McKeown Group Limited v Russell HC Timaru CIV 2008-476-530

[2010] NZHC 1820

IN THE HIGH COURT OF NEW ZEALAND TIMARU REGISTRY

CIV-2008-476-000530

UNDER  the Fair Trading Act 1986

BETWEEN  MCKEOWN GROUP LIMITED Plaintiff

ANDJENNIFER JANE RUSSELL Defendant

Hearing:         9 September 2010 (by telephone) Appearances: L A Andersen for Plaintiff

QCS Hix for Defendant

Judgment:      30 September 2010

JUDGMENT OF HON. JUSTICE FRENCH

as to Interests and Costs

[1]      In my judgment of 19 August 2010, I upheld McKeowns’ claim against Mrs

Russell under the Fair Trading Act 1986.

[2]      As regards quantum, I held that McKeowns were entitled to recover 50% of

$161,155.95 less a discount for recovered debts and unpriced stock owing to Mrs

Russell’s company PDSA.

[3]      The following issues were reserved for further written submissions and a conference call:

i)The amount of the deduction for the recovered debts and the unpriced stock.

ii)       Interest on the judgment sum.

MCKEOWN GROUP LIMITED V RUSSELL HC TIM CIV-2008-476-000530  30 September 2010

iii)      Costs.

[4]      It  is  now  confirmed  that  the  debts  owed  to  PDSA  and  recovered  by

McKeowns amount to $3550.07 while the value of the unpriced stock is $381.92.

[5]      After taking those figures into account, the amount of the recoverable loss due to McKeowns is therefore $78,611.98 (being 50 per cent of $161,155.95, less

$3550.07 and $381.92).

[6]       McKeowns initially sought interest at the Judicature Act rate of 8.4 per cent from 15 January 2006 being the date McKeowns took over the business as well as costs calculated on a 2B basis and disbursements.

[7]      However, the rate of 8.4 per cent only came into force on 1 July 2008, and does not apply retrospectively: see Rowling v Takaro Properties Limited [1987] 2

NZLR 700 (PC).  That means that if interest is to be awarded, the rate for the period

15 January 2006 to 30 June 2008 is only 7.5%.  Having re-calculated the amount, McKeowns now seek interest in the sum of $29,034.94.

[8]      Mrs Russell opposes any award of costs or interest being made in favour of McKeowns, and submits that if any costs orders are to be made, they should be made in her favour.

[9]      In support of this contention, her counsel Mr Hix advances the following arguments:

i)Mrs  Russell  made  a  Calderbank  offer  which  exceeds  the amount of the judgment.

ii)McKeowns refused to participate in two judicial settlement conferences.

iii)      Mrs Russell was partially successful in her defence.

[10]     The Calderbank offer relied upon was made on 1 November 2007.  At that time, McKeowns had issued proceedings in the District Court which were subsequently discontinued.

[11]     The District Court proceedings were brought against both PDSA and Mrs

Russell.

[12]     The claims pleaded in the District Court proceeding against Mrs Russell personally were founded on allegations of reckless trading and the giving of an indemnity, but made no reference to the Fair Trading Act.

[13]     The Calderbank offer was detailed and had essentially two components.

[14]     The first offer was expressed to be an offer to pay $40,000 plus interest and some costs “in full and final settlement of all causes of action against Mrs Russell in the proceeding but without any admission of liability”.

[15]     The second offer was conditional on acceptance of the first offer.

[16]     The second offer was expressed to be an offer in full and final settlement with regard to the claim against PDSA and all other potential claims McKeowns might have against PDSA arising out of their business relationship or otherwise, and against Mrs Russell personally.

[17]     Mr Hix submits the combined total of the two offers ($95,824) exceeds the judgment sum, and therefore r 14.3 applies, disentitling McKeowns to costs and justifying an award of costs in Mrs Russell’s favour.  He also argues that if interest is payable on the judgment sum, it should only be up to the date at which this offer was made.

[18]     I am not persuaded Mrs Russell can rely on the Calderbank offer.

[19]     Apart from anything else, the second offer to pay the additional $45,000 related to claims against PDSA and the judgment at issue is a judgment solely

against Mrs Russell. Thus even if the first offer can be construed as including a claim under the Fair Trading Act, the offer is significantly less than the judgment sum.

[20]     As for McKeowns’ refusal to attend judicial settlement conferences, I accept that in principle such a refusal may, depending on the circumstances, be a relevant factor.

[21]     However, this case turned on credibility, and I found that Mrs Russell who consistently denied liability was not a credible witness.   In those circumstances, it would in my view be inappropriate to penalise McKeowns for refusing to attend a settlement conference.

[22]     As regards the argument that Mrs Russell was partially successful, Mr Hix points out that defences run by Mrs Russell had the effect of reducing the amount claimed by some 60 per cent.

[23]     Rule 14.7(d) provides that the Court may reduce the costs otherwise payable under the Rules if:

although the party claiming costs has succeeded overall, that party has failed in relation to a cause of action or issue which significantly increased the costs of the party opposing costs;

[24]     In this case, the issues on which McKeowns have failed were not issues which significantly increased Mrs Russell’s costs or Court time.

[25]     In  those  circumstances,  I am  not  prepared  to  reduce  the  costs  otherwise payable.

[26]     A final point raised by Mr Hix arises out of the fact that the claim was within the jurisdiction of the District Court.

[27]     Rule 14.13 stipulates:

14.13   Proceedings within jurisdiction of District Court

Costs ordered to be paid to a successful plaintiff must not exceed the costs and disbursements that the plaintiff would have recovered in the District

Court if the proceeding could have been brought there, unless the court otherwise directs.

[28]   After McKeowns’ application for summary judgment was dismissed, McKeowns applied for the case to be transferred to the District Court.

[29]     Mrs Russell’s preference however was for the matter to remain in the High

Court unless there were grounds for a transfer.

[30]     In light of Mrs Russell’s attitude, McKeowns did not persist with its transfer application and by consent the proceeding remained in the High Court.

[31]     Mr Hix said he had always assumed costs would be on a District Court basis.

[32]     For his part, Mr Andersen submits that the costs recoverable in the District Court would actually be greater than those recoverable in the High Court because the proceeding would have been categorised as category 3 in the District Court.

[33]     The various scale costs calculations are as follows:

High Court  2B  $30,856

District Court  2B  $21,824

District Court  3B  $32,055

District Court  2C  $36,009

[34]     I  am  not  persuaded  that  the  proceeding  would  necessarily  have  been categorised as Category 3 in the District Court.  On the other hand, I accept that the time allowances under band B in the District Court are inadequate for many of the steps.

[35]     In those circumstances, I accept that the interests of justice support a High

Court 2B calculation and award costs on that basis accordingly.

Outcome

[36]     Judgment is entered in favour of McKeowns for the sum of $107,646.92 plus costs of $30,856 and disbursements of $10,418.40.

Solicitors:
Aspinall Joel, Dunedin

(Counsel: L A Andersen, Dunedin) Quentin Hix Legal, Timaru