NZ Natural Therapy Ltd (in liquidation) v Little

[2016] NZHC 3079

IN THE HIGH COURT OF NEW ZEALAND

AUCKLAND REGISTRY

CIV-2013-404-4866

[2016] NZHC 3079

UNDER

the Companies Act 1993

IN THE MATTER

of the liquidation of NZ Natural Therapy Ltd (In Liquidation)

BETWEEN

NZ NATURAL THERAPY LTD (IN LIQUIDATION)

First Plaintiff

VIVIEN JUDITH MADSEN-RIES AND

HENRY DAVID LEVIN as liquidators of NZ NATURAL THERAPY LTD (IN

LIQUIDATION)
Second Plaintiff

AND

JOHN LAWSON LITTLE

Defendant

Hearing:	(On the papers)
Counsel:	K H Morrison and G A Campbell for Plaintiffs P J Dale for Defendant
Judgment:	15 December 2016

COSTS JUDGMENT OF BREWER J

Solicitors:           Meredith Connell (Auckland) for Plaintiffs

Saunders Robinson Brown (Christchurch) for Defendant

NZ NATURAL THERAPY LTD (IN LIQUIDATION) v LITTLE [2016] NZHC 3079 [15 December 2016]

Introduction

[1]                 This proceeding is adjourned part-heard. I determined the first cause of action (against the plaintiffs) but could not determine the second cause of action due to the defendant taking the plaintiffs by surprise with briefs of evidence of experts whose evidence would found a defence to the second cause of action which was not pleaded by the defendant.

[2]This Judgment determines costs on the adjournment.

Background

[3]                 The background can be taken from the relevant paragraphs of my Minute of 30 August 2016:

[17]   My overall view is that the defendant had an obligation to seek leave to amend his statement of defence so that his pleading properly reflected his new response to the plaintiffs’ second cause of action. I accept that his disputed evidence is outside the scope of the pleadings and that the plaintiffs

– notwithstanding the prayer for an inquiry – could not have been expected to prepare to meet it.

[18]      However, as I have indicated to counsel, on an interests of justice basis I am not prepared to decide the second cause of action knowing that there is expert evidence which might be a complete answer to the plaintiffs’ claim but which I will not hear. The new evidence was found late by the defendant and disclosed promptly. But neither will I require the plaintiffs to cross-examine on the evidence when they have not had the opportunity to fully examine the documents which might bear on the evidence. I note, for example, that the two accountants who prepared the financial statements which will be said to be in error have not been briefed to give evidence. Further, Ms Morrison has particularised the related documentary evidence which would be sought by the plaintiffs as part of their preparation for testing the proposed evidence. That documentation (which includes IRD records) is not currently available.

[19]      Given my indication that I would not exclude the evidence, nor require the plaintiffs to meet it without adjournment, Ms Morrison submits that I should now hear all of the evidence now available and then adjourn having given directions as to the provision by the defendant of the further material to be provided. The trial phase would then be completed by further cross- examination of the defendant’s witnesses and the calling of rebuttal evidence.

[20]      Mr Dale submits that it would be better to adjourn the proceeding now and that subjecting Defence witnesses to more than one session of cross- examination would be unattractive.

[21]      Counsel are agreed that it would be useful if, during this trial phase, I heard the evidence on, and determined, the first cause of action. That is to

say, if I were to decide that the first plaintiff was not acting as a corporate trustee then the sum of $1,059,590.49 is at issue. However, if I were to find that the first plaintiff was a corporate trustee, then the maximum sum at issue pursuant to the second cause of action is $323,148.

[22]I will proceed in the following way:

(1)I will hear the evidence on the first cause of action tomorrow. If I can, I will give my decision on that point with reasons to follow. I will then adjourn the case part-heard.

(2)I will immediately convene a directions conference to regularise the pleadings (if the parties think regularisation is necessary) and to timetable the necessary discovery. We will also need to address the future conduct of the trial. Counsel are to be prepared to propose specific directions.

(3)I will make directions for the determination of costs to this point. My expectation is that I will make an award of costs against the defendant.

The plaintiffs’ claim for costs

[4]The plaintiffs seek costs totalling $15,387 for:

(a)The steps taken as a result of the defendant’s late provision of his briefs of evidence, and the new ground of defence signalled in the briefs served ($6,467); and

(b)Wasted costs ($8,920).

[5]                 The plaintiffs seek also an  unless  order  that  these  costs  be  paid  within  10 working days. The unless order is sought because the plaintiffs will need to incur further costs in preparing for the resumed trial, and the wasted costs should be available for this purpose.

The defendant’s response

[6]                 The defendant’s memorandum, filed on 15 September 2016, goes well beyond the issue of quantum. The points raised by the defendant on the future of the litigation might well be relevant to the costs of the proceeding eventually. I will not consider them here.

[7]                 As to quantum, the defendant’s primary position is that I should fix costs in relation to the attendances leading up to the trial but not make an order for wasted costs.

[8]The defendant submits:

(a)The costs may not be wasted depending on the future of the trial. It may not, for example, be necessary to pursue all of the causes of action.

(b)The current account issue is relatively narrow.

(c)The evidence that has been given will not be wasted.

[9]                 If wasted costs are to be awarded, then they should be minimised due to the defendant’s personal financial position and the difficulties he has with a parallel proceeding. It is also submitted that the reasons giving rise to the failure to amend the statement of defence cannot be laid entirely at the defendant’s door.

Decision

[10]             I have no difficulty in finding that the plaintiffs should be awarded scale costs for the steps taken directly to address the late provision of briefs of evidence, and the new ground of defence signalled therein. I accept the plaintiffs’ schedule and will make an order for costs in the sum of $6,467.

[11]             I will also make an order for wasted costs. However, I do not accept that these are properly assessed as one-half of scale costs for the proceeding to this point.

[12]             I have determined already the first cause of action. That was the major part of the plaintiffs’ case. Preparation for the second cause of action and other causes of action will not be wasted. I accept, however, that there will be a degree of waste in that the plaintiffs will have to “gear up” for another hearing and there will be some costs incurred again in that process. I also accept that there must be some sanction for the defendant.

[13]             It is impossible for me to do more than adopt a broad approach in the exercise of my discretion. I estimate and assess relevant wasted costs as one-quarter of the scale 2B costs. I will award the plaintiffs $4,460 in wasted costs.

[14]             I decline to make an unless order. I determined the first cause of action, the major cause of action, against the plaintiff. This will have to be taken into account when the proceeding is eventually decided. There could well be a set-off.

Result

[15]I direct the defendant to pay costs to the plaintiffs in the sum of $10,927, being:

(a)Scale costs - $6,467

(b)Wasted costs - $4,460

Brewer J