Renner v Renner
[2015] NZHC 2451
•7 October 2015
IN THE HIGH COURT OF NEW ZEALAND TAURANGA REGISTRY
CIV-2013-470-569 [2015] NZHC 2451
BETWEEN IAN RODNEY RENNER
Plaintiff
AND
CATHERINE MARY RENNER First Defendant
IAN LUKE DUSTIN Second Defendant
Hearing: (On the papers) Counsel:
C T Gudsell QC for Plaintiff
W T Nabney for First DefendantJudgment:
7 October 2015
JUDGMENT OF BREWER J (Costs)
This judgment was delivered by me on 7 October 2015 at 5:00 pm pursuant to Rule 11.5 High Court Rules.
Registrar/Deputy Registrar
Solicitors: Mackenzie Elvin (Tauranga) for Plaintiff
Lyon O’Neale Arnold (Tauranga) for First Defendant
(Copy to Second Defendant in person)
RENNER v RENNER [2015] NZHC 2451 [7 October 2015]
Introduction
[1] In my judgment delivered on 11 June 2015, I held that the plaintiff, Mr Renner, was successful in his claim for contribution against the first and second defendants, Mrs Renner and Mr Dustin respectively, as co-guarantors.1
[2] I omitted, however, to deal with Mr Renner’s claim for interest on the judgment sums. Mr Renner and Mrs Renner agree that interest has accrued on the judgment sums but they disagree on the date from which the interest accrues. This judgment deals with that issue.
[3] Mr Renner also seeks increased costs under r 14.6(3)(b)(v) of the High Court
Rules on the basis of a “without prejudice save as to costs” settlement offer dated
12 May 2015 (“the Settlement Offer”). This judgment deals also with that
application.
Issues
[4] Accordingly, the issues that I must address are:
(a) On what date did interest on the contribution begin to accrue?
(b)What are the costs and disbursements to which Mr Renner is entitled on a 2B basis?2
(c) Is Mr Renner entitled to increased costs?
On what date did interest on the contribution begin to accrue?
Principles
[5] A guarantor can recover interest from his co-guarantor on the sum due for contribution. It is a well-established principle that the interest is calculated from the
date on which the guarantor’s payments exceed the guarantor’s proportionate share
1 Renner v Renner [2015] NZHC 1315.
2 The basis on which I awarded costs.
of the common liability.3 Where one guarantor overpays the debt in excess of his fair share, there is an implied contract between all the co-guarantors to indemnify the overpaying guarantor for the amount which he paid in excess of his obligation. An award for contribution is in the nature of contractual damages and so requires the other co-guarantors to put the overpaying guarantor in the same position he would have been in if the other co-guarantors had honoured their obligations to guarantee the debt.4
The parties’ submissions
[6] Mr Gudsell QC submits that Mr Renner is entitled to interest on the contributions recoverable from Mrs Renner and Mr Dustin from 12 October 2011, being the day after Mr Renner paid $1,320,000 to FM Custodians Ltd pursuant to the guarantee.
[7] Mr Nabney accepts that Mr Renner is entitled to interest on the contributions. But he submits it would be inequitable to require the payment of interest from the date the payment was made. This is because the payment on that date was not made by Mr Renner himself, but rather by the Ian Renner Trust (“the Trust”) which lent the money to Mr Renner. In his submission, Mr Renner merely swapped one debt for another. Instead, Mr Nabney says it would be appropriate to require the payment of interest from the date that the proceedings against Mrs Renner were issued, that date being 9 October 2013. In making this argument, Mr Nabney relies on the decision of this Court in Trotter v Franklin in which Tipping J awarded interest from
the day in which proceedings were brought.5
3 In re Fox, Walker, & Co, ex parte Bishop (1880) 15 Ch D 400 (EWCA) at 422; Davies v
Humphreys (1840) 6 M&W 152, 151 ER 361; Lawson v Wright (1786) 1 Cox Eq Cas 275, 29
ER 1164; Hitchman v Stewart (1855) 3 Drew 271, 61 ER 907; Re Swan’s Estate (1869) 4 Ir Eq
209. See also Geraldine Andrews QC and Richard Millet QC Law of Guarantees (6th ed, Sweet& Maxwell, London, 2011) at [12-014]; JC Phillips The Modern Contract of Guarantee (2nd
English Ed, Sweet & Maxwell, London, 2010) at [12-247]; Halsbury’s Laws of England (5th ed,
2008) vol 49 Financial Services and Institutions at [1171].
4 McColl’s Wholesale Pty Ltd v State Bank of New South Wales & Ors [1984] NSWLR 365 (NSWSC) at 376-365; In re Fox, Walker, & Co, ex parte Bishop, above n 3, at 422.
5 Trotter v Franklin [1991] 2 NZLR 92.
Discussion
[8] The principle is well-established: interest is calculated from the date on which the payment in excess of the guarantor’s obligation is made. There is no discussion in Tipping J’s judgment in Trotter v Franklin as to why interest began to run on the day on which proceedings were brought rather than on the day on which the overpayment was made. That decision runs against clear authority. Furthermore, I agree with Mr Gudsell’s submission that the fact that the payment was made with money lent to Mr Renner by the Trust is irrelevant. Mr Renner incurred a debt in order to pay the guaranteed amount on 12 October 2011. I find that interest began to run on 12 October 2011.
[9] Mr Renner seeks interest at 5 per cent per annum, which reflects the prescribed rate as set by the Judicature (Prescribed Rate of Interest) Order 2011, for the period 12 October 2011 to the date of judgment.6 Calculating interest from
12 October 2011 to the date of judgment (11 June 2015):7
(a) Mrs Renner’s liability to pay interest is $34,160.00 on the sum of
$186,666.67.
(b) Mr Dustin’s liability to pay interest is $103,700.00 on the sum of
$566,666.67.
[10] In the event that Mr Renner is entitled to an increased contribution from Mrs Renner due to an inability to recover against Mr Dustin, then Mrs Renner’s liability will increase accordingly. But Mrs Renner cannot be obliged to pay more
than $86,010.00 in interest.
6 Judicature Act 1908, s 87.
7 There were 1338 days between 12 October 2011 and 11 June 2015. Mrs Renner and Mr Dustin must pay a total of 18.3 per cent interest on the respective sums that they owe to Mr Renner ((0.05/365) x 1338 = 0.183).
What are the costs and disbursements to which Mr Renner is entitled on a 2B
basis?
[11] In my judgment, I awarded Mr Renner costs against Mrs Renner and Mr Dustin on a 2B basis. Having considered the parties’ submissions, I set out the costs and disbursements to which Mr Renner is entitled in the paragraphs that follow.
[12] Mrs Renner and Mr Dustin are jointly and severally liable8 for the following costs:
Description Time allocation Amount (@ $1,990 per day) Commencement of proceedings by plaintiff 3 $5,970.00 Reply 0.8 $1,592.00 Preparation for first Case Management
Conference
0.4 $796.00 Filing memorandum for first or subsequent case
management conference or mentions hearing on
24 April 2014, 23 June 2014, 25 July 2014,
8 December 2014 and 10 December 20142 $3,980.00 Appearance at first and subsequent case
management conferences on 30 April 2014,
25 June 2014 and 10 December 2014
0.9 $1,791.00 List of documents on discovery 2.5 $4,975.00 Inspection of documents 1.5 $2,985.00 Plaintiff ’s preparation of briefs 2.5 $4,975.00 Plaintiff ’s preparation of list of issues,
authorities and common bundle
2.5 $4,975.00 Preparation for hearing 3 $5,970.00 Appearance at hearing 2.5 $4,975.00 Sealing judgment (@ 2,330 per day)9 0.2 $116.50 Total $43,100.50
[13] Mrs Renner is individually liable for the following additional costs:
Description Time allocation Amount (@ $1,990
per day)
Preparation of written submissions for
interlocutory hearing on 23 July 2014
1.5 $2,985.00 Appearance at hearing of defended application
for sole or principal Counsel at hearing on
23 July 20140.25 $497.50 Total $3,482.50
8 High Court Rules, r 14.14.
9 The daily recovery rate was increased prior to the judgment being sealed.
Description Time allocation Amount (@ $1,990 per day) Filing memorandum dated 29 April 2015 0.2 $398.00 Appearance at case management conference on
30 April 2015
0.25 $497.50 Total $895.50
[15] Mrs Renner and Mr Dustin are jointly and severally liable also for the
following disbursements:
Description Actual costs (GST inclusive where applicable) Court fees: filing fee on Statement of Claim,
scheduling fee and hearing fee
$9,350.00 Preparation of bundles (copy centre costs) $1080.65 Expert’s costs (Telfer Young) $20,297.50 Process Server’s fees $92.50 Title searches (x 5) $25.00 Total $30,845.15
Is Mr Renner entitled to increased costs?
[16] Mr Gudsell submits that in the event that Mr Renner is unable to recover against Mr Dustin, and as a result the liability of Mrs Renner is increased, Mr Renner should be entitled to increased costs against Mrs Renner pursuant to rr 14.6(3)(b) and 14.11 of the High Court Rules because of the Settlement Offer.
Principles
[17] Rule 14.6(3)(b)(v) provides:
(3) The court may order a party to pay increased costs if—
…
(b) the party opposing costs has contributed unnecessarily to the time or expense of the proceeding or step in it by—
…
(v) failing, without reasonable justification, to accept an offer of settlement whether in the form of an offer under rule 14.10 or some other offer to settle or dispose of the proceeding; or
14.11 Effect on costs
(1) The effect (if any) that the making of an offer under rule 14.10 has on the question of costs is at the discretion of the court.
(2) Subclauses (3) and (4)—
(a) are subject to subclause (1); and
(b) do not limit rule 14.6 or 14.7; and
(c) apply to an offer made under rule 14.10 by a party to a proceeding (party A) to another party to it (party B).
(3) Party A is entitled to costs on the steps taken in the proceeding after the offer is made, if party A—
(a) offers a sum of money to party B that exceeds the amount of a judgment obtained by party B against party A; or
(b) makes an offer that would have been more beneficial to
party B than the judgment obtained by party B against party A.
(4) The offer may be taken into account, if party A makes an offer that—
(a) does not fall within paragraph (a) or (b) of subclause (3); and
(b) is close to the value or benefit of the judgment obtained by party B.
[19] In Holdfast NZ Ltd v Selleys Pty Ltd,10 the Court of Appeal provided guidance on the correct approach to an award of increased costs. Once the Court has categorised the proceeding and worked out a reasonable time for each step in the proceeding (as I have already done), it is necessary to step back and consider the costs award to which the successful party should be entitled.
[20] The principles relating to increased costs where an unsuccessful party rejects a without prejudice save as to costs settlement offer can be summarised:
(a) The offer must be written, be clearly and unambiguously stated11 and provide to the other party sufficient time to consider the offer.12
10 Holdfast NZ Ltd v Selleys Pty Ltd (2005) 17 PRNZ 897 (CA).
11 See, for example, Concrete Structures (NZ) Ltd v Palmer HC Auckland CIV 2004-463-825,
7 April 2005.
12 Health Waikato Ltd v Van der Sluis (1997) 10 PRNZ 514 (CA).
(b)Such an offer does not, by itself, give rise to an entitlement to increased costs. Whether or not the increase is awarded is at the discretion of the Court.13 The offer is not the sole consideration: all relevant circumstances must be considered.14
(c) Interest and costs are taken into account when calculating whether the sum offered is more or less than the judgment sum.15
(d)The failure to accept the offer must be “without reasonable justification” so putting the focus on the conduct of the recipient of the offer and whether that contributed unnecessarily to the time or expense of the proceeding.16
(e) The reasonableness of a party’s rejection of the offer is to be assessed
at the time of rejection.17
The Settlement Offer
[21] The Settlement Offer was made approximately two weeks before the hearing on 12 May 2015. I summarise the Offer:
(a) The Offer identifies the key issue in dispute as the relevance of the purchase of an adjoining property by a company associated with Mr Donne. The Offer explains why the purchase of the property by Mr Donne is entirely irrelevant to the issues that the Court would be required to determine at trial. Counsel for Mr Renner wrote that the purchase has no impact whatsoever on Mr Renner’s entitlement to
seek contribution from his co-guarantors. The arguments advanced in
13 See, for example, Junior Farms Ltd v Commissioner of Inland Revenue (2011) 25 NZTC 25,754 (HC).
14 Gauld v Waimakariri District Council [2014] NZHC 956.
15 Sharp Tudhope v McEwan (2003) Ltd [2010] NZCA 166.
16 Holdfast NZ Ltd v Selleys Pty Ltd, above n 10.
17 See, for example, New Zealand Sports Merchandising v DSL Logistic Ltd HC Auckland
CIV 2009-404-5548, 19 August 2010.
support of this proposition largely align with my findings in my judgment dated 11 June 2015.18
(b)The Offer expresses the view that following the summary judgment proceedings, full discovery was provided by Mr Renner and there was nothing in the discovery material that disentitles Mr Renner from seeking full contribution from Mrs Renner and Mr Dustin based on the settlement sum of $1,320,000. It avers that Mrs Renner and Mr Dustin do not have a defence to the claim.
(c) The Offer then explains that Mrs Renner’s and Mr Dustin’s liability will be determined by the number of solvent co-guarantors. It explains that if Mr Dustin is insolvent, then Mrs Renner will be required to pay contribution of $470,000 together with interest and costs. The Offer sets out a table with a number of scenarios detailing Mrs Renner’s potential liability depending on the solvency of Mr Dustin.
(d)Mr Renner expresses real doubt about the ability of Mr Dustin to pay the sum claimed in the light of his earlier bankruptcy and the information provided about his current financial position.
(e) The Offer states that:
We advise that our client is willing to enter into full and final settlement with Mrs Renner and Mr Dustin as co-guarantors, if they pay a total sum of $475,000 to him, with costs to lie where they fall. How the sum of $475,000 is divided between Mrs Renner and Mr Dustin is a matter for them to consider. The full terms of any settlement are to be recorded in a Settlement Deed satisfactory to all parties.
We invite Mrs Renner and Mr Dustin to present a joint proposal in
settlement of our client’s claim.
(f) The Offer gave Mrs Renner and Mr Dustin until 5:00 pm on 15 May
2015 to accept the Offer.
18 Renner v Renner, above n 1.
(g)The Offer warns that if the Settlement Offer is rejected, the letter containing the Offer will be provided to the Court in support of a claim for increased costs against Mrs Renner and Mr Dustin.
The parties’ submissions
[22] Mr Gudsell submits that, for two reasons, Mrs Renner’s refusal to accept the Settlement Offer was unreasonable in all the circumstances and justifies a 50 per cent uplift on scale costs. First, the Offer made it clear that Mrs Renner had no defence to Mr Renner’s claim. Second, the Offer made it clear that the quantum of Mrs Renner’s liability to pay contribution is to a large degree determined by Mr Dustin’s ability to make a contribution. Mrs Renner had been provided with enough information to reach a conclusion that Mr Dustin was unlikely to be able to pay.
[23] Mr Nabney for Mrs Renner submits that in the settlement letter, Mr Renner required Mrs Renner to pay a sum substantially greater than that which she is liable in the first instance being $186,666.67 plus interest. He adds that at the time it was known to Mrs Renner that Mr Dustin’s bankruptcy was annulled on 14 September
2012, some six months after he had been adjudicated bankrupt and the basis of annulment was that the Court was satisfied that his debts had been fully paid or satisfied and that the assignee’s fees and costs incurred in the bankruptcy had also been paid. So, he concludes, it was reasonable that Mrs Renner proceeded with her defence notwithstanding the Settlement Offer because it required her to pay substantially more than the sum for which she was potentially liable.
[24] Finally, Mr Nabney submits that Mrs Renner’s liability will not be known until such time as Mr Renner seeks to take enforcement action against Mr Dustin in relation to the judgment obtained against him. He says that any inability to recover will not be a result of the way in which Mrs Renner has conducted the proceedings, but, rather, Mr Dustin’s inability to pay, and Mrs Renner should not be penalised for that inability.
Discussion
[25] I am not prepared to grant an uplift of costs against Mrs Renner that would be conditional upon Mr Renner not being able to recover against Mr Dustin. The focus of r 14.6(3)(b)(v) is properly on whether the rejection of the offer was reasonable (despite the ultimate result) so as to have contributed unnecessarily to the time or expense of the proceeding. The rejection of a settlement offer is either reasonable or unreasonable at the time the rejection is made. The reasonableness or unreasonableness of a rejection does not depend on the ultimate result of the hearing or the ability to enforce the judgment against a second defendant who is jointly and severally liable for the judgment sum. It follows logically that an uplift for the purposes of r 14.6(3)(b)(v) cannot depend on an uncertain future event. It would go against the scheme of the rules to make a conditional order of the nature sought by Mr Gudsell.
[26] I am also of the view that increased costs are not available in any event. Mr Renner told Mrs Renner that she would not win, should be careful because of Mr Dustin’s likely impecuniosity, and asked her to pay what he was seeking. It was not unreasonable for Mrs Renner to reject that offer and defend the claim. She lost. Scale costs apply.
Orders
[27] In relation to interest, I make the following orders:
(a) Mrs Renner must pay interest of $34,160.00 on the sum of
$186,666.67.
(b) Mr Dustin must pay interest of $103,700.00 on the sum of
$566,666.67.
(c) If Mr Renner is entitled to an increased contribution from Mrs Renner due to an inability to recover against Mr Dustin, Mrs Renner’s liability to pay interest will increase accordingly. Mrs Renner cannot be obliged to pay more than $86,010.00 in interest.
[28] In relation to costs and disbursements, I make the following orders:
(a) Mrs Renner and Mr Dustin are jointly and severally liable to pay to
Mr Renner $43,100.50 in costs.
(b)Mrs Renner must, in addition to the amount stipulated in [27](a), pay to Mr Renner a further $3,482.50 in costs.
(c) Mr Dustin must, in addition to the amount stipulated in [27](a), pay to
Mr Renner a further $895.50 in costs.
(d) Mrs Renner and Mr Dustin are jointly and severally liable to pay to
Mr Renner $30,845.15 in disbursements.
Brewer J
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