Roose v Duthie

[2015] NZHC 2961

IN THE HIGH COURT OF NEW ZEALAND

AUCKLAND REGISTRY

CIV-2014-404-1025

[2015] NZHC 2961

BETWEEN

DENISE MICHELLE ROOSE

First Plaintiff

AND

DENISE DEVELOPMENTS LIMITED

Second Plaintiff

AND

DMR DEVELOPMENTS LIMITED

Third Plaintiff

AND

CRAIG DUTHIE AND KIRSTEN TAYLOR-RUITERMAN

First Defendants

AND

DRK CHARTERED ACCOUNTANTS LIMITED

Second Defendant

On the papers

Appearances:

S Langston for plaintiffs

GD Pearson and JK Scragg for defendants

Judgment:

25 November 2015

JUDGMENT (NO. 2) OF TOOGOOD J

[AS TO COSTS ON INTERLOCUTORY APPLICATION]

This judgment was delivered by me on 25 November 2015 at 4:00 pm Pursuant to Rule 11.5 High Court Rules

Registrar/Deputy Registrar

ROOSE v DUTHIE [2015] NZHC 2961 [25 November 2015]

[1]    On 27 August 2015, I delivered a judgment1 in which I ruled on several preliminary questions raised by the plaintiffs for determination prior to trial. The issues were determined principally in favour of the defendants who now seek costs pursuant to leave reserved.

[2]    The plaintiffs collectively brought claims in contract, tort and equity against the defendants:

(a)alleging breaches of a duty of care under a contract of retainer with an accountant, in tort, and in equity, asserting negligence in connection with tax advice given regarding the purchase of a property by the third plaintiff;

(b)alleging breaches of a duty of care under the contract of retainer, in tort, and in equity, asserting negligence in connection with the compilation and filing of the plaintiffs’ 2009 financial statements and 2009 tax return;

(c)alleging breaches of a duty of care under the contract of retainer, in tort, and in equity, asserting negligence in connection with the Inland Revenue Department’s tax review and subsequent audit; and

(d)under the Contractual Mistakes Act 1977 asserting that the sale and purchase agreement was entered into by a common mistake.

[3]    In the judgment it was held that the claims in contract and tort based on admittedly erroneous advice as to the tax effect of the transaction were limitation- barred because the causes of action accrued, at the latest, on 14 April 2008 and the proceedings were not issued until 2 May 2014, more than six years later. It was held also that the first-named first defendant did not owe a continuing duty to correct his negligent advice once given. Further, it was held that the cause of action under the Contractual Mistakes Act 1977 was misconceived and not arguable. Leave was granted to the plaintiffs to recast their claims in equity.

1      Roose v Duthie [2015] NZHC 2035.

[4]    The outcome of the judgment on the interlocutory application is that the plaintiffs will not be able to pursue the bulk of their claims. It is estimated by counsel for the defendants that the remaining clauses in equity, re-pleaded, give rise to a potential liability of $80,000, at most.

[5]    The effect of the judgment, therefore, has been to dispose of most of the causes of action, but the proceeding remains on foot.

[6]    The plaintiffs have appealed the determinations. They sought a deferral of the defendants’ costs application, but I ruled that costs should be dealt with as required by the High Court Rules.2

[7]    The defendants seek costs on both the interlocutory application and the substantive proceeding, including increased costs.

[8]    It is not appropriate for the Court to address the claim for costs on the substantive proceeding until the proceeding has been completed. The fact that the plaintiffs have put the defendants to the time and expense of resisting a substantive proceeding which, as things stand at present, has largely been unsuccessful, can be taken into account when the proceeding is disposed of finally. I confine this determination, therefore, to the interlocutory application.

[9]    It is agreed that the interlocutory proceeding should be allocated to Category 2B for costs purposes. The defendants seek the costs of second counsel. This was an interlocutory application only and it was dealt with in a relatively short hearing on papers filed. An allowance for second counsel is not justified.

[10]   The remaining issue is whether the defendants should have increased costs on account of  settlement  proposals  made  by  the  defendants  on  26 June 2014  and 23 December 2014.

[11]   The June 2014 settlement proposal was that the plaintiffs should agree to discontinue on the basis that the defendants would not pursue recovery of their costs

2      High Court Rules, r 14.8.

to that date, the offer being accompanied by a statement that the defendants would seek indemnity costs if the offer was not accepted. That is not a settlement offer which can impact on costs; it is merely an expression of confidence by the defendants and a threat to seek increased costs if the matter went further and the plaintiffs failed.

[12]The December 2014 offer was a proposal that the plaintiffs should be paid

$50,000 in full and final settlement of their claim, with costs lying where they fell. That was an offer to settle the entire proceeding which can be taken into account when the substantive proceeding is finally disposed of.

[13]   I am not persuaded that the case is one in which the rules for the awarding of increased costs apply. The arguments of counsel were relatively straightforward, albeit that they required careful consideration by the Court and a lengthy judgment. Ms Langston’s calculation, set out at [5] of her submissions, appropriately reflects a Category 2B approach to the interlocutory application.

[14]   The defendants seek travel expenses for Wellington-based counsel. They are entitled to counsel of their choosing but they should not expect to be able to pass on to the plaintiffs the additional cost of their choice.

Order

[15]   Accordingly, I order that the plaintiffs shall pay costs to the defendants in the sum of $6,066 and disbursements of $110. All other costs in the proceeding are reserved for consideration when the matter is finally determined.

………………………….

Toogood J