Hawkes Bay Power v G G Graham

[2003] NZCA 119

IN THE COURT OF APPEAL OF NEW ZEALAND

CA162/02

BETWEENHAWKES BAY POWER DISTRIBUTORS LIMITED

Appellant

ANDG G GRAHAM

Respondent

Hearing:12 June 2003

Coram:Blanchard J
Panckhurst J
O'Regan J

Appearances:  D J White QC for Appellant

G G Graham in Person

Judgment:19 June 2003 

JUDGMENT OF THE COURT DELIVERED BY O’REGAN J

[1]       This is an appeal against a decision of Ellis J to decline an application made by the appellant, Hawkes Bay Power Distributors Limited (the company) for an award of costs against the respondent, Mr Graham, after the company had been successful in the substantive proceedings between the parties in the High Court.

History

[2]       The dispute between the company and Mr Graham has a long history.  It arises from the acquisition by the predecessor to the company, the Hawkes Bay Electric Power Board (the Board), of the electricity retailing business of the Napier City Council, which was known as Bay City Power.  That acquisition took place in September 1991.  Mr Graham was a Bay City Power customer, and as a result of the acquisition became a customer of the Board.  The Board charged a higher price for power to former customers of Bay City Power than it charged to its other customers in the vicinity of Napier, which Mr Graham believed contravened the Electrical Supply Regulations 1984.  Those Regulations were revoked in April 1993, so his claim related to the period from September 1991 until April 1993.   Mr Graham alleged that he was overcharged by $187.92.  About 5,000 other customers of Bay City Power were similarly affected.

[3]       Mr Graham issued proceedings against both the company and the Attorney General.  The significant steps in the litigation are:

a)On 14 September 1995 a statement of claim was issued against the company and the Attorney General seeking relief on the grounds of breach of statutory duty, ultra vires, mistake of fact, unauthorised sub-delegation, uncertainty, taking irrelevant considerations into account, bad faith/improper purpose and the common law of monopolies;

b)The parties agreed on three questions of law for decision, which were to be determined on the basis of an agreed statement of facts.  These came before Neazor J and he answered those questions favourably to Mr Graham in a judgment dated 4 September 1998;

c)The company appealed to this Court.  In a judgment dated 9 June 1999, this Court allowed the company’s appeal.  On the key area of dispute this Court determined that the Board would not have been precluded on supplying on differential terms in some circumstances, but the agreed statement of facts did not allow a final determination as to whether those circumstances existed;

d)As a result of the 1999 decision of this Court, the company’s solicitors wrote to Mr Graham’s solicitors on 14 July 1999 indicating on a without prejudice basis that if Mr Graham were to discontinue his proceedings, the company would agree to an order that no costs ought to be made against Mr Graham.  This offer was not accepted.

e)Mr Graham filed an amended statement of claim on 18 May 2000.  By this stage Mr Graham was not legally represented and he has conducted his own case since that time.  The Attorney General was no longer a defendant and the grounds of relief were limited to breach of statutory duty, the common law of monopolies and a new cause of action, breach of the New Zealand Bill of Rights Act.

f)The company then applied to the High Court for security for costs.  In a judgment dated 25 September 2000, Master Thomson ordered that Mr Graham provide security in the sum of $50,000.  The Master commented that the merits were overwhelmingly against Mr Graham.  He did not however, make an order for costs against Mr Graham in relation to the application for security, but commented that Mr Graham needed to appreciate that this was the last indulgence he was likely to be granted by the Courts in respect of costs, if the case progressed further.

g)Mr Graham filed a further amended statement of claim on 13 November 2000.  A new defendant was added – the Hawkes Bay Power Consumers’ Trust (the Trust).  There was also an additional ground for relief, breach of the trust deed establishing the Trust.

h)Mr Graham sought review of the Master’s decision to require $50,000 security for costs.  In a judgment dated 13 March 2001, Goddard J reduced the order for security for costs from $50,000 to $25,000.  She noted that neither Neazor J nor this Court had made any order for costs and that the company had expressly waived seeking costs in this Court, even though it was successful.  She ruled that the company’s estimate of the costs it would incur if the matter proceeded to trial in the High Court was inflated.  She also commented that the judgment of this Court rendered it unlikely that Mr Graham would ultimately succeed, and that an order for security for costs was therefore appropriate “notwithstanding any vestigial public interest in the case”.  Mr Graham did not appeal against the decision of Goddard J and provided the $25,000 security.

i)A further amended statement of claim was filed by Mr Graham on 4 May 2001.  The Trust was no longer a defendant and the only ground on which relief was sought was breach of statutory duty by the Board.

j)On 20 November 2001, the company’s solicitors wrote to Mr Graham offering not to seek costs if he discontinued the proceeding and agreed not to make further claims in relation to the subject matter of the proceeding.  Mr Graham did not accept the offer.

k)The matter then proceeded to trial in the High Court at Napier on 3-4 December 2001.  In a judgment dated 7 December 2001, Ellis J ruled in the company’s favour, determining that the circumstances in which this Court had said it would have been lawful for the Board to charge a differential tariff did exist at the relevant time and that the charges for electricity to Mr Graham during the relevant period were not therefore unlawful.  On the subject of costs, Ellis J said (at paragraph 18): 

The plaintiff has failed in his claim and he has been under notice that substantial costs may be claimed against him, and that he had little or no chance of success.  There was little personal profit in the claim for him personally, and his actions have been motivated by a strong sense of injustice.  If an injustice has been done, it has not been done by the defendant as I have tried to explain.  In all the circumstances, I would like to suggest that the plaintiff agrees to take the matter no further and that the defendant does not pursue the question of costs.  The question of costs is accordingly reserved.

l)Mr Graham did not appeal against the decision of Ellis J within the 28 day appeal period.  However, this was a mistake on his part because he believed that the time for appealing ran from the date of the sealing of the judgment, rather than the date of its delivery, and the sealed judgment had not been sent to him because of an oversight on the part of the company’s solicitors.  He therefore applied to this Court for leave to appeal out of time.  That application was heard on 24 April 2002.  In this Court, the company accepted that the failure to appeal in time had been unintended and had occurred for the reasons which Mr Graham had given, but it argued that special leave to appeal should not be granted because, in the circumstances, Mr Graham’s claim was frivolous, vexatious and/or without merit.  Mr Graham’s application was declined because his appeal was really an attempt to have this Court reconsider the interpretation of the relevant regulation which had been given in this Court’s judgment of 9 June 1999.  That matter was res judicata.  Mr Graham had sought that a full Court of five Judges should sit to reconsider the issues dealt with in the June 1999 judgment so that the Court could “rectify” what he said was its earlier “flawed” judgment.  It was noted that no application for recall of that judgment had ever been made and there had been no appeal from it, so that it would not be possible for this Court to review the decision in any further hearing between the parties.

m)As Mr Graham had not accepted Ellis J’s proposal that he take matters no further, the company applied to the High Court for costs in relation to the proceeding heard by Ellis J.  In a judgment dated 16 July 2002, Ellis J noted that Mr Graham had not elected to let the matter rest, and costs had therefore been sought.  However, he refused the application for costs.

n)Mr Graham then applied to this Court to recall its judgment of 24 April 2002 (in which leave to appeal against the substantive decision of Ellis J was declined).  This Court delivered a judgment on 25 September 2002 dismissing that application.  This Court awarded costs of $500 against Mr Graham, but pointed out that it was a lenient order and warned him he could not expect any further indulgence in relation to costs if he attempted to continue the litigation and was unsuccessful.

o)Mr Graham then made a further application to recall this Court’s judgments of 25 September and 24 April 2002.  This application was also dismissed.

p)Mr Graham then applied again to this Court for recall of all of the judgments of this Court.  That application has been dealt with administratively.

The costs judgment of Ellis J

[4]       The judgment which is the subject of the present appeal was issued by Ellis J on 16 July 2002.  It is brief.  The essential reasoning is contained in paragraph 3 which says:

I consider this to be public interest litigation which has in fact gone beyond what might reasonably have been expected.  However, I have no doubt as to the good faith of Mr Graham and as to his genuine and public spirited feeling of grievance.  There was never to be any financially significant reward for him.

The Company’s submissions

[5]       Counsel for the company, Mr White QC, accepted that the decision of the Judge to decline the application for costs was the exercise of a discretion and that this Court would be reluctant to interfere.  However, he argued this was one of the rare exceptions where the Court should interfere because the Judge had been wrong in principle, and was plainly wrong in his conclusion.

[6]       Mr White referred us to paragraph 18 of the Judge’s substantive judgment (reproduced in paragraph 3(k) above) in which the Judge had recorded that Mr Graham was under notice that he risked a substantial costs award against him, that he had little or no chance of success and that if any injustice had been done, it had not been done by the defendant.  He noted that Mr Graham had not taken up the Judge’s suggestion to let the matter lie, but rather had sought to appeal to this Court.  He said these were relevant factors to the decision on costs, but had not been referred to in the costs judgment.

[7]       Mr White particularly questioned the Judge’s characterisation of the proceedings as public interest litigation.  He argued that the public interest element had evaporated with the decision of this Court on 9 June 1999, and noted that this had been accepted by both Master Thomson and Goddard J in their decisions relating to security for costs.  Mr White argued that by the time the case had gone to trial before Ellis J, no public interest element remained.

[8]       Mr White referred to the warnings given by both Master Thomson and Goddard J about the likelihood of failure and the risk of costs, particularly the reference by the Master to the decision not to award costs on the first security for costs application, being the “last indulgence”.

[9] Mr White pointed out that Mr Graham had spurned two offers of settlement which had been made on 14 July 1999 and 20 November 2001 respectively. He said these offers were clearly relevant under R 48G of the High Court Rules and should have been taken into account by the Judge in exercising his discretion.

[10]     Mr White said the actual costs incurred by the company in this litigation greatly exceeded the amount of the security held by the High Court.  He made it clear that the claim for costs related only to the case heard by Ellis J (and not to the earlier proceedings in the High Court and this Court), and said even in relation to that part of the overall litigation, the actual costs incurred by the company greatly exceeded $25,000.

[11] Mr White accepted that matters relating to costs are at the discretion of the Court (R 46), but he pointed to other rules which supported his contention that costs should have been awarded in this case. In particular he referred to R 48C which deals with situations in which it is appropriate to make an order for increased costs or indemnity costs. He noted that the factors to be taken into account in relation to increased costs under R 48C(3) included where the party opposing costs has contributed unnecessarily to the time or expenses of the proceeding by taking an unnecessary step or an argument that lacked merit, or by an unreasonable failure to accept a legal argument. He also pointed to R 48C(4) which provides that a Court may order indemnity costs where a person has unnecessarily continued a proceeding. He said these provisions applied in this case, because Mr Graham had unnecessarily prolonged the proceedings after it had been made clear to him both by the Master and by Goddard J that, faced with the decision of this Court of 9 June 1999, he was unlikely to be successful in the High Court.

Mr Graham’s submissions

[12]     Mr Graham submitted that the substantive decision of Ellis J was wrong.  The decision of this Court to decline leave to appeal against that decision was wrong.  The decision of this Court in June 1999 was wrong, and the decisions of Master Thomson and Goddard J on the security for costs applications were based on what he called false evidence presented by the company.  Apart from noting that Mr Graham did not appeal against this Court’s decision of 9 June 1999, or Goddard J’s decision to order security for costs of $25,000, we make no other observations about those submissions as they relate to matters which have been determined already. 

[13]     Mr Graham made it clear he sees this case as one of an injustice being perpetrated on the former power consumers in the Bay City Power area.  It is obvious he has seen this litigation as something of a crusade and, perhaps because of that has continued to prosecute the claim against the company in circumstances where there was a clear risk of a costs award going against him, a risk to which he had been alerted by the Courts and by the company’s legal advisers.

Decision

[14]     We accept Mr White’s submission that the public interest aspect to this litigation had effectively evaporated after the decision of this Court in June 1999.  Mr Graham has been the beneficiary of a very benign approach by the Courts in relation to costs orders.  In that regard, we note specifically the decision of Master Thomson to which reference was made earlier in this judgment, and the invitation in paragraph 18 of the substantive judgment of Ellis J which offered Mr Graham an opportunity to avoid a costs award. 

[15]     We accept Mr White’s submission that, in view of Mr Graham’s failure to accept Ellis J’s proposal, and the settlement offers made by the company, and his pursuit of litigation well after it was obvious to any reasonable person it would fail, it was appropriate for a costs order to be made. 

[16]     The company sought an order for $25,000 which equates with the amount of security held by the Registrar of the High Court.  Mr Graham indicated that he was able to provide this security only by borrowing from friends, and in view of his economic situation we believe an award of costs for the full $25,000 would be unduly onerous on him.  We consider an order for costs of $10,000 would appropriately reflect the balance required between the need to ensure that the processes of the Court are not abused and the company is not unfairly prejudiced by the prolonged pursuit of this litigation against it, and the need to reflect the potentially onerous consequences of an award on Mr Graham.

[17]     We therefore allow the appeal and order that Mr Graham pay costs of $10,000 to the company.

[18]     There will be no award of costs in this Court.

Solicitors:

Izard Weston, Wellington for Appellant