Johnson v Barry Park Investments Limited

[2019] NZHC 1213

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2018-404-455

[2019] NZHC 1213

IN THE MATTER OF

an application under section 323 of the Property Law Act 2007

BETWEEN

XANTHE ANNA JOHNSON AND MARK ANDREW GRAHAM

Plaintiffs

AND

BARRY PARK INVESTMENTS LIMITED

Defendant

Hearing:

On the papers

Counsel:

K Quinn and C Pearce for the Plaintiffs

G J Kohler QC and S J Neville for the Defendant

Judgment:

31 May 2019

COSTS JUDGMENT OF MUIR J

This judgment was delivered by me on Friday 31 May 2019 at 11.30 am pursuant to Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar Date:…………………………

Counsel:

K Quinn Barrister, Auckland C Pearce, Barrister, Auckland

G Kohler QC, Barrister, Auckland

Solicitors:

Heimsath Alexander, Auckland Ellis Gould, Auckland

JOHNSON v BARRY PARK INVESTMENTS LIMITED [2019] NZHC 1213 [31 May 2019]

Introduction

[1]                 In my judgment dated 27 March 2019, I stated that the plaintiffs were entitled to costs and provisionally indicated that I considered these appropriately assessed on a 2B basis. I further indicated that it was my expectation quantum could be settled by the parties. Regrettably, this has not been the case and a further judgment is therefore required.

[2]                 Neither party takes issue with my provisional 2B categorisation. The areas of dispute relate largely to:

(a)the incidence of costs on the plaintiffs’ withdrawn application for leave to commence by way of originating application;

(b)whether there should be an uplift to or deduction from the plaintiffs’ base line entitlement; and

(c)what disbursements are recoverable, particularly in relation to experts.

The application for leave

[3]                 Initially, the plaintiffs sought to commence their proceedings by way of originating application. They applied for leave accordingly. To provide context to the leave application they simultaneously filed their substantive evidence (including expert evidence).

[4]                 The application was opposed by the defendant and heard by me. The principal ground of opposition, reflected in paragraph [6] of my Minute dated 15 February 2018, was that the defendant intended to file a counterclaim to advance rights of natural support for the defendant’s house. Mr Kohler QC submitted that this could not be dealt with efficiently in the context of a claim against the defendant, which had been brought under Part 19 of the High Court Rules.

[5]                 During the course of exchanges with counsel, Mr Kohler persuaded me that, despite my initial assessment that the Part 19 procedure might provide a satisfactory

vehicle for disposition of the dispute, the prospect of such counterclaim significantly undermined the utility of that approach. It appeared to me that the Court would likely be faced with parallel ordinary proceedings at the behest of the defendant and an application to consolidate such proceedings with the plaintiffs’ originating application. If that were the case I could see little advantage in the whole dispute not moving forward as an ordinary proceeding.

[6]                 I discussed these provisional views at length with counsel during the course of the hearing. I advised that I thought the case could benefit from intensive case management and assignment to a Judge. I sought assignment in my own favour from the Chief High Court Judge and advised the parties after the lunch adjournment that this had been approved. I further indicated that I did not consider the plaintiffs should have to start again and that the matter could progress with statements of claim, defence and counterclaim.

[7]                 On that basis, the plaintiffs indicated that they did not resist orders declining leave to proceed by way of originating application, while opposing any application for costs in respect of the steps taken up to that point.

[8]                 I reserved costs on the basis that I could not then say the plaintiffs’ application had been ill-conceived at the time of filing, and that I considered my assessment would benefit from a better understanding of the full factual matrix, which I could only be expected to have at a later point in the proceeding.

[9]                 Both parties now seek costs in respect of the application for leave. In the alternative, the plaintiffs say that costs should lie where they fall. The plaintiffs’ scale claim is $12,990. The defendant’s scale claim is $10,926.

[10]              In my view, costs should lie where they fall. Although the fact the application for leave was dismissed might ordinarily be thought to support a claim by the successful respondent,1 I take into account the fact that, despite the fact a counterclaim was filed and prosecuted through to trial, it was abandoned in final submissions. Had that decision been made at the outset, I consider that the matter could have proceeded

1      High Court Rules 2016, r 14.2(1)(a).

under Part 19 after all, at least with reasonable co-operation between counsel on discovery issues. I regard that as a sufficient “other reason” within the terms of Rule 14.7(g) to decline a costs award in the defendant’s favour. By the same token, an award in favour of the plaintiffs would breach the most fundamental tenant of any costs assessment – that “the loser and only the loser pays”,2 unless there are exceptional reasons. I do not consider the reasons in this case sufficiently exceptional. I note the sensible concession in open correspondence from the plaintiffs’ counsel that in the interests of agreeing costs, those on the interlocutory application should lie where they fall. In the event, no agreement was possible, but his position accurately foreshadows my own.

Increased/decreased costs

[11]              Although in their attempts to resolve costs the plaintiffs did not seek an uplift on scale costs (and indeed proposed an approximately $20,000 discount for prompt settlement of the quantum), they reserved their right to seek increased costs in the absence of agreement.

[12]              No agreement having been reached, they now seek an uplift of 25 per cent. They do so for the following reasons:

(a)The matter was not as complex as the defendant had foreshadowed and could have proceeded under the Part 19 procedure.

(b)The “detailed historic searching” that the defendant insisted was necessary, and on which it further relied to oppose the application for leave, achieved no useful result.

(c)The defendant’s interrogatories were irrelevant, and the plaintiffs’ answers to them neither referred to in opening nor closing.

(d)The counterclaim was not pursued at trial, but in the meantime the plaintiffs were required to answer it.

2      Shirley v Wairarapa District Health Board [2006] NZSC 63, [2006] 3 NZLR 523 at [19].

(e)The defendant refused even to admit an encroachment until the eve of trial, requiring the plaintiffs to produce detailed survey evidence.

(f)The defendant challenged the feasibility of removing the wall, claiming “detailed engineering evidence [would] particularly be required”, but then chose not to call any evidence in that respect.

(g)Mr Burton attempted to mislead the Court as to his financial means on at least six occasions in his signed (and read) brief of evidence, by casting himself as someone facing financial hardship and who would be seriously embarrassed by any exercise of the Court’s discretion to require removal or reconstruction of the wall. As a result, extensive research and cross-examination was necessary to reveal the true position.

[13]              Cumulatively, I consider that these factors do justify an uplift under Rule 14.6(3)(b)(ii), (b)(iii) and (c). In particular, Mr Burton’s attempts to portray himself as someone who – on account of his financial circumstances – should be the beneficiary of the Court’s discretion were significantly misleading. As the cross- examination demonstrated, he is, despite the somewhat eccentric circumstances in which he chooses to live, a multi-millionaire. The trial was unnecessarily extended to correct the impression he chose to create and I have no doubt that extensive background research was required to undertake what was an effective cross- examination in this respect.

[14]              The very late concession in relation to the encroachment and the prosecution of a counterclaim that was ultimately abandoned also weigh significantly in my assessment. I am left in no doubt that Mr Burton chose to pursue an approach to the proceedings which was designed to increase cost and difficulty from the plaintiffs’ perspective. Steps were taken that lacked merit and sensible concessions (as in respect of the encroachment) came too late.

[15]I consider the claim for a 25 per cent uplift reasonable and allow it.

[16]              However, against that I must take into account the defendant’s legitimate argument that, although the plaintiffs succeeded overall, they were unsuccessful in persuading me (at least at this stage) that an order should be made compelling the defendant to remove and reconstruct the wall in accordance with the methodology of their expert, Mr Wood. Rather, I considered the appropriate course was to order works either in accordance with that methodology, or any alternative methodology approved by structural and geotechnical engineers engaged by the defendant and tabled with the Court. In so doing, I recognised a range of possible solutions open to the defendant which could potentially be very much cheaper than the +$400,000 works proposed by Mr Wood.

[17]              In the result, although relief was ordered in terms of paragraphs A and B of the plaintiffs’ principal cause of action, I declined relief in terms of paragraphs C and D.

[18]              I accept Mr Kohler’s submission that one of the significant focuses in the case was the nature of the relief which should be granted in the event the wall was found to be a wrongly placed structure, and I accept that, by analogy with cases where allowance has been made for prosecution of unsuccessful causes of action, some adjustment of the costs order is appropriate on this account. Indeed, Rule 14.7(d) specifically recognises as grounds for abatement of a costs order “failure in relation to a cause of action or issue” which significantly increased costs.

[19]              I consider an allowance of 15 per cent appropriate in this respect. In the result, I allow a net uplift of 10 per cent.

Experts’ costs

[20]              The plaintiffs claim experts’ costs of $54,714. This figure is broken down into two components, being (1) costs associated with the trial of $49,506 and (2) a sum of

$5,208, which is 50 per cent of the experts’ costs incurred in 2017 when the initial application for leave was filed.

[21]              In respect of the 2017 costs, I accept the plaintiffs’ submission that the work was far from wasted. It formed the nucleus of the evidence at trial, even though in the case of Mr Wood it was necessary for him to refine his predecessor Mr Thomas’

methodology. Again responsibly, the plaintiffs concede that some duplication would inevitably have occurred. That is why they propose a 50 per cent discount. I accept that this represents an appropriate exercise of the discretion contained in Rule 14.12(3) in respect of an otherwise meritorious disbursement claim.

[22]              In respect of the experts’ trial costs, I have reviewed the detailed timesheets and invoices of the five experts involved.3 I consider the accounts demonstrably reasonable in the context of a one-week trial which raised issues of considerable complexity from an engineering, town planning and quantity surveyor perspective.4

[23]              The defendant argues that the evidence of Messrs Wood and Ranum was not “reasonably necessary for the conduct of the proceedings” within the terms of Rule 14.12(2)(c) and should therefore be disallowed. Mr Wood prepared the detailed methodology of wall removal and reconstruction which (at this stage) the Court has not mandated, Mr Ranum costed the same.

[24]              I do not regard the costs of these witnesses as having been unreasonably incurred in the context of the proceedings. One of the defendant’s significant grounds of defence was that removal of the wall could not be safely done. Mr Wood’s evidence was, I accept, necessary to demonstrate that the work was feasible and safe. Moreover, although my judgment gave the defendant the option of developing other methodologies, in the absence of such, the direction is to undertake the work in accordance generally with the methodology developed by Mr Wood. Mr Wood’s approach is therefore effectively the default one. And, in respect of Mr Ranum, I accept the plaintiffs’ submission that because the ultimate remedy was always going to be discretionary, the costs of removal and reinstatement were matters necessarily before the Court.5

3      Mr Ranum did not prepare and retain time sheets, instead maintaining a running tally of hours spent, which was then disposed of when the invoice was sent.

4      That conclusion relates to both scope of attendances (Rule 14.12(2)(c)) and amount charged (Rule 14.12(2)(d)).

5      As Mr Quinn submits, if the costs of removal had, for example, been totally disproportionate to benefit, the Court may have been persuaded to order damages in lieu.

Other disbursements

[25]              The defendant challenges an invoice of $559 for the LawFlow 3-discovery platform. It says that there was a modest number of discoverable documents (approximately 200) and that because of other allowances for discovery it is not a proper, necessary or appropriate disbursement. I do not agree. The use of an electronic platform to manage discovery is now routine and I accept will have saved counsel several hours in collating documents, preparing discovery lists and trial bundles. I allow the disbursement.

[26]              Consistent with my previous conclusions, I do not allow for a filing fee on the originating application and interlocutory application for leave.

Second counsel

[27]              I certify for second counsel. This was a moderately complex claim where both parties were represented by two counsel and the defendant by a Queens Counsel. The plaintiffs’ submissions were detailed, extensive and significantly assisted in the preparation of my judgment. I have no doubt their quality reflected the combined input of counsel.

Costs on preparation of costs submissions

[28]              The plaintiffs seek costs on preparation of their costs submissions by analogy with item 24 of Schedule 3 ($3,445). They further seek an uplift on that or an order for indemnity costs if the final award of costs is “materially more” than the $125,000 (all in) which they offered to settle costs for. As it is, my ultimate award exceeds

$125,000 but not by a significant amount (approximately 5 per cent).

[29]              I consider an award of costs by analogy with item 24 appropriate. However, I discount the amount claimed by 50 per cent to reflect late provision by the plaintiffs of their experts’ time sheets. Rule 14.12(2) refers to verified disbursements and although I have found the accounts (1) identify attendances reasonably necessary for the conduct of the proceedings and (2) reasonable in amount, verification was a legitimate request. However, in view of the number of differences between the parties,

I consider it most unlikely that timely provision would have resulted in settlement. I also have no doubt that the solicitor/client costs involved in preparation of the plaintiffs’ submissions will have been appreciably higher than the 50 per cent allowance I make.

Result

[30]              I award costs and disbursements in favour of the plaintiffs and against the defendant in the total amount of $133,716.70 calculated in accordance with the Schedule annexed hereto.

Muir J

Schedule

Costs – Main Proceeding	Allocation (Band B)	Amount $
Commencement 1 Commencement of proceeding by plaintiff	3	6,690.00
Other pleadings and notices 3 Reply	0.8	1,784.00
Case Management 10 Preparation for first case management conference	0.4	892.00
11 Filing memorandum for case management conference	0.4	892.00
13 Appearance at case management conference (2 May 2018)	0.3	669.00
Interrogatories, discovery and inspection 17 Answer to interrogatories	1	2,230.00
20 List of documents on discovery	2.5	5,575.00
21 Inspection of documents	1.5	3,345.00
Trial preparation and appearance 30 Plaintiffs’ preparation of briefs	2.5	5,575.00
31 Plaintiffs’ preparation of list of issues, authorities, and common bundle	2.5	5,575.00
33 Preparation for hearing	3	6,690.00
34 Appearance at trial by principal counsel (5 days)	5	11,150.00
35 Appearance by second counsel (5 days)	2.5	5,575.00
Subtotal	$56,642.00
Plus 10% uplift Plus costs allowance on costs submissions Subtotal General Disbursements	$  5,664.20  $  1,722.50 $64,028.70
Process server fee	155.00
Filing fee – statement of claim	1,350.00
Filing fee – defence to counterclaim	110.00
Scheduling fee for trial	1,600.00
Hearing fee for trial	11,200.00
LawFlow e-discovery platform (19 May 2018-28 Feb 2019)	559.00
Subtotal	$14,974.00
Experts
2017 (less 50%)	5,208.00
Trial experts	49,506.00
Subtotal	$54,714.00
Grand Total	$133,716.70