Kloet v Blair & Co Limited HC Invercargill CIV 2011-425-000230
[2011] NZHC 1797
•16 December 2011
IN THE HIGH COURT OF NEW ZEALAND INVERCARGILL REGISTRY
CIV 2011-425-000230
BETWEEN ERIC JOHN FAESEN KLOET AND SUZANNE JOY FAESEN KLOET Plaintiffs
ANDBLAIR & CO LIMITED First Respondent
ANDMANTELL INCORPORATED LIMITED Second Respondent
Hearing: (On Papers)
Counsel: P J Dale for Appellants
K R Baxter for Second Respondent
M E Parker for First Respondent
Judgment: 16 December 2011
JUDGMENT OF FOGARTY J
[1] In a judgment delivered in the District Court at Queenstown (Judge Doherty) on 14 April 2011 the appellants in these proceedings obtained judgment against the first defendant, the first respondent in these proceedings, for wasted costs
$13,593.67, remedial costs $17,775.55 and against the first defendant’s counterclaim. The Judge also made interest awards in favour of the appellants against the first defendant. The Judge ordered costs on a schedule 2B basis to the plaintiffs against the first defendant for the claim and the counterclaim.
[2] The appellants appeal the order of costs in respect of the first defendant, and seek increased costs.
[3] The judgment of the District Court also gave judgment against the plaintiffs in favour of the second defendant/the second respondent. Thereby it rejected the
plaintiffs’ claim against the second defendant. That decision is appealed. Second,
KLOET AND KLOET V BLAIR & CO LIMITED HC INV CIV 2011-425-000230 16 December 2011
the Judge ordered the plaintiffs to pay the sum of $7,284 being the second defendant’s claim lodged against the plaintiffs initially in the Disputes Tribunal and transferred to the District Court. It was treated by Judge Doherty as a counterclaim in these proceedings. The appellants say the Judge erred entering judgment on that sum as there was no pleaded counterclaim. The Judge ordered interest on that sum from 30 November.
[4] The second defendant’s obtained costs on a schedule 2B basis against the plaintiffs. They also appeal that decision arguing that if the second defendant was entitled to costs, these costs should have been paid by the first respondents.
[5] The parties have agreed the appeal will be resolved on the papers. There are effectively two appeals.
First appeal against first respondent
[6] As indicated, this issue is limited to the refusal of the Judge to award increased costs. Before the District Court they had sought indemnity costs. I will assume that approach included calling increased costs.
[7] The appellants contend that the Judge erred by failing to award increased costs because:
i. The appellants’ claim was for only $33,832.77 plus a claim for
general damages of $5,000
ii.The appellants, accordingly, prior to issuing proceedings offered to mediate, but the offer was declined by the first respondents.
iii.The only offer to settle made by the first respondent was for the sum of $15,000 (inclusive of costs) by which time the appellants had incurred the costs of preparing and filing proceedings, completing discovery and inspection, and travelling to Queenstown with counsel for an unsuccessful settlement conference.
iv. The first respondent’s counterclaim was completely without merit.
v. The first respondent’s principal effectively admitted the appellants’
claim in cross-examination.
vi.The appellants should not have been left out of pocket in respect of the litigation given the modest amount involved and their attempts to avoid litigation.
[8] There is no doubt that the appellants tried to mediate and settle the case and were dragged into litigation against their wishes. However, it would be breaking new ground to mount a claim for increased costs on the grounds that a party has not engaged in alternative dispute resolution prior to going to trial. That is not the policy generally prevailing under the District Court Rules which follow in large parts the policy under the High Court Rules.
[9] The argument has to rely on r 47C(3)(iii), (iv) and (v) or (c) or (d). Rule 47C
provides:
47C Increased costs and indemnity costs
...
(3) The Court may order a party to pay increased costs if -
...
(iii) failing, without reasonable justification, to admit facts, evidence, or documents or accept a legal argument; or
(iv) failing, without reasonable justification, to comply with a notice for discovery, notice for further particulars, notice for interrogatories, or other similar requirement under these rules; or
(v) failing, without reasonable justification, to accept an offer of settlement whether in the form of an offer under rule 47G or some other offer to settle or dispose of the proceeding; or
...
(c) the proceeding is of general importance to persons other than just the parties and it was reasonably necessary for the party
claiming costs to bring the proceeding or participate in the proceeding in the interests of those affected; or
(d) some other reason exists which justifies the Court making an order for increased costs despite the principle that the determination of costs should be predictable and expeditious.
[10] The judgments to be made here are essentially discretionary. See the opening
sentence of subs (3): “The Court may.”
[11] A Court on appeal will not lightly set aside a decision by the trial Judge, who has always a more detailed and nuanced understanding of the behaviour of the parties than is possible on appeal. It is necessary to demonstrate an error of principle or that the decision is manifestly wrong.
[12] The argument for increased costs is built around the merit of the case and essentially is arguing that the first respondent should have known that they were going to lose. In litigation it is common for different parties to have completely different points of view, which have to be resolved by an independent Judge. A judgment which demonstrates clearly that one party’s view is correct and the others is not, is not a basis for increased costs. Increased costs is a remedy which lies somewhere between ordinary costs and indemnity costs. But increased costs are not readily ordered.
[13] The basic principle is that the parties should go into litigation and be prepared to settle with some certainty as to the costs to be awarded, and normally they will not be increased costs or indemnity costs. Settlement is encouraged even of parties who are likely to succeed, who should take into account the cost of pursuing the claim through to judgment. In New Zealand, unlike some other common law jurisdictions, it is not the policy that the successful parties recover all their costs. Indeed, the policy that they recover two-thirds of a standard set of costings may bear no relationship at all to the actual costs. Increased costs cannot be pursued on the ground that a party did not participate in alternative dispute resolution. Parties are entitled to prefer an adjudication. Under current authority it is not possible for the Court to look at actual costs. I see no reason why the District Court Judge’s
judgment on costs should be disturbed. The appeal against the order for costs in respect of the first respondent is dismissed.
Appeal against orders in favour of the second respondent
[14] As to the failure of the claim pleaded against the second defendant, the argument contends that the errors were as follows:
1.It was an error in fact in law to find that the second respondent was not liable because:
(i) The fireboxes were only between 11% and 20% effective.
(ii)The second respondents had not previously sold the Warmington model fireboxes, and so were unaware as to whether they were fit to purpose.
(iii)The fact that the appellants specifically ordered Warmington fireboxes on the recommendation of the first respondents did not relieve the second respondent from liability because it was not necessary for the appellants to stipulate the requirement for “a substantial working fireplace around which the appellants could sit and feel the warmth” and because s
7(1)(a) of the Consumer Guarantees Act 1993 provides that goods are of an acceptable quality if they are “fit for all the purposes which goods of the type in question are commonly supplied”. The Judge erred in overlooking that provision.
[15] The Judge was not persuaded by this argument. This was for the core reason that the second respondent merely supplied what was precisely ordered by the plaintiffs. The Judge also found on the probabilities that for the purposes of the Consumer Guarantees Act the Warmingtons were of appropriate quality and fit for their purpose.
... The fact that they were relatively inefficient when compared to the Jetmaster or any other fire appliance is relevant as Mr Vis was not made aware of the requirement for a substantial working fireplace around which the plaintiffs could sit and feel the warmth.
[16] The concept of fitness for the purpose has to be read within the concept of acceptable quality as defined in s 7(1) of the Consumer Guarantees Act. It provides:
7 Meaning of “acceptable quality”
(1) For the purposes of section 6 of this Act, goods are of acceptable quality if they are as -
(a) Fit for all the purposes for which goods of the type in question are commonly supplied; and
(b) Acceptable in appearance and finish; and
(c) Free from minor defects; and
(d) Safe; and
(e) Durable, -
as a reasonable consumer fully acquainted with the state and condition of the goods, including any hidden defects, would regard as acceptable, having regard to -
(f) The nature of the goods:
(g) The price (where relevant):
(h) Any statements made about the goods on any packaging or label on the goods:
(i) Any representation made about the goods by the supplier or the manufacturer:
(j) All other relevant circumstances of the supply of the goods.
...
[17] There is no doubt that the Judge understood he was applying the meaning of acceptable quality when discussing the application of the Consumer Guarantees Act.
[18] Mr Dale reiterates the argument that the Warmington fireplaces could not be of acceptable quality, fit for the purpose, because they only had a heat output ranging between 11% and 22% of efficiency. Those numbers overlook the measure. It is not a measure of relative efficiency between fireplaces. Fireplaces are well understood
not to be particularly efficient ways of heating a home. These fireplaces were not intended to heat the home.
[19] This Court takes judicial notice that there is a wide variety of fireplaces on the market of varying degrees of efficiency. This Court is familiar with the variable efficiency of fireplaces. The least efficient are the conventional wood open fireplaces.[1]
[1] Sintes and Anor v W H Harris Limited HC Christchurch CIV 2006-409-001402
27 February 2008
[20] The Court can take judicial notice of these obvious facts about fireplace efficiencies. Where one goes for a traditional open brick fireplace one is clearly trading off efficiency for ambience. In many modern homes the fireplace’s function is to provide some heat, but also to provide ambiance. Many modern homes are centrally heated or if not fully centrally heated have significant other sources of heat. Fireplaces often trade off appearance and efficiency of combustion for warmth. Fireplaces are not sold on the quality of generating warmth solely. All this is obvious to the Court and it is submitted by the second respondents in paragraph 17 of the submissions that this was common ground at the trial.
[21] Therefore, I think there can be no suggestion that the Warmington fireplaces are not acceptable quality under the Act because they are not as efficient as other fireplaces or that they are not efficient generally. The Consumer Goods Act claim was properly dismissed by the Judge. That left the raw and primary fact that the brand was nominated by the first defendant and simply ordered from the second defendant. I agree with the Judge’s finding that the claim was entirely misplaced.
The judgment for the second defendant of $2,784
[22] This sum is a net sum. The Judge found that the second defendant was entitled to full payment for $4,784 being payment for the grates and rail burners. He set off the $2,000 received for the deposit on the Jetmaster order. The argument
against this judgment is solely on a pleading point, that it was not pleaded as a
counterclaim. This dispute was originally commenced in the Disputes Tribunal and was transferred to the District Court. The argument against entry of the judgment is purely procedural and is not engaged on the merits. That is an insufficient argument. The point was not effectively pursued in the written submissions of counsel for the applicants. That appeal is dismissed.
That the second defendant’s costs should have been paid by the first defendant
[23] It was the plaintiff who brought the proceedings against the second defendant. There is no basis in the rules for this remedy. The argument was not pursued on appeal beyond simply asking the Court on appeal to do it. This appeal is dismissed.
Conclusion
[24] The plaintiffs’ appeals fail completely. The first and second respondents are
entitled to costs. If the parties cannot agree on costs leave is reserved to apply.
Solicitors:
Grove Darlow & partners, Auckland, for Appellants
M E Parker, Queenstown, for First Respondent
Anderson Lloyd, Queenstown, for Second Respondent
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