Herbert Construction Company Limited v Tuck Contractors Limited (in liq) HC Napier CIV-2011-441-54

[2011] NZHC 1377

IN THE HIGH COURT OF NEW ZEALAND NAPIER REGISTRY

CIV-2011-441-54

BETWEEN  HERBERT CONSTRUCTION COMPANY LIMITED

Plaintiff

ANDTUCK CONTRACTORS LIMITED (IN LIQUIDATION)

Defendant

Judgment:      19 August 2011 at 9:00 AM

COSTS JUDGMENT OF ASSOCIATE JUDGE D I GENDALL

Thisjudgment was delivered by Associate Judge Gendall on 19 August 2011 at 9am under r 11.5 of the High Court Rules.

Solicitors:           Lunn & Associates, Solicitors, PO Box 846, Napier

Bannister & von Dadelszen, Solicitors, PO Box 745, Hastings

HERBERT CONSTRUCTION COMPANY LIMITED V TUCK CONTRACTORS LIMITED (IN LIQUIDATION) HC NAP CIV-2011-441-54 19 August 2011

[1]      In a judgment I gave in this proceeding on 22 July 2011, on an application by Herbert Construction Company Limited (Herbert) to set aside a statutory demand issued against it by Tuck Contractors Limited (in liquidation) (Tuck) for the sum of

$24,577.03, I declined to set aside the statutory demand.

[2]      In doing so, I noted at [43] of that judgment:

[43]      Tuck having been successful before me, I consider that it is entitled to costs.  I note that Mr Gilmour [counsel for Tuck] seeks the opportunity to provide information in support of a costs claim.   I accordingly invite the parties to file memoranda sequentially with regard to the question of costs which are to be referred to me for a decision.

[3]      Counsel for Herbert and counsel for Tuck have now filed memoranda, each dated 15 August 2011, related to this issue of costs, and these have been referred to me.

[4]      I  have  now  had  an  opportunity  to  consider  the  matters  raised  in  those memoranda and in this proceeding generally, and I give my decision on the question of costs.

[5]      At the outset, it is clear that Tuck, being the successful party in opposing Herbert’s application to set aside the statutory demand in question, is entitled to costs in this matter.   No serious dispute as to this has been raised by Mr O’Connor for Herbert.

[6]      The only issue before me therefore is whether costs should be awarded here in the usual way on a category 2B basis or, as Tuck requests, an uplift in these costs, suggested at 20 per cent over scale, should be made.

[7]      Herbert opposes any uplift in category 2B costs here.

[8]      Initially in his submissions for Herbert, Mr O’Connor noted that Tuck and its solicitors had not provided any details in relation to the actual legal costs incurred by Tuck in this matter, notwithstanding Tuck’s attempt in this case to seek an increased costs award. This is noted.

[9]      In  his  costs  memorandum,  Mr Gilmour  for  Tuck  recorded  that  costs according to scale on a 2B basis here would amount to $4,512.   On this amount, Tuck seeks an uplift of 20 per cent, it says to take into account two offers made to settle the proceeding prior to the hearing before me on 16 June 2011.  These offers were contained in letters dated 31 May 2011 and 15 June 2011 from counsel for Tuck to counsel for Herbert.  By these letters, Mr Gilmour contends that Tuck put Herbert firmly on notice as to likely difficulties with its application to set aside the statutory demand.   Notwithstanding these identified difficulties, Tuck says that it went on to offer to settle, on a without prejudice basis, not only the present proceeding before this Court, but also effectively all disputes between the parties, and in doing so to accept a sum of $20,000 in full and final settlement of all monies said to be owed by Herbert to Tuck.  It appears that both offers were made “without prejudice save as to costs”.   These settlement offers, however, were rejected by Herbert.

[10]     Mr Gilmour for Tuck contends that both these proposals were made with a view to avoiding unnecessary expense in proceeding to a hearing of the application to set aside the statutory demand, an application which ultimately was refused.

[11]     It is on this basis that, given the efforts Mr Gilmour says were made on behalf of Tuck to settle the issues between the parties and to avoid the time and expense involved  in  the  hearing,  all  of  which  were  rejected  by  Herbert,  an  uplift  of

20 per cent over scale costs is warranted.

[12]     In response, Mr O’Connor for Herbert contends that the settlement offers made by Tuck here are irrelevant to present cost considerations insofar as they relate simply to the statutory demand process.  He argues that Tuck’s settlement proposals related to its overall claim against Herbert and a range of unrelated matters, and not just the statutory demand process itself.  Further, he says that Tuck did not choose to bring a claim against Herbert for the overall monies in question, but instead chose to issue the statutory demand.

[13]     Mr O’Connor went on to indicate that Herbert has also raised a counterclaim against Tuck in this proceeding, and now intends to apply for leave to commence

proceedings against Tuck as a company in liquidation under s 248 Companies Act

1993.

[14]     In addressing applications for increased costs provided for at r 14.6(3) High

Court Rules, McGechan on Procedure notes:[1]

[1] Andrew Beck and others McGechan on Procedure (looseleaf ed, Brookers, updated to 5 July

2011) at [HR14.6.02(2)(a)(iii)].

(iii)     Failing to accept offer of settlement — r 14.6(3)(b)(v)

The following points emerge from decided cases:

•A  defendant  seeking  increased  costs  against  a  plaintiff, which earlier failed to accept a settlement proposal, “will need to establish clearly that the failure was unreasonable. More evidence than normal is required because the Court does  not  have  a  definitive  judgment  against  which  to contrast the settlement offer.  A Court cannot assume that a discontinuance is akin to judgment for the defendant”: Holdfast NZ Ltd v Selleys Pty Ltd (2005) 17 PRNZ 897 (CA) at [29].

•All  offers  are encompassed  by the  rule,  not just r 14.10 (Calderbank) offers.   But it does not encompass a letter, even if “detailed and intelligent”, sent for the justifiable purpose of trying to stop the litigation and save further costs, but not containing any offer.  Rejection of such a letter does not constitute a failure to accept an offer of settlement under r 14.6(3)(b)(v):  Nandro  Homes  Ltd  v  Datt  HC Auckland CIV-2008-404-6676, 13 July 2009 at [13].

•The reasonableness of a party’s rejection of a r 14.10 offer is to be assessed at the time of rejection, not just against the subsequent result: New Zealand Sports Merchandising Ltd v DSL   Logistics   Ltd   HC   Auckland   CIV-2009-404-5548,

19 August 2010 at [37].

[15]     Having  considered  these  particular  matters  and  counsel’s  submissions advanced on this costs issue, I am satisfied that, although it is unfortunate here that these parties appear to be continuing to engage in internecine squabbling between themselves over long-outstanding contractual issues, in a technical sense the settlement offers made by Tuck do seem to relate not only to its statutory demand claim but also to other matters and Herbert’s counterclaims (which are still to be

brought).  Given this, I take the view, but only by a fine margin, that these settlement

offers  are not  a  basis  to  seek  an  increased  costs award  on  what  was  a  simple application to set aside the statutory demand itself.

[16]     I therefore decline the request from Tuck for a 20 per cent uplift over scale costs.

[17]     Instead, an order is now made that Herbert is to pay to Tuck costs on the application to set aside the statutory demand on a category 2B basis, amounting to

$4,512, together with disbursements (if any) as approved by the Registrar.

Associate Judge D.I. Gendall