Il Forno Limited v Kleine

[2020] NZHC 2730

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2016-404-621

[2020] NZHC 2730

BETWEEN

IL FORNO LIMITED

Plaintiff

AND

DOUGLAS JAMES KLEINE

First defendant

AND

FLOW CONTROL LIMITED

Second defendant

AND

ANDREW MICHAEL KLEINE

Counterclaim defendant

Hearing:	On the papers
Appearances:	MJW Lenihan for the plaintiff and counterclaim defendant J G Ussher for the defendant and counterclaim plaintiff
Judgment:	16 October 2020
Reissued:	19 October 2020

JUDGMENT OF JAGOSE J

[Costs]

This judgment was delivered by me on 16 October 2020 at 2.00pm.

Pursuant to Rule 11.5 of the High Court Rules.

………………………… Registrar/Deputy Registrar

Counsel:

MJW Lenihan Barrister, Auckland J G Ussher Barrister, Auckland

IL FORNO LTD v KLEINE - Costs [2020] NZHC 2730 [16 October 2020]

[1]    My 31 July 2020 judgment – declaring Andrew Il Forno’s sole shareholder; upholding Il Forno’s claim to $14,815 damages in negligence; ordering the defendants’ delivery up of digital files to Il Forno; and otherwise dismissing all causes of action in both claim and counterclaim – reserved costs for determination on memoranda for filing on ten and five working day returns.1

[2]    In its claim, Il Forno seeks mostly 2B (but also 2C for inspection) scale costs of $42,856 plus disbursements of $52,505 on its claim, and of $51,202 plus disbursements of $31,739 on the counterclaim. It includes in error to claim $2,230 costs and $500 disbursements already awarded by Bell AJ,2 which I deduct. I regret the delay in addressing the parties’ timely memoranda; Il Forno’s costs claim was not put before me until 5 October 2020 (when I was away on circuit).

[3]    My  31  July  2020  judgment  observed  “although  Il   Forno  has  achieved  a measure of success, no party can claim comprehensively to be successful in the proceeding”. Il Forno also had claimed to recover some  $43,277 in fees paid to  Flow Control; the defendants  counterclaimed  for  a  50  per  cent  shareholding  in Il Forno, and $650,000 in quantum meruit. In the family context to the proceeding, that led me to a preliminary view costs should lie where they fell.3 Il Forno suggests, if any deduction is desirable on account of its partial success, a 25 per cent reduction in scale costs would address that.

[4]    The  defendants  propose  unspecified   reduced   costs,   predominantly   on Il Forno’s limited success as measured against its initial $245,667 claim across six causes of action, but also on grounds of contended shortfalls in evidence and excesses in process. They also resist disbursements for expert evidence as excessive, and claim effective success on their counterclaim by reason of my finding “Jim advanced the necessary $10,000 to Andrew as a loan”,4 which Jim proposes to “enforce”.

[5]Costs otherwise payable may relevantly be reduced if:5

1      Il Forno Ltd v Kleine [2020] NZHC 1889.

2      Il Forno Ltd v Kleine CIV 2016-404-261, 30 November 2018 (minute).

3 At [89].

4 At [28].

5      High Court Rules 2016, r 14.7(d), (f), and (g).

although the party claiming costs has succeeded overall, that party has failed in relation to a cause of action or issue which significantly increased the costs of the party opposing costs;

…

the party claiming costs has contributed unnecessarily to the time or expense of the proceeding or step in it by … failing, without reasonable justification, to admit facts, evidence, or documents, or accept a legal argument

…

some other reason exists which justifies the court refusing costs or reducing costs despite the principle that the determination of costs should be predictable and expeditious.

[6]    The defendants’ proposal for reduced costs exaggerates the parties’ comparative positions on the proceeding’s disposition. Their continued resistance of liability for their negligent tax work is an exercise in denial. They cannot now be heard to complain of expert expenses or inspection costs incurred by Il Forno essentially by reason of Jim’s failure to take reasonable care to maintain Il Forno’s financial records.6

[7]    I expressly did not find Andrew had any liability to Jim in respect of the loan.7 Neither is there any declaration in the defendants’ favour; nor are judgments or findings of fact in civil proceedings admissible in other civil proceedings to prove the existence of facts at issue in the former.8 There is no basis for their assertion “the quantum meruit claim has essentially succeeded on issue”; to the contrary, I held the defendants had not discharged their onus of proof at all.9

[8]    I cannot sensibly delineate Il Forno’s effort engaged successfully, in obtaining its relief and in opposing the defendants’ counterclaim, from that on which it failed. ‘Comprehensive success’ is not the measure of costs: it is instead a burden on “the party who fails with respect to a proceeding”.10 Here, that unmistakably is the defendants. The extent of Il Forno’s failure is not claimed significantly to have increased the defendants’ costs. Their generalised complaint Il Forno was ‘continuously unwilling to admit facts’ makes little sense given the counterclaim’s

6      Il Forno Ltd v Kleine, above n 1, at [50]–[55].

7 At [67].

8      Evidence Act 2006, s 50(1).

9      Il Forno Ltd v Kleine, above n 1, at [83]

10     High Court Rules 2016, r 14.2(a).

failure. Neither does the late appearance of the IRD refund, denying a further topic for cross-examination, offer any foundation for a reduction in costs.

[9]    Last, having regard for the evidence at trial, I do not consider the experts’ invoices to be unreasonable.

[10]   I order the defendants jointly and severally to pay Il Forno costs in the amount of $91,828, plus disbursements of $83,744.

—Jagose J