JDA.co Limited v AIG Insurance New Zealand Limited
[2022] NZHC 301
•28 February 2022
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2019-404-988
[2022] NZHC 301
BETWEEN JDA CO. LIMITED
First Plaintiff
NIKKYO CO. LIMITED
Second PlaintiffINTEGRITY EXPORTS CO. LIMITED
Third PlaintiffAND
AIG INSURANCE NEW ZEALAND LIMITED
First Defendant
VERO INSURANCE NEW ZEALAND LIMITED
Second DefendantIAG NEW ZEALAND LIMITED
Third Defendant
Hearing: On the papers Counsel:
P J Napier and N Coyle for the Plaintiffs
P Davies and C Langstone for the Defendants
Judgment:
28 February 2022
JUDGMENT OF GAULT J
(Costs and recall)
This judgment was delivered by me on 28 February 2022 at 4:00 pm pursuant to r 11.5 of the High Court Rules 2016.
Registrar/Deputy Registrar
……………………………………
JDA CO. LTD v AIG INSURANCE NEW ZEALAND LTD [2022] NZHC 301 [28 February 2022]
[1] Following my judgment of 29 October 2021 dismissing the plaintiffs’ claims seeking declarations that there is cover under a marine cargo insurance policy for damage to vehicles caused by typhoons in Japan,1 the defendants seek costs on a 2B basis together with a significant uplift on the basis that a settlement offer they made was not accepted.
[2] The plaintiffs dispute some disbursements and dispute any uplift on the basis that the settlement offer could not be accepted because it sought to bind other parties not involved in the proceeding.
[3] In the plaintiffs’ costs memoranda, they also seek recall of the judgment and a ruling in relation to refund of premiums.
Scale costs
[4] My judgment indicated the defendants are entitled to costs.2 The plaintiffs accept the defendants’ calculation of 2B costs totalling $62,876.50.
Settlement offer
[5] On 31 May 2021, the defendants sent the plaintiffs a settlement offer on a without prejudice save as to costs basis in which they offered to settle the litigation by paying the sum of $500,000.
[6] The plaintiffs did not respond to the settlement offer. The defendants say they incurred legal costs of $72,094.50 in the period after the offer. Acknowledging there is some duplication with scale costs, they propose an uplift in the region of $55,000.
[7] The Court may order increased costs if the party opposing costs has contributed unnecessarily to the time or expense of the proceeding or a step in it by failing, without reasonable justification, to accept an offer of settlement whether in the form of an offer under r 14.10 or some other offer to settle or dispose of the proceeding.3
1 JDA Co. Ltd v AIG Insurance New Zealand Ltd [2021] NZHC 2912.
2 At [101].
3 High Court Rules 2016, r 14.6(3)(b)(v).
[8] The question is whether the plaintiffs acted unreasonably in not accepting the offer. In assessing whether a failure to accept a settlement offer is reasonable, the Court’s assessment is a broad one taking into account, amongst other matters, the offer, its timing, its size, the reasonable expectations of the party who refuses the offer, and whether the parties were in a position to assess the merits when the offer was received.4 The reasonableness of a party’s rejection of a Calderbank offer must be assessed at the time of the rejection, not against the subsequent result.
[9] The onus is on the defendants to persuade the Court that an award of increased costs is justified.
[10] Here, the Calderbank letter stated that the offer was open for acceptance until 5pm on 4 May 2021, although this was clearly a typographical error given the letter was dated 31 May 2021. The defendants say the letter was open for acceptance until 5pm on 4 June 2021. In context, I agree. The letter stated:
Given that we are now three weeks from trial and there is preparation work to be done, this offer will be open for acceptance only until 5pm on Friday, 4 May.
[11] 4 June 2021 was a Friday. So the offer lapsed then, having been open since Monday of that week.
[12] The offer proposed “full and final settlement of all car damage claims made under the ATL AIMS policy and arising from typhoons Cimaron, Jebi and Trami, whether part of this litigation or not”. While the plaintiffs noted that typhoon Trami formed no part of the proceeding, that does not of itself mean it was reasonable not to accept the offer.
[13] The plaintiffs also say the offer was not capable of acceptance because it required instructions from parties that were not involved in the proceeding. There was a representative component to the claim. Insofar as the plaintiffs are referring to parties represented by the plaintiffs, there is merely a timing issue as the plaintiffs may
4 Samson v Mourant [2016] NZHC 1119 at [44], citing Weaver v HML Nominees Ltd [2016] NZHC 473 at [30].
have needed to get instructions. The time for acceptance was tight, especially in the context of a representative claim, but the plaintiffs did not seek an extension of time.
[14] The plaintiffs also say the offer was not capable of acceptance as it needed parties other than the plaintiffs and the represented parties to accept it. It is unclear to what extent the settlement offer applied to parties other than the plaintiffs and the represented parties. If that were an issue with the settlement offer, I would have expected the plaintiffs to respond and identify it. In the absence of any response, or evidence substantiating the issue, I do not consider the offer was incapable of being accepted by the plaintiffs and the represented parties alone. They could have accepted the offer. The represented parties were identified and the defendants could be expected to know that others, that is any insureds who were not represented, would not be bound by the settlement.
[15] Aside from the representative component, assessment of reasonableness is complicated here by the fact that the plaintiffs’ claim sought only declarations of cover, so the total amount in dispute was not evident on the pleadings. The Calderbank letter identified that the total potential claim was $2.69 million and indicated the offer represented about 18.5 per cent of the total, but the letter acknowledged that total was based only on the average per vehicle of the paid claims. Given the uncertainty as to the amount in dispute and also the different position of different claimants, I place limited weight on the size of the offer.
[16] The offer was made three weeks before trial, at a time when the parties were in a position to assess the merits since briefs had been exchanged. But the issues developed even at trial and the defendants succeeded at least in part on issues other than those raised in the letter. There was also mixed success on the issues pursued at trial.
[17] Overall, viewed at the time, I am not persuaded that the plaintiffs acted unreasonably in not accepting the settlement offer by 4 June 2021. Their expectation of cover was not entirely unreasonable.
[18] Even if I had been persuaded the plaintiffs had acted unreasonably, the uplift would have been much lower than sought. Where increased costs are warranted, they are approached by way of an uplift from scale costs, not by reference to actual costs. Given 2B costs of $62,876.50, the uplift sought of $55,000 is over 87 per cent. Increases in scale costs above 50 per cent are unusual. This reflects the fact that scale costs are designed to deliver to the successful party approximately two-thirds of the daily rate considered reasonable once the proceeding has been placed in its appropriate category for complexity and significance and then in the appropriate band for time. Thus, as the Court of Appeal observed in Holdfast NZ Ltd v Selleys Pty Ltd:5
An increase of 50 percent on scale costs should grant the costs-claiming party a fair recovery for the step unnecessarily forced on it, assuming that the time allocated to the step has been reasonably calculated… Any greater recovery than that would mean that the party paying costs is contributing to the other party’s choice of special counsel.
[19] That is not to say an uplift of more than 50 per cent can never be justified, as there may be circumstances where the Court considers a higher award of increased costs to be justified.6 But it would not have been warranted here.
[20]For these reasons, the defendants are entitled to 2B costs of $62,876.50.
Disbursements
[21] The defendants accept that GST should be removed from the claim for disbursements.
[22] As to the disputed witness expenses, I consider Mr Sheppard was primarily a factual witness. His evidence could have been given by AVL. However, the pre-trial order made by consent was that his evidence be given by AVL unless the current travel restrictions changed before trial. As the restrictions did change, he travelled to New Zealand. In those circumstances, I allow Mr Sheppard’s travel expenses (excluding GST).
5 Holdfast NZ Ltd v Selleys Pty Ltd (2005) 17 PRNZ 897 (CA) at [47].
6 At [48].
[23] The plaintiffs dispute the sealing fee, as no order or judgment has been sealed. On that basis, it is disallowed. Otherwise, the disbursements claimed are allowed (excluding GST).
Refund of premium
[24] In the plaintiffs’ costs memoranda, a separate point was raised regarding the need for premiums to be refunded. Evidently, the parties have not agreed on the calculation following the judgment declining cover. Mr Napier says the parties are unable to agree as to the precise meaning of paragraph [99] of the judgment, and requests recall and a ruling as to any limitation upon refund of premiums paid.
[25] Ms Davies submits that there is no “very special reason” to recall,7 and that the judgment merely contained an observation rather than a ruling in relation to refund of premiums, which was not a pleaded issue.
[26]The relevant paragraph of my judgment stated:
[99] Finally, I note that, insofar as insurers have succeeded in avoiding cover on the basis that there was no intention to take insurance or no declaration in accordance with the policy terms, it was accepted that premiums will need to be refunded.
[27] Rather than a ruling, I was recording a concession made on behalf of the defendants. On the issues at trial, I was not called upon to rule on any claim for refund of premiums, any limitation on refunds or the quantum (which would require detailed analysis). In these circumstances, I do not consider there is a very special reason to recall my judgment.
[28] I add that declining to recall does not mean the plaintiffs are precluded from pursuing refunds. In that regard, Ms Davies submits that the proposition put to Mr Sheppard in cross-examination was that if the named plaintiffs did not qualify as insureds, they would be entitled to refunds, and that this qualification does not apply given my finding that all the named plaintiffs did qualify as insureds. However, that is not the form of the concession recorded in [99] of the judgment set out above.
7 Horowhenua County v Nash (No 2) [1968] NZLR 632 (SC).
Result
[29] The defendants are entitled to 2B costs of $62,876.50 plus disbursements as claimed (excluding GST) except for the sealing fee.
[30]The application for recall is declined.
Gault J
Solicitors:
Mr P Napier, Keegan Alexander, Auckland
Ms P Davies and Mr C Langstone, Fee Langstone, Auckland
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