LHL Leasing Solutions Limited v Pinto Limited

[2018] NZHC 2019

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV 2013-404-5240

[2018] NZHC 2019

BETWEEN

LHL LEASING SOLUTIONS LIMITED

Plaintiff

AND

PINTO LIMITED

Defendant

Hearing:	On the papers
Counsel:	G Denholm for Plaintiff R J M Sim for Defendant
Judgment:	9 August 2018

JUDGMENT OF JAGOSE J

[Costs]

This judgment is delivered by me on 9 August 2018 at 10AM pursuant to r 11.5 of the High Court Rules.

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

Registrar / Deputy Registrar

Solicitors/Counsel:

Foy & Halse (G W Halse) Epsom, Auckland

Gallaway Cook Allan Lawyer (RJM Sim/DP Robinson), Dunedin Greg Denholm, Barrister, Auckland

LHL LEASING SOLUTIONS LTD v PINTO LTD – COSTS [2018] NZHC 2019 [9 August 2018]

[1]My judgment of 12 June 2018 dismissed Leasing Solutions’ claim to recover

$607,015.98 from Pinto in liquidated damages.1 At [59], I expressed my preliminary view “Leasing Solutions should be liable to pay 2B costs and disbursements to Pinto”.

[2]That is accepted by both parties, which Mr Sim for Pinto quantifies as

$53,743.00 in 2B costs plus disbursements of $4,499.94, and Mr Halse for Leasing Solutions does not dispute.

[3]                 However, Mr Sim says there are grounds for either an adjustment to reflect Leasing Solutions’ unaccepted written offer, made without prejudice as to costs, or an uplift by way of increased costs. Mr Halse resists both.

Without prejudice offer

[4]                 By email of 28 March 2018, Mr Sim wrote to Leasing Solutions’ then counsel, Gregory Denholm (now retired from practice):

Without Prejudice Except as to costs.

Further to our discussion a short time ago, I confirm that if your client agrees by tomorrow to withdraw his claim, the Defendant will not seek costs and will sign an acknowledgment on your Discontinuance to that effect.

My understanding, which you should confirm with the court, is that the full amount of the security for costs which your client has paid will then be released to him. My recollection is that that is $43,000.

In the event that this matter proceeds to trial and the defendant succeeds, I will produce this email in support of an award of actual solicitor and client costs. As discussed, I consider that there are fatal flaws in the claim because of both the clear evidence of the waiver of the obligation to return the equipment and the inapplicability of liquidated damages – which is the only damages basis pleaded.

No response is evidenced before me, but the offer plainly was not accepted.

[5]                 The offer constitutes an offer made under HCR 14.10, in that it is in writing between the parties, is expressly stated to be without prejudice except as to costs, and relates to an issue in the proceeding, being its ultimate determination. Although I

1      LHL Leasing Solutions Ltd v Pinto Ltd [2018] NZHC 1387 [“Substantive judgment”].

decided the case on a different basis from that originally pleaded by the parties, one of Mr Sim’s “fatal flaws” was made out at [54]. As noted at [57(b)], I would not have found the other.

[6]The materiality of such an offer resounds in HCR 14.11:

14.11   Effect on costs

(1)The effect (if any) that the making of an offer under rule 14.10 has on the question of costs is at the discretion of the court.

(2)Subclauses (3) and (4)—

(a)are subject to subclause (1); and

(b)do not limit rule 14.6 or 14.7; and

(c)apply to an offer made under rule 14.10 by a party to a proceeding (party A) to another party to it (party B).

(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.

[7]                 Pinto’s offer was not for a sum of money, and Leasing Solutions did not obtain judgment against Pinto. The offer thus does not fall within HCR 14.11(3)(a) or (b). If, by ‘the judgment obtained’ in HCR 14.11(4), the rule means to include a judgment dismissing Leasing Solutions’ claim (which is not grammatically obvious), “[t]he offer may be taken into account” on the question of costs, subject to my discretion.2

2      HCR 14.11(1).

[8]                 Alternatively (or in any event), the question is what costs is Pinto entitled to, from the date of the offer. I may order Leasing Solutions to pay increased costs to Pinto if it:3

… fail[s], without reasonable justification, to accept an offer of settlement whether in the form of an offer under rule 14.10 or some other offer to settle or dispose of the proceeding; …

[9]                 Mr Halse does not address Leasing Solutions’ failure to accept Pinto’s offer.  I infer nothing Mr Halse could say would advance Leasing Solutions’ case in this respect, that is, there is no good evidence to counter the inference its failure to accept Pinto’s offer was not reasonably justified.

[10]             I come to that view in any event. Leasing Solutions’ prospects were “extremely modest” from the outset of the proceeding.4 By March 2018, Leasing Solutions was down to a single cause of action, the core element of which Associate Judge Bell had already held could not fairly be determined, and the Judge had indicated a better course.5 The benefit of walking away without a costs liability from a flawed proceeding conducted over half a decade was obvious.

[11]             By ‘increased costs’ is meant an uplift from scale, the Court of Appeal accepting the uplift “logically” should not be more than 50 per cent.6 Given my ‘obvious’ point in the previous paragraph, that is the uplift I will apply to the costs to which Pinto is entitled from the date of its offer.

[12]             Mr Sim’s letter indicated Pinto would be seeking indemnity costs, which Mr Sim now quantifies at $26,466.50 from that date. However, I do not see indemnity costs to be justified in the circumstances,7 particularly given the location of ‘offers’ in HCR 14.11(3) (‘increased costs’), and not HCR 14.11(4) (‘indemnity costs’).

3      HCR 14.6(3)(b)(v).

4      LHL Leasing Solutions Limited v Pinto Limited [2014] NZHC 2397 at [28]-[30].

5      Substantive judgment, above n 1, at [2] and [57(a)] citing LHL Leasing Solutions Ltd v Pinto Ltd

[2017] NZHC 1050 at [49], [50]-[51], and [54].

6      Holdfast NZ Ltd v Selleys Pty Ltd (2005) 17 PRNZ 897 (CA) at [46]-[48].

7      HCR 14.6(4)(f).

[13]             The 50 per cent uplift from the date of the offer increases 2B costs by $8,028, making Leasing Solutions liable to pay costs in the sum of $61,771.

Increased costs

[14]             HCR 14.6(3)(b) also allows for increased costs in circumstances “the party opposing costs has contributed unnecessarily to the time … of the proceeding” by actions or inactions in its course. Pinto seeks increased costs more generally, on grounds of Leasing Solutions’ broadly described delays in the proceeding.

[15]             I have more difficulty with that proposition. On interlocutory steps in this proceeding, to which claims for increased costs because of delay more sensibly would apply, Pinto has already been awarded ordinary costs,8 reduced costs (due to discovery uncertainties),9 or (on the parties’ “divided success”) no costs.10 Indeed, Leasing Solutions expressly was denied costs on grounds of its “unjustified and un-excused delay”.11

[16]             I am not prepared retrospectively to review Leasing Solutions’ conduct of the proceeding, when I have not had oversight of that conduct, and the judges who had have addressed costs issues arising in its course. (I note Mr Sims’ confirmation Pinto’s costs claim now does not claim for any step addressed in earlier costs determinations.)

Order

[17]I order Leasing Solutions to pay Pinto increased 2B costs in the amount of

$61,771.00, plus disbursements in the amount of $4,499.94.

—Jagose J

8      LHL Leasing Solutions Limited v Pinto Limited, above n 4, at [47(e)]. See also the Minute of Associate Judge Sargisson, dated 15 May 2015, at [5].

9      Minute of Associate Judge Sargisson, dated 30 November 2016.

10  LHL Leasing Solutions Limited v Pinto Limited, above n 5, at [57]. Similarly, albeit tentatively (but apparently not disputed), in LHL Leasing Solutions Limited v Pinto Limited [2016] NZHC 1777 at [58].

11     LHL Leasing Solutions Limited v Pinto Limited [2016] NZHC 1017 at [45].