Lawrence v Glynbrook 2001 Ltd
[2015] NZHC 1005
•13 May 2015
IN THE HIGH COURT OF NEW ZEALAND DUNEDIN REGISTRY
CIV-2009-412-713 [2015] NZHC 1005
BETWEEN DEAN ROBERT LAWRENCE
Plaintiff
AND
GLYNBROOK 2001 LIMITED First Defendant
CRAIGADEAN DAIRY FARM LIMITED
Second Defendant
CRAIG WILLIAM LAWRENCE Third Defendant
ALFRED NORMAN WILLIAM LAWRENCE
Fourth Defendant
BEVERLY DIANE LAWRENCE Fifth Defendant
ALFRED NORMAN WILLIAM LAWRENCE and BEVERLY DIANE LAWRENCE
Sixth Defendants
MARBLE HILL DAIRIES LIMITED Seventh Defendant
Hearing: On Papers Counsel:
H McIntosh and H Macfarlane for the Plaintiff
T J Shiels QC and D R Tobin for the DefendantsJudgment:
13 May 2015
COSTS JUDGMENT OF BROWN J
LAWRENCE v GLYNBROOK 2001 LTD [2015] NZHC 1005 [13 May 2015]
[1] The plaintiff (Dean) seeks an award of costs of $405,334.81 comprising: (a) scale costs of $106,253.50;
(b) increased costs (70 per cent uplift) of $74,377.45; (c) disbursements of $224,703.86.
A substantial volume of material has been filed in support of that claim.
[2] The defendants contend, having regard to keeping costs proportionate, the relative success of the parties, the conduct of the parties and certain settlement negotiations, that the appropriate order is that costs should lie where they fall. Alternatively they say that costs and disbursements should be reduced having regard to various settlement offers.
General approach
[3] A fundamental principle applying to the determination of costs in New Zealand is that costs follow the event: Manukau Golf Club Inc v Shoye Venture Ltd.1 Indeed the Supreme Court there said that a Court does not have to give reasons for costs orders where it is simply applying the fundamental principle that costs follow the event and the costs awarded are within the normal range applicable to that Court. It is only when something out of the ordinary is being done that some explanation, which may be brief, should be given.2
[4] Dean contends that he was unquestionably the successful party and that the net outcome of the judgment was:
“(a) Dean won wholly or materially on five of his six causes of action.
Moreover, the one cause of action on which he did not win, ie the Glynbrook Deed claim, was entirely alternative to the first and third causes of action, and he won the relevant relief on those two alternatives.
1 Manukau Golf Club Inc v Shoye Venture Ltd [2012] NZSC 109, [2013] 1 NZLR 305 at [8].
2 At [16].
(b) He won wholly or materially on all of his different categories of claim, namely: the Partnership (fourth cause of action); Glynbrook shareholding (first and third causes); Craigadean / s174 (fifth cause); and Marble Hill / s348 (sixth cause).
(c) He won on all of the key contested facts, and in particular: (i) the timing of his departure from Clydevale Farm; (ii) the signing of the Deed, and the timing of that;
(iii) the terms of the October Agreement;
(iv) the decision-making and management of Edendale Farm and Craigadean; and
(v) the circumstances of his departure from that farm.
(d) He successfully defended all of the defendants’ various affirmative defences of laches, acquiescence, estoppel, assignment and limitation, with the one exception of the limitation on the Glynbrook equitable damages claim (on which he was awarded specific performance instead).
(e) He therefore won: (i) damages of $463,000; (ii) interest on same, of $218,000; and (iii) a valuable 12.5% shareholding.”
[5] In contrast Dean submits that the defendants’ success was limited to:
(a) succeeding on only one cause of action out of six, although relief on that cause of action was still awarded against them;
(b)achieving a significant reduction in the damages claimed on the fourth cause of action but which translated automatically into an increased value of the 12.5 per cent shareholding awarded to Dean under the first and third causes of action.
[6] The defendants recognise the general principle but argue that this is a case calling out for an “in the round” approach. They say the case was conducted in a way that was out of proportion to the issues, illustrated by the fact that the costs claimed are approximately 60 per cent of the monetary judgment ordered (which includes interest to the date of judgment). While acknowledging that the plaintiff succeeded in obtaining an order for specific performance for the transfer of
13 Glynbrook shares, they contend that on the evidence it would be entirely speculative to attribute anything more than a nominal value to that shareholding.
[7] Dean responds that:
(a) the suggestion that the case was conducted in a way “out of proportion with the issues” cannot be substantiated: the issues were many and complex and not helped by what Dean describes as the defendants’ intransigence followed by late capitulation in several instances;
(b)the award of the Glynbrook shares was self-evidently a valuable result for Dean, the agreed potential value of the shares being set out in the supplementary joint witness statement;
(c) the settlement offers can only fall to be assessed under a specific part of the High Court Rules and cannot themselves support a general “in the round” approach to costs;
(d)the assignment amendments made to the pleadings are irrelevant in the circumstances where the Court ruled that there was no requirement for the assignments to be pleaded.
[8] I agree with Dean’s submission that an assessment of which party was “successful” requires both a consideration of which party won the principal contests of law and fact3 and a realistic appraisal of the end result, rather than focusing on who initiated what step and the extent to which that step succeeded or failed.4
[9] Dean was plainly the successful party and prima facie is entitled to an award of costs.
3 Phoenix Organics Ltd v RD 2 International Ltd (No 2) HC Auckland CIV-2005-404-005070,
21 December 2005.
4 Packing In Ltd (in liquidation) v Chilcott (2003) 16 PRNZ 869 (CA).
[10] As the agreed list of issues (recorded at [87] of my judgment and almost seven pages in length) reflects, this was a complex case with a range of affirmative defences. The cases for both sides were efficiently run and counsel did well to complete the evidence within the allocated two weeks and to condense closing submissions into a further two days. In all the circumstances I do not consider that the case was conducted in a way out of proportion to the pleaded issues.
Scale costs
[11] Dean submits that the appropriate starting point is scale costs. Appendix 1 to his costs memorandum is a calculation of scale costs of $85,123.50 on a
2B basis, that being the original categorisation of the case in 2010.
[12] The defendants accept the accuracy of the calculation of 2B scale costs in Appendix 1. Furthermore they specifically accept that if costs are dealt with on a scale basis (with or without modification) it is appropriate to allow for second counsel. However they contend that a reduction from scale is appropriate and they resist Dean’s submission that there should be an uplift from scale.
[13] Dean submits that the original categorisation did not envisage the length and complexity of the case and contends that certain steps were ultimately required which now justify a band C categorisation. With reference to inspection he submits that a band C (six day) time allowance should be allowed having regard to the fact that the defendant filed six discovery lists and that large numbers of documents were discovered.
[14] He also submits that the time allowed in band B under the heading “Trial preparation and appearance” (2.5 days for preparation of briefs; 2.5 days for preparation of list of issues, authorities and common bundles and three days preparation for hearing) is quite inadequate for the complexity of the proceeding. The defendants resist band C categorisations for those aspects of the case.
[15] As noted above, the case was complex involving six causes of action and numerous defences including affirmative defences. While the common bundle was not particularly large, a substantial amount of discovery and inspection was required spanning a significant period of time including accounting records for the partnership and both Glynbrook and Craigadean. I consider that band C is appropriate for items 21, 30, 31 and 33 in Schedule 3 which produces a scale calculation of $106,253.50.
[16] It is also necessary to deal with an outstanding costs claim relating to an interlocutory application for discovery heard by Whata J on 13 November 2012. I allow costs on a 2B basis (but without an uplift).
A reduction from scale?
[17] The defendants’ argument in favour of a reduction is based on what those
aspects of their success at trial:
(a) the deed cause of action;
(b)Dean’s alleged failure to acknowledge and address the difficulty that, while there was clearly a basis for equitable damages in lieu of specific performance, there was no basis for equitable damages in addition to specific performance;
(c) significant parts of the partnership claim were based on market rentals for stock and plant which were rejected;
(d)the quantum awarded under the partnership claim was a fraction of that sought.
[18] On the basis of their view as to their success, the defendants submit that a deduction of 50 per cent from the scale calculation is appropriate in the event that their “in the round” argument, that no costs should be ordered, is rejected.
[19] Dean draws attention to the observation of the Court of Appeal in
North Shore City Council v Body Corporate 189855 that:5
The principle that costs follow the event is the norm and the exceptions must not be permitted to detract significantly from that and the allied principle that “the determination of costs should be predictable and expeditious”.
[20] I accept Dean’s submission that when considered in that context the extent of the defendants’ success does not justify any reduction in the costs payable to Dean based on proportionality of trial success. Consequently I reject the submission that a reduction from scale is appropriate.
An increase above scale?
[21] Dean seeks increased costs in the measure of an uplift from scale by no less than 70 per cent in reliance on r 14.6, in particular because:
(a) the nature of the proceeding or the step in it was such that the time required by each step substantially exceeded the time allowed under band C: HCR 14.6(3)(a); or
(b)the defendants’ conduct has contributed unnecessarily to the time and expense of numerous steps in the proceeding and hearing time: HCR 14.6(3)(b).
[22] Dean argues that band C time was substantially exceeded both in relation to inspection and trial preparation and appearance. He further argues that the defendants’ conduct unnecessarily contributed to the time and cost of numerous steps in the proceeding, drawing attention specifically to:
(a) the alleged failure or refusal to comply with discovery obligations;
(b) the adjournment of two earlier trial fixtures;
5 North Shore City Council v Body Corporate 189855 [2010] NZCA 234, (2010) 20 PRNZ 740 at [12].
(c) advancing issues which were subsequently not pursued;
(d)alleged unmeritorious defences, in particular laches, acquiescence and estoppel. It is further contended that the defences of a requirement for notice and consideration for the Official Assignee assignments had no merit on the face of the relevant legislation;
(e) overall justice.
[23] While acknowledging that their discovery was less than perfect, the defendants submit there is no basis for any suggestion of conscious impropriety and that the significance of some factual issues, and therefore the relevance of documents, developed as the case proceeded as illustrated by the repeated amendment of Dean’s pleadings.
[24] With reference to the adjournments, they note that the first was occasioned by the need to await the outcome of their appeal in the Official Assignee proceeding while the second was to allow global settlement discussions to be progressed. They argue that it would be wrong in principle to allow costs in excess of scale on account of the fact that their case was refined as matters proceeded and factual matters were further explored. They make the point that if Dean’s approach was accepted, then a defendant would be in a better position on costs if it failed to make realistic concessions at an appropriate time. While acknowledging that some defences were unsuccessful, the defendants submit that they contributed very little, if any, to trial time and preparation.
[25] So far as inspection of documents and trial preparation and appearance are concerned, I consider that those matters are already sufficiently addressed in the uplift to band C allowed above.6 I agree with the defendants that the second adjournment was by mutual request and that it is inappropriate to seek to
apportion responsibility in respect of that by reference to costs.
6 At [15].
[26] However I consider there is merit in the points which Dean makes first about the costs associated with the need for renewed preparation as a consequence of the first adjournment and secondly with reference to the wasted work which was occasioned in addressing a number of points which the defendants subsequently abandoned in closing submissions, including:
(a) the denial that the October agreement was a binding agreement;
(b)the argument that it was a term of the October agreement that Dean work on Edendale Farm for a period of five years;
(c) the contention that the October agreement was conditional on execution of the deed.
I consider that these matters warrant a modest uplift. I direct that Dean is entitled to an uplift on the adjusted scale figure at [15] above of 10 per cent.
Disbursements
[27] The plaintiff seeks disbursements of $224,703.86 as follows:
1. Filing fees
2,658.20
2. Hearing and scheduling fees
32,000.00
3. Accounting expert (Mr MacDonald)
97,201.39
4. Accounting expert (Mr Frost)
21,340.60
5. Court appointed accounting expert (Mr Higgs)
17,940.00
6. Valuation expert (Mr Barron)
22,399.70
7. Travel and accommodation
19,227.91
8. Copying costs – paid to Downie Stewart and
Rodgers Law
2,849.40
9. Copying costs – Russell McVeagh & Van Aart
Sycamore
2,401.77
10. Agency fees, Couriers, Searches and Stationery
6,684.89
TOTAL
224,703.86
[28] The defendants accept items 1, 2, 4 and 5 in their entirety. They challenge items 3 and 7 and they propose reduced amounts for items 6 and 8-10.
Mr MacDonald’s fees
[29] The principal item of contest relates to Mr MacDonald’s fees of
$97,201.39. The defendants submit that Mr MacDonald’s fees should be disallowed because he was not an appropriate person to engage as an expert witness for the following reasons:
(a) he had been the accountant for the Lawrence family enterprise in a relevant period and therefore lacked independence;
(b)he has a relationship with Mr Patterson, Dean’s funder, which calls into question his independence;
(c) his evidence had an air of unreality;
(d)Dean ultimately engaged and relied on Mr Frost to establish his accounting position;
(e) the need for Mr Higgs’ engagement arose largely from the extreme
position taken by Mr MacDonald.
[30] Dean responds that the suggestion of Mr MacDonald’s disqualification for partiality (which is not accepted) is raised at much too late a stage in the proceeding to be taken into account. He points out that the defence accepted, without any formal reservation, Mr MacDonald’s expertise for the purpose of the joint witness statement (JWS) and the joint memorandum explaining the JWS.
[31] Contrary to the “air of unreality” contention, he submits that Mr MacDonald played an invaluable role as an expert working closely with counsel for Dean throughout the proceeding and with Mr Harvie (the defendants’ expert) in producing the JWS. Mr Harvie, who became involved for the defendants much later, had much more information to work with as a consequence of Mr MacDonald’s initial work. Mr Frost was not a signatory to the JWS but only opined on key issues that Mr MacDonald and Mr Harvie had already refined.
[32] At [7] of my judgment I referred to the JWS as a feature of the degree of co-operation between counsel. As the joint memorandum of counsel of
6 May 2014 recorded, as a consequence of the JWS, the 22 pages of supporting working papers and the explanatory note (tabs 7, 8 and 9 respectively of Dean’s bundle for opening) the oral evidence of the accounting experts was not required to be led and tested at trial.
[33] Indeed I observe that that material was referred to in a number of
paragraphs in the defendants’ written closing submissions including:7
340.After considerable work the accounting experts retained by the parties went through correcting the various sets of accounts created for the four companies involved [working papers pages
1-4 Plaintiff’s Bundle for opening tab 8]. The need for this recreation shows the complexity of what actually occurred.
[34] Given the footing on which the matter proceeded, which was particularly constructive and which avoided the need for potentially lengthy accounting evidence, I do not consider that there is validity to the points which the defendants now seek to advance. Consequently Mr MacDonald’s fees are allowed as a disbursement.
Mr Barron’s fees
[35] So far as Mr Barron’s fees are concerned I consider that there is merit in the defendants’ submission that the value of Clydevale Farm became an irrelevant issue after the filing of the defendants’ ultimate statement of defence. Accordingly I accept their contention that the allowable figure should be
$14,186.40.
Travel and accommodation expenses
[36] Dean seeks travel and accommodation costs for his legal team’s
preparation for and attendance at trial, in particular:
7 See also paras 341, 349, 350, 356 and 429.
(a) appearance of two counsel at trial in Dunedin and to present closing submissions in Christchurch;
(b)two legal staff to inspect documents (discovered late) and to brief witnesses in Dunedin for preparation of witness statements.
[37] No issue is taken by the defendants with the manner in which those costs have been established. However they submit that there is no proper basis for allowing travel and accommodation as those costs do not meet the “reasonably necessary” test. They contend that Dean has no connection with Wellington and that no reason is given why it was reasonably necessary to instruct Wellington solicitors when competent Dunedin solicitors could have conducted the litigation.
[38] In principle I consider that the defendants’ stance is sound. However, courtroom unavailability made it necessary for counsel to travel to Christchurch for closing submissions and I consider that it is appropriate to allow travel and accommodation expenses in relation to that final stage of the hearing in the sum of
$2,781.39.
Copying costs
[39] The defendants do not dispute that the copying costs were incurred but they observe that Dean has failed to distinguish between copies required by Rules of Court (to which he is entitled) and those for which specific approval is necessary. They submit that a fair allowance for items 8 and 9 is $3,000.
[40] Dean replies that all of the Russell McVeagh and Van Aart Sycamore costs were for photocopying required by the High Court Rules in that they related to the preparation of bundles and documents for filing. To the extent that the costs in relation to inspection (the Rodgers Law and Downie Stewart costs) were not for copying required by the Rules, Dean seeks the Court’s approval of them because they were specific to the proceeding, reasonably necessary and reasonable in amount.
[41] I accept that the copying costs in relation to inspection satisfy r 14.12(2)(b), (c) and (d) and I approve those disbursements for the purposes of the proceeding. Consequently Dean is entitled to the full amounts of items 8 and
9.
Agency fees, couriers etc
[42] The defendants make the point that some of the claimed amount of
$6,684.89 appears to include research costs which are not normally allowed. They further submit that agency fees appear to arise primarily from Dean’s choice of out-of-town solicitors and that two service fees appear extremely high, being each in excess of $400. They suggest that without further details being available and exhaustive analysis a fair figure to allow would be $2,000. Dean’s memorandum in reply did not engage on these points.
[43] My perusal of the spreadsheet provided in support of this category of disbursements suggests that the defendants make a valid point with reference to research costs. There are also numerous entries for stationery and binding and an item of $150 for obtaining reprinted bank statements. I agree that the two instances of urgent document service in 2011 totalling $859.05 appear rather high and there are a number of other significant service fees. In the absence of a response to the defendants’ points I adopt their suggested figure of $2,000.
“Calderbank” offers
[44] The defendants submit that r 14.11 gives the Court the discretion when dealing with costs to consider the making of an offer under r 14.10, namely a written offer that is expressly stated to be without prejudice except as to costs and which relates to an issue in the proceeding. They submit that they made three relevant offers:
(a) $300,000 on 30 March 2011; (b) $400,000 on 15 April 2014;
(c) $400,000 plus a transfer of the benefit of Craigadeane tax losses on
9 May 2014.
[45] Relevant to the parties’ positions on these offers are subss (3) and (4) of r 14.11:
(3) Party A is entitled to costs on the steps taken in the proceeding after the offer is made, if party A–
(a) offers a sum of money to party B that exceeds the amount of a judgment obtained by party B against party A; or
(b) makes an offer that would have been more beneficial to party B than the judgment obtained by party B against party A.
(4) The offer may be taken into account, if party A makes an offer that–
(a) does not fall within paragraph (a) or (b) of subclause (3);
and
(b) is close to the value or benefit of the judgment obtained by party B.
[46] So far as the first offer was concerned the defendants submit that, while it did not exceed the judgment and arguably was not “close” to the judgment ultimately delivered, on the pleadings current at the time Dean’s claim was fatally flawed.
[47] For the reasons explained in my judgment I do not accept the defendants’ submission that, because no assignment was pleaded, the claim as pleaded in the second amended statement of claim dated 2 July 2010 would have failed. While the defendants fairly take the point that the 2010 Assignment (which was the only assignment in existence as at the date of the first offer) did not assign the partnership claim, I do not consider that it is appropriate to view the offer as
“arguably close” given, as noted in the judgment,8 the defendants challenged the
validity of the 2010 Assignment with the consequence that Dean’s lawyers
revisited the issue with the Official Assignee which culminated in the entry into the Deed of Assignment.
8 At [80].
[48] The defendants concede that the second offer “probably” does not meet the test of “close” but submit that the effort to engage on settlement was a reasonable one. I consider that that offer was not close to the judgment amount and I also take into account Dean’s point that that offer was made only three weeks before trial.
[49] With reference to the third offer Dean takes the point that it was not a written offer as required by r 14.10, it was not expressed to be without prejudice save as to costs and it was incapable of acceptance as there was no certainty as to the mechanism for transferring the tax losses. All those points have validity. In any event I accept the submission that it would be unfair to penalise Dean in costs for declining the offer which was made on the eve of the trial.
[50] Consequently the various settlement proposals do not cause me to allow any adjustment to the costs to which Dean is entitled.
Costs on the costs memoranda
[51] Dean seeks costs for the preparation of the memorandum of 22 December
2014 which I accept involved a considerable amount of administrative assembly work. The defendants propose a figure of $1,000 as appropriate. However the defendants’ memorandum necessitated a response memorandum addressing the issue of Calderbank offers and a variety of other matters. I consider that a total
award of $2,000 is appropriate for Dean’s memoranda on costs.
Brown J
Solicitors:
Van Aart Sycamore, Dunedin for Plaintiff
Downie Stewart, Dunedin for Defendants
26