010 until 23 September 2014 although the hacking occurred over a shorter period. Some of these documents were not confidential and were discoverable, but some were legally privileged in that they contained advice from Mr Harrington’s solicitor, Mr Thwaites. The Judge described this latter category as follows:[18]
Emails in June 2013 included Mr Thwaites’ advice sent to Mr Harrington before a Board meeting. There was correspondence with Mr Thwaites in 2014, as to how Mr Harrington and others might exit [the company].
[17]Reasons judgment, above n 3, at [86]–[89].
[18]At [89].
Mr Wilding did not initiate the hacking. The Judge noted that Mr Wilding asked Mr Heyward to stop, but he did not do so.[19] As soon as Mr Wilding’s counsel found out about the hacking, it was disclosed to the defendants.[20] The Judge observed in his Costs judgment that there was no issue at the trial about what had occurred saying the issue “was straightforward evidentially and there was no contest about the illicit nature of the hacking”.[21] The Judge considered it was mostly relevant to whether Mr Wilding should be given the opportunity to purchase the shares.[22]
[19]At [88].
[20]At [88].
[21]Costs judgment, above n 1, at [21].
[22]At [21] and [44].
Mr Hunt submits that an order for increased costs should have been made to reflect that these emails were hacked to obtain litigation advantage.
We disagree. The hacking of the emails by Mr Heyward occurred outside the period of the litigation, prior to 23 September 2014, whereas the proceeding was not filed until 17 December 2014. The hacking did not contribute to the cost of the litigation, it merely formed part of its subject matter. The Judge was entitled to place no weight on this when determining who should bear the costs of the litigation.
Should the Judge have made a Sanderson order?
This is ground (e) of Mr Wilding’s cross-appeal. Mr Dale suggests that if this Court is persuaded to interfere with the Judge’s exercise of discretion, one option, in addition to a direction that costs lie where they fall as between Mr Wilding and Mr Harrington, would be to make a Sanderson order requiring Mr Harrington to pay the costs of the other defendants.
This is a very ambitious submission which we have no hesitation in rejecting. We have already found that the Judge was entitled to award increased costs against Mr Wilding for the costs of trial after 28 June 2016 because he unreasonably failed to accept a global settlement offer made by all defendants. There could be no principled reason for requiring Mr Harrington to pay the other defendants’ costs after that date; indeed, it would be perverse to make such an order in the circumstances. All defendants (other than the fourth defendant) had to be joined to the proceeding given the nature of the relief sought, including under s 174 of the Companies Act. Mr Harrington was not an unsuccessful defendant who should be ordered to pay the costs of the successful defendants. The defendants were equally successful in respect of Mr Wilding’s claims. Mr Harrington’s costs award was reduced to reflect that he failed on his counterclaims against Mr Wilding.
Should the Judge have awarded costs to Mr Harrington on his application for costs?
This is ground (l) of Mr Harrington’s appeal. The Judge declined to award costs on the application for costs for the reasons set out in the following paragraph of his Costs judgment:
[221] Costs are sought in respect of these very thorough and lengthy submissions, accompanied by large volumes of authorities, bundles of supporting documents, and associated memoranda. Each party has had some wins and some losses and I decline to make an order for “costs on costs”.
Mr Hunt notes that the High Court sometimes awards costs for the costs incurred in seeking costs. He says, citing the High Court’s judgment in Parsot v Greig Developments Ltd, it is “settled law” that a successful party is “entitled” to an appropriate allowance for the preparation of costs memoranda.[23] He contends the Judge should have awarded Mr Harrington costs for preparation of costs submissions and for the one-day hearing on costs.
[23]Parsot v Greig Developments Ltd (2008) 18 PRNZ 995 (HC) at [23].
There is no inflexible rule that a party who is awarded costs is “entitled” to costs associated with the application for costs. Costs for each step in a proceeding are always at the discretion of the court. The Judge considered that success on the respective costs applications was shared. That assessment is borne out by the present appeal and cross-appeal on costs. We see no appealable error in the Judge’s exercise of discretion in not awarding costs to Mr Harrington on his partially successful costs application.
Should the Judge have increased the costs award to compensate Mr Harrington for the delay in issuing the judgment?
This is ground (m) of Mr Harrington’s appeal. The Judge addressed this issue as follows:
[222] Mr Hunt submitted I should make the equivalent of an order for interest on costs. The law he cites is against this but there is a “use of money” impact on the defendants by delay in judgment. It is, however, very small, and would not impact the broad exercise of discretion which is at the date of judgment.
Mr Hunt submits that the Judge failed to exercise his discretion properly on this issue given that the Costs judgment was not delivered until 22 June 2018, the costs hearing took place on 3 August 2017 and the costs were mostly incurred prior to December 2016. Mr Hunt says Mr Harrington should have been compensated for being kept out of his money for this lengthy period by an increased award of costs. He acknowledges that the court cannot award interest on costs before costs have been awarded.
Section 20 of the Interest on Money Claims Act 2016 provides that a court may not award interest under the Act on costs awarded to a party for any period preceding the date the costs are awarded. We do not consider this prohibition can be subverted by increasing an otherwise appropriate costs award, in effect to recognise interest on the costs incurred.
Conclusion
An appeal against the exercise of a discretion, such as a decision on costs, cannot succeed unless it can be shown that the Judge acted on a wrong principle, failed to take account of relevant matters, factored in the irrelevant, or was plainly wrong. No such error has been demonstrated in this case. Any reading of the comprehensive Costs judgment demonstrates the considerable care the Judge took in considering all arguments advanced before him on the competing costs applications. Nothing was overlooked. There is no basis for us to interfere with the Judge’s carefully reasoned conclusions. The appeal and cross‑appeal must accordingly be dismissed.
Both parties sought costs for the appeal. As neither the appeal nor the cross‑appeal has succeeded, costs should lie where they fall.
Result
The appeal is dismissed.
The cross-appeal is dismissed.
We make no order for costs.
Solicitors:
Young Hunter, Christchurch for Appellant
Ewart & Ewart, Auckland for Respondent
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