Prophecy Networks Ltd v Revera Ltd
[2015] NZHC 899
•1 May 2015
IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY
CIV-2014-485-709 [2015] NZHC 899
BETWEEN PROPHECY NETWORKS LTD
Plaintiff
AND
REVERA LTD Defendant
Hearing: (On the papers) Counsel:
C R Carruthers QC and J L W Wass for Plaintiff
J A Craig and S S R Meares for DefendantJudgment:
1 May 2015
JUDGMENT OF BREWER J (Costs)
This judgment was delivered by me on 1 May 2015 at 3:30 pm pursuant to Rule 11.5 High Court Rules.
Registrar/Deputy Registrar
Solicitors: Quigg Partners (Wellington) for Plaintiff
Simpson Grierson (Auckland) for Defendant
PROPHECY NETWORKS LTD v REVERA LTD [2015] NZHC 899 [1 May 2015]
Introduction
[1] In my judgment in Prophecy Networks Ltd v Revera Ltd, I dismissed the plaintiff’s claim and held that the defendant is entitled to costs, which were to be fixed on a 2B basis and to be calculated by the Registrar if the parties cannot agree.1
[2] The parties cannot agree. The grounds of disagreement require determination by me, not the Registrar.
[3] There are three issues:
(a) To what scale costs on a 2B basis is the defendant entitled? (b) Is the defendant entitled to increased costs?
(c) Is the defendant entitled to its disbursements for an expert witness?
To what scale costs on a 2B basis is the defendant entitled?
[4] The defendant seeks scale costs on a 2B basis of $39,700.50. The parties agree on the calculation except for three items.
(a) Item 24 – Preparation of written submissions for interlocutory application for summary judgment
[5] The plaintiff applied for summary judgment but withdrew the application two days before the defendant was required to file submissions in opposition. The defendant claims an allowance for the preparation of written submissions for the summary judgment application.
[6] In my view, the defendant is not entitled to an allowance for the preparation of written submissions. The defendant was not actually required to file the submissions and their preparation no doubt assisted the defendant in the trial before me. It was not wasted expense. The cost of preparing the submissions is adequately compensated by the allowance for the defendant’s preparation for the trial.
(b) Item 32 – Defendant’s preparation of authorities, and the common bundle
[7] The defendant seeks an allowance of two days for the preparation of the common bundle. It was the plaintiff who prepared the common bundle. The actions of the defendant in relation to the common bundle were: (a) to provide a list of documents to be included in the common bundle; (b) to review the index of the common bundle; and (c) to provide copies of 13 authorities to the Court as part of
opening and closing submissions.2 The common bundle was not large and
complicated and did not require significant co-ordination between the parties. I fix the allocation of time at 0.5 days.
(c) Item 35 - Second and subsequent counsel if allowed by Court
[8] The defendant submits that costs should include the presence of second counsel. I disagree. This was not a complicated case administratively or legally, reflected by the short duration of the trial. The defendant did not require a second counsel.
(d) Conclusion on scale costs
[9] The defendant is entitled to 2B scale costs of $32,238.00.
Is the defendant entitled to increased costs?
[10] The defendant seeks increased costs on the basis that the plaintiff failed to accept a reasonable settlement offer and took an unreasonable step in the proceedings by making an application for summary judgment. The plaintiff opposes the application submitting that a decision to increase costs would be res judicata, and that the grounds for allowing increased costs are not made out.
(a) Is a decision to increase scale costs res judicata?
[11] The plaintiff submits that the Court has already fixed costs at scale, therefore a decision to increase costs would be res judicata. I disagree. This Court has held that it has jurisdiction to consider an application for an award of increased costs
notwithstanding that it previously fixed them or indicated a category and band, provided it did so without the benefit of full submissions or details of relevant considerations.3
(b) Did the plaintiff fail without reasonable justification to accept an offer of settlement?
[12] I may order increased costs if I am satisfied that the plaintiff has failed without reasonable justification to accept an offer of settlement.4
[13] On 14 April 2014, the defendant sent the plaintiff a letter containing an offer to settle the proceeding on a without prejudice save as to costs basis.5 In that offer, the defendant would promptly pay the plaintiff $25,000 plus GST, and would not seek costs if the plaintiff discontinued the proceeding at that point. The letter also set out the defendant’s position with regard to summary judgment which was that the plaintiff would be unlikely to succeed. On 28 April 2014, the plaintiff rejected the offer.6
[14] It was not unreasonable for the plaintiff to reject the offer. The defendant has always conceded that the plaintiff is entitled to be paid $25,000 plus GST under the agreement in contention. As the plaintiff points out, at the time of the offer, the defendant would not have been entitled to more than three days of costs, which would have been a total of $5,970.7 Therefore, it was not unreasonable for the plaintiff to reject an offer which removed a contingent liability of around $6,000.
[15] I do not accept the defendant’s submission that at this stage of the proceedings it was clearly evident to the plaintiff that its claim was unlikely to succeed. I agree with the plaintiff that the defendant’s offer essentially amounted to
a “walk away” proposition. As pointed out by the Court of Appeal:8
3 See, for example, Kolmar Investments Ltd v R Hannah & Co Ltd HC Auckland CIV-2002-404-
1861, 24 November 2004.
4 High Court Rules, r 14.6(3)(b)(v).
5 Letter from James Craig to Raylee Harley, 14 April 2014.
6 Letter from Raylee Harley to James Craig, 28 April 2014.
7 That is, allowances for commencement of the defence, filing a memorandum for the first mention hearing and filing opposition to the summary judgment application.
8 Hira Bhana & Co Ltd v PGG Wrightson Ltd [2007] NZCA 342 at [26].
…where the nature of the offer made is simply a “walk away” proposition, made early in the proceedings, it cannot be the case that the mere fact that the party which rejected the offer subsequently loses means that party is required to pay indemnity costs or increased costs. If that were so, it would mean that the costs regime set out in [r 14] would be effectively bypassed in almost all cases where the defendant succeeds, because defendants would routinely make “walk away” offers of the kind made in this case, and then claim indemnity costs if they subsequently succeed at trial.
[16] Accordingly, it is not appropriate to award increased costs.
(c) Did the plaintiff take an unnecessary step or pursue an argument that lacked merit?
[17] I am also entitled to award increased costs if the plaintiff took an unnecessary step or pursued an argument that lacked merit.9 I do not believe an increase in costs should be made on the basis that the plaintiff made an application for summary judgment when there was an arguable defence to that summary judgment application. The plaintiff withdrew the application before the defendant had to file submissions. As I have stated above, the work the defendant did in preparation for
the summary judgment application was not wasted and the defendant is adequately compensated for it by item 33 – preparation for hearing.
(d) Conclusion on increased costs
[18] I decline to award increased costs in this case.
Is the defendant entitled to its disbursements for an expert witness?
[19] The defendant claims disbursements of $220 for Court filing fees and
$27,379.64 (excluding GST) for expert witness costs. The plaintiff disputes the expert witness costs.
[20] The defendant called one expert witness, Mr Cameron-Brown. In order to recover for Mr Cameron Brown’s costs, the defendant bears the onus of establishing that Mr Cameron-Brown’s evidence was reasonably necessary for the conduct of the
proceeding and that his costs were reasonable in amount.10
9 High Court Rules, r 14.6(3)(b)(ii).
10 Auckland Waterfront Development Agency Ltd v Mobil Oil New Zealand Ltd [2015] NZHC 470 at [50].
[21] I am not satisfied that Mr Cameron-Brown’s evidence was reasonably necessary for the conduct of the proceedings. Mr Cameron-Brown gave evidence on the usual duration of an investment banking advisory mandate and whether it is reasonable for an advisor to expect a commission on a sale if they are not the effective cause of the sale. That evidence was largely irrelevant because the issues that were the subject of the dispute turned on what the parties had agreed in their contract. There was no evidence that either of the parties was a part of, or had knowledge of, the industry norms to which Mr Cameron-Brown testified. Mr Cameron-Brown’s evidence was marginally relevant to my determination of whether the agreement applied to the sale to Telecom in that he gave evidence that an
information memorandum has a limited shelf life.11 His evidence was not relevant to
me in deciding whether the agreement was terminated in 2008 or whether the agreement was abandoned. I noted this both during trial, where I questioned whether Mr Cameron-Brown’s evidence actually passed the substantial helpfulness test,12 and
also in my judgment.13
[22] Given the very limited utility of Mr Cameron-Brown’s evidence to me, and the fact that this was a dispute that did not really require the calling of an expert witness, I am prepared to allow 10 per cent of the claim: $2,737.96.
[23] Accordingly, the plaintiff is to pay the defendant $2,957.96 in disbursements.
Decision
[24] The plaintiff is to pay the defendant a total of $35,195.96 in costs as set out in the table attached.
Brewer J
11 Prophecy Networks Ltd v Revera Ltd, above n 1, at [18].
12 Notes of evidence at 72.
13 Prophecy Networks Ltd v Revera Ltd, above n 1, at [54].
Item Description Date Time Cost Commencement 2 Commencement of defence by
defendant
January 2014 2.0 $3,980.00 Other pleadings and notices 9 Pleading in response to
amended pleading
8 July 2014 0.6 $1,194.00 Case Management 10 Preparation for the first case
management conference (including discussion about discovery)
17 June 2014 0.4 $796.00 11 Filing memorandum for first
or subsequent case management conference or mentions hearing
21 February
2014
0.4 $796.00 11 Filing memorandum for first
or subsequent case management conference or
mentions hearing
10 June 2014 0.4 $796.00 13 Appearance at first or
subsequent case management conference
17 June 2014 0.3 $597.00 Interrogatories, discovery and inspection 20 List of documents on
discovery
21 July 2014 2.5 $4,975.00 21 Inspection of documents 24 July 2014 1.5 $2,985.00 Interlocutory applications 23 Filing opposition to
interlocutory application
20 March
2014
0.6 $1,194.00 Trial preparation and appearance 30 Plaintiff’s or defendant’s
preparation of briefs or affidavits
12 December
2014
2.5 $4,975.00 32 Defendant’s preparation of
authorities, and common bundle
December
2014 onwards
0.5 $995.00 33 Preparation for hearing February 2015 3.0 $5,970.00 34 Appearance at hearing for sole
or principal counsel
9-10 February
2015
1.5 $2,985.00 Subtotal Costs 16.2 $32,238.00 Disbursements 14(b) Filing fee – notice of
opposition to application for summary judgment
20 March
2014
$110.00 12 Filing fee – amended
statement of defence
9 July 2014 $110.00 Expert witness – Mr Cameron-
Brown.
16 February
2015
$2,737.96 Subtotal Disbursements $2,957.96 Total $35,195.96
2