Science Alive Charitable Trust v Parry Field Lawyers

[2019] NZHC 2918

IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY

I TE KŌTI MATUA O AOTEAROA ŌTAUTAHI ROHE

CIV-2018-409-305

[2019] NZHC 2918

BETWEEN

SCIENCE ALIVE CHARITABLE TRUST

Plaintiff

AND

PARRY FIELD LAWYERS

First Defendant

AND

PARRY FIELD LAWYERS LIMITED

Second Defendant

AND

OCTA ASSOCIATES LIMITED

First Third Party

AND

SNEDDON & ASSOCIATES LIMITED

Third Third Party

Hearing:

On the papers

Counsel:

J A Foote and C Milne for Plaintiff

J Eckford for First and Second Defendants Forrest and Z Caughey for First Third Party P W G Ahern for Third Third Party

Judgment:

8 November 2019

JUDGMENT OF ASSOCIATE JUDGE LESTER

(as to costs)

This judgment was delivered by me on 8 November 2019 at 2.30pm pursuant to Rule 11.5 of the High Court Rules

Registrar/Deputy Registrar 8 November 2019

SCIENCE ALIVE CHARITABLE TRUST v PARRY FIELD LAWYERS [2019] NZHC 2918

[8 November 2019]

[1]                This proceeding related to a claim against the defendant law firm (Parry Field Lawyers and Parry Field Lawyers Ltd, together referred to as “the defendants”) which acted for the plaintiff in relation to the settlement of the plaintiff’s insurance claim arising from earthquake damage to the plaintiff’s building in Christchurch.

[2]                The claim asserted that prior to the plaintiff settling its claim, the defendants failed to give advice to the plaintiff that the plaintiff may be able to recover under its policy for multiple events arising from the multiple earthquakes.

[3]                The defendants denied they were liable but joined three third parties which they said had assisted the plaintiff with the management of the insurance claim.

[4]                The defendants say that the first third party and third third party were joint tortfeasors as they had duties to advise the plaintiff in respect of its insurance claim and if the defendants were liable (which the defendants denied), then the third parties were obliged to indemnify the defendants or otherwise contribute to the defendants’ liability.

[5]                The proceeding commenced in May 2018 but did not materially progress. The third party claim against the second third party was discontinued in October 2018. On 3 December 2018 a direction was made that an amended statement of claim with details as to quantum be filed by 22 December 2019. It  eventuated  that  the  plaintiff was not able to obtain the information it needed to replead and the plaintiff discontinued its claim against the defendants on 5  September  2019.  The  defendants discontinued that claim against the third parties on 10 September 2019. The defendants and third parties seek costs.

[6]The issues for this judgment are:

(1)Should the presumption in r 15.23, High Court Rules 2016, that the plaintiff will pay the defendants’ costs following a discontinuance be departed from?

(2)Should the plaintiff be responsible for the costs obligations that the defendants have to the third parties arising from the defendants’ discontinuance against the third parties?

The presumption

[7]Counsel agree that the starting point is r 15.23:

Unless the defendant otherwise agrees or the court otherwise orders, a plaintiff who discontinues a proceeding against a defendant must pay costs to the defendant of and incidental to the proceeding up to and including the discontinuance.

[8]                Both the plaintiff and the defendant referred to Associate Judge Abbott’s decision in FM Custodians Ltd v Pati, where his Honour said the Court should:1

(a)not take into account the merits of the case;

(b)consider the reasonableness of the stances of the parties; and

(c)take into account conduct prior to commencement of proceedings.

[9]Therefore, the merits are essentially put to one side.

[10]            In meeting the plaintiff’s submission that its discontinuance cannot be equated with a win for the defendants, the defendants refer to Wylie  J’s  judgment  in  Yarrall v Earthquake Commission, where his Honour held:2

… discontinuance is ordinarily tantamount to a judgment for the defendant. It is trite law that the successful party in litigation is normally entitled to costs ...

[11]            The defendants also refer to the Yarrall decision for authority that the presumption in r 15.23 is not lightly displaced.

1      FM Custodian’s Ltd v Pati [2012] NZHC 1902 at [11].

2      Yarrall v Earthquake Commission [2015] NZHC 1451 at [18].

[12]            As to the reasonableness of the parties, I do not consider either party has acted unreasonably in the conduct of the proceeding. The plaintiff commenced a proceeding which ultimately it recognised it could not pursue and discontinued the proceeding.

[13]            I do not consider that I am assisted in determining whether the presumption should apply by the negotiations that took place around whether the discontinuance should be on a no costs basis or a reduced costs basis. There is nothing in the defendants’ pre-litigation conduct which  might  be  said  to  have  contributed  to  the proceedings being commenced on some incorrect basis or the like which might have had some relevance to whether the presumption should be displaced.

[14]            The plaintiff submits the proceeding was discontinued at a relatively early stage. Whether that is an accurate classification of the timing of the discontinuance is open to debate, but I do not consider the timing of the discontinuance particularly relevant to the presumption.

[15]            Even if the merits were to be considered, it is the plaintiff’s case that the merits were not obvious. Assuming that is the case, then the merits would not outweigh the presumption that costs are payable given the merits would be neutral.

[16]            Accordingly, no specific factor has been identified that, in my view, rebuts the presumption that the plaintiff should pay the defendants’ costs.

Quantum

[17]I here deal with issues other than responsibility for the third parties’ costs.

[18]            The reality is that very little of substance happened in this proceeding after about March 2019. The plaintiff sought a number of extensions of time to file its amended statement of claim but ultimately was not able to do so.

[19]            I have referred above to there being negotiations about the terms upon which the plaintiff would be permitted to discontinue. On 1 March 2019 the defendants made a “drop hands” offer with there being no contribution to the defendants/third parties’ costs. This offer lapsed. Further negotiations about the terms of the discontinuance

recommenced in early August 2019 with exchanges about what terms the defendants/third parties would accept. Offers continued to be exchanged through August 2019 and terms had not been reached by the time the plaintiff discontinued.

[20]            While there is some merit in the fact that the pre-discontinuance offers may have a result of an improved position for the plaintiff on costs, I do not consider that grounds to order an uplift on costs for steps after those offers.

[21]            Had the offers not been made and the matter discontinued, then the defendants would be entitled to scale costs (in the absence of other factors). Had the offers been accepted then the defendants would have received a reduced amount of costs. The sanction, if that is the correct term, for the plaintiff not accepting the earlier offers    is that it does not get the benefit of the discount. In any event, the resolution of costs was something of a moving feast with the plaintiff facing costs issues with multiple parties. I do not consider the plaintiff took an unreasonable approach to trying to resolve costs. I do not consider the circumstances warrant an uplift for the steps that occurred while the parties attempted to settle costs.

[22]            Nor do I consider the plaintiff’s charitable status to have any relevance to the costs exercise.

[23]            Ultimately, I find the plaintiff is liable to pay the defendants costs on a 2B basis for all steps in the proceeding up to the determination of costs which I deal with below along with disbursements as fixed by the Registrar.

Disbursements

[24]            It was appropriate for the defendants to instruct an expert and the defendants are entitled to the recovery of the expert fee of Mr Jones in the sum of $5,264.70. The plaintiff says the merits were not obvious – a defendant would be entitled to take expert advice in such circumstances.

[25]            As to costs on the costs memorandum, they are to be on a scale basis. I agree that the costs submissions were just that, submissions rather than a simple

memorandum, and the allowance of the costs memorandum of $3,585.00 is allowed but with no uplift on that figure.

Costs claim by the plaintiff

[26]            The plaintiff seeks costs against the first third party for a telephone conference held on 8 August 2019. That application is not granted. While it was reasonable for the plaintiff to seek agreement to defer the conference while discussions about settlement continued, the telephone conference was of some importance as the fixture at that time scheduled for 10 February 2020 was vacated at the conference.

Third party costs

[27]            Following the discontinuance of the claim by the plaintiff against the defendants, the defendants filed notices of discontinuance against the two remaining third parties. Both third parties seek costs on a 2B basis in respect of their involvement.

[28]The third third party seeks costs against the defendants.

[29]            The first third party also seeks scale costs, and does not have a preference as to whether it is against the plaintiff or the defendants, with its closing submission being:

The Court has a discretion to hold the plaintiff liable for the third parties’ costs, and it would be just in this situation to do so.

Plaintiff’s liability for third party costs

[30]            There is no presumption that the plaintiff is automatically liable for the costs of a third party if the plaintiff discontinues against the defendant or fails at trial against the defendant.

[31]            Cooper J in the costs judgment in Phoenix Organics Ltd v  RD2  International Ltd, discussed the Court’s jurisdiction to award costs in favour of a third party against a plaintiff directly.3

[32]            The existence of the jurisdiction in this case is not an issue. The issue is whether the plaintiff should have to meet the costs claimed by the third parties either directly or by indemnifying the defendants in that regard.

[33]            The plaintiff says it was not reasonable and proper for the defendants to join the third parties and as it had no control over that it should not be liable for those costs.

[34]            The plaintiff says that it considered, but rejected, bringing a claim directly against third parties.

[35]            The issue as recognised by the plaintiff is whether it was reasonable for the defendants to join the third parties.

[36]            The plaintiff relies in part on the defendants having discontinued their third party claim brought against the second third party. The third party proceedings were issued on 19 July 2018. The second third party filed its defence on 22 August 2018. The defendant discontinued the second third party claim on 23 October 2018.

[37]            The plaintiff suggests the defendants’ early discontinuance against the second third party is indicative  of a too ready preparedness to join third parties.   However,  I see the discontinuance as indicative of the defendants being prepared to review the joinder and/or to consider issues presumably raised by the third parties as to why the joinder should not be maintained. That of course is not to leave the question of reasonableness of joinder in the hands of the defendants, but I do not accept the plaintiff’s argument that the relatively early discontinuance against one third party suggests that the continuation against the other two third parties was unreasonable.

3      Phoenix Organics Ltd v  RD2  International  Ltd  (No  2)  HC  Auckland  CIV-2005-404-5070, 21 December 2005.

The costs of the second third party

[38]            The speed with which the defendants discontinued against the second third party is consistent with the defendants accepting that its joinder against that party could not be sustained. The discontinuance filed records “there is no order as to costs”. The plaintiff was requested to sign the discontinuance and did so. As the plaintiff was asked to sign a discontinuance on the basis that there was no order as to costs, in my view, it cannot now be asked to pay costs to the defendants arising from that discontinuance.

[39]            To the extent that the defendants seek costs in relation to the claim against the second third party, that claim is not allowed.

The costs of the first and third third parties

[40]            In respect of these claims, the plaintiff has not explained why it was unreasonable for the defendants to join the first and third parties. All the plaintiff says is that it considered the parties against which it would bring proceedings and chose not to bring claims against the third parties. The reasons why a plaintiff may elect not to sue one party among many potential defendants can be many and varied.

[41]            In the absence of the plaintiff being able to articulate why joinder of the first and third third parties was unreasonable it is, in my opinion, not appropriate that the defendants should bear the costs that they will have to pay to the third parties upon its discontinuance against them.

[42]            The joinder of the third parties was, in my view, a direct and reasonable reaction to the plaintiff’s proceeding. This was significant commercial litigation. While the quantum of the plaintiff’s claim was not particularised, its statement of claim disclosed that it had settled its insurance claim for $19.7 million based on the sum insured figure. The statement of claim alleged that the plaintiff suffered loss in not being advised that it might be able to bring claims for multiple events. The value of the sum insured suggests the quantum of the plaintiff’s claim when ultimately quantified would be significant.

[43]            The risk that the defendants would join third parties was always a real one upon the issue of the proceedings in this case. As noted, the allegation against the defendants was a failure to give advice to the plaintiff in respect of its insurance claim. Others were involved in managing or co-ordinating the insurance claim and so it was not surprising that the defendant should look to join other parties who may have had responsibilities to give the plaintiff advice in respect of its claim.

[44]            At the end of the day, it was not unreasonable for the defendants to join the third parties and accordingly it is not unreasonable for the plaintiff to be responsible for those costs on it discontinuing its claim.

[45]            Accordingly, the first and third third parties are awarded costs on a 2B basis against the defendants. The plaintiff is to indemnify the defendants in respect of those costs awards.

[46]            I do not award any uplift in respect of the third parties’ costs claims. The first third party has in its costs memorandum referred to the March 2019 Calderbank offer in respect of costs. I have already said that I do not consider the plaintiff’s actions in the case of the negotiations around costs justify an uplift.

Associate Judge Lester

Solicitors:

Duncan Cotterill, Christchurch Parker Cowan, Queenstown Morrison Kent, Auckland

Darroch Forrest Lawyers, Wellington (for First Third Party)