Jatco Holdings Limited v Nelson City Council

[2015] NZHC 2158

ORDER PROHIBITING ACCESS TO THE SUBMISSIONS ON COSTS AND THE SUPPORTING DOCUMENTATION THAT WAS FILED (INCLUDING THE SETTLEMENT AGREEMENT) WITHOUT LEAVE OF THE COURT.

IN THE HIGH COURT OF NEW ZEALAND NELSON REGISTRY

CIV 2013-442-288 [2015] NZHC 2158

BETWEEN

JATCO HOLDINGS LIMITED

Plaintiff

AND

NELSON CITY COUNCIL First Defendant

PYERS SERVICES LIMITED Second Defendant

On the papers
Counsel:	M R C Wolff for the Plaintiff J C Ironside and D Russ for the First Defendant
Judgment:	7 September 2015
Reissued:	15 September 2015

JUDGMENT OF MALLON J (Costs)

[1]      This is a claim for costs following settlement of a damages claim.  The claim was for alleged negligence by the Nelson City Council (the Council) in issuing a building consent in respect of a residential property owned by the plaintiff.

[2]      As first pleaded, the claim was for $220,656.60, being the cost of remedial works together with unquantified consequential losses.  Pursuant to a first amended statement of claim, the cost claimed became $458,617.21.   Consequential losses were also claimed.  Three further amendments to the claim were made.  Ultimately the cost claimed was $402,551.15 together with consequential and other losses in

excess of $140,000.

JATCO HOLDINGS LIMITED v NELSON CITY COUNCIL [2015] NZHC 2158 [7 September 2015]

[3]      The Council agreed to settle the claim for a confidential sum, the details of which have been provided to the Court.  The terms of that settlement excluded costs. The terms also provided that the presumption in r 15.23 of the High Court Rules, that the party discontinuing a claim should pay costs, did not apply.

[4]      The plaintiff now seeks  that the Court determine costs.   It claims costs, calculated  on  the  basis  of  schedule  2B,  totalling  $37,014.     It  also  claims disbursements made up of filing, setting down, and expert fees totalling $31,997.83. In support of its claim it relies on Morris Crock Limited v Cycletreads Limited.1   In that case, the Associate Judge awarded 2B costs and disbursements to the plaintiff following a settlement for approximately one-third of the original claim.

[5]      The Council submits that there should be no costs or disbursements ordered. It  submits  that  a  principal  part  of  the  proceeding was  a  claim  in  relation  to  a particular alleged defect (which has been identified to the Court).  The relief claimed included  the  costs  of remedial  work  for  that  alleged  defect.   The terms  of the settlement provide an agreement and confirmation that a building consent for the remedial works will not include a requirement to remediate in respect of that particular alleged defect.

[6]      The Council submits that a major stumbling block to settlement was the claim relating to this particular alleged defect.   It notes that subsequent to an unsuccessful  mediation  held  on  30 May  2014,  the  Council  made  a  number  of settlement offers.2    The last of these was made on 2 June 2014 at which time the Council offered a sum which was more than sufficient to carry out remedial works other than in relation to this particular alleged defect.  The Council submits that it was unreasonable for the plaintiff not to accept this offer.  The settlement which was later reached comprised the sum as offered on 2 June 2014, together with an amount which reflected the inevitable cost to the Council if a two week trial in Wellington

were to proceed.

1      Morris Crock Limited v Cycletreads Limited HC Auckland CIV-2004-404-4764, 5 December

2005.

2      High Court Rules, r 14.10.  The plaintiff objects to the defendant disclosing these settlement offers to the Court on the basis that they are subject to privilege which the plaintiff does not waive.   However all these offers were made on a “without prejudice save as to costs” basis. They are therefore able to be provided to the Court for the purposes of determining costs.

[7]      The Council further submits that if costs are to be ordered in favour of the plaintiff, the following matters arise:

(a)       The replies to the statements of defence were unnecessary.

(b)The preparation of 13 memoranda for case management conferences reflects the manner in which the plaintiff conducted the proceeding, which involved repeatedly repleading its case.

(c)      The  bulk  of  trial  preparation  was  directed  towards  the  particular alleged defect that was not made out.

(d)      Most of the expert’s brief related to the particular alleged defect that

was not made out.

(e)      The other expert fee related to a claim for diminution in value which formed no part of the settlement.

[8]      I  consider  that  the  plaintiff  should  have  an  order  for  costs.    It  was  the successful party in that it issued proceedings which led to a settlement in which it received a payment of money.  That said, it is apparent from the pleadings and the terms of the settlement that a substantial part of the claim related to an alleged defect that was not made out.  It is apparent that the proceeding would have been settled earlier had that part of the claim not been included.  This distinguishes the matter from Morris Crock Limited v Cycletreads Limited where the Associate Judge considered that it was not shown that the cause of action not pursued had added to the costs of litigation.

[9]      I therefore consider that the plaintiff should have its costs on a 2B scale, in accordance with the schedule to its 21 July 2015 memorandum, but only in respect of the steps in that schedule up to 30 July 2014 (allowing the plaintiff a reasonable opportunity to consider the Council’s offer on 2 June 2014).  As a consequence it is unnecessary to consider the Council’s points in [7] above except those relating to disbursements.

[10]     As to disbursements, I consider that the defendant should pay the filing fee for the issue of the proceeding ($1,350), the filing fee for the amended statement of claim ($110) which was filed before the Council made its 2 June 2014 offer, and the setting  down  fee  of  $1,600.    I  also  consider  that  the  Council  should  pay  the Alexander & Co expert fees of $28,366.33, and the Riepen Valuation Limited expert fee of $241.50.  While the Alexander & Co expert fees covered work on the alleged defect that was not made out, and the claim was settled on the basis of something other than diminution of value, these sums were reasonably incurred by the plaintiff in pursuing its claim.

[11]     Costs and disbursements are ordered to the plaintiff in accordance with [9] and [10] above.   I confirm that the hearing fee is to be refunded (if that has not already occurred).

[12]     The  settlement  agreement  was  entered  into  on  a  confidential  basis.    To preserve that confidentiality the parties seek an order that “the costs decision be made on a restricted basis” in accordance with r 3.9(3) of the High Court Rules. That rule relates to access to “documents” during the substantive hearing stage of a proceeding.  It is appropriate to make an order prohibiting access to the submissions on costs and the supporting documentation that was filed (including the settlement agreement) without leave of the Court.   However, in seeking the Court’s determination of costs, open justice considerations arise.   It is not appropriate to prohibit publication of this judgment which I have been able to prepare without detailing any matters that are confidential.

Mallon J

Recall and reconsideration

[13]     Shortly after delivering the above judgment on 7 September 2015 I received a communication from the plaintiff’s counsel, via the registry, that there was an error in the judgment concerning the date that the Council made its last settlement offer. The judgment was given on the basis that the Council’s last settlement offer was

made on 2 June 2014. This was as advised by the Council in its submissions.  In fact that offer was made on 2 June 2015.

[14]     Upon being advised of this error I issued a direction that I was proposing to recall the judgment on the basis of a material mistake of fact and reconsider the matter in light of the correct position.   I directed that if either party wished to be heard about this before I did so they would need to respond by the end of that day. Both parties did respond but neither took issue with the proposed recall.   I am therefore recalling my judgment and reconsidering the matter.

[15]     The plaintiff’s position is that it should have its costs up to 30 July 2015 (rather than 30 July 2014).  The Council’s position is that its key offers were those made in November 2014 and December 2014.  It says that these offers reflected the cost of remediation of one defect which is the only area in respect of which it accepted  some  responsibility.    It  says  that  the  later  offers  were  increased  only because of anticipated trial costs.   It further says  that the settlement agreement reflects that numerous alleged building defects did not in fact exist.

[16] I am unable to accept the Council’s position on the information before me. An attachment to the Council’s submissions sets out the remediation costs under a number of heads. These include the defect for which the Council accepts responsibility and the particular alleged defect referred to at [5] above. The settlement agreement, as I read it, agrees only that the particular alleged defect referred to at [5] above does not require remediation. I am unable to see any acknowledgement that numerous other alleged building defects did not in fact exist.

[17]     In these circumstances I consider the appropriate approach is to allow the plaintiff’s costs up to the 2 June 2015 letter.  The Council’s 2 June 2015 letter re- initiated settlement negotiations which quickly led to a settlement agreement.  The letter contained an offer that was open for acceptance until 8 June 2015.  That was an appropriately short timeframe given the looming trial date. The plaintiff’s counter offer was made on 9 June 2015 but was well above the settlement figure that was reached.  The settlement was concluded on 13 July 2015, by which stage the plaintiff had begun trial preparation.

[18]     This means not allowing the plaintiff to recover the costs of trial preparation itemised as being incurred on 6 July 2015.  I do not disallow the other items that are referred to at [7](a) and (b) above.  The plaintiff provided a response to those matters and, in light of that response, it is not possible for me to say that the 13 case management conferences (which on the face of it are excessive) were entirely attributable to the plaintiff, nor that the replies to the statements of defence were unnecessary.

[19]     Accordingly, I order that the Council is to pay the plaintiff’s costs on a 2B basis in accordance with its schedule to its 25 July 2015 memorandum for all steps that are claimed in that schedule except the claim for trial preparation.   The disbursements to be paid remain as I have set out in [10] above.  I consider that only one amended statement of claim should be allowed for (in addition to the filing fee for the issue of the proceeding) as the number of amended claims that were filed should not have been necessary.

[20] I confirm that the hearing fee should be refunded if that has not already occurred. I confirm what I have said and ordered at [12] above.

Mallon J