Herron v Wallace - [2018] NZHC 2638

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2013-404-001806

[2018] NZHC 2638

BETWEEN
STUART WALTON HERRON

Plaintiff

AND

WAYNE ANDREW WALLACE

First Defendant

SHADES OF AUTUMN LIMITED
Second Defendant

BELMONT LIFESTYLE VILLAGE LIMITED

Third Defendant

Hearing: 26 February 2018 (adjourned part-heard) Memorandum of Counsel dated 13 August 2018 Minute dated 21 August 2018
23 August 2018 (balance of hearing)

Appearances:

R Dellow for the Plaintiff (February only) C Patterson for the Plaintiff (August only)

M Corlett QC and E Armstrong for the Defendants

Judgment:

10 October 2018

JUDGMENT OF HINTON J

This judgment was delivered by me on 10 October 2018 at 11.30 am pursuant to Rule 11.5 of the High Court Rules

…………………………………………………………………… Registrar/Deputy Registrar

Counsel/Solicitors:
Chris Patterson Barrister Ltd
Marc Corlett, Queen’s Counsel, Auckland Wilson Harle, Auckland

STUART WALTON HERRON v WAYNE ANDREW WALLACE [2018] NZHC 2638 [10 October 2018]

[1] This judgment re-visits an indemnity costs award made by Faire J on 1 December 2016,1 following a decision of the Court of Appeal on 14 August 2017. The Court reduced the judgment sum from $966,531 to $291,531, and directed that costs needed to be re-fixed by this Court.2 The key point is the effect on a contractual indemnity costs award of the claimant party’s limited success.

[2] There are also two separate costs issues arising out of interlocutory applications before Faire J, where costs were not fixed at the time. These are:

(a)The plaintiff’s claim for costs following the defendants’ urgent interlocutory application dated 9 June 2017 to vary consent orders in relation to the substantive and costs judgments of Faire J and the (late) withdrawal of that application on 20 June 2017.

(b)The plaintiff’s claim for costs following the defendants’ unsuccessful application to re-call and stay the substantive judgment.

Background

[3] The background to the case is very clearly set out in the Court of Appeal judgment.

[4] Mr Wallace and Mr Herron are property developers who undertook a number of projects together. In 2005, it was discovered that Mr Wallace had diverted funds from their projects. They entered into two settlement deeds. This proceeding was about whether Mr Wallace had been discharged from some or all of the indebtedness agreed under those deeds, or if not, how much he owed to Mr Herron.

[5]Mr Herron sued for $5.6 million approximately, including interest.

[6] Of the two settlement deeds, the principal settlement deed, signed on 20 October 2005, was called SH8 (also referred to as the Sidmouth Settlement Deed).

1 Herron v Wallace [2016] NZHC 2896.
2 Wallace v Herron [2017] NZCA 346.

In it, Mr Wallace acknowledged he owed Mr Herron $3.160 million. Materially, SH8 also outlined circumstances in which Mr Wallace was entitled to a reduction or credit.

[7] A further deed of acknowledgement of debt, called SH9, was signed at the same time, recording a $600,000 debt due from Mr Wallace to Mr Herron. Faire J found this was a double-up…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

Continue reading Herron v Wallace

Details

AGLC: Herron v Wallace [2018] NZHC 2638
Case: [2018] NZHC 2638
Decision Date: 10 October 2018

CaseChat Overview and Summary

Herron v Wallace is a case concerning an indemnity costs award made by Faire J, which was later subject to review by Hinton J following a Court of Appeal decision that altered the original judgment sum. The Court of Appeal reduced the sum from $966,531 to $291,531 and directed that costs be re-fixed by the High Court. The key issue was the effect on the indemnity costs award of the claimant’s partial success. The court had to determine whether the indemnity costs award should be reduced given the significant reduction in the judgment sum and the defendants’ partial success on appeal. The Court of Appeal also made an observation regarding the enforceability of conditional fee agreements, which was not a finding. The court considered the arguments from both sides, with the defendants arguing for either a complete denial of indemnity costs or a substantial reduction, and the plaintiff arguing for the costs to lie where they fall.

Hinton J held that the plaintiff remained entitled to costs, but the award should be reduced. The court rejected the argument that the plaintiff’s misconduct or the defendants’ partial success should result in a denial of costs or a significant reduction. Instead, the court decided to reduce the costs by 30 per cent, bringing the total costs award to $235,000, including GST. The court found that while the defendants’ partial success warranted some reduction, the costs award should not be proportionately reduced to match the new judgment sum. The court also ruled that interest should run on the costs award from 1 December 2016 at the rate of 5 per cent per annum under s 87 of the Judicature Act 1908. The court further fixed costs for the interlocutory applications, reducing the claim for the re-call application by approximately 30 per cent, bringing it to $50,000, and accepting the claim for the application to vary consent orders as reasonable.

Orders