Napier City Council v Local Government Mutual Funds Trustee Limited

[2023] NZHC 493

IN THE HIGH COURT OF NEW ZEALAND NAPIER REGISTRY

I TE KŌTI MATUA O AOTEAROA AHURIRI ROHE

CIV-2017-441-000070

[2023] NZHC 493

BETWEEN

NAPIER CITY COUNCIL

Plaintiff

AND

LOCAL GOVERNMENT MUTUAL FUNDS TRUSTEE LIMITED

Defendant

Hearing:	On the papers
Counsel:	D H McLellan KC and G N M Tompkins for the Plaintiff C L Hlavac for the Defendant
Judgment:	13 March 2023

JUDGMENT OF GRICE J

(Costs)

Introduction

[1]                 This is an application for costs by the Napier City Council (the Council) following a successful appeal to the Court of Appeal quashing the original judgment and costs order1 made in favour of the defendant (Riskpool) and directing that the High Court fix costs on the trial.2

[2]                 The parties have been unable to agree on the Council’s entitlement to costs and disbursements, although they have narrowed the areas of disagreement through discussions. As directed, the Council filed its application for costs and submissions

1      Napier City Council v Local Government Mutual Funds Trustee Ltd [2021] NZHC 1477 [the High Court decision]; and Napier City Council v Local Government Mutual Funds Trustee Ltd [2021] NZHC 2572 [the first costs decision].

2      Napier City Council v Local Government Mutual Funds Trustee Ltd [2022] NZCA 422 [the Court of Appeal decision] at [153].

NAPIER CITY COUNCIL v LOCAL GOVERNMENT MUTUAL FUNDS TRUSTEE LIMITED [2023] NZHC 493 [13 March 2023]

by memorandum, Riskpool filed a response and the Council filed a reply to that. In addition, Riskpool filed a reply to the Council’s reply. The Council opposes the filing of Riskpool’s reply on most points as it was not contemplated in the timetable. The Council said that reply should not be considered apart from the submissions on one issue, which I deal with below.

[3]                 The Council in its application initially sought a total sum in costs and disbursements of $311,597.87. In its reply to Riskpool’s response it has adjusted that figure to $303,943.68. Riskpool says that the Council’s entitlement is $211,949.

[4]The Council seeks costs of $119,162.13, reduced from its original claim of

$128,810.13. Riskpool says the Council is only entitled to $96,984. The differences between the parties in relation to the calculation of costs largely relate to time allocations for the filing of amended pleadings and discovery as well as the Council’s claim for increased costs resulting from the filing of what it describes as “a high volume” of inadmissible evidence filed by Riskpool.

[5]In addition, the Council claims the sum of $174,399.98 (reduced from

$174,406.17) for disbursements. Riskpool responds saying the Council must deduct

$59,441.20 from its claim for various reasons. The difference between the parties largely relates to the disbursements claimed by the Council for its experts.

Legal principles in relation to costs

[6]                 Costs are at the discretion of the Court.3 The High Court Rules 2016 apply to the calculation of costs and sets out the principles according to which the discretion must be exercised.4 The aim of the regime is to achieve predictability, consistency and expediency in determining costs. In most cases it should be possible to make the necessary calculations based on sch 2 and sch 3 of the High Court Rules, which provide standardised skill categories and bands allocating time for each step in the proceeding.

3      High Court Rules 2016, r 14.1.

4      Rule 14.2.

[7]                 This proceeding was allocated as category 2, being a proceeding of average complexity requiring counsel of skill and experience considered average in the High Court. Time allocations were to be in accordance with band B, which allows an amount of time normally considered reasonable for the step. If that schedule does not apply, a time determined by analogy with the schedule is allocated. If no analogy can usefully be made, a time is assessed at what is likely to be required for a particular step.

[8]                 Increased and indemnity costs are governed by r 14.6, which allows for the Court to make an order increasing costs otherwise payable under the rules or that the costs payable are the actual costs, disbursements, and witness expenses reasonably incurred by a party.

Submissions

[9]                 The Council has calculated most steps on a 2B basis. Those are set out as a schedule to its initial costs submissions.

[10]              The Council notes that costs have been calculated taking into account the following:

(a)costs and disbursements for second counsel, which was certified in the original costs judgment in favour of Riskpool;5

(b)the hearing durations applicable for the trial and the issues conference on 12 November 2019 were agreed between the parties; and

(c)costs for Riskpool’s adjournment application and unsuccessful application to strike out have been previously settled and paid so have been excluded.

[11]              Riskpool contests the calculation of costs on a number of fronts. In general terms these relate to:

5      The first costs decision, above n 1, at [14](a).

(a)Admissibility of evidence: the claim for increased costs said to be as a result of Riskpool’s attempts to call inadmissible evidence. The parties agreed before trial that the objections as to admissibility of evidence should be dealt with at trial. However, the Council says that as a result it was required to expend time and cost in considering the material and dealing with it at trial, which led to both an increase in legal costs and trial time taken. An uplift of 25 per cent for relevant steps is sought increasing the costs by $10,381.

(b)Amended pleadings: the Council amended its statement of claim, as a result of which pleadings in response and reply were required. Riskpool says it should be entitled to set off an allowance for the extra pleadings caused by that amendment.

(c)Disbursements: this relates to experts’ fees which have been claimed as disbursements.

[12]I now deal with each of those matters.

Admissibility of evidence

[13]              The Council, following the receipt of Riskpool’s response, amended its increased costs claim under this head. It says this should be calculated by reference to band B and accordingly amended its calculations to reflect a 25 per cent uplift over 2B scale costs. The total $10,381.57 claimed for the uplift includes: the preparation of the common bundle (uplift of $298.75); preparation for hearing (uplift of

$4,033.13); the appearances at hearing for principal counsel (uplift of $4,033.13); and appearance at hearing for second counsel ($2,016.56).

[14]              Riskpool says the admissibility issues were not essentially complex and would not justify any more than a normal amount of time being required for the relevant steps. It says that the parties had previously agreed that a normal amount of time was considered reasonable for all steps and that band B was appropriate. Riskpool’s claims for costs in the first High Court costs decision for equivalent steps relating to the same issue was based on band B. Riskpool acknowledges there was a memorandum filed

by the Council in response to a court direction. The plaintiff provided assistance to the Court by providing a synopsis of argument on the issue. Riskpool says that while that might justify a step for submissions, rather than a memorandum, and a larger time allocation, that allowance can only reasonably be a calculation in accordance with band B.

[15]              I accept that it is appropriate for increased costs to be awarded because of the admissibility challenge. The parties had discussed the issue prior to trial in an attempt to resolve it and were unsuccessful. They disagree about whether the Council made any requests for documents to be removed from the common bundle or to record any objections to the admissibility of documents pursuant to r 9.5(2). I am not in a position to resolve that dispute. However, I am aware that the issue of admissibility was raised prior to trial and the parties agreed that the issue should be addressed at trial to save time. In those circumstances I am of the view that the successful party should be entitled to increased costs in the circumstances of this case. There is no doubt an increase in time and therefore cost was involved in the preparation and trial due to the issues surrounding the admissibility of evidence. At the same time, the parties sensibly agreed to deal with it at trial. This was more efficient than dealing with it as a separate pre-trial application and the agreed course is likely to have saved both parties time and costs.

[16]              The most expeditious way of dealing with the issue is by way of an uplift on the relevant steps, but not as high as 25 per cent. I consider a more appropriate uplift would be 10 per cent in relation to putting together the common bundle, preparation and appearances at hearing. I award that accordingly.

Amendments to pleadings

[17]              Riskpool says that the costs claimed by the Council for the statement of defence of $1,784 (7 December 2018) was a cost associated with the original pleading and should be met by the Council in accordance with r 7.77(8). The Council filed an amended statement of claim dated 3 April 2019, leading to a further reply statement of defence being filed on 17 June 2019, a step which is also included in the Council’s claim for costs at $1,784.

[18]              Riskpool also says it is entitled to a set off for one statement of defence pursuant to r 7.77(8). That rule relevantly provides:6

7.77     Filing of amended pleading

(1)A party may before trial file an amended pleading and serve a copy of it on the other party or parties.

…

(8) If an amended pleading has been filed under this rule, the party filing the amended pleading must bear all the costs of and occasioned by the original pleading and any application for amendment, unless the court otherwise orders.

…

[19]              The Council said it was required to file an amended statement of claim because the Waterfront proceedings which were in the background to the claim the subject of this proceeding had settled so it was necessary to bring matters up to date in the pleadings.

[20]              Riskpool also contests the claim of 1.5 days for the preparation of submissions in respect of issues for trial and onus on 14 October 2019, because it was a memorandum of counsel, not submissions, and therefore the appropriate allocation is

0.4 days for step 11, being the filing memorandum in respect of case management/issues conference. It says this justifies a net deduction of $2,629 in costs.

Miscellaneous points

[21]              In relation to the claim for the preparation of submissions in response to Riskpool’s memorandum seeking directions regarding case management/issues conference on 30 October 2019, the defendant says this was a memorandum for the issues conference on 12 November 2019 and the correct allocation is 0.4 days for the filing of a memorandum in respect of the case management/issues conference. This, it says, justifies a net deduction of $2,629.

[22]              The Council claims for three lists of documents in discovery at 2.5 days each. Riskpool says the second and third lists were only required because the Council’s

6      Emphasis added.

initial discovery was inadequate. Therefore, the cost of the second and third lists of documents should be met by the Council. This justifies a deduction of $11,950, being

2.5 days at $2,390 per day for each additional list of documents.

[23]              In addition, Riskpool says that the claim of $2,804.04 for three memoranda regarding confidentiality dated 3 April 2019, 25 August 2020 and 28 June 2021 relate to confidentiality, which was an issue that only affected the Council and in which Riskpool had no interest. Therefore, the cost should be met by the Council.

[24]              In addition, Riskpool says deduction should be made in respect of the memorandum  for  and  appearances  at   the   case   management   conference   on 21 September 2022 (deductions of $956 and $717 respectively), because these steps occurred after the proceeding was remitted back to the High Court. Therefore they are not properly claimable as costs in relation to the original judgment. The defendant says costs in relation to the proceeding going forward will need to be considered separately once the issues of quantum have been determined.

Analysis in relation to costs

[25]              Riskpool submitted that $40,207.57 should be deducted from the Council’s initial claim for costs. This includes a deduction of $29,826 from the Council’s claim for scale costs. In addition, it says the $10,381.57 claim for increased costs was not justified and should be deducted.

[26]              As the result of Riskpool’s response, the Council in its reply reduced its 2B costs claim from $128,810.13 to $119,162.13. It maintained its increased costs claim for $10,381.57.

[27]              I have found that the Council is entitled to an increased costs claim, but only an amount equivalent to an uplift of  10 per cent on the steps  claimed, not the        25 per cent sought by the Council.

[28]              I do not accept Riskpool’s claim that the Council’s costs should be reduced for steps relating to confidentiality matters which the defendant says were for the benefit of the Council. The issue of confidentiality arose in relation to a settlement of the

underlying proceedings. Matters of this nature regularly arise in the normal course of proceedings. There is no reason why the successful party should not be awarded costs on the steps in relation to those matters here.

[29]              In relation to Riskpool’s submission that deductions should be made for the case management conference on 21 September 2022 and related costs, I agree with the Council’s submission. The time taken up at the conference largely related to the stay application, which was refused (although subsequently the parties have agreed to postpone the quantum hearing in this Court pending the outcome of the Supreme Court appeal for which leave has been granted). However, generally the conference and related costs should be allowed as steps in the proceeding. The Council is entitled to costs on these steps as the successful party.

[30]              The Council is entitled to costs on the three lists of documents provided on discovery as claimed. I do not consider it is appropriate to make the deductions sought by Riskpool in relation to the lists of documents. It is not unusual that discovery needs to be refreshed from time to time in cases such as this is where the relevant events took place over a relatively long timeframe and various documents may become relevant or not to one party or the other as the proceeding unfolds. Accordingly, the claims relating to the three lists of documents are allowed.

[31]              In relation to the dispute concerning the memorandum/submissions for the case management conference on 30 October 2019 the Council has adjusted its claim by deducting $956 from its original claim of $2,390. This accords with the adjustment sought by Riskpool in its schedule A to its memorandum of 22 November 2022. However, the Council notes that its memorandum of counsel dated 14 October 2019 in substance contained submissions filed in response to submissions made by Riskpool in support of its interlocutory application seeking adjournment of trial, directions to determine the trial issues and onus, and admissibility of evidence. I accept the Council is entitled to costs for those submissions.

[32]I make those directions accordingly.

Disbursements

[33]              Riskpool says the Council’s claim for $95.65 for the filing fee relating to the amended statement of claim is a cost to be met by the Council pursuant to r 7.77(8) of the High Court Rules. As I have found, the Council appropriately filed an amended statement of claim and was entitled to costs on that. It follows that it is also entitled to the filing fee.

[34]              A further minor deduction of $27.53 is sought for two items where Riskpool says the amount claimed exceeds the supporting invoice. Only the cost of disbursements is claimable. Therefore, to that extent the deduction is allowed.

[35]              The Council also claims expert witness fees as a recoverable disbursement pursuant to r 14.12(2)(a). Insofar as relevant, that provides:

14.12   Disbursements

(1)In this rule,—

disbursement, in relation to a proceeding,—

(a)means an expense paid or incurred for the purposes of the proceeding that would ordinarily be charged for separately from legal professional services in a solicitor’s bill of costs; and

(b)includes—

(i)fees of court for the proceeding:

(ii)expenses of serving documents for the purposes of the proceeding:

(iii)expenses of photocopying documents required by these rules or by a direction of the court:

(iv)expenses of conducting a conference by telephone or video link; but

(c)does not include counsel’s fee.

(2)A disbursement must, if claimed and verified, be included in the costs awarded for a proceeding to the extent that it is—

(a)of a class that is either—

(i)approved by the court for the purposes of the proceeding; or

(ii)specified in paragraph (b) of subclause (1); and

(b)specific to the conduct of the proceeding; and

(c)reasonably necessary for the conduct of the proceeding; and

(d)reasonable in amount.

(3)Despite subclause (2), a disbursement may be disallowed or reduced if it is disproportionate in the circumstances of the proceeding.

…

[36]              The Council claims by way of disbursements the actual costs of the expert witnesses Mark Powell, Maynard Marks ($27,430) and James White of Kwanto ($91,206 04). Riskpool says the costs totalling $118,363.04 for Maynard Marks and James White of Kwanto, the Council’s building surveying and quantity surveying experts respectively, compare to Riskpool’s expert costs in respect of the same disciplines of $38,531 for its one expert. However, it acknowledges that as Riskpool had only one expert witness for the building survey and quantity surveying evidence, this would have resulted in some efficiencies such as for travel costs and the cost of attendance at meetings. It says, however, those efficiencies would have been more than offset by the background knowledge the Council’s experts would have had from their involvement in the underlying proceedings. Riskpool’s expert had to spend time obtaining information about the relevant building, the underlying claim and the extent and cost of remedial work claimed and carried out.

[37]              Further, Riskpool said in its response it had asked for a full breakdown of the work undertaken by the expert witnesses to which the invoices relate, including time records, but this information has not been provided. It said the Council had provided invoices in respect of the expert witness costs claimed and based on the date of those invoices it seemed likely that many of the costs claimed related to the Waterfront proceedings settled in February 2019.

[38]              Riskpool says on the information provided the Council has not established that those expert witness costs are specific to and reasonably necessary for the conduct of the proceeding, nor are they reasonable in the amount as required by r 14.12(2)(b)– (d).

[39]              In its reply to Riskpool’s response, the Council provided a substantial quantity of material, including the Kwanto timesheets. As a result of this, Riskpool filed a further reply, which the Council says should not be accepted by the Court insofar as it relates to anything other than the Kwanto issues.

[40]              Riskpool is entitled to reply to new material provided by the Council in its reply. The information should have been provided by the Council when Riskpool requested it. As a result of the provision of the material Riskpool says that as far as it can determine from the descriptions of the work carried out on each date, the disbursements relate to the proceeding. However, it stresses that a number of the descriptions do not contain sufficient detail to say with certainty whether all of the costs claimed were reasonably necessary for the conduct of the proceeding.

[41]No issue was taken with the hourly fees sought. They were in the range of

$175.04 for support staff to $450 for Mr White. These rates appear within the appropriate range for experts and their staff. In addition, it appears from the Kwanto timesheets that the work charged was caried out in the period which would be expected to relate generally to the proceeding, assisting counsel and preparation for trial and related expenses. A perusal of the narration on the timesheets indicates in general terms the activities that would be expected for these types of attendances, although, as Riskpool has pointed out, some narrations lack detail. However, standing back and looking at the costs as a whole, over the period incurred and the tenor of the timesheet descriptions as well as the description of the professional services rendered in respect of the period ended 7 August 2020, I am satisfied that the fee of $91,206.04 is reasonable for the purposes of the proceeding.

[42]              In relation to the Maynard Marks disbursement, the Council produced eight invoices for fees incurred between 26 February 2019 and 31 August 2020. It noted the invoices had also been provided to the solicitors for Riskpool on 7 October 2022. The invoices are described as “timesheet” invoices and separately identify the line items. For each line item the invoices provide a descriptive narrative, the relevant individual(s) at Maynard Marks involved, the time spent, and the applicable hourly rate. Again, no criticism is made of the rates charged and over the time of the life of the services this appears to be a reasonable charge.

[43]              Riskpool says that its expert which covered both disciplines cost less than one-third of the equivalent two council experts. It is difficult to make comparisons between experts, and the parties have the right to choose their experts. Riskpool was able to use an expert who covered both disciplines but that does not mean that the Council should be required to or could find such an expert. The professional and technical issues arising in the case justified two experts being involved. I also bear in mind that the Council was the party who had to prepare the initial briefs and spreadsheets, and this usually involves more work than for the defendant.

[44]              The task of the Court is to consider whether the experts’ disbursements claimed are reasonable in the context of the case both as to amount and as to the necessity of the relevant evidence for the conduct of the proceeding. I am satisfied of that in relation to both Council experts. I allow the claims for disbursements made in relation to the experts.

Conclusion

[45]              I have dealt with the points raised by Riskpool opposing various costs and disbursements claims by the Council. My findings are set out above. I will leave it to counsel to undertake the calculations as a result of my findings. Other than the matters raised and dealt with, I award costs in favour of the Council as claimed. The claims appear reasonable for the proceeding.

[46]              Counsel may raise any matters resulting from this determination by way of memorandum filed within five days of the date of this judgment.

Grice J

Solicitors:

Wilson Harle, Auckland Young Hunter, Christchurch