Perrot-Hunt v Johnston
[2018] NZHC 1748
•16 July 2018
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2015-404-2506
[2018] NZHC 1748
BETWEEN MATTHEW NEIL PERROT-HUNT
First Plaintiff
HUNT FT LIMITED and DEBRA CECILIA
HOLTOM as trustees of the Hunt Family Trust
Second Plaintiffs
AND
EDWARD ERROL JOHNSTON
First Defendant
Cont….
Hearing: On the papers Appearances:
R S Pidgeon for Plaintiffs
M Francis and I R Shennan for Fourth Defendant
Judgment:
16 July 2018
JUDGMENT OF LANG J
[re costs on adjournment of application for re-joinder]
This judgment was delivered by me on 16 July 2018 at 3.30 pm, pursuant to Rule 11.5 of the High Court Rules.
Registrar/Deputy Registrar Date……………
PERROT-HUNT v JOHNSTON [2018] NZHC 1748 [16 July 2018]
EDWARD JOHNSTON & CO TRUSTEES
LIMITED (as former trustee of the Hunt Family Trust)
Second Defendant
RONALD BRUCE JOHNSON, JOHN KAHUKIWA and LAWRENCE PONNIAH
(sued as Corban Revell) Third Defendants
RONALD BRUCE JOHNSTON as
principal of Central Park Legal Limited (removed)
Fourth Defendant
ROSS JAMES FARRON and JAMES ROBERT ARTHUR NASH
Fifth Defendants
ROSS JAMES FARRON
Sixth Defendant
[1] On 12 June 2018 I was scheduled to hear an application by the plaintiffs for an order re-joining Mr Johnson as a fourth defendant to the proceeding. He had earlier been struck out as a defendant by Associate Judge Bell on 11 April 2017.1
[2] After reading the file on 7 June 2018 I became concerned regarding the state of the pleadings in the then current version of the statement of claim. For that reason, I issued a Minute directing a telephone conference to be held with counsel on Friday 8 June 2018. Counsel for the plaintiffs was unable to attend that conference for medical reasons, and it was therefore necessary to direct a face to face conference on Monday 11 June 2018. During this conference, I pointed out the flaws I considered the statement of claim to contain.
[3] On the morning of 12 June 2018 counsel for the plaintiffs produced a new version of the statement of claim. This excluded causes of action on which the re- joinder application had previously been based and added a new cause of action that had never been pleaded before. The new cause of action raised potential limitation issues. To deal with this the plaintiffs also filed an application for an order under s 45 of the Limitation Act 2010 extending the period of limitation in relation to the new cause of action.
[4] Faced with these developments, it was not possible for the hearing to proceed. I therefore made timetable orders for the fourth defendant to file documents responding to the application and the new statement of claim. I then directed that the application for re-joinder based on the amended statement of claim was to be heard before Associate Judge Bell on 24 September 2018.
[5] The proposed fourth defendant now seeks an award of costs to reflect the wasted costs incurred in relation to the hearing on 12 June 2018 and the steps taken prior to that hearing. The proposed fourth defendant also seeks increased costs on the basis that the plaintiffs took or pursued an unnecessary step that lacked merit. In addition, he contends the plaintiffs failed to respond to correspondence pointing out the difficulties in the current version of the statement of claim and inviting the plaintiffs to reconsider their position.
1 Perrot-Hunt v Johnston [2017] NZHC 689.
[6] The plaintiffs oppose any award of costs being made. They contend the issue of costs should await the disposition of the extant application for re-joinder.
[7] The issue of costs is further complicated by the fact that one of the second plaintiffs, Ms Debra Holtom, is legally aided. The first plaintiff has also applied for legal aid but his application has not yet been finally determined.
Should the proposed fourth defendant receive an award of costs?
[8] Although costs are at the discretion of the Court,2 r 14.2 of the High Court Rules 2016 sets out the principles informing the exercise of the discretion. To the forefront of these is the principle that the party who fails with respect to a proceeding should pay costs to the party who succeeds.3
[9] I do not consider it appropriate to postpone the determination of costs in relation to the hearing that was scheduled to commence on 12 June 2018. The ability to proceed with that hearing evaporated as soon as the plaintiffs produced their amended statement of claim. Although the application for re-joinder has not yet been determined, it now relates to a completely different claim than was the case prior to 12 June 2018.
[10] I regard the proposed fourth defendant as being the successful party in relation to the application that was to be heard on 12 June. The plaintiffs must be taken to have accepted that the previous version of the statement of claim did not provide a basis for their application for re-joinder to succeed. The proposed fourth defendant is therefore entitled to an award of costs on the basis that he was the successful party in relation to the application in its original form.
Should the proposed fourth defendant receive increased costs?
[11] Rule 14.6(3)(b)(ii) of the High Court Rules permits the Court to make an order for increased costs in circumstances where the party against whom costs are sought has taken or pursued an unnecessary step or an argument that lacks merit. The Court
2 High Court Rules 2016, r 14.1.
3 Rule 14.2(1)(a).
may also award increased costs where a party fails to comply with directions of the court,4 and where it fails without reasonable justification to accept an offer of settlement.5
[12] As Mr Francis for the proposed fourth defendant points out, the plaintiffs’ prior conduct of this proceeding has not been satisfactory. It has been marked by several attempts to review or recall interlocutory decisions, all of which have been abandoned before they have been heard. I accept that these actions have resulted in the defendants incurring unnecessary costs but I do not consider they should carry weight in the present context. I need to make my decision based on the effect of the plaintiffs’ actions in relation to the present application.
[13] Counsel for the plaintiffs accepts that his submissions in relation to the hearing on 12 June 2018 were filed late and in breach of the Court’s earlier directions. That put counsel for the proposed fourth defendant under considerable pressure in preparing for the hearing.
[14] More importantly, however, it took the Court’s intervention at a very late stage to force the plaintiffs to reconsider the adequacy of their existing statement of claim. It ought to have been obvious to counsel for the plaintiffs that the causes of action that have now been abandoned should never have been included in the statement of claim. Their inclusion in the statement of claim until the day of the hearing means the plaintiffs took an unnecessary step or pursued an argument that was without merit in terms of r 14.6(3)(b)(ii).
[15] Conversely, the cause of action that has now been added ought to have been included in the statement of claim much earlier. The facts on which it is based were set out in the affidavit filed in support of the original application for re-joinder. It is difficult to understand how those facts could have been included in an affidavit when they had no relevance to the existing version of the statement of claim. This suggests counsel for the plaintiffs failed to properly analyse the proposed claim against the fourth defendant until the Court intervened immediately prior to the hearing.
4 Rule 14.6(3)(b)(i).
5 Rule 14.6(3)(b)(v).
[16] These factors persuade me it is appropriate to make an award of increased costs against the plaintiffs who are not legally aided. Those plaintiffs are ordered to pay the fourth defendant costs on a category 2B basis but increased by 50 per cent to reflect the issues to which I have referred. They are also to pay the proposed fourth defendant’s disbursements as fixed by the Registrar.
[17] Any plaintiff who is not presently legally aided but who subsequently receives legal aid extending back to the filing of the original application has leave to apply by memorandum to recall this judgment to reflect the grant of legal aid.
The legally aided plaintiff
[18] Costs in relation to legally aided parties are governed by s 45 of the Legal Services Act 2011 (the Act), which provides:
45 Liability of aided person for costs
(1)If an aided person receives legal aid for civil proceedings, that person's liability under an order for costs made against him or her with respect to the proceedings must not exceed an amount (if any) that is reasonable for the aided person to pay having regard to all the circumstances, including the means of all the parties and their conduct in connection with the dispute.
(2)No order for costs may be made against an aided person in a civil proceeding unless the court is satisfied that there are exceptional circumstances.
(3)In determining whether there are exceptional circumstances under subsection (2), the court may take account of, but is not limited to, the following conduct by the aided person:
(a)any conduct that causes the other party to incur unnecessary cost:
(b)any failure to comply with the procedural rules and orders of the court:
(c) any misleading or deceitful conduct:
(d)any unreasonable pursuit of 1 or more issues on which the aided person fails:
(e)any unreasonable refusal to negotiate a settlement or participate in alternative dispute resolution:
(f) any other conduct that abuses the processes of the court.
(4)Any order for costs made against the aided person must specify the amount that the person would have been ordered to pay if this section had not affected that person's liability.
(5)If, because of this section, no order for costs is made against the aided person, an order may be made specifying what order for costs would have been made against that person with respect to the proceedings if this section had not affected that person's liability.
(6)If an order for costs is made against a next friend or guardian ad litem of an aided person who is a minor or is mentally disordered, then—
(a)that next friend or guardian ad litem has the benefit of this section; and
(b)the means of the next friend or guardian ad litem are taken as being the means of the aided person.
[19] In short, s 45(2) prohibits the Court from making an order for costs against a legally aided person unless there are exceptional circumstances. In determining whether exceptional circumstances exist, the Court may take into account, to the extent they are relevant, the conduct of the legally aided party in relation to the issues set out in s 45(3).
[20] Mr Francis contends exceptional circumstances exist in the present case. He says the plaintiffs have engaged in conduct that has caused his client unnecessary cost, they have failed to comply with procedural orders, they have unreasonably pursued issues on which they have effectively failed and they have refused unreasonably to engage in settlement discussions.
[21] I readily acknowledge that the case for the plaintiffs has not been conducted in the manner required of litigants in civil proceedings in this Court. As I have already observed, however, the problems that have arisen in relation to this particular application flow from the fact that counsel for the plaintiffs failed to comply with timetable directions imposed by the Court and failed to appreciate the inadequacy of his clients’ pleadings until the issue was raised by the opposing party and the Court. Sadly, however, neither of those shortcomings is particularly uncommon. I do not consider they fall within the category of exceptional circumstances that justify an award of costs being made against a legally aided litigant.
[22] I therefore make no order for costs against Ms Holtom. Instead, I make an order under s 45(5) of the Act specifying that if s 45 had not affected Ms Holtom’s liability to pay costs, I would have ordered her to pay costs on a category 2B basis uplifted by 50 per cent together with disbursements as fixed by the Registrar.
[23] I further direct that the plaintiffs who are not legally aided are to pay the costs ordered in this judgment no later than 17 August 2018. Should that not occur, the proposed fourth defendant may apply by memorandum for an order staying the application for re-joinder until the costs have been paid. For the avoidance of doubt, this direction does not suspend the timetable set out in my Minute dated 12 June 2018.
Lang J
Solicitors:
R S Pidgeon, Auckland Wotton + Kearney, Auckland Keegan Alexander, Auckland
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