Newands v Sovereign Assurance Company Limited

[2014] NZHC 2420

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2012-404-002618 [2014] NZHC 2420

BETWEEN

JAMES GORDON NEWLANDS

Plaintiff

AND

SOVEREIGN ASSURANCE COMPANY LIMITED

First Defendant

AND

BRUCE GRAHAM CORTESI Second Defendant

AND

PLANWISE FINANCIAL SERVICES LIMITED

Third Defendant

On thepapers:	3 October 2014
Appearances:	G Keene and P Kemps for the Plaintiff R Hern for the Second and Third Defendants
Judgment:	3 October 2014

COSTS JUDGMENT OF ASSOCIATE JUDGE SARGISSON

This judgment was delivered by me on 3 October 2014 at 3.30 p.m. pursuant to Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar

Date.......................................

Solicitors:        Kemps Weir, Auckland

McElroys, Auckland

JAMES GORDON NEWLANDS v SOVEREIGN ASSURANCE COMPANY LIMITED [2014] NZHC 2420 [3 October 2014]

[1]      On 1 May 2014 I made orders in respect of the second and third defendant’s application for summary judgment.  The orders were made in the terms set out in counsel’s joint memorandum of 30 April 2014, and were as follows:

[2]  As requested, I make final orders as follows:

a)        The causes of action in contract are struck out.

b)An order for summary judgment is made dismissing the remaining causes of action.

c)        Costs are reserved.

[2]      As requested by counsel I fixed a timetable for them to file memoranda on the issue of costs.  In this judgment I deal with the remaining issue as to costs.

[3]      The second and third defendants submit that costs should follow the outcome in the usual way, and therefore that they should have an order for costs against Mr Newlands.  Additionally they seek a 25% uplift on 2B costs, on the basis that there are good reasons to justify an uplift.  Mr Newlands’ position is that if costs are awarded against him, they should be reduced costs.

[4]      There is no dispute as to the principles that govern the application for costs. Although costs are in the overall discretion of the Court, the Court is obliged to follow the principles set out in High Court Rule 14.2.  The starting point outlined in r 14.2(a) is that the party who fails with respect to an interlocutory application should pay costs to the party who succeeds.  So far as possible, the determination of costs should be predictable and expeditious: r 14.2(g).   However, r 14.6 provides reasons to allow an uplift in costs otherwise payable under the High Court scale, and r 14.7 provides reasons to refuse or reduce costs.

[5]      Rule 14.7(g) provides that costs may be refused or reduced if “some other reason exists which justifies the Court refusing costs or reducing costs despite the principle that the determination of costs should be predictable and expeditious.  The Court of Appeal has recently stated that the “other reason” exception should be kept

limited, having regard to the policy of the cost regime and the emphasis it places on costs following the event.  Otherwise the exception will swallow the rule.1

[6]      Counsel for the second and third defendants submits there is no reason why costs should not follow the event in this case.  Additionally counsel submits that “a modest   uplift   on   scale   costs   (25%)   is   appropriate”.      Counsel   argues   that Mr Newlands’ continuation of the claim from an early point following the joinder of the  second  and  third  defendants  was  unreasonable  and  unmeritorious.     The contention is essentially that Mr Newlands should have accepted early on that his case lacked merit.  Counsel points out that Mr Newlands eventually acknowledged, at the hearing, that the contractual causes of action in his amended claim were out of time.  Counsel submits that additionally:

(a)      Mr Newlands persisted in his pleading that the negligence causes of action accrued at a different time to the contractual causes of action, though there was no legally sustainable basis particularised for this.

(b)      Further and more critically,  Mr Newlands  alleged  equitable fraud.

However, as found in the judgment, there is nothing to that effect in

any of Mr Newlands’ pleadings or evidence.

(c)      Further, counsel’s submissions did not rely on knowing concealment of the essential facts of that failure in the cause of action, nor did they address the key element of fraudulent concealment and the breach of duty to disclose the failures.

(d)The defendants put Mr Newlands on notice that his causes of action were statute barred, and

(e)      That he was given the opportunity to explain on several occasions why he was persisting.

1Roberts v Professional Conduct Committee of the Nursing Council of New Zealand [2014] NZCA 141 at [24], per French J

[7]       Plainly, this is a case where in terms of the principles governing costs, costs should follow the event.   Counsel for Mr Newlands did not press the contrary. Rather he argues that r 14.7(g) should be invoked to reduce the cost that would ordinarily be payable to a successful applicant for summary judgment because the second defendant owed the plaintiff fiduciary duties, and acted in a manner that was inconsistent with those duties by, among other things, encouraging a misunderstanding on the part of the plaintiff that insurance cover would apply if there existed any genuine reason preventing the plaintiff from continuing his work for a period of 3 months or more;  not sending appendices to the policy documents that  would  have  enabled  the  plaintiff  to  ascertain  early on  that  the  policy was inadequate.   Relevantly, the second defendant did not file any affidavit in reply denying this conduct.  Counsel submits these factors point to the possibility that the plaintiff’s  claim,  which  has  been  denied  to  him  due  to  a  technical  limitations defence, was nonetheless meritorious.  He argues that the second defendant may well be guilty of a breach of fiduciary duty, and may have escaped liability on a technical ground, and that in the circumstances it would not be appropriate to award increased costs.

[8]      In  support  of  a  reduced  level  of  costs,  “possibly half  of  what  the  scale indicates”, counsel for Mr Newlands relies on the same arguments.   Counsel also challenges the scale calculations of counsel for the second and third defendants in relation to the list of documents and inspection of documents on discovery, on the basis that discovery and inspection in the present case were of modest proportions, and  nowhere  near  as  extensive  as  might  often  be  the  case  in  the  High  Court. He submits that:

(a)      An allowance of one day would be generous, and that one and a half days allocated in the High Court scale would be overly so for the second and third defendants’ list of documents, which contained only approximately 340 separate items.

(b)      The plaintiff’s list of documents contained only 153 items, and half a

day should be ample for the purposes of inspection.

(c)      Accordingly counsel  submits  that  there  should,  in  any case,  be  a reduction for discovery and inspection from four days down to one and a half days.

[9]      The overarching submission for reduced costs is that the second defendant has avoided a trial on the merits by way of a technical defence.  Any award of scale costs including reduced costs for discovery and inspection, should be then reduced further by half.

Decision

[10]     The  second  and  third  defendants  were  the  successful  parties  on  their application, and as such they have a prima facie entitlement to a full award of costs under the High Court costs regime.

[11]     I am not persuaded by Mr Newlands’ argument that there should be a reduced award because their success turned ultimately on a technical defence, but for which the case would have been unsuitable for summary judgment.   The defendants’ application was no less successful because of the particular ground or grounds on which that success was assured.

[12]     But I am also not convinced that the second and third defendants should have an increase over and above scale costs.   Though the plaintiff ultimately conceded that cause of action based on contract should be struck out, he made no such concession in relation to his case in negligence, and in that case   his arguments (particularly on  the correct legal principles to  be applied) invited consideration. Ultimately they did not persuade me, but they were not so meritless or so hopeless as to attract the sanctions of increased costs.

[13]     I turn then to the remaining question of whether the time allowance for discovery and inspection in the High Court scale would be excessive in the circumstances of this case.  The four day allowance under band B for a Category 2

proceeding would ordinarily apply.   If the actual time incurred was less than four days, then a reduction would be warranted to those allowed under band A pursuant to r 14.7.

[14]     In the circumstances I will allow 2B costs to the second and third defendants for these steps, but subject to the condition that such costs do not exceed the actual costs incurred by them for these steps.  Counsel for the second and third defendants is to file and serve a memorandum confirming what the actual costs incurred for these steps were.

[15]     For all other steps I will allow 2B costs.

Result

[16]     I make an order for costs in favour of the second and third defendants on a

2B basis together with disbursements to be fixed by the Registrar.   Before the Registrar approves the calculation of 2B costs, counsel for the second and third defendants is to file and serve a brief memorandum confirming whether or not the

actual costs incurred for items 20 and 21 exceed 2B scale costs.

Associate Judge Sargisson