Keezz Ltd (NZCN 6836013) v Te Whatu Ora Health New Zealand (formerly Waikato District Health Board)

[2023] NZHC 1744

IN THE HIGH COURT OF NEW ZEALAND HAMILTON REGISTRY

I TE KŌTI MATUA O AOTEAROA KIRIKIRIROA ROHE

CIV-2019-419-000268

[2023] NZHC 1744

BETWEEN

KEEZZ LTD (NZCN 6836013)

First Plaintiff

KEEZZ PTY LTD (CAN 116 327 005)
Second Plaintiff

AND

TE WHATU ORA – HEALTH NEW ZEALAND (FORMERLY WAIKATO DISTRICT HEALTH BOARD)

Defendant

Hearing:	(On the papers)
Judgment:	6 July 2023

COSTS JUDGMENT OF VENNING J

This judgment was delivered by me on 6 July 2023 at 12.30 pm, pursuant to Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar

Date……………

Solicitors:           McLeod & Associates, Auckland

Buddle Findlay, Wellington

Counsel:            A R Gilchrist, Auckland

A V Shinkarenko, Auckland

KEEZZ LTD (NZCN 6836013) v TE WHATU ORA – HEALTH NEW ZEALAND [2023] NZHC 1744 [6 July 2023]

[1]    In its substantive judgment of 1 June 2023,1 the Court dismissed the plaintiffs’ claims and entered judgment for the defendant. As to costs the Court said as follows:2

Costs should follow the event. Costs on a 2B basis with an allowance for second counsel would seem appropriate. However, I reserve the issue of costs in case there has been any relevant exchange between the parties on that issue. Any costs memoranda by WDHB to be filed and served without 20 working days. Any response by Keezz 10 working days later, with any reply within five working days. Submissions are to be limited to five pages.

[2]    The parties have been unable to resolve the issue of costs.3 The defendant seeks scale 2B costs with a 50 per cent uplift, totalling $127,984.50, together with disbursements in the sum of $76,222.86 (excluding GST), (in total $204,207.36).

[3]    The plaintiffs’ position is that costs to scale with no uplift and reasonable disbursements should be awarded. The plaintiffs calculate costs of $68,593 with disbursements of $40,400.03 (in total $108,993.03).

[4]    The parties agree on the broad principles. They differ on the application of those principles.

[5]The plaintiffs take issue with a number of the steps claimed by the defendant.

The common bundle

[6]    The plaintiffs submit they should not pay the defendant’s costs claimed for the electronic common bundle. The rules provide for an allowance for preparation of the common bundle. While the bundle is commonly prepared by the plaintiffs, in this case I accept on the basis of counsels’ memoranda that the defendant was required to co- ordinate the final bundle. It is entitled to recover the costs of doing so.

The costs associated with subpoenaing Dr Howard

[7]    The plaintiffs submit the fact Dr Howard was a reluctant witness is not a matter which they should have to pay for. Again, however, I accept that given Dr Howard

1      Keezz Ltd v Te Whatu Ora – Health New Zealand [2023] NZHC 1360.

2 At [188].

3      Defendant filed an initial memorandum on 16 June 2023, and a reply memorandum on 4 July 2023. Plaintiffs filed a memorandum in response on 28 June 2023.

was off-shore it was necessary to issue a subpoena to ensure his attendance and to protect the defendant’s position in the case of his non-attendance. Indeed, as the defendant’s counsel submit in response, the fact he was prevented from leaving the country by his CEO and the Minister of Health during the week of the trial due to urgent business confirmed the need for the subpoena. As it was his evidence was required to be given by AVL.

[8]    I accept the defendant is entitled to the costs associated with obtaining and serving the subpoena on Dr Howard, but I do not consider there should be an uplift on those costs.

The costs on costs issue

[9]    In Strata Title Administration Limited v Body Corporate Administration Ltd the Court of Appeal implicitly recognised the jurisdiction to award costs on a costs application.4 There is no reason in the present case not to exercise the discretion of the Court and award costs on the memoranda dealing with the issue. Again, however, no uplift should apply to those costs.

Individual items

[10]   The plaintiffs submit that four of the memoranda claimed for by the defendant should not be recoverable. I accept the force of the plaintiffs’ submission in relation to the memorandum of 20 March 2020 as it was a memorandum seeking an extension of time for bringing an application and the memorandum of 18 December 2020 which sought an extension to the agreed timetable to file discovery. However, although the other two memoranda were prepared by the plaintiffs they required consideration and attention by the defendant. They are properly recoverable.

The list of documents

[11]   The plaintiffs take the view that the defendant should not recover two different amounts for discovery. The defendant’s response is that there is an ongoing obligation

4      Strata Title Administration Limited v Body Corporate Administration Ltd [2014] NZCA 96 at [10]–[14].

in relation to discovery and costs should be allowed. I consider the issue of a second allowance for discovery is related to the disbursements claimed for the electronic discovery which at $20,509.82 is a significant cost. Given that I propose to allow that disbursement and accepting the plaintiffs’ submission that part at least of the further relevant documents arose because certain documents were incorrectly discovered in part 2 of the initial list and should have been discovered in part 1, only one, rather than two allowance for discovery of $5,975 is appropriate.

Inspection

[12]   The two amounts claimed for inspection relate to the two separate discovery lists provided by the plaintiffs. There is no reason not to allow both amounts claimed in relation to that.

General preparation for trial

[13]   While the trial was completed within four and a half days, the rules provide an allowance of one day for the first to fifth hearing days. I allow the full amounts claimed.

The uplift claimed

[14]   The defendant relies on r 14.6(3)(b) of the High Court Rules 2016 to support its submission that an uplift to scale costs is appropriate in this case. The defendant says the plaintiffs contributed unnecessarily to the time and expense of the proceeding by:

(a)unreasonably rejecting five settlement offers;

(b)pursuing, and then abandoning, unmeritorious claims;

(c)pursuing arguments that lacked merit;

(d)adducing large amounts of irrelevant evidence;

(e)calling expert evidence from Mr Kemp, the forensic accountant, despite the parties agreeing there would be no expert evidence;

(f)failing to appreciate the defendant’s position and maintaining agreed facts were disputed;

(g)failing to prepare the common bundle and casebook on time, competently, or in accordance with the Rules;

(h)making no attempt to agree a chronology.

[15]   A number of the matters raised by the defendant to support the uplift in costs are matters that can and do arise in the course of civil proceedings generally. Further, the arguments about the Services Agreement, the issue of whether Keezz AU or Keezz NZ cancelled the Services Agreement and the suggestion the At Risk Fee (ARF) became payable when the defendant included promised savings in its budget at the start of the Surgical Services Reinvention Project (SSRP) were points which ultimately may have lacked merit, but really occupied little of the Court time. A similar point can be made in relation to the plaintiffs’ apparent misunderstanding and misrepresentation of the defendant’s position regarding the issue of where the savings needed to be banked, whether the SSRP was actually successful, and whether the defendant was willing to pay the ARF if the contractual pre-conditions were met. While the plaintiff’s position may have been misguided, ultimately the points were not material in terms of time.

[16]   Next, while the plaintiffs called expert evidence the defendant was able to respond to it with its own expert. It is not unreasonable for a party on reflection, to consider further evidence may be required to boost their case, and indeed a reasonable part of the case involved consideration of whether, as a fallback position, the projected savings were realistic. Mr Kemp’s evidence was relevant to that. To the extent this extended the hearing, that is reflected in the time allowance for the hearing.

[17]   Generally, counsel for both the plaintiffs and defendant presented their cases responsibly and cooperated to ensure the case was concluded within the timeframe set

by the Court. Mr Boyd’s brief of evidence did include inadmissible matters and matters which were not entirely relevant but again I do not consider those issues sufficient, on their own, to support increased costs.

[18]   In my judgment the principal matters that support an increased cost award in this case is the plaintiffs’ failure to accept a reasonable settlement offer, and the additional and ultimately wasted cost incurred by the defendant in responding to the claims of breach of the Fair Trading Act and misrepresentation and misleading and deceptive conduct which were only abandoned at the conclusion of the evidence. By that stage the defendant had been required to fully prepare a response to them.

[19]   In the present case the defendant made a number of offers of settlement. On 18 December 2019, after filing the statement of defence, the defendant offered to pay NZD 75,000 to settle the dispute in response to the plaintiffs’ demand. The defendant made further offers on 27 November 2020 and prior to discovery. The defendant then made yet further offers for NZD 50,000 on 5 May 2021 (following discovery), on 18 May 2022 (after the matter was set down for trial), and at the mediation on 12 December 2022. I agree that there was no sensible counteroffer to the later two offers.

[20]   As the Court noted in Weaver v HML Nominees Ltd a successful Calderbank offer does not of itself give rise to entitlement to increased or indemnity costs as they remain at the Court’s discretion.5 The assessment of whether increased costs should be awarded and extend to the increase can be impacted by a number of factors, including:

(a)the size of the offer relative to the actual costs;

(b)the amount of the claim;

(c)the reasonable expectation of the parties that refuses the offer;

(d)the amount of preparation for trial already undertaken;

5      Weaver v HML Nominees Ltd [2016] NZHC 473 at [30].

(e)whether the proceeding concerned an uncertain area of law;

(f)whether the parties are in a position to assess the merits when the offer was received;

(g)the information available to the party who receives the offer and the extent to which they can assess the offer;

(h)the timing of the offer; and

(i)the conduct of the offeror.

[21]   I consider that the settlement offer of $50,000 in May 2021 following discovery was a reasonable one. It was made at a time when the proceedings had been on foot for some time and discovery had been completed. The plaintiffs should have been in a position to undertake a proper assessment of the offer. The discovery should have disclosed the weaknesses in the plaintiffs’ case and the internal conflict on some aspects.

[22]   As noted, the plaintiffs also withdrew two of its causes of action at the conclusion of the evidence. There was always an issue for the plaintiffs with those claims, given the entire agreement clause in the Services Agreement.

[23]   Finally, I accept the defendant has acted reasonably in all the circumstances. For the above reasons I consider an uplift of 50 per cent is appropriate for all steps taken by the defendant from 30 May 2021, with the exception of the costs associated with obtaining the subpoena, the costs memoranda and sealing the costs order which I allow for at the standard 2B scale.

[24]   On my calculation, that leads to a costs figure of $101,216.50 in accordance with the attached schedule.

Disbursements

[25]   Rule 14.12 confirms that a disbursement is an expense paid or incurred for the purposes of the proceeding that would ordinarily be charged for separately from the Legal Services. A disbursement must be included in a costs award if it is approved by the Court for the purpose of the proceeding, is specific to the conduct of the proceeding, and is reasonably necessary and reasonable in amount.

[26]   Apart from the standard disbursements payable under r 14.12(1)(b), the disbursements sought in the present case include the costs associated with the service of the subpoena, the expert witness Mr Shaw’s costs, and some miscellaneous costs associated with trial preparation and attendance.

[27]   The plaintiffs take issue with the additional disbursements associated with out- of-town counsels’ travel and accommodation costs. The claim against the defendant involved challenges to and criticism of the senior management of the WDHB. WDHB was entitled to instruct counsel of choice and counsel that the WDHB had an ongoing relationship with. The disbursements of senior and second counsel are appropriately claimed.

[28]   Save for the additional third counsel, I approve the disbursements as being incurred for the purposes of the proceeding, and as being reasonably necessary and reasonable in amount. I do not, however, allow the disbursements associated with third counsel. Approval was given for second counsel but not for third counsel.

[29]   As noted, the disbursements associated with the electronic discovery prepared by McGrathNicol Limited are significant – $20,509.82. However, as also noted, there has been a reduction in overall costs claimed by the defendant for discovery. The Court has reduced the amount claimed for discovery by $5,975. In my judgment, given the documentation that was put before the Court for the hearing the resultant costs associated with discovery (both in terms of scale and the disbursements) are reasonable in a case of this nature.

[30]   The plaintiffs also took issue with the costs associated with Mr Shaw’s evidence. The Court accepted Mr Shaw’s evidence and preferred it to the evidence of

Mr Kemp. I accept the force of the submission made by the defendant that the scope of Mr Shaw’s evidence would have been less were it not for Mr Kemp’s extensive reply brief. I approve the amount of disbursements claimed for Mr Shaw’s evidence.

[31]The end result for disbursements calculated as above is $74,500.90.

Result

[32]   The plaintiffs are to pay the defendant’s costs of $101,216.50, together with disbursements of $74,500.90, in total $175,717.40.

[33]   I make an order authorising the Registrar to disburse the amount held for security for costs together with any interest accrued on that sum to the defendant’s solicitors in part payment of the costs order.

Venning J

Schedule 1 - costs

Item	Step	Allocated days (band B)	Cost (category 2 - $2,390 per day) ($)
2	Commencement of defence by defendant (statement of defence dated 3 December 2019)	2	4,780.00
9	Pleading in response to amended pleading (statement of defence to first amended statement of claim dated 28 May 2021)	0.6	1,434.00
10	Preparation for first case management conference (including discussion about discovery) on 11 February 2020	0.4	956.00
11	Filing memorandum dated 21 January 2020 for first case management conference	0.4	956.00
13	Appearance at first case management conference on 11 February 2020	0.3	717.00
11	Filing joint memorandum dated 11 March 2020	0.3	717.00
11	Filing joint memorandum dated 3 November 2020 seeking discovery orders	0.3	717.00
11	Filing joint memorandum dated 4 February 2021 regarding discovery	0.3	717.00
11	Filing joint memorandum dated 13 April 2021 seeking pre-trial directions	0.3	717.00
11	Filing joint memorandum dated 1 July 2022 regarding change of defendant	0.3	717.00
11	Filing memorandum dated 25 October 2022 regarding evidence	0.3	717.00
11	Filing joint memorandum dated 2 May 2023 regarding trial matters	0.3	717.00
11	Filing memorandum dated 4 May 2022 regarding inadmissible documents	0.3	717.00

Item	Step	Allocated days (band B)	Cost (category 2 - $2,390 per day) ($)
20	List of documents on discovery (affidavit dated 5 March 2021)	2.5	5,975.00
21	Inspection of documents (plaintiffs' initial tranche provided on 5 March 2021)	1.5	3,585.00
21	Inspection of documents (plaintiffs' supplementary discovery provided on 25 July 2022)	1.5	50% uplift – 5,377.50
33	Preparation of (7) briefs, list of issues, authorities, agreeing common bundle (and casebook)	5	50% uplift – 17,925.00
33A	Additional allowance for whichever party prepared common bundle (and casebook)	0.5	50% uplift – 1,792.50
33B	Preparation for hearing	5	50% uplift – 17,925.00
34	Appearance at hearing for principal counsel	5	50% uplift – 17,925.00
35	Appearance at hearing of second counsel as allowed by court	2.5	50% uplift – 8,962.50
37	Filing originating application to serve a subpoena on a witness in Australia and supporting affidavit	2	4,780.00
29	Sealing orders to serve witness in Australia	0.2	478.00
11	Filing memorandum as to costs	0.3	717.00
11	Filing reply memorandum as to costs (if incurred)	0.3	717.00
29	Sealing judgment and costs orders (to be incurred)	0.2	478.00
Total		35.7	$101,216.50

Disbursements

Disbursement	Invoice	Cost (ex GST) ($)
Disbursements claimed	76,222.86
LESS
Flights - Eilis Donnelly – trial (third counsel)	202305	399.13
Accommodation - Eilis Donnelly – trial (third counsel)	202305	1,322.83
Total	74,500.90