Health Waikato Ltd v Elmsly

[2004] NZCA 35

IN THE COURT OF APPEAL OF NEW ZEALAND

CA69/03

BETWEENHEALTH WAIKATO LIMITED

Appellant

ANDWAYNE GEORGE ELMSLY

Respondent

Hearing:8 March 2004

Coram:William Young J
Goddard J
Gendall J

Appearances:  D J Taylor for Appellant

E J Hudson for Respondent

Judgment:25 March 2004 

JUDGMENT OF THE COURT DELIVERED BY WILLIAM YOUNG J

Introduction

[1]       This is an appeal from a judgment of the Employment Court (Travis J) delivered on 1 April 2003 in which he awarded the respondent (Dr Wayne Elmsly) costs of $36,000.  The costs judgment was a sequel to a substantive decision of Travis J delivered on 20 June 2002 in which he awarded Dr Elmsly $15,000 by way of damages for breaches by the appellant (to which we will refer as Health Waikato) of his employment contract.

Background facts

[2]       In 1986, Dr Elmsly took up employment with the Waikato Area Health Board (the statutory predecessor of Health Waikato) to work as a pathologist at Waikato Hospital.  This employment came to an end in October 1997.  Dr Elmsly brought proceedings in the Employment Court claiming that the dismissal was unjustified and also alleging various other breaches of the contractual duties owed to him by Health Waikato.

[3]       We can set out the key facts reasonably briefly.

[4]       Dr Elmsly suffers from a form of depressive disorder, the onset of which predated any of the conduct on the part of Health Waikato which was the subject of complaint.  

[5]       The problems which gave rise to this litigation relate to two post-mortem examinations carried out by Dr Elmsly in 1993.  In each case, the deceased had died in the course of, or following, surgical procedures in respect of which a fellow employee of Health Waikato, Dr Long, had been the anaesthetist.  There were police investigations in relation to both of the deaths, a coroner’s inquest into one of them and a prosecution of Dr Long for manslaughter in relation to the other.

[6]       Dr Elmsly became extremely anxious about what he perceived to be pressure, adverse comments and innuendo from his colleagues in relation to his conduct and his co-operation with the police.  He spoke to both his immediate superior and the chief executive of Health Waikato about the difficulties that had arisen.  He also spoke to a Regional Manager.  In his substantive judgment the Judge found that the conduct of two of these people constituted a breach of the implied terms of the employment contract to act as a good employer and not to destroy or seriously damage the relationship of trust and confidence between employer and employee.  The Judge concluded that they did not provide appropriate support for Dr Elmsly and,  what was worse, that there was an attempt to persuade him not to co-operate fully with the police on the basis that unnecessary co-operation would serve to further isolate him from his colleagues.

[7]       Difficulties associated with all of this came to a head on 23 July 1993 when Dr Elmsly was suspended by Health Waikato in circumstances that the Judge held to be in breach of his employment contract.

[8]       Dr Elmsly returned to work in August 1993 and following this there were no incidents of materiality to this litigation for nearly two years.

[9]       In July 1995 the manslaughter charge against Dr Long was dismissed, see R v Long [1995] 2 NZLR 691. Dr Long then complained to Health Waikato about Dr Elmsly’s conduct. Health Waikato referred this complaint on to the New Zealand Medical Council and informed Dr Elmsly of this action.

[10]     The Medical Council wrote to Health Waikato on 12 September 1995 recording its understanding that the complaint had merely been brought to its notice and indicating that the complaint was not going to be taken any further.  This letter was never passed on to Dr Elmsly and until early 1997 he assumed that the complaint to the Medical Council was still outstanding.  The failure by Health Waikato to tell Dr Elmsly that the complaint was not being processed by the Medical Council was held by the Judge to be a further breach of the employment contract.

[11]     Professional issues associated with Dr Elmsly’s participation in the prosecution of Dr Long were addressed, in the end, by the commissioning of Professor Sir John Scott to provide a report.  This he did in November 1996.  Sir John concluded that Dr Elmsly had behaved according to high professional standards and that Dr Long’s complaint should be considered closed. 

[12]     Sadly, Sir John’s report did not resolve the underlying difficulties.  Dr Elmsly was left with the view that the conduct of Health Waikato had left in doubt his competence as a pathologist.  He found it difficult to face other people at work and he adopted a “siege mentality” by keeping to himself, not attending meetings and working hours that allowed him to avoid coming into contact with other staff.   He was frequently absent from work. Eventually, in October 1997 Health Waikato terminated Dr Elmsly’s employment, an action which the Judge held to be justified as the contract of employment was by then frustrated due to the inability of the Dr Elmsly to work effectively.

[13]     Dr Elmsly then brought proceedings alleging breach of his employment contract and unjustified dismissal. 

The substantive judgment

[14]     As is apparent from what we have said, the Judge found in favour of Dr Elmsly on three issues:  inappropriate pressure applied on him in 1993 in relation to his co-operation with the police, the 23 July 1993 suspension and the failure to tell him promptly of the fact that the Medical Council was not acting on the complaint which originated with Dr Long.

[15]     The Judge also made a number of findings in favour of Health Waikato:

1.That there was no breach of duty in 1993 by Health Waikato in failing to enquire into whether conduct directed at the respondent by senior medical staff was improper. 

2.That there was no breach of the contractual duty to provide a safe system of work between May 1993 and June 1995. 

3.That in the period between 1995 and 1997 there had been no breach of the duty to avoid excessive pressure and to provide Dr Elmsly with a safe system of work. 

4.That the dismissal in October 1997 was justified as the contract of employment was frustrated by reason of Dr Elmsly’s then inability to function due to his mental state.

[16]     The Judge held that Dr Elmsly had not proved that any recurrence of his depressive illness was caused by the breaches of contract by Health Waikato.  This meant that Dr Elmsly’s claims for losses of salary, medical expenses, other lost income and loss of sick leave entitlements failed.  Modest compensatory damages of $15,000 were therefore awarded.   A claim for exemplary damages associated with the July 1993 suspension was rejected.

Costs judgment

[17]     In the judgment now under appeal, Travis J accepted that it is normal to provide “a reasonable contribution to costs reasonably and actually incurred”.

[18]     The costs incurred by Dr Elmsly were $72,000 (including comparatively modest disbursement of around $1,300).  Similar costs were incurred by Health Waikato.

[19]     Travis J recorded the principal submission made by Mr Taylor for Health Waikato in these terms

[12]     … Mr Taylor asserted that it was possible to show that approximately three quarters of the time at trial was put into the causes of action on which the plaintiff had failed completely and of the remaining one quarter of the time in which the plaintiff succeeded only in part.  He observed that there were 467 pages of transcript covering 13 witnesses, 5 of whom need not have been called if the only issues were those on which the plaintiff had succeeded.  He then analysed the balance of the evidence concluding that of the 467 pages, only about 120 were directed to causes of action on which the plaintiff had enjoyed some success.  He did a similar exercise on the bundle of documents, which were in 3 volumes, totalling some 570 pages.  He contended that less than half had any relevance and of that, nearly half was made up of the employment contract documents in respect of which no issue arose.  He claimed that had discovery been limited to the matters on which the plaintiff succeeded it would have taken only one half a day rather than one and a half days.  He observed that the ratio between time spent on causes of action on which the plaintiff failed and time spent on causes of action on which the plaintiff had at least some success was 3 to 1 against the plaintiff; 120 pages out of 467 pages of evidence and a net of 227 pages from some 570 pages in the agreed bundle.

[13]     While accepting that part of the 9 hearing days were part days, he analysed the balance of the time and contended that the plaintiff had enjoyed at least partial success on issues which would have taken approximately 2 full days.

As will become apparent, this submission was accepted, at least partly, by the Judge.

[20]     Travis J considered there was a “rough correlation” between the present case and the decision in Victoria University of Wellington v Alton-Lee [2001] ERNZ 305 where the plaintiff had claimed some $1.3 million and succeeded to the extent of $101,000 after an 18 day trial.  An award of $160,000 by way of costs and $21,397 by way of disbursements in favour of the plaintiff was upheld by the Court of Appeal.  By way of comparison Dr Elmsly had claimed $137,000 (as the Judge saw it) and had recovered $15,000.

[21]     In Alton-Lee this Court was troubled by the apparent generosity of the award of the costs as against the plaintiff’s limited success, in economic terms, at trial.  Having noted this, the judgment went on:

[62]     … But in evaluating this consideration, there are five significant factors which leave us with the view that the $160,000 award in relation to legal costs should not be regarded as being unreasonable: -

1.        Her solicitors had significant unbilled time which was written off. If the unbilled time of $52,000 is added to the costs regarded by the Chief Judge as actually incurred, a figure close to $290,000 is reached.   We accept that an assessment of what costs are reasonable in relation to litigation is not controlled by the level of costs actually charged.  But in this case the Chief Judge's assessment of what constituted reasonable costs started with what he took to be the costs actually charged which he then reduced for lack of success on some of the causes of action.  Since the decision by Dr Alton-Lee's solicitors to write off a substantial part of their costs was no doubt associated with her only qualified success in the proceedings and thus reflected her failure on the tenure claims, the approach adopted by the Chief Judge seems to have involved a double discount.

2.        The case is not to be looked at or assessed solely in financial terms.  As the dispute between her and the University developed, Dr Alton-Lee was faced with allegations of misconduct in relation to equipment and funds associated with the ERUDITE programme.  The judgment of the Chief Judge is a vindication of her in respect of those allegations.  Further, the University, entirely unnecessarily in the view of the Chief Judge, put in issue Dr Alton-Lee's standing as a scholar with an international reputation. Her contentions as to that were vindicated.

3.        The Chief Judge also had other criticisms of the way in which the University conducted its defence of the claim – criticisms which, in his view, resulted in the trial taking longer than would otherwise have been necessary.

4.        The Chief Judge's assessment appears to have been that most of the time at trial was devoted to issues upon which Dr Alton-Lee succeeded.

5.        To the extent to which an 18 day trial might be thought to be disproportionate to the result reached, the apparent absence of a serious attempt on the part of the University to settle the dispute was a material (if not necessarily a decisive) consideration particularly in a context where there was evidence before the Chief Judge indicating that there had been a genuine desire on the part of Dr Alton-Lee to seek an agreed resolution.

[22]     In the judgment under appeal Travis J referred to this passage from the Alton‑Lee judgment and he then sought to apply the five considerations which we have just set out to the facts of the case at hand:

[29]     The Court of Appeal accepted that an assessment of costs on a two third basis might be generous given Dr Alton-Lee’s limited success in economic terms at trial but in evaluating that consideration looked to what it described as 5 significant factors which led it to conclude that the total award made of $160,000 plus some $21,000 of disbursements for an 18 day trial, was not unreasonable.

[30]     The first factor was the writing off by the plaintiff of a significant amount of unbilled time, a factor which has no parallel in this case.

[31]     The second factor was that the case was not to be looked at or assessed solely in financial terms because Dr Alton-Lee was faced with allegations of misconduct from which she was vindicated and the university had put in question her standing as a scholar with an international reputation and her contentions as to that were also vindicated.

[32]     In the present case, as Mr Hudson has contended, the plaintiff’s reputation was in issue especially in the circumstances surrounding his suspension and my findings went some distance towards vindicating his complaints.

[33]     The third factor was the length of time the university had taken with its claim, which is not a feature in the present case, as both parties approached a difficult and complex factual situation in a highly efficient and thorough manner which did not waste time.

[34]     The fourth was that the Judge’s assessment appeared to have been that most of the time the trial was devoted to the issues upon which Dr Alton-Lee succeeded.  I accept from Mr Taylor’s careful analysis that this is not the same situation in the present although, as I have noted, it was necessary to canvass quite a considerable amount of material to get to the nub of the problem.

[35]     The fifth point was that an 18 day trial was disproportionate to the result received in the absence of a serious attempt on the part of the university to settle the dispute.  I have received no material which would enable me to form any view on whether there was any failure on the part of either party in the present case to attempt a settlement.  I therefore do not take that factor into account.

[36]     Taking into account the analogous factors in the present case and the time that was spent on causes of action on which Dr Elmsly failed, I consider that the appropriate basis for an award of costs is one half of the actual and reasonable costs incurred by Dr Elmsly.  Thus, of the sum, which includes witnesses expenses and accommodation costs of $72,203.75, I award half, which I round down to $36,000.

(Emphasis added)

[23]     What the Judge meant by the passage in para [34] of his judgment which we have italicised is not entirely clear.  It appears to be a reference back to an earlier passage in his judgment in which he said:

[27]     … .  It is understandable, given what I found to be the plaintiff’s inability to forgive, forget and move on, that he would have viewed every subsequent incident [ie events subsequent to the July 1993 suspension] as part of a continuum.  Thus, all the incidents which troubled him through to the end of his employment with the defendant needed to be examined to determine whether the defendant had any legal liability for them.

(Emphasis added)

Appellant’s submissions

[24]     Mr Taylor, for Health Waikato, claimed that the Judge had accepted his analysis of the time spent at trial on the various causes of action.  He was critical of the Judge’s comment (in para [34] of the judgment under appeal) that “it was necessary to canvass quite a considerable amount of material to get to the nub of the problem”.  He observed that the Judge did not state what the “nub of the problem” actually was although he suggested that it was probably a reference back to the passage from para [27] of the judgment which we have set out earlier.  He argued that this passage in the judgment indicated that the approach the Judge took to the award of costs was inappropriate.

[25]     Mr Taylor’s argument was that the award of $36,000 showed that the Judge had either fixed costs at a level in excess of an indemnity for the causes of action on which Dr Elmsly succeeded, or awarded him costs on the claims which had failed.  He said that Court had no jurisdiction to do the first, and the second was only appropriate if there was some objectively justifiable explanation for departing from the usual approach.  He submitted that there was no such factor present.  He challenged the relevance of the consideration that Dr Elmsly’s reputation was in issue as no witnesses other than Dr Elmsly were called as to this.  

[26]     Mr Taylor invited us to set aside the award of costs leaving the parties to meet their own costs.  Alternatively, he invited us to set costs at a more modest level than those imposed by the Judge.  He invited us to deal with the question of costs in the event that we allow the appeal, rather than remit the matter back to the Judge for further determination. 

Respondent’s submissions

[27]     Mr Hudson, for Dr Elmsly, reiterated the general principles that costs should follow the event and should amount to a reasonable contribution to costs actually and reasonably incurred.  What is recoverable depends on all the material circumstances.  Success is not to be assessed solely in financial terms because matters pertaining to vindication and personal reputation or standing are of equal importance.

[28]     Mr Hudson argued that there was no issue as to the reasonableness of the costs incurred by Dr Elmsly and took us to Mr Taylor’s written submissions on this point to Travis J in the Employment Court which, he contended, amounted to a concession.  His argument seemed to be that this “concession” obviated any need to look at the parties’ comparative success and failure in the substantive proceedings.

[29]     He said that there was no lack of merit in the issues on which Dr Elmsly failed. 

[30]     The award of $36,000 was reasonably open to the Judge particularly having regard to comparable cases.

[31]     So he contended that the Judge did not err in considering costs on a global basis rather than making a separate determination in relation to each cause of action and that there was no legitimate basis to interfere with the exercise of the Judge’s discretion.

Discussion

General

[32]     The costs award was made pursuant to s108 of the (now repealed) Employment Contracts Act 1991, which provided:

The Court in any proceedings may order any party to pay to any other party such costs and expenses (including expenses of witnesses) as it thinks reasonable and may apportion any such costs between the parties or any of them as it thinks fit and may at any time vary or alter any such order in such manner as it thinks reasonable.

We note that paragraph 19 in Schedule 3 of the Employment Relations Act 2000 is in identical terms.

[33]     The s108 discretion is broad and Health Waikato therefore faces the double problem that this is an appeal confined to a point of law and is against the exercise of a discretion.  In terms of May v May (1982) 1 NZFLR 165 at 170:

The appellant must show the Judge acted on a wrong principle: or that he failed to take into account some relevant matter or that he took account of some irrelevant matter or that he was plainly wrong.

[34]     As the cases show, however, it is by no means unknown for costs awards to be set aside on appeal.

The decision to award costs to Dr Elmsly

[35]     Costs usually follow the event.  In most cases it is clear who has been successful in litigation and thus prima facie entitled to an award of costs.  But cases where the parties have mixed success are by no means rare and in such instances it is not necessarily easy to determine who “won” the case so as to be entitled presumptively to costs. 

[36]     There might be thought to be something unsatisfactory about the result of the costs judgment  Both parties spent around $72,000 on the case and most of this money was spent arguing about issues in respect of which, in the end, Health Waikato was successful.  Yet Health Waikato has wound up being required to pay not only its own costs but also half of Dr Elmsly’s.

[37]     Against that background, Mr Taylor’s submission that the parties ought to have been left to pay their own costs had some attraction.  A decision to that effect would, we think, have been open to the Judge. 

[38]     That said, we are satisfied that the Judge’s implicit conclusion that Dr Elmsly had sufficient success at trial to warrant an award of costs was open to him. 

[39]     It is not usual in New Zealand for costs to be assessed on an issue by issue basis, albeit that it is common enough, where both parties had a measure of success at trial, for no order as to costs to be made.  The reluctance to assess costs on an issue by issue basis probably stems from the reality that in most cases of partial success it is not practical to separate out from the total costs incurred by the parties what was incurred in relation to the individual issues before the Court. 

[40]     The result of the present case was that Dr Elmsly was awarded relief and it would appear (given that there was no Calderbank letter) that he had to go to Court to receive that relief.  Conventional practice (probably influenced by the way in which the old payment in rules used to operate) has been to regard a plaintiff in this situation as having an entitlement to costs.  While this is no doubt a simplistic and not entirely logical approach, it is reasonably straightforward to apply.  Further, it is not unjust to defendants, providing Judges are prepared to react appropriately where there has been a Calderbank offer.  In any event, whatever the merits of current costs practice, there is nothing out of the ordinary in the conclusion of the Judge that Dr Elmsly was entitled to costs.

[41]     We regard it as surprising that Health Waikato did not make a Calderbank offer.  An employer involved in an imbroglio of the sort involved here (and associated with a break-down in personal relationships) is perhaps unlikely to come through Employment Court litigation entirely unscathed.  The reasons offered to us in this case for not making such an offer seemed to us to come down to an assessment that such an offer would not have been accepted.  But, as this Court pointed out in Alton-Lee, the whole point of making an offer in Calderbank form is to provide against the contingency (and perhaps the likelihood) that the offer will not be accepted.

Quantum

[42]     As good a starting point as any for fixing the costs in Employment Court litigation is the two step process identified by this Court in Binnie v Pacific Health Ltd [2002] 1 ERNZ 438 at 443:

[14]     The first step is to decide whether the costs actually incurred by the plaintiff were reasonably incurred.  Adjustment must be made if they were not.  The second step is to decide, after an appraisal of all relevant factors, at what level it is reasonable for the defendant to contribute to the plaintiff's costs.  Potentially that level can be anywhere from 100% to 0%.  A starting point at 66% is generally regarded as helpful in ordinary cases.  Mr Taylor reflected common practice when he referred to this as the two-thirds rule.  If such a starting point is adopted, careful attention must be given to factors said to justify an increase or a decrease.

[43]     It will be recalled that Mr Hudson sought to argue that the concession by Health Waikato that Dr Elmsly’s costs were reasonably incurred meant that analysis of the parties’ comparative success was unnecessary.  Presumably this argument was based on the passage from the Binnie judgment which we have just set out.  It was, however, not a particularly helpful argument as we pointed out to Mr Hudson during the hearing.  All that Health Waikato was really conceding was that the $72,000 in costs incurred by Dr Elmsly was reasonable as between him and his solicitors and counsel.  It could not sensibly be regarded as acknowledging or accepting that Dr Elmsly’s comparative lack of success at trial was irrelevant.  In any event, a plaintiff’s failure to succeed on a number of issues at trial might be thought to be relevant to either the first or the second of the steps identified in Binnie. 

[44]     All members of this Court have been troubled by both the quantum of the award and the reasons given by the Judge.  The reasons for this concern are as follows:

1.Alton-Lee was used as a comparator case.  The award of costs in the Employment Court in Alton-Lee was very much the top end of what was acceptable.  Fixing costs by reference to what happened there is thus likely to produce figures very much at (and perhaps beyond) the margin of what is acceptable.  The case should primarily be regarded as an example of the reluctance of this Court to interfere with costs awards rather than as an example of best practice in fixing costs. 

2.Of the five considerations referred to in the Alton-Lee judgment which was seen as warranting the high award despite the plaintiff’s comparatively meagre award of damages, only one (the importance of reputational vindication) was really applicable to Dr Elmsly.  This reputational factor was perhaps of less significance than in the Alton-Lee case given Dr Elmsly’s vindication by Sir John Scott.  So, even allowing for the fact that the award of costs was only for half the amount of the costs actually incurred (as against the approximately two-thirds figure in Alton-Lee), the result looks generous to Dr Elmsly when compared to Alton-Lee.

3.The Medical Council issue in respect of which Dr Elmsly succeeded in relation to the events of 1995 to 1997 was minor and no relief was granted in relation to it.  So, broadly speaking, Dr Elmsly can be regarded fairly as having succeeded in relation to his claims relating to the events of 1993 and having failed in relation to his claims in relation to subsequent events.  The Judge plainly concluded that at least a majority of the hearing time (and perhaps the three-quarters argued for by Mr Taylor) was associated with issues on which Dr Elmsly failed.  While it is true that New Zealand Courts do not usually award costs on an issue-based basis, failure of a “successful party” on so large a scale cannot properly be ignored (see for instance r48D(d), High Court Rules). 

4.The Judge recognised, and to some extent allowed for, Dr Elmsly’s comparative lack of success at trial.  Normally issues of weighting are of no moment on an appeal against a discretionary assessment.  So an argument that the Judge under-weighted this consideration would not warrant appellate review.  This, however, is subject to the under-weighting not being associated with an error of law.  In this case the allowance made by the Judge for Dr Elmsly’s comparative lack of success at trial was heavily qualified because “it was necessary to canvass quite a considerable amount of material to get to the nub of the problem”.  This, in turn, appears to be a reference back to para [27] of the judgment, which we have earlier set out.

5.Para [27] of the judgment concerns us.  The Courts are reasonably familiar with the inability of some plaintiffs “to forgive, forget and move on”.  Where such a plaintiff is troubled by a series of events, considerable examination may well be required to determine whether a particular defendant has any legal liability.  That these factors were present in this case seems to have been treated by the Judge as a reason for downplaying the significance of the time spent at trial on the issues on which Dr Elmsly failed.  But these are the sort of personal considerations which, if allowed to influence costs decisions, would overwhelm the general rule that costs follow the event.

6.Further, this case was unusual in that the issues raised by Dr Elmsly fell largely into two quite discrete time periods which were separated by a hiatus of some two years.  In this situation it is quite possible to apportion, at least approximately, the costs incurred by the parties as between issues on which Dr Elmsly succeeded and issues on which Health Waikato succeeded.  Given this context, we think it inescapable that the costs awarded to Dr Elmsly represented more than a fair assessment of costs reasonably incurred in relation to the issues on which he won.  Further, the corollary of this conclusion is that the award was therefore in part a contribution to his costs on claims on which he failed; this in circumstances where there could be no warrant for taking that unusual course. 

[45]     We are very conscious of the breadth of the Judge’s discretion and of course the existence of his equity and good conscience jurisdiction.  But, for the reasons given, we are satisfied that, in his approach to the weight to be given to Dr Elmsly’s relative lack of success at trial, the Judge took into account an irrelevant consideration.  Further, the effect of the decision has resulted in Dr Elmsly being awarded a contribution to his costs on issues on which he failed and is therefore plainly wrong.

[46]     Mr Taylor invited us to fix costs rather than to remit the issue of costs to the Judge for re-assessment.  We are prepared to accede to this invitation because we are anxious to spare the parties another hearing and thus a further round of costs associated with this unhappy litigation. 

[47]     The Judge accepted the drift of Mr Taylor’s argument as to the proportions of time spent on the parts of the case on which Dr Elmsly succeeded and those on which he failed but not necessarily the full argument in all its detail.  Since the invitation for us to deal with costs came from Mr Taylor, we propose to make all reasonable assumptions in favour of Dr Elmsly. 

[48]     On that basis we fix $30,000 as the proportion of the costs reasonably incurred by Dr Elmsly in relation to the issues on which he succeeded.  We propose to allow for two-thirds recovery of that figure, producing a total costs award of $20,000.  Following the approach adopted by the Judge, we do not distinguish between costs and disbursements.

Other comments

[49]     In the course of the Judge’s decision he referred to a submission that there should be “harmony between the approach to costs in the High Court and that in the Employment Court”, although he did not necessarily adopt that contention. 

[50]     Under the current High Court costs regime the actual costs incurred by a successful party have limited relevance.  There is an over-arching principle that a costs award should not exceed the actual costs incurred by the successful party.  As well, if a Judge is considering the possibility of making an award of indemnity costs, the actual level of costs incurred might be of some relevance.  But for general purposes associated with the costs regime, the actual costs incurred by a successful party are irrelevant and ought not to be referred to the Judge in the course of submissions, see Nomoi Holdings Ltd v Elders Pastoral Holdings Ltd (2001) 15 PRNZ 155 and Beach Road Preservation Society Inc v Whangarei District Council (2001) 16 PRNZ 13.  Reference can also be made to the recent decision of this Court in Glaister v Amalgamated Dairies CA99/03, 1 March 2004.

[51]     While it would open to the Employment Court, if it chose, to adopt the High Court approach to costs, it has not done so and it is, indeed, perfectly entitled to follow its existing practice, in terms of which costs actually and reasonably incurred are the relevant starting point.

[52]     There was some debate between the parties as to just how much money Dr Elmsly was claiming.  The Judge took the view the claim was for $137,000.  Mr Hudson considered that this was an over-statement.  He contended that by the end of trial the relief sought was only $102,000.   We see no point in resolving this issue as what we are about to say is equally applicable whether the claim was for $137,000 or $102,000. 

[53]     Whether the claim was for $137,000 or $102,000, it hardly warranted nine hearing days in Court, and the laying out of nearly $150,000 in legal fees along with all the other resources (particularly the time of those involved) which were devoted to the case.  A comparison between resources committed and the actual result (an award of damages of $15,000) is all the more stark.  Access to justice and reputational considerations mean that a costs benefit analysis of litigation of this sort cannot be confined solely to economic considerations.  Nonetheless, we think that a more sensible approach by defendants to the making of Calderbank offers and steely responses by the Courts where plaintiffs do not beat Calderbank offers would be in the broader public interest. 

Disposition

[54]     The appeal is allowed accordingly.  The award of costs is reduced to $20,000.  Health Waikato is entitled to costs in this Court in the sum of $6,000 together with disbursements (including the reasonable travel and accommodation expenses of counsel) to be agreed between the parties and, in default of agreement, to be fixed by the Registrar.

Solicitors:
Swarbrick Dixon, Hamilton for Appellant
Kit Clews, Hamilton for Respondent