McEwan (2003) Limited v Sharp Tudhope HC Tauranga CIV 2007-470-654

[2010] NZHC 1206

IN THE HIGH COURT OF NEW ZEALAND TAURANGA REGISTRY

CIV 2007-470-654

BETWEEN  MCEWAN (2003) LIMITED Plaintiff

ANDSHARP TUDHOPE Defendant

Hearing:         (on the papers)

Counsel:         J B Holmes for Plaintiff

F B Barton for Defendant

Judgment:      16 July 2010

JUDGMENT (NO. 2) OF HEATH J

This judgment was delivered by me on 16 July 2010 at 4.00pm pursuant to Rule 11.5 of the High

Court Rules

Registrar/Deputy Registrar

Solicitors:

Sanderson Weir, PO Box 856, Auckland Anderson Lloyd, Private Bag 1959, Dunedin Counsel:

J M Holmes, PO Box 13 110, Tauranga

MCEWAN (2003) LIMITED V SHARP TUDHOPE HC TAU CIV 2007-470-654  16 July 2010

Introduction

[1]      McEwan (2003) Ltd (McEwan), sued Sharp Tudhope (the solicitors) for negligence.   Its allegation was that the solicitors failed adequately to document a settlement agreement entered into between McEwan and another company following a mediation.  In a judgment given on 15 June 2009,[1] I found in favour of McEwan; awarding damages in the sum of $100,000, interest at Judicature Act rates from the date of issue of the proceeding and costs on a 2B basis, together with reasonable

disbursements.

[1] McEwan (2003) Ltd v Sharp Tudhope HC Tauranga, CIV 2007-470-654, 15 June 2009.

[2]      When judgment was reserved, at the conclusion of the hearing in April 2009, counsel  for  the  solicitors  did  not  inform  me  that  a  Calderbank[2]  letter  was  in existence.  Nor did they ask that costs should be reserved until after judgment was given.

[2] Calderbank v Calderbank [1975] 3 All ER 333 (CA) at 342-343.

[3]      Following delivery of judgment the solicitors appealed to the Court of Appeal against the order for costs, saying that costs should not have been awarded against them for the period after the Calderbank letter was sent on 25 September 2008.  The solicitors contended that the settlement offer was a relevant factor that ought to have

been taken into account under r 48GA of the High Court Rules.[3]

[3] This was the rule in force at the time of the offer. See now r 14.10 of the High Court Rules.

[4]      The Court of Appeal allowed the appeal but remitted questions of costs for my consideration.[4]   The Court of Appeal considered I was best placed to assess the relevance of the offer, in the context of the general discretion as to costs.[5]

[4] Sharp Tudhope v McEwan (2003) Ltd [2010] NZCA 166.

[5] Ibid, at [16].

[5]      Counsel agreed that I should deal with questions of costs on the papers.   I

have now received written submissions from each and proceed to give judgment.

Analysis

[6]      Rule 48GA(1) reiterates that a “without prejudice save as to costs” letter is a factor to be taken into account by the Court in exercising its discretion as to costs. Unless a sum of money is offered that exceeds the amount of a judgment obtained by the party refusing the offer, the Court may take the offer into account.[6]

[6] Rule 48GA(4)(a) and (5).

[7]      The Calderbank letter was dated 25 November 2008.   After indicating the solicitors’ view of the merits of the claim it concluded:

...

5.        What  is  inevitable  is  that  there  is  going  to  be  significant  cost incurred in going to trial.  There is also an element of litigation risk which applies to both sides.  The level of risk is something that we cannot agree on.  However, in the light of the costs and the low level of litigation risk our client is prepared to offer on a “without prejudice” basis the sum of $100,000 all up to settle your client’s claim.  We have firm instructions from the underwriters to proceed to trial should this figure not be accepted.

6.        The offer remains open for 14 days from the date of this letter.

.... (my emphasis)

[8]      The offer was not accepted but, on 5 December 2008, counsel for McEwan responded as follows:

...

13.It is still the opinion of McEwan and the advisers to that company that the proceedings will be successful.

14.It is accepted, however, that it would be desirable to bring this whole issue to a much earlier settlement.  Accordingly it is suggested that a settlement of something approaching the $417,000 set out in the Amended Statement of Claim, without any further allowance for costs or interest could be appropriate.

I  would  appreciate  any  comment  that  you  have  on  the  above.    I  am concerned to get an early resolution if one is available and would prefer to have that by Christmas.  I had allocated the weeks over the Christmas break and the first week of the New Year into time available for full sets of documentation ready for trial.  If you believe it appropriate I could arrange to come to Dunedin to further any appropriate discussion.

....

[9]      This is not a case in which the offer exceeded the amount for which judgment was entered.  It did not take into account either interest or costs incurred to that time.

[10]     The position is akin to that discussed by the Court of Appeal in Health Waikato Ltd v van der Sluis,[7] in which the predecessor of r 48GA was discussed.  In that case, the Employment Court Judge gave no weight to a Calderbank offer. Delivering the judgment of the Court in that case, McGechan J said:[8]

[7] Health Waikato Ltd v van der Sluis (1997) 10 PRNZ 514 (CA). 

[8] Ibid, at 521-522

...,  the  Calderbank  letter  field  is  fully  discretionary.  Calderbank  letters should be governed, at least primarily, by whatever the authors of such letters actually say; bearing in mind the proper need, in a discretionary area, for clarity (“transparency”). In the absence of specific rules, others should not be artificially imported. Calderbank letters can readily spell out whether or not pre-offer costs are included and, if so, whether on a specified or “reasonable” basis. ...   [In two cited cases] the offers were stated specifically to be without costs. That is the proper “transparent” approach which should be encouraged. We do not, of course, altogether rule out the possibility of implication one way or the other, as a matter of interpretation on ordinary principles. We do not agree, however, that there should be an implication that costs down to date of offer are to be paid in addition to amounts offered, simply because nothing else is said. Where nothing is said, the authors fairly bear the burden.  That has application in the present case. The letter of 16

February 1995  made  no  mention  of  costs.  It  is  to be  interpreted,  when written, as “all in”. The letter of 24 February 1995 which renewed its terms

on a Calderbank basis did not improve matters. The combination remained

“all in”. There is no room for any implication that HWL accepted some unexpressed additional liability for pre-offer costs. These totalled a notified

$45,000  and  had  been  the  subject  of  sardonic  comment.  It  would  have

required clear words to imply acceptance of a costs liability. There were none.

[11]     A similar approach should be taken in this case.  It was abundantly clear that the solicitors intended to litigate if the offer of $100,000 were not accepted in full and final settlement.  That position was reinforced by the subsequent refusal of the solicitors to engage in discussion following the letter of 5 December 2008 from counsel for McEwan.  In saying that, it is not surprising that the letter of 5 December did  not  prompt  further  negotiations,  given  the  yawning  gap  in  the  proposed settlement figures.

[12]     In those circumstances, I do not consider the Calderbank letter should be given any weight on costs.  My view as to costs remains as set out in my judgment of

15 June 2009.

Result

[13]     Costs  are  awarded  in  favour  of  McEwan  on  a  2B  basis,  together  with reasonable disbursements.  Both are to be fixed by the Registrar.

P R Heath J

Delivered at 4.00pm on Friday 16 July 2010