Jackson Bay Mussels Limited v N-Viro Limited HC Blenheim CIV-2010-406-000255

[2011] NZHC 1577

IN THE HIGH COURT OF NEW ZEALAND BLENHEIM REGISTRY

CIV-2010-406-000255

BETWEEN  JACKSON BAY MUSSELS LIMITED Plaintiff

AND  N-VIRO LIMITED Defendant

Hearing:         On the Papers

(Heard at Nelson)

Appearances: G M Downing for Plaintiff

A B Darroch and J Maslin-Caradus for Defendant

Judgment:      20 July 2011

JUDGMENT OF ASSOCIATE JUDGE OSBORNE AS TO INCREASED COSTS

Background

[1]      This proceeding was commenced by the plaintiff with a summary judgment application which was withdrawn on the eve of hearing.   The Court awarded the costs of the interlocutory application on a 2B basis, together with disbursements.  In doing so the Court found that the usual practice whereby costs are reserved (NZI Bank Ltd v Philpott [1990] 2 NZLR 403) should not apply. The main reason was that the Court found this to have been a case where it should have been clear to a plaintiff from the outset that there was an arguable defence.

[2]      The  Court noted that the defendant  had,  before  filing its opposition  and evidence in opposition, written to the plaintiff’s solicitors raising factual issues as to consultation between the parties and instructions to the defendant which had varied

the  original  design.    The  plaintiff’s  claim  was  based  on  a  proposition  that  the

JACKSON BAY MUSSELS LIMITED V N-VIRO LIMITED HC BLE CIV-2010-406-000255 20 July 2011

defendant had installed screw anchors incorrectly and not in accordance with the design.

[3]      The letter sent to the plaintiff’s solicitors elicited a two-sentence response in which  the  matters alleged  by the  defendant  were  said to  be incorrect  and “not accepted”.

[4]      Mr Darroch, for the defendant, suggested that the costs on the summary judgment application should be on an indemnity, or at least, an increased level.  The Court was not satisfied that the application should be dealt with in that way.  The Court particularly noted that much of the inquiry and assembly of evidence to which the defendant had been put would serve the defendant in relation to the substantive proceeding.

[5]      Costs were accordingly awarded on a 2B basis.

The discontinuance of the proceeding

[6]      On 3 June 2011 the plaintiff discontinued the proceeding. [7] High Court Rules 15.23 provides:

Unless the defendant otherwise agrees or the court otherwise orders, a plaintiff who discontinues a proceeding against a defendant must pay costs to the defendant of and incidental to the proceeding up to and including the discontinuance.

The plaintiff’s position on costs

[8]      Mr Downing, for the plaintiff, did not address submissions directly to r 15.23. Implicitly, however, he submitted that there should be no costs in relation to the substantive proceeding because there has not been a need for attendances beyond those covered by the award of costs on the interlocutory application.  He submitted in the alternative that if further costs are to be awarded they should be on a scale 2B basis and limited to item 4.11 (case management conference) at 0.3 days.

[9]      Mr  Downing  attached  correspondence  which  had  taken  place  between counsel before the discontinuances filed in which Mr Downing sought to obtain the defendant’s agreement to not pursuing costs.   When the defendant’s solicitors indicated that costs would definitely be  sought, the plaintiff’s solicitors initially suggested that that would lead to the filing of an amended statement of claim seeking a remedy against the defendant for additional losses suffered, including losses of profits.  At the same time the plaintiff’s solicitor asked the defendant’s solicitor to clarify what costs the defendant would be seeking over and above those already awarded.

[10]     The defendant’s solicitors responded that a 2B scale award would allow for the preparation of a defence (Item 2 - $3,760) and for appearances at case management  conferences  (Item  4.11  -  $564).    The  defendant’s  solicitors  then recorded that if the plaintiff discontinued and the Court awarded scale 2B costs, then those would be recoverable. They added –

As you know, there is also the opportunity for us to seek increased or indemnity costs.   The level of these costs were set out in our earlier application to the Court.

[11]     In the event, the plaintiff did not move to file any amended pleading or to take any other step in the proceeding, save that approximately two weeks later it filed a discontinuance.

Defendant’s position on costs

[12]     The  defendant  seeks  costs  on  the  discontinuance.    Mr Darroch,  for  the defendant, submits that this is a situation where increased or indemnity costs are appropriate.

The approach to be adopted

[13]     I approach this matter upon the basis of the principles collected in McGechan on  Procedure  HR  15.23.01,  as  drawn  from,  particularly,  the  Court  of  Appeal

judgment in Kroma Colour Prints v Tridonicatco NZ Ltd (2008) 18 PRNZ 973 at

975.

[14]     The considerations which weigh with me in this case are these.

[15]     There is no reason to displace the presumption under r 15.23 whereby costs should follow the event.   The plaintiff commenced the proceeding causing the defendant to require legal representation for advice and steps in its defence.   The award of costs in the summary judgment application was limited to the costs associated  with  the  interlocutory application  and  did  not  extend  to  the  broader requirements of substantive defence.

[16]     The Court is not able to speculate on the merits of this case which it has not heard.  The merits are not so clear in this case that they should properly influence the Court’s  costs  decision  upon  the  discontinuance.    There  is  suggestion  from  the plaintiff that alternative arrangements now arrived at by the plaintiff have cut across what would otherwise be viable claims it would have against the defendant.  On the other hand, there are submissions on behalf of the defendant to the effect that the changes which have occurred are essentially changes which had been previously recommended.  But I cannot resolve what is a factual dispute between the parties.

[17]     What is clear, however, is that from an early point the plaintiff did not engage with the engineer to the extent the plaintiff could have.  The plaintiff chose not to call  evidence  from  the  engineer.   When  the  engineer’s position  was put  to  the plaintiff by the defendant after this proceeding was issued, there still remained at that point a sense of non-engagement on the part of the plaintiff.  It is appropriate in these circumstances that there be an increase on scale costs.  That in my judgment, can be appropriately reflected by an uplift on scale 2B.

[18]     Counsel  for  the  defendant  has  advised  the  Court  that  after  allowing  for

$2,160.00 awarded on the interlocutory application, the defendant is left carrying costs  of  $21,331.28  up  to  the  interlocutory  point,  and  an  additional  $9,084.20 incurred  since  that  point.    Reference  is  made  to  the  briefing  of  witnesses  in

anticipation of proceeding to trial and in other matters of correspondence, together with this application for costs.

[19]     I do not view this as an appropriate case for indemnity costs.   There were issues to be resolved between the parties which takes the case out of the categories of vexation or impropriety, which are part of r 14.6(4).  On the other hand, there is a case for an increase of costs having regard to r 14.6(3)(b) and the circumstances I have referred to above in relation to the engineer.

Order

[20]     I order that the defendant pay to the plaintiff the costs of this proceeding (other than those already awarded) on the basis of a 2B award with an uplift of 50 per cent.   Without limitation, I certify for the commencement of the defence, one appearance at a case management conference, and (in relation to this question of costs) the filing of a memorandum for a case management conference.  If there were other steps taken by the defendant which are properly costs items, the Registrar is to allow those also when approving costs.  I also award disbursements to be fixed by

the Registrar.

Associate Judge Osborne

Solicitors:

McFadden McMeeken Phillips, PO Box 656, Nelson
Duncan Cotterill, PO Box 827, Nelson