Minister of Education v James Hardie New Zealand
[2018] NZHC 1732
•13 July 2018
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2013-404-1899
[2018] NZHC 1732
UNDER Consumers Guarantees Act 1993, the Fair Trading Act 1986, the Building Act 2004 BETWEEN
THE MINISTER OF EDUCATION AND OTHERS
First to Fourth Plaintiffs
AND
JAMES HARDIE NEW ZEALAND
First Defendant
STUDORP LIMITED
Second DefendantCARTER HOLT HARVEY
Third Defendant
……………………………/continued
Hearing: On the papers Counsel
TC Weston QC, JRJ Knight and DJ Barr for Councils JG Miles QC and ED Nilsson for Carter Holt Harvey NF Flanagan and J Carlyon for Ministry
Judgment:
13 July 2018
JUDGMENT OF FITZGERALD J
[As to costs of Councils’ application to strike out and Carter Holt Harvey’s application for an extension of time
This judgment was delivered by me on 13 July 2018 at 3 pm, pursuant to Rule 11.5 of the High Court Rules.
Registrar/Deputy Registrar
Date……………
The Minister of Education and Others v James Hardie New Zealand [2018] NZHC 1732 [13 July 2018]
CSR BUILDING PRODUCTS (NZ) LIMITED
Fourth Defendant
ANDAUCKLAND COUNCIL AND OTHER TERRITORIAL AUTHORITIES LISTED IN SCHEDULE 1 TO THE FIRST AMENDED STATEMENT OF CLAIM BY THIRD DEFENDANT AGAINST FIRST TO FIFTIETH THIRD PARTIES
First to Fiftieth Third Parties
CIV-2016-404-2991
BETWEEN CARTER HOLT HARVEY LIMITED
Plaintiff
ANDAUCKLAND COUNCIL AND OTHER TERRITORIAL AUTHORITIES LISTED IN SCHEDULE 1 TO THE PLAINTIFFS’ NOTICE OF PROCEEDING AND STATEMENT OF CLAIM
First to Fiftieth Defendants
Introduction
[1] On 26 January 2018, I delivered a judgment on the Councils’ application to strike out Carter Holt’s claims for contribution, together with Carter Holt’s application for an order extending the time for service of third party notices, and that CIV-2013- 404-1899 (“main proceeding”) and CIV-2016-404-2991 (“contribution proceeding”) be consolidated.
[2] The Councils advanced their application to strike out Carter Holt’s contribution claims on six grounds. I declined to strike out most of the claims. I accepted, however, the Councils’ argument that the 10-year longstop limitation period in the Building Acts (1991 and 2004) applies to claims for contribution. As a consequence, I concluded that a (relatively small) number of Carter Holt’s contribution claims were so clearly time-barred they ought to be struck out.
[3] Carter Holt’s application for an extension of time was essentially the “flipside” of one aspect of the Councils’ application. For that reason, my dismissal of that aspect of the Councils’ application led to the granting of Carter Holt’s application. I dismissed Carter Holt’s application for an order consolidating the main and contribution proceedings.
[4] I encouraged the parties to agree on costs. Unfortunately, they have been unable to do so, and indeed take diametrically opposed positions:
(a)The Councils say that they were the successful parties overall; there are no reasons to reduce what would otherwise be payable to them on a scale basis; and they therefore seek approximately $35,000 by way of scale costs.
(b)Carter Holt, on the other hand, says it was the successful party overall, and therefore seeks scale costs of approximately $25,000.
[5] The Ministry appeared at the hearing and made brief submissions, though the key issues were as between the Councils and Carter Holt. The Ministry does not seek costs, and neither the Councils nor Carter Holt seeks costs against the Ministry. I therefore do not consider the Ministry’s position any further in this judgment.
The applications — more detail
[6] The background to the Councils and Carter Holt’s applications is set out in my judgment of 28 January 2018 and is not repeated here.
[7] As noted, the Councils applied to strike out Carter Holt’s contribution claims in their entirety. The Councils’ application was advanced on six grounds:
(a)First, they were seriously prejudiced by what they said was excessive delay in service of the third party notices.
(b)Second, the delay in serving the third party notices was an abuse of process in the main proceedings.
(c)Third, the lack of sufficient particulars in Carter Holt’s claims against the Councils renders Carter Holt’s claims vexatious or an abuse of process.
(d)Fourth, Carter Holt’s claims against the Councils are made without an evidential foundation and are an abuse.
(e)Fifth, claims by Carter Holt against the Councils in respect of at least 326 of the school buildings in the main proceedings, and at least a further 90 school buildings in the contribution proceedings, are time- barred (the relevant buildings having been completed more than 10 years before the third party notices were filed or the contribution proceedings commenced).
(f)Sixth, Carter Holt’s claims for contribution from the Councils in both proceedings are so different from the Ministry’s claims against Carter Holt that they cannot be sustained (the “same damage” argument).
[8] The first and fifth grounds of the Councils’ application overlapped. A key aspect of the first ground of the application was the Councils’ submission that the 10- year long stop provisions in the Building Acts apply to claims for contribution. Under the first ground, the Councils said that they were seriously prejudiced by Carter Holt’s
delay in serving the third party notices, given that between the issuing of the notices in December 2013 and their service in December 2016, the 10-year longstop period expired in respect of at least 49 school buildings. Similarly, under the fifth ground, the Councils argued that a significant number of Carter Holt’s claims were time-barred as a result of the longstop provisions.
[9]Carter Holt disputed that the longstop provisions apply to contribution claims.
[10] As noted, I accepted the Councils’ argument and concluded that the longstop provisions do apply to claims for contribution.
[11]In relation to the remaining grounds of the strike out application:
(a)The Councils’ second ground was, as noted, that the delay in serving the third party notices was an abuse of process in the main proceeding. This ground also overlapped to a significant degree with the first ground, and was not pressed firmly as a separate and free-standing basis upon which to strike out or set aside the third party notices. As I did in relation to the first ground, I concluded that while the delay in serving the third party notices was inordinate and inexcusable, the Councils had not suffered such prejudice which justified the claims being struck out.
(b)The third ground concerned the lack of particulars to Carter Holt’s claims. Carter Holt acknowledged that its pleading was deficient in this regard. Carter Holt said that striking out its claim was not, however, the appropriate remedy, particularly prior to any application for further and better particulars having been brought and considered. It said the proper course was a direction that particulars be provided, a position which I ultimately accepted. I noted, however, that this approach did not sanction Carter Holt’s approach to its pleading to that point.
(c)The fourth ground, namely that the pleading disclosed no evidential foundation, raised the same issues as those under the third ground, with the same result.
(d)Finally, on the sixth ground, I concluded that for the purposes of the strike-out application, it was arguable that the Ministry’s claim against Carter Holt and Carter Holt’s claims against the Councils were, in certain respects, in relation to the “same damage” (being a prerequisite of a contribution claim).
Approach to costs
[12] The starting point on an application for costs is to consider which party was the “successful” party overall. Having identified the successful party, the ordinary approach will then be to award costs to that party on a scale basis.1 The High Court Rules 2016 also provide for mechanisms to either increase or decrease the costs to be awarded, namely:
(a)awarding increased or indemnity costs;2 or
(b)decreasing the costs otherwise payable to the successful party, or ordering that costs lie where they fall, including to reflect partial success only.3
[13] The approach to costs in cases of partial success was usefully summarised by the Court of Appeal in two relatively recent decisions.
[14] The first is the Court of Appeal’s decision in Water Guard NZ Ltd v Midgen Enterprises Ltd.4 In that case, the plaintiff had succeeded in only two of its five claims. The High Court considered that 75 per cent of trial time had been devoted to the plaintiff’s unsuccessful claims, and so found the defendant to be the successful party.5 Costs were awarded on that basis, also taking into account the plaintiff’s unreasonable conduct in declining settlement offers.6
1 Manukau Golf Club Inc v Shoye Venture Ltd [2012] NZSC 109, [2013] 1 NZLR 305 at [8].
2 High Court Rules 2016, r 14.6.
3 Rule 14.7.
4 Water Guard NZ Ltd v Midgen Enterprises Ltd [2017] NZCA 36.
5 Water Guard NZ Ltd v Midgen Enterprises Ltd [2016] NZHC 2347.
6 Costs were awarded to the defendant (on a 2B basis) for 75 per cent of the trial where it was successful, but only for one counsel to take into account its failure on the three proven claims. Though the defendant was unsuccessful on the remaining 25 per cent, no costs were awarded in the plaintiff’s favour for that portion because of the unreasonable conduct.
[15] The Court of Appeal allowed the appeal in part. It emphasised that it was unprincipled to award costs to the losing side. It disagreed with the High Court that the plaintiff had lost the status of being the “successful” party because it failed on most of its claims which in turn occupied most of the trial. It observed that those matters can be properly recognised in other ways, such as reducing costs otherwise payable or ordering costs to lie where they fall. Overall, the Court considered that while the plaintiff was strictly successful, costs should nevertheless lie where they fall in light of the declined settlement offers and the trial-time allocations:
[18] When viewed in the round, allowing the burden of costs to lie where they fall in what was fruitless and uneconomic litigation accords with the overall justice of the case.
[16] The Supreme Court declined leave to appeal and endorsed the overall approach adopted to costs by the Court of Appeal.7
[17] The second decision is the Court of Appeal’s judgment in Weaver v Auckland Council.8
[18] Reinforcing that the “loser” ordinarily pays, the Court of Appeal in Weaver observed that although the appellants in that case had not succeeded to the full extent of their damages claim (but only roughly to half that extent), “success on more limited terms is still success”.9 The Court went on to observe that given the limited success in that case, the award of costs to the appellants was to be reduced by 50 per cent.
The parties’ submissions
The Councils’ submissions
[19]The Councils say they were the successful party overall on the applications.
[20] They say that the ultimate relief sought in their application in respect of all but one of its grounds was to strike some school buildings out of the claim,10 and that they
7 Midgen Enterprises Ltd v UV Water Systems Ltd [2017] NZSC 68.
8 Weaver v Auckland Council [2017] NZCA 330.
9 At [26].
10 The exception to this was the sixth ground, which would have been a complete bar to further proceedings.
succeeded in having some school buildings struck out. They therefore say that while they were not entirely successful on their application, they were the substantially successful party. And while only a relatively small number of claims were struck out as a result of my judgment, they note that a process has been put in place to determine further time-barred buildings which are likely also to be struck out.
[21] The Councils say that Carter Holt’s partial success does not justify a reduction in their costs. As noted, they suggest that through the process identifying further buildings which are time-barred, further buildings will be struck out. In addition, they say that had Carter Holt’s claims been properly particularised from the outset, then it is likely that many more claims could have been able to be struck out in the judgment, given the relevant details required for striking out a claim would have been apparent on Carter Holt’s pleading.
[22] The Councils say that in those circumstances, refusing costs to the Councils based on limited success would reward Carter Holt for a technical victory that it only achieved by its own failure to properly particularise its claims. The Councils also note that Carter Holt’s own application, being the flipside of certain aspects of the Councils’ strike out application, sought an indulgence from the court. With reference to Cunningham v Butterfield, the Councils submit that where a party is successful in an interlocutory application seeking an indulgence of the court, costs should be awarded against the party seeking that indulgence (despite that party’s success).11
Carter Holt’s submissions
[23] Carter Holt says that it was the successful party overall. It says the Councils sought to have Carter Holt’s contribution claims set aside or struck out in their entirety, and they failed. They say that claims relating to 95.7 per cent of the buildings at issue remain live and Carter Holt was wholly successful in its application for an extension of time for service of its third party notices.
[24] While it acknowledges the Court concluded that the 10-year longstop applies to contribution claims, it says that finding in and of itself cannot justify any costs
11 Cunningham v Butterfield [2014] NZCA 213.
award in the Councils’ favour, given the possibility that further claims may be removed as a result is irrelevant. Carter Holt says that any order for costs must reflect the outcome of the particular application determined.
[25]Accordingly, Carter Holt says it is the successful party because:
(a)it successfully resisted the Councils’ attempt, on five separate grounds, to strike out or set aside Carter Holt’s claims;
(b)it successfully resisted the Councils’ attempt to strike out claims in respect of 378 of 415 buildings the Councils said were so clearly time- barred that they must be dismissed now; and
(c)it was granted leave to serve its original third party claims out of time, because the Councils failed to provide any credible evidence of actual prejudice.
[26] Carter Holt concludes that the Councils’ application was premature and unjustified, and should not be condoned by an award for costs.
Discussion
Who was the successful party?
[27]I am satisfied the Councils were overall the successful party.
[28] Ultimately they sought to strike out Carter Holt’s contribution claims. They had partial success in doing so. I do not consider the fact they sought to strike out the claims in their entirety, but only a part of the claims was struck out, means they were unsuccessful.
[29] The position can be considered by looking at an example of a damages claim. A party may claim $100,000 in damages. They may only succeed to the extent of
$10,000 damages. On the Court of Appeal’s analysis in Weaver, that party would still be considered the successful party, given “success on more limited terms is still
success”.12 And in such a case, the party claiming $100,000 in damages claims that entire sum (just as, in this case, the Ministry sought to strike out the claims in their entirety). The party in the damages example did not claim $10,000. Nevertheless, being awarded some damages is still considered success.
[30] I also accept the Councils’ submission that a reasonable proportion of the time and argument at the hearing was devoted to the legal issue of whether the Building Act longstop provisions apply to claims for contribution. The Councils were wholly successful on that argument. I accept Carter Holt’s position that I cannot, directly at least, take into account whether further buildings might be struck out as a result. But the legal findings in respect of the longstop provisions were an important aspect of the Councils’ application, and thus the outcome on them is a meaningful success for the Councils in the context of the overall proceeding.
[31] Further, I do not agree that the Councils’ application was premature and unjustified, such as to disentitle them from costs altogether. They were successful on part of their application. And while I did not accept a number of the other grounds of the application, the arguments raised were proper and justified, given the defective state of Carter Holt’s pleading and the very lengthy delay in serving the third party notices. Accordingly, while the strike-out application based on particulars could have been preceded by an application for further and better particulars, the overall thrust of the Councils’ application was justified. For this reason, I do not agree that awarding costs to the Councils “condones” an otherwise unjustifiable application.
Should the costs award to the Councils be reduced to reflect partial success?
[32] I do not accept, however, the Councils’ proposition that the costs award should not be reduced to reflect their partial success only.
[33] The Councils did not succeed on significant aspects of their application. In my view, therefore, it would be unprincipled to award full costs to them. Carter Holt no
12 Weaver v Auckland Council [2017] NZCA 330 at [26].
doubt incurred significant costs on those aspects of the Councils’ claims on which they were successful.13
[34] As the Court of Appeal observed in Weaver, it is not appropriate to “unpick” what happened in a hearing in minute detail, in terms of precise time allocations to particular issues.14 Rather, the position is to be viewed “in the round”,15 adopting a “realistic appraisal”.16 Taking that approach, and given the Councils’ success was minimal (in a strict sense), though nevertheless meaningful, I consider an appropriate award of costs is 40 per cent of scale costs.
Carter Holt’s application
[35] On Carter Holt’s application, I consider the appropriate result is for costs to lie where they fall. That application was a response to certain aspects of the Councils’ application. No significant time was devoted to it (as a separate issue) at the hearing. Rather, the hearing proceeded on the basis that if the Councils did not succeed in having the contribution claims struck out for prejudice, the extension of time would follow. Carter Holt’s “success” in relation to this separate application is accordingly already recognised in the reduction in the costs award in favour of the Councils, to reflect its “failure” on the related aspect of its application. I am also mindful of the Court of Appeal’s observations in Cunningham v Butterfield that, had the application been considered on a stand-alone basis, it sought an indulgence, particularly given the very lengthy delay in the third party notices being served.
Quantum of costs
[36] Both parties agree that Category 3 is the appropriate category for the applications. I accept that time allocations in the B categories are appropriate for most of the steps, but accept that the preparation of the Councils’ application and submissions ought to be categorised as Category C.
13 Rule 14.7(d).
14 Weaver v Auckland Council [2017] NZCA 330 at [24].
15 Water Guard NZ Ltd v Midgen Enterprises Ltd [2017] NZCA 36 at [18]; Weaver v Auckland Council [2017] NZCA 330 at [18].
16 Weaver v Auckland Council [2017] NZCA 330 at [26].
[37]In terms of the schedule attached to the Councils’ submissions:
(a)As the costs are only in relation to the particular applications, I do not consider items 11 and 13 ought to be included in this costs award.
(b)I certify for second counsel (as per Item 27 in the Schedule).
(c)Given my conclusion that costs should lie where they fall on Carter Holt’s application, items 23 and 24, and the disbursement for filing a notice of opposition, should also be removed.
(d)Disbursements on the Councils’ application are awarded in full.
[38] There is accordingly a costs award in favour of the Councils in the total sum of $11,812.00, as set out in the attached schedule.
Fitzgerald J
Solicitors: Meredith Connell, Auckland
LeeSalmonLong, Auckland Simpson Grierson, Auckland
Item Description Band Time Allocation Cost 40% of cost Interlocutory Application 22 Filing interlocutory
application by Councils
C 2 $6,600.00 $2,640.00 24 Preparation of written submissions C 3 $9,900.00 $3,960.00 25 Preparation by applicant of bundle for hearing B 0.6 $1,980.00 $792.00 26 Appearance at hearing of defended application for
sole or principal counsel
1.5 $4,950.00 $1,980.00 27 Second and subsequent counsel 0.75 $2,475.00 $990.00 Subtotal
$10,362.00
Disbursements
Filing fee — Interlocutory application $500.00 $500.00 Copying common bundle of documents $950.00 $950.00 Subtotal
$1,450.00
Total
$11,812.00
2
6
0