Poplawski v Pryde

[2013] NZHC 2042

IN THE HIGH COURT OF NEW ZEALAND INVERCARGILL REGISTRY

CIV 2011-425-000117 [2013] NZHC 2042

BETWEEN

ZBIGNIEW JAN POPLAWSKI and STEFAN DAVID POPLAWSKI Plaintiffs

AND

THOMAS McNEIL PRYDE First Defendant

CRUICKSHANK PRYDE Second Defendant

TE ANAU INVESTMENT NO. 1
LIMITED
Third Defendant

Hearing:	(On Papers)
Counsel:	P W Michalik for Plaintiffs M E Parker and A J Nash for First and Second Defendants
Judgment:	13 August 2013

COSTS JUDGMENT OF WHATA J

[1]      The plaintiffs were largely successful in their appeal against my judgment1 on the question of liability under the Fair Trading Act 1986.2    Accordingly, as the successful party, costs should ordinarily follow the event.

[2]      The defendants, however, contend that the plaintiffs were only partially successful, with both this Court and the Court of Appeal holding that the plaintiffs were  contributorily  negligent  to  the  tune  of  50  per  cent.    On  that  basis,  the defendants  request  that  the  parties  bear  their  own  costs  in  the  High  Court,  or,

alternatively, that the defendants pay the plaintiffs a sum of 50 per cent of the

1      Poplawski v Pryde [2012] NZHC 2011.

2      Poplawski v Pryde [2013] NZCA 229.

POPLAWSKI and POPLAWSKI v PRYDE [2013] NZHC 2042 [13 August 2013]

standard Schedule 2B costs sought, excluding the plaintiffs’ applications for specific

allowances.

Legal framework

[3]      Rule 14.1 of the High Court Rules confers a general discretion on the Court to award costs.  The discretion should be exercised in accordance with the general scheme of Part 14, particularly rr 14.2 to 14.10.3    When the discretion is exercised outside the general scheme it must be undertaken in a considered and particularised way. This is because:4

... costs orders should allow a litigant with a real argument presented responsibly to approach the Court without apprehension that the predictable costs regime may be departed from if the case fails.

[4]      The  Court  in  Holdfast  NZ  Ltd  v  Selleys  Pty  Ltd5   helpfully  sets  out  the following steps that should be followed when assessing costs:

(a)      Categorise the proceedings under r 14.3.

(b)       Work out a reasonable time for each step under r 14.5. (c)     Consider whether extra time is justified.

(d)Step back and assess the overall entitlement to costs, including under r 14.6, dealing with increased and indemnity costs.

The plaintiffs’ claim

[5]      The plaintiffs seek 2B costs according to scale.  They rely on r 14.2(a), which states:

(a)       the party who fails with respect to a proceeding or an interlocutory application should pay the costs of the party who succeeds.

3      Refer Glaister v Amalgamated Dairies Ltd [2004] 2 NZLR 606 (CA) at [24].

4      Bradbury v Westpac Banking Corporation [2009] NZLR 400 (CA) at [94].

5      Holdfast NZ Ltd v Selleys Pty Ltd (2005) 17 PRNZ 897 (CA) at [43]-[48].

The plaintiffs say that they were successful by a comfortable margin, and that the defendants clearly failed.

[6]      The plaintiffs acknowledge r 14.7(d), which provides the following reason why costs might not follow the event:

(d)       although the party claiming costs has succeeded overall, that party has failed in relation to a cause of action or issue which significantly increased the costs of the party opposing costs.

[7]      The plaintiffs say that they did not fail on any particular issue, only that the plaintiffs’ argument was not wholly accepted.   They submitted that given the defendants had taken the position that the misleading email made no contribution to the plaintiffs’ loss, there was no scenario under which this contribution issue would not have had to be addressed by the Court.  They make the point that the defendants were wholly unsuccessful:   they sought an allocation of no responsibility on themselves, and were held responsible for $175,000 plus interest from the date of the advance.

[8]      The plaintiffs also claim specific allowances for their costs on the costs arguments.  They say that there have now been two such arguments and that neither should have been necessary.  The first argument was in effect a wasted step, given that an appeal was in play, and by seeking costs the defendants took the risk that the appeal could go against them, as it did.

The defendants’ position

[9]      The defendants essentially rely on r 14.7(d) and say that the plaintiffs were not largely successful.   They emphasise that both the High Court and Court of Appeal held the plaintiffs were contributorily negligent, and that this is a significant finding both against the plaintiffs and against the argument the plaintiffs were the successful party by a very comfortable margin.  They note that in most United States jurisdictions a finding of 50 or 51 per cent contribution against the plaintiffs would have  precluded  any  kind  of  recovery  altogether.    It  is  said  that  the  plaintiffs

maintained throughout the proceeding that they in no way contributed to their own loss.6

[10]     It is then submitted that had the plaintiffs properly evaluated their position in light of my judgment, the material in their possession and pre-trial correspondence on this point, they likely would have conceded the point of contribution, at least to the extent of the High Court’s finding, and it would not have then fallen to the Court of Appeal to determine the matter.  The defendants also refer to Red Eagle,7 where it is said that the appellants in that case adopted a much more considered approach. The appellant there did not seek to disturb the High Court’s finding that the plaintiff was 50 per cent liable for its loss.

[11]     The defendants then say that the proceeding is a matter of public interest, and that  the  plaintiffs  contributed  unnecessarily  to  the  time  and  expense  of  the proceeding as they failed to accept a legal argument that they in any way contributed to their own loss.  It is said that the plaintiffs’ imprudence was highlighted in a letter dated 29 April 2011.

[12]     In terms of the specific allowances sought by the plaintiffs, the defendants make a point that they had succeeded in the High Court and were entitled to seek costs, given that the High Court judgment had not been stayed.  They also note that the plaintiffs do not seek support by reference to legislation, regulation or case law for the additional allowances.

Assessment

[13]     There is no challenge to the categorisation or reasonable time for each step.  I

deal with the claim for extra time/uplift below I now turn to the overall entitlement.

[14]     I take my lead from the Court of Appeal and make an award of costs on a 2B

basis in favour of the plaintiffs, reduced by 10 per cent to reflect the failure of the plaintiff to establish full liability, for the following reasons.

6      Reference is made to the plaintiffs’ submissions in the High Court dated 2 August 2012, at

[130]-[135]; submission on appeal dated 5 April 2013, at [119]-[126].

7      Red Eagle Corporation Ltd v Ellis [2010] NZSC 20.

[15]     In reality, this case was fought on two essential issues, namely:

(a)      Whether the first defendant was liable for misleading conduct; and

(b)      If so, whether such liability is diminished or extinguished by the

plaintiffs’ own negligence.

[16]     The latter issue was raised by way of affirmative defence, wherein the first and/or second defendants pleaded:

[41]      If  the  first  and/or second defendants  are jointly and/or  severally liable to the plaintiffs, which is denied, such liability is diminished or extinguished by the plaintiffs’ own negligence

[17]     It will be evident that the plaintiff was successful in relation to the claim based  on  misleading  conduct.    The  first  and  second  defendants  then  failed  to establish that the liability was extinguished by virtue of the plaintiffs’ own negligence, but were partially successful in establishing a reduction in that liability. While it could be said that the reduction is substantial, the fact remains that the argument about contribution had to be thoroughly ventilated given the affirmative defence pleaded.  In addition the Fair Trading Act is a form of consumer protection legislation and thus successful claims further the public interest.

[18]     I therefore conclude, as the Court of Appeal did, that the plaintiffs have been substantially but not entirely successful and costs should follow the event.  The normal costs award should be reduced slightly to reflect that the plaintiffs succeeded in their main argument, but not in their argument that the defendants should pay 100 per cent of their loss. A costs award of 90 per cent of costs on a 2B basis plus 90 per cent of usual disbursements should follow.

Extra time/costs?

[19]     I  am  not  prepared  to  uplift  the  costs  award  as  sought  by the  plaintiffs. Arguments about costs are an ordinary incident of proceedings, and I was not taken to any authority which suggested that there should be a costs award on the costs memoranda.  In reality, also, the plaintiffs elected on appeal to contest not only the

primary finding but also the secondary finding of contribution.  They failed on that latter aspect.  This meant that the issue of costs in this Court had to be revisited.  My position might have been different had they foregone the contribution argument in the appellate Court.

Result

[20]     Accordingly, the plaintiffs are entitled to costs on a 2B basis, reduced by

10%.  Quantum is to be agreed.  This should not be difficult given there has been no challenge to the 2B qualification.

Solicitors:

Morrison Kent, Wellington

M E Parker, Queenstown