Kent v Robert Bosch (Australia) Pty Limited

[2016] NZHC 2650

IN THE HIGH COURT OF NEW ZEALAND HAMILTON REGISTRY

CIV-2013-470-000504 [2016] NZHC 2650

BETWEEN

LINUS KARL KENT, JILLIAN ROV

KENT AND TOMPKINS WAKE TRUSTEES (2009) LIMITED Plaintiffs

AND

ROBERT BOSCH (AUSTRALIA) PTY LIMITED

First Defendant

ALBERT GEORGE Second Defendant

Hearing:	On the papers
Judgment:	7 November 2016

JUDGMENT OF COURTNEY J

This judgment was delivered by Justice Courtney on 7 November 2016 at 3.30 pm

pursuant to R 11.5 of the High Court Rules

Registrar / Deputy Registrar

Date………………………

KENT & OR v ROBERT BOSCH (AUSTRALIA) PTY LTD & OR [2016] NZHC 2650 [7 November 2016]

[1]      The plaintiffs discontinued this proceeding in February 2015, a few days before the scheduled trial date. A settlement had been reached between the plaintiffs and the first defendant and no issue as to costs arose between those parties.   The second defendant seeks costs on the discontinuance.1

[2]      Ordinarily the  second  defendant  would  be  entitled  to  costs  by  virtue  of r 15.23 of the High Court Rules, which provides that:

Unless the defendant otherwise agrees or the Court otherwise orders, a plaintiff who discontinues a proceeding against the defendant must pay costs to the defendant of and incidental to the proceeding up to and including the discontinuance.

[3]      The principles related to costs on discontinuance were summarised by the Court of Appeal in Kroma Colour Prints Ltd v Tridonicato NZ Ltd (Kroma): the presumption in favour of awarding costs to a defendant on discontinuance may be displaced if there are just and equitable circumstances not to apply it; the Court will not speculate on the respective strengths and weaknesses of the witnesses’ cases but the reasonableness of the positions taken by the parties are to be considered.2

[4]      The plaintiffs resist costs being awarded. They say that they acted reasonably in bringing and discontinuing the proceedings and that if the second defendant were to be awarded costs he would be getting unfair advantage through his unreasonable refusal to participate in the settlement negotiations to the extent of the costs issue.

[5]      The plaintiffs’ claim concerned an under-floor heating system installed in the plaintiffs’ new home in the Coromandel Peninsula.   The first defendant was the supplier of the heating unit.  The second defendant was a heating installer approved by the first defendant.  The first and second defendants each asserted that the other was at fault.   Although the heating system cost just over $190,000, the cost of rectifying the alleged defects in the system was $778,700, exclusive of GST, consent fees, professional fees and other associated costs.  The reason for the high remedial cost is the fact that the system was largely embedded in the concrete floor of the

dwelling.

1      Regrettably, this application was not referred to a judge until very recently.

2      Kroma Colour Prints Ltd v Tridonicato NZ Ltd (Kroma) [2008] NZCA 150.

[6]      The proceeding was commenced in 2013, with the first case management conference held in November that year.  By the date of the second case management conference in June 2014 the second defendant had run out of money and his counsel withdrew.   The second defendant was unrepresented from that point on.   When evidence was exchanged the plaintiffs and the first defendant each provided substantial factual briefs of evidence and expert evidence.   The plaintiffs’ expert evidence was partly directed towards establishing that the second defendant was responsible for the defects in the heating system.   The second defendant provided only a brief of his own evidence.   He had no expert evidence to rebut that of the plaintiffs and the first defendant.

[7]      In  counsel’s  memorandum  on  the  costs  issue  Mr  MacGillivray,  for  the plaintiffs, explained that there were brief, without prejudice discussions between the plaintiffs and the second defendant in April 2014 in which the second defendant said that because of his financial position he would be unable to contribute to any settlement.  The plaintiffs and the first defendant therefore did not seek the second defendant’s  participation  in  the  subsequent  negotiations  that  resulted  in  the settlement between them.   The plaintiffs’ counsel contacted the second defendant directly to advise him of the attempts at settlement and that if a settlement was reached he would be asked to do no more than not prevent settlement by agreeing not to claim costs.  However, when a settlement between the plaintiffs and the first defendant was reached the second defendant declined to waive any claim for costs.

[8]      The second defendant did not challenge any of these assertions.  His position is that he did not act unreasonably in refusing to agree to the discontinuance on a no costs basis, that he was put to cost and inconvenience by the proceedings and that it was in the plaintiffs’ interests to agree to a contribution to his costs so that the proceedings could be resolved.

[9]      In  my view  it  would  be  inequitable  to  require  costs  to  be  paid  on  this discontinuance. Although I am not concerned with the merits of the respective cases, it is clear from the circumstances of the settlement and the discontinuance that it was in the interests of all parties for the matter to be discontinued.   In particular, the discontinuance  of  the  claim  against  the  second  defendant  spoke  to  the  second

defendant’s financial position rather than to the strength of his defence; he was unrepresented  and  with  no  evidence  to  rebut  the  plaintiffs’  expert  evidence. Judgment  would  likely  spell  bankruptcy.    The  plaintiffs  were  in  an  invidious position; either proceed to trial knowing that the second defendant would be unable to meet any judgment or costs award or discontinue and face a claim for costs.   I consider that the second defendant’s refusal to participate in the settlement, even to the extent of an agreement as to costs, makes it inequitable for him to obtain an award of costs.

[10]     The application is refused.

P Courtney J