Maqbool v Tower Insurance Limited

[2023] NZHC 1665

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2019-404-2389

[2023] NZHC 1665

BETWEEN

SAIJAD ALI MAQBOOL

First Plaintiff

JALAL KHAN MAQBOOL
Second Plaintiff

AND

TOWER INSURANCE LIMITED

Defendant

Hearing:	On the papers
Judgment:	30 June 2023

JUDGMENT OF LANG J

(Costs)

This judgment was delivered by Justice Lang On 30 June 2023 at 11.00am

Pursuant to r 11.5 of the High Court Rules Registrar/Deputy Registrar

Date:…………………………

Solicitors/counsel:

Duncan Cotterill, Auckland

Copy to:

S Maqbool

J K Maqbool

MAQBOOL v TOWER INSURANCE LTD [2023] NZHC 1665 [30 June 2023]

[1]                On 28 March 2023, I issued a judgment in which I dismissed an application by the plaintiffs for a declaration that they were entitled to indemnity under an insurance policy for damage caused by fire to a house property that they owned.1

[2]                I dismissed the claim because I was satisfied the plaintiffs had omitted to advise the insurer of a fact that would have been material to the insurer’s decision to provide insurance cover for the property. This was the fact that the plaintiffs had converted a single dwelling into two self-contained dwellings, each of which had its own kitchen. The plaintiffs had also carried out the work without obtaining the necessary consents and compliance certifications.

[3]                The parties have been unable to reach agreement regarding costs. I am therefore required to determine costs on the basis of the memoranda the parties have filed.

The arguments

[4]                There can be no dispute that the defendant was the successful party and as such is entitled to an award of costs.2 The defendant has incurred costs amounting to

$306,055.70 inclusive of disbursements. These include invoices the defendant has received from its expert witnesses totalling $15,884.79 and other disbursements totalling $1,569. Of this sum the defendant seeks a costs award of $250,000. Costs calculated on a category 2B basis (based on a trial lasting 3.5 days) would amount to

$54,970.

[5]                The plaintiffs have filed wide-ranging submissions making a number of allegations against the defendant and its counsel. They have also filed a copy of an affidavit that Moore J has already ordered should be removed from the Court file because of its inappropriate and offensive content. I direct that the Registrar is to remove the affidavit from the file and return it to the plaintiffs forthwith. In short, the plaintiffs ask the Court to reduce the amount of costs payable to reflect the fact that

1      Maqbool v Tower Insurance Ltd [2023] NZHC 632.

2      High Court Rules 2016, r 14.2(1)(a).

they have families to support and will need to obtain financial assistance from family members to pay any award of costs.

Indemnity costs

[6]                The costs that the defendant seeks are approximately five times the amount allowed by the scale. I therefore regard the claim as effectively being for indemnity costs even though the defendant has reduced the amount claimed by $56,000 from actual costs incurred.

[7]                Indemnity costs are governed by r 14.6 of the High Court Rules 2016. This permits the Court to make an order for indemnity costs against a party who has acted vexatiously, frivolously, improperly or unnecessarily in taking a step in a proceeding.3 It is now well established that indemnity costs will only be awarded where a party has behaved very badly or very unreasonably.4 Such an award is exceptional and requires flagrant misconduct on the part of the party against whom costs are awarded.5

[8]                The plaintiffs have not acted very badly or very unreasonably in advancing and prosecuting their claims. I am therefore satisfied that there is no jurisdiction to make an award of indemnity costs.

Increased costs

[9]                The Court has the power under r 14.6(3) to make an order of increased costs where a party has failed, without reasonable justification, to accept an offer of settlement prior to trial. In the present case the defendant made two offers to settle the proceeding prior to trial. On 28 October 2020, the defendant’s solicitors wrote to the plaintiffs on a “without prejudice save as to costs” basis offering to settle the claim. The offer involved the plaintiffs discontinuing the claim and paying disbursements to the defendant in the sum of $980.00. The plaintiffs declined the offer. They would obviously have been in a better position than they are now in if they had accepted the offer.

3      High Court Rules 2016, r 14.6(4)(a).

4      Bradbury v Westpac Banking Corporation [2009] NZCA 234, [2009] 3 NZLR 400 at [27].

5 At [28].

[10]            On 11 June 2021, the defendant’s solicitors again wrote to the plaintiffs on a “without prejudice save as to costs” basis. On this occasion, the defendant offered to pay the plaintiffs the sum of $220,000 in full settlement of their claim. The plaintiffs declined this offer and sought payment in the sum of $350,000. The plaintiffs are plainly in a significantly worse position now than they would have been if they had accepted this offer.

[11]            The plaintiffs say that they never rejected the offer but instead made a counter- offer in the sum of $350,000. I consider this to be a distinction without a difference. The fact that the plaintiffs advised the defendant that they sought payment of the sum of $350,000 rather than $250,000 inevitably meant they were rejecting the defendant’s offer of $220,000.

[12]            The plaintiffs ought to have been aware that their claim faced considerable difficulties because they had altered the dwelling that was destroyed by fire without advising the defendant that they had carried out the alterations. As I found in the judgment, this was a material factor that would have influenced the insurer in its decision to offer cover for the property.6 The defendant’s solicitors were pointed out these difficulties in considerable detail when making the offers of settlement so the plaintiffs ought to have been alert to the jeopardy their claim potentially faced.

[13]            It is perhaps understandable that the plaintiffs elected not to accept the first offer, which would have required them not only to discontinue their claim but also to make a payment to the defendant. However, I am satisfied the plaintiffs failed without reasonable justification in refusing to accept the second offer of settlement. The offer was generous given the circumstances. It follows that jurisdiction exists to make an increased award of costs and I consider it appropriate to make such an award. However, I consider the sum sought by the defendant to be much too high, particularly given the fact that the offer of settlement was not made until June 2021 when the proceeding was well advanced.

[14]            I therefore direct that the plaintiffs are to pay the defendant costs on a category 2B basis on all steps taken up until 11 June 2021. The defendant is entitled to an award

6      At [51]-[54].

of costs uplifted by 150 per cent on all steps taken after that date. This means increased costs will be payable on all steps taken after the case management conference that was held on 22 October 2020. In addition, the plaintiffs will be required to pay the defendant disbursements, including expert witnesses’ expenses, amounting to

$17,453.79.

Lang J