Jokim Investments Limited v Sowman

[2018] NZHC 2305

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2017-004-354

CIV-2015-404-2921 [2018] NZHC 2305

BETWEEN

JOKIM INVESTMENTS LIMITED

Plaintiff

AND

GRANT IAN SOWMAN

First Defendant

ADRIENNE WILLIAMS

Second Defendant

Hearing:

On the papers

Appearances:

R E C Coulter for the Plaintiff

J S Langston for the First Defendant

Judgment:

4 September 2018

JUDGMENT NO 2 OF PALMER J

(Costs)

This judgment is delivered by me on 4 September 2018 at 10.00 am pursuant to r 11.5 of the High Court Rules.

.....................................................

Registrar / Deputy Registrar

Solicitors/Counsel:

Castle Brown, Auckland Shieff Angland, Auckland

JOKIM INVESTMENTS LTD v SOWMAN NO 2 [2018] NZHC 2305 [4 September 2018]

The proceeding

[1]                   On 28 and 29 June 2018, I presided over a trial to determine the amount of compensation due to Jokim Investments Ltd (JIL) from Mr Grant Sowman and, by formal proof, Ms Adrienne Williams. The defendants were tenants who manufactured methamphetamine in JIL’s apartment, causing damage. In the judgment of 25 July 2018, I set total liability at $299,120.26 plus interest.1 I granted leave for the parties to file a memorandum each in relation to costs.2

[2]                   Before the trial, JIL obtained a freezing order in relation to a property owned by Mr Sowman on Great Barrier Island. This is currently extended until 11.59 pm Thursday 1 November 2018.

[3]There were several pre-trial settlement offers:

(a)On 9 May 2017, counsel for Mr Sowman indicated by email Mr Sowman’s niece would be prepared to raise a mortgage to contribute money to settlement, and inquired as to how much money JIL would accept to settle all matters with costs lying where they fall.

(b)On 10 May 2017, JIL offered to settle for the total sum then pleaded, which included restoration costs of $355,250.52 plus GST, legal costs of $1,512, costs and expenses of $18,270.82 plus interest and ongoing lost rental of over $36,530.24 plus interest, less $10,000, plus costs on a 2B basis. It raised an option of Mr Sowman’s niece purchasing the Great Barrier Island property which could be held to meet liability.

(c)On 23 April 2018, Mr Sowman offered to pay $195,000 conditional on his niece raising a mortgage to purchase the Great Barrier Island property. On 17 May 2018, Mr Sowman increased that offer to

$240,000 including costs.

1      Jokim Investments Ltd v Sowman [2018] NZHC 1857.

2 At [57].

(d)On 24 May 2018, JIL offered to accept $300,000 plus interest. Mr Sowman rejected that on 25 May 2018 and increased his 17 May offer by $10,000 to $250,000 including costs.

Relevant law of costs

[4]                   It is a fundamental principle in New Zealand that costs are awarded to the winning party and against the losing party in legal proceedings. The costs awarded reflect the complexity and significance of the proceeding under r 14 of the High Court Rules 2016 (the Rules). Costs can be increased or reduced under rr 14.6 and 14.7. An increase may be justified if there is a failure by the paying party to act reasonably in relation to the proceeding, increasing its time or expense.3 Under r 14.12, disbursements can also be awarded. Under r 14.13, if the proceeding could have been brought in the District Court, costs awarded to a successful plaintiff in the High Court must not exceed the costs and disbursements the plaintiff would have recovered there.

Submissions

[5]                   JIL seeks costs on a 2B basis against Mr Sowman of $46,384, with a 25 per cent uplift bringing the total to $61,102, and against Ms Williams of $7,136, and joint and several costs against both of them, relating to expert evidence, of $12,488. The costs claimed include steps taken in the Tenancy Tribunal and District Court before the proceeding was transferred to the High Court.

[6]                   Mr Coulter, for JIL, submits JIL has unnecessarily been put to unnecessary and increased costs. He submits the hearing time could have been considerably reduced had Mr Sowman agreed to JIL’s proposal for the expert witnesses to present their evidence at trial in what is called a “hot-tub” and to meet before the hearing. In addition, JIL claims disbursements of $6,937.20 against Mr Sowman, $1,135.40 against Ms Williams and $44,053.79 against them both jointly and severally. In relation to the freezing order on the Great Barrier Island property, JIL claims $12,042 in scale costs against Mr Sowman with a 25 per cent uplift bringing the claim to

3      Bradbury v Westpac Banking Corp [2009] NZCA 234, [2009] 3 NZLR 400; Paper Reclaim Ltd v Aotearoa International Ltd [2006] 3 NZLR 188 (CA).

$15,052.50, as well as $2,321.50 for disbursements. JIL also seeks interest on all claims, which it specifies.

[7]                   In response Ms Langston, for Mr Sowman, seeks costs on a 2B basis and disbursements, together totalling $41,027.50. She submits:

(a)JIL has been unsuccessful because Mr Sowman admitted liability from the outset. JIL initially sought damages of approximately $544,000 which reduced before trial, then at trial claimed $353,841.68. Mr Sowman claimed the amount should be $215,000, but JIL obtained judgment for only $299,120.66 plus interest. So there is no basis for increased costs. Instead, Mr Sowman should be awarded costs.

(b)JIL obtained two tenders after the hearing but before judgment which put the cost of remediation at less than the award for that in the judgment. She submits it is up to the Court to determine whether the tenders should have been provided to the Court and, if so, whether that would have a bearing on quantum. She also submits they may be relevant to my assessment of the settlement offers.

(c)Alternatively, costs should lie where they fall. As a further alternative, she submits JIL should be awarded the cost of commencing the claim on a 2B basis, at $6,690, but nothing more because after the claim was filed and liability admitted, all the steps taken by JIL advanced a claim for damages that substantially failed.

(d)If costs are awarded to JIL, a number of amendments are required which bring the costs claimable to $37,241 and JIL cannot claim a number of disbursements. JIL’s hot tubbing claim is misconceived and the settlement offers do not assist JIL.

Decision

[8]                   JIL has not been as successful in this proceeding as it submitted it should be, either in initiating the proceeding or at trial. But it has been successful. It obtained

judgment for almost $300,000. There is no basis for awarding costs to Mr Sowman, who was not successful, or in reducing the costs awarded to JIL.

[9]                   But there is also no basis for awarding increased costs against Mr Sowman. His defence succeeded in reducing the amount for which JIL initially claimed he was liable and equivalent to JIL’s last settlement offer. I do not consider his rejection of the settlement offers was without reasonable justification under r 14.6(3)(v). I am not convinced further expert conferencing would necessarily have reduced hearing time, given the experts’ evidence at trial.

[10]               Under s 83(4) of the Residential Tenancies Act 1986, proceedings transferred from the Tenancy Tribunal to the District Court are deemed to have been commenced in the District Court. Costs are available for the steps there under s 102 of that Act. The amounts at stake when the proceedings were initially filed were above the District Court’s then jurisdiction of $200,000.4 The amount eventually sought at trial was, slightly, above the District Court’s jurisdiction of $350,000 at the time of trial.5 So costs are available at the High Court rate not the District Court rate. I award costs on a 2B basis as set out below.

[11]               I do not consider further the tender information said to have been obtained between hearing and judgment. JIL may have had a continuing disclosure obligation to Mr Sowman under r 8.18 of the Rules. Counsel’s formal obligation to update the Court up until final judgment relates to legal issues.6 There might be an obligation to bring to the Court’s attention a new incontrovertible material fact that arises after a hearing. But the parties would have needed the opportunity to test or make submissions on potential new evidence. They did not, and the judgment was issued. Now, that new evidence can only be considered further on appeal.

[12]               For the avoidance of doubt, I have not relied on JIL’s reply submissions, filing of which I had not given leave. I have therefore not allowed reply submissions to the reply submissions. Enough time and money has been spent on these issues.

4      District Courts Act 1947, s 29.

5      District Court Act 2016, s 74, which came into effect on 1 March 2017.

6      Lawyers and Conveyancers Act (Lawyers: Conduct and Client Care) Rules 2008, r 13.11.

Result

[13]               I award costs and disbursements for the proceeding, including the freezing order application, to JIL on a 2B basis, with no uplift, against Mr Sowman and Ms Williams as sought by JIL, except:

(a)I do not award costs for second counsel as I do not consider that reflected the nature and complexity of the case.7

(b)I do not award costs for completing inspection or requesting particulars because these steps were not taken.

(c)I do not award costs for step 28 listed in Schedule A, dealing with the 10 May 2018 request for discovery of further documents. Discovery has already been accounted for in the costs schedule, at least some of the documents requested should probably have been discovered anyway, and the two days claimed is excessive.

[14]               I accept JIL’s interest calculations in its memorandum of 24 August 2018, which has not been opposed.

Palmer J

7      Nomoi Holdings Ltd v Elders Pastoral Holdings Ltd (2001) 15 PRNZ 155 (HC).