Shabor Limited v Graham
[2021] NZHC 3576
•21 December 2021
IN THE HIGH COURT OF NEW ZEALAND HAMILTON REGISTRY
I TE KŌTI MATUA O AOTEAROA KIRIKIRIROA ROHE
CIV-2017-419-88
[2021] NZHC 3576
IN THE MATTER of the sale and purchase of a farm at 910 Moerangi Road, Oparau BETWEEN
SHABOR LIMITED
Plaintiff
AND
ROBERT GRAHAM
First Defendant
PINE RIDGE TRUSTEE COMPANY LIMITED
Second Defendant
Hearing: On the papers Appearances:
KM Quinn and CB Pearce for the Plaintiff
DM O’Neill and PA Depledge for the First and Second Defendants
Judgment:
21 December 2021
JUDGMENT No. 3 OF FITZGERALD J
[As to readjustment of costs in light of appeal decision]
This judgment was delivered by me on 21 December 2021 at 3.00pm, pursuant to Rule 11.5 of the High Court Rules.
Registrar/Deputy Registrar
Date……………
Solicitors: Cargill Stent Law, Taupo
Forgeson Law, Te Kuiti (D Foregson)
SHABOR v GRAHAM [2021] NZHC 3576 [21 December 2021]
Introduction and background
[1] In my substantive judgment delivered on 13 March 2020, I found that the first and second defendants (collectively “Mr Graham”) had falsely represented the carrying capacity of a farm when advertising it for sale.1 I found this to be in breach of s 35 of the Contract and Commercial Law Act 2017 (CCLA) and s 9 of the Fair Trading Act 1986 (FTA).
[2] Despite these findings, however, I ultimately dismissed the plaintiff’s (Shabor’s) claims on the basis of a no reliance/disclaimer clause in the agreement for sale and purchase between the parties.
[3] Shabor subsequently appealed against my judgment to the Court of Appeal. The Court of Appeal dismissed the appeal on the CCLA cause of action, but granted the appeal on the FTA cause of action.2 The Court concluded that the no reliance/disclaimer clause did not break the chain of causation between Mr Graham’s misleading conduct and Shabor’s loss.3 Had I upheld Shabor’s FTA claim, I had recorded what I would have likely awarded by way of damages, including that I would have reduced the damages award by 40 percent to reflect Shabor’s own conduct.4 The Court of Appeal adopted my assessment of the difference between the price paid by Shabor for the farm and its actual value ($530,000),5 though reduced that amount by 30 percent, not 40 percent, to reflect Shabor’s own conduct.6
[4] In my original costs judgment, I awarded scale costs in Mr Graham’s favour, though reduced the award by 25 percent to reflect that a (very) significant amount of time and cost was devoted by both parties to assessing the carrying capacity of the farm, an issue on which Mr Graham was unsuccessful.7
1 Shabor Ltd v Graham [2020] NZHC 507 (HC judgment).
2 Shabor Ltd v Graham [2021] NZCA 448, (2021) 16 TCLR 177 (CA judgment).
3 At [56].
4 HC judgment, at [236].
5 CA judgment, at [67].
6 At [83].
7 Shabor Ltd v Graham [2020] NZHC 1592 (original costs judgment).
[5] In light of Shabor’s successful appeal on the FTA cause of action, and the Court of Appeal’s award of damages, the costs of the proceeding in this Court now need to be revisited. The parties agree that a scale 2B costs award in Shabor’s favour is appropriate. Mr Graham also agrees with Shabor’s quantification of a scale 2B costs award. The parties disagree, however, on whether:
(a)there should be a reduction to the costs award to reflect those aspects of Shabor’s claims on which it was unsuccessful;
(b)the costs award ought to include Shabor’s costs for Mr Graham’s unsuccessful (defendant’s) application for summary judgment;
(c)the fees for one of the experts called by Shabor ought to be excluded from the disbursements awarded; and
(d)Shabor should be awarded only 50 percent of the hearing fee.
The parties’ submissions
Shabor’s primary submissions
[6] Shabor says there should be no reduction to the scale costs award, given the CCLA and FTA causes of action “were alternative ways of approaching the same core issue”. Shabor acknowledges that the Court of Appeal’s judgment demonstrates that different legal considerations apply to the two causes of action, but says that that does not distract from the fact that both causes of action were grounded on the same facts and allegations.
[7]Accordingly, Shabor seeks a full costs award including on the basis that:
(a)As noted in my original costs judgment, the bulk of the trial was taken up with the core factual issue of whether there had been a misrepresentation or misleading conduct.
(b)Shabor succeeded on that issue.
(c)The costs incurred establishing these elements were therefore necessary to considering relief under both the FTA and CCLA causes of action.
(d)While Shabor failed on the CCLA cause of action, that failure was the result of what Shabor describes as a “legal technicality” (namely the no reliance/disclaimer clause in the sale and purchase agreement).8 Shabor says that consideration of this issue, in the context of the trial as a whole, did not significantly increase the costs incurred by Mr Graham, a pre-requisite to reducing a scale costs award pursuant to r 14.7(d) of the High Court Rules 2016 (the Rules).
(e)Shabor also rejects a suggestion made in correspondence on behalf of Mr Graham that there should be a reduction in the costs award on the basis that the damages awarded on the FTA claim were less than the full quantum sought (a greater damages award having been sought on the CCLA cause of action, and the Court of Appeal reducing the FTA damages by 30 percent), on the basis that “success on more limited terms is still success”.
(f)Standing back, Shabor says that the core of its claim against Mr Graham was that due to misleading and deceptive conduct, Shabor overpaid for the farm. Liability in respect of that claim has been established and a substantial award of damages has been ordered. Shabor further submits that in achieving this result, it did not pursue any unreasonable or implausible arguments that unnecessarily added to the costs of the litigation.
8 While the categorisation of the reason for the CCLA cause of action failing is not material to the issues I must determine, I observe that the assessment and enforcement of a contractual provision between the parties is not aptly described as a “legal technicality”.
(g)On the anticipated challenge to the fees of Mr Beetham (an expert called on behalf of Shabor who gave evidence on the losses incurred by Shabor for the purposes of the CCLA claim), Shabor notes that Mr Beetham’s evidence also was directed to issues on which it was successful, namely the carrying capacity of the farm. Shabor says that only a small proportion of Mr Beetham’s evidence was directed to loss as calculated on the contractual measure, being the only area connected to the unsuccessful aspect of its claim. Shabor submits that these aspects of Mr Beetham’s evidence nevertheless also assisted and “buttressed” aspects of the argument that the representation as to carrying capacity of the farm was misleading.
[8] On this basis, Shabor seek a costs award of $181,324.45, comprising scale costs of $97,378.00 and disbursements of $83,946.45. Shabor also seeks costs on its application for costs, in the sum of $3,585.00.
Mr Graham’s submissions
[9] Mr Graham notes that Shabor was only partially successful before the Court of Appeal, its appeal on the CCLA cause of action being dismissed, and the Court reducing the damages awarded on the FTA cause of action by 30 percent.
[10] Mr Graham first refers to my findings that the misrepresentations he made were not made wilfully nor with intent. On that basis, counsel for Mr Graham submits that Mr Graham was entitled to take the stance that he did in defending the claims brought against him, and should not be criticised for that stance. Mr Graham further submits that the fact Shabor succeeded on only one of the two causes of action it advanced, and had a 30 percent discount applied to the FTA damages award, justifies a reduction in the scale costs award. Counsel refers to a number of authorities in which scale costs awards have been reduced to reflect “mixed success”.9
9 QBE v Wild South Holdings Limited [2015] NZCA 39 at [6] – [7]; Weaver v Auckland Council [2017] NZCA 330, (2017) 24 PRNZ 379; Brandlines Limited v Central Forklift Group Limited HC Wellington CIV-2009-485-2803, 14 June 2011 at [11]; and Houghton v Saunders [2018] NZSC 112 at [5] and following.
[11] Mr Graham ultimately submits that the scale costs should be reduced by 50 percent, and then having regard to the Court of Appeal’s finding, by a further 30 percent of that half. Accordingly, on the basis of a 2B costs award calculated in accordance with Shabor’s costs submissions, Mr Graham suggests that the costs award should be $31,350.00.
[12] On disbursements, Mr Graham says that Mr Beetham was called primarily to give evidence about the expenditure required by Shabor to bring the farm up to the level Shabor expected it to be, and Shabor was not successful on that aspect of its claim. Mr Graham also notes that to the extent Mr Beetham gave evidence as to the meaning of a stock unit, there was a variety of evidence given on that topic, and his evidence was but one of the views proffered by a range of experts at trial.
[13] Mr Graham accordingly submits that Mr Beetham’s fees should be excluded altogether.
[14] Turning to the costs of the summary judgment application, as noted, this was a defendant’s summary judgment application, brought solely on the basis of the no reliance/disclaimer clause in the underlying contractual documents. The summary judgment application was dismissed, on the basis that the full circumstances needed to be taken into account to make an assessment of whether it was fair and reasonable to enforce that clause.10 Mr Graham submits that having considered all of the relevant circumstances, he was successful on the enforceability of the clause in the CCLA cause of action, including after the Court of Appeal’s decision. Mr Graham suggests that as the appeal has subsequently been allowed in relation to the FTA cause of action, the costs of the summary judgment application ought to be halved, reducing the applicable scale costs by $3,900.50 (being 50 percent of the costs claimed of $7,805.00).
[15] Mr Graham also submits that the hearing fee should only be awarded as a disbursement at 50 percent, thus reducing the disbursements claimed by Shabor and to be awarded to $36,595.66.
10 Shabor Ltd v Graham [2017] NZHC 3146.
[16] Together with the suggested scale costs award and half of the costs relating to summary judgment, Mr Graham submits that the overall costs award should be
$71,956.16. Mr Graham submits that costs should lie where they fall on the application for costs.
Shabor’s costs submissions in reply
[17] In a (detailed) submission in reply, Shabor first says that there should be no alteration to the summary judgment costs that have been included in the scale costs award it seeks. It submits that the summary judgment application failed, and once the substance of the case had been examined, the basis upon which the summary judgment application had been brought also failed in relation to the FTA cause of action. Shabor notes that having been the successful party to both the interlocutory application and then at trial, the plaintiff “must be entitled to the costs of the interlocutory”.
[18] Shabor submits that Mr Graham’s characterisation of my findings as to the nature of the misrepresentation he made is incorrect, but says that whether or not Mr Graham was entitled to challenge or defend the proceedings is irrelevant to costs in any event. Shabor says that the starting point remains that costs follow the event in the ordinary way, and a consequence for an unsuccessful party (even one acting reasonably) is being required to meet a proportion of the successful party’s actual costs.
[19] Shabor also disputes the relevance of the various authorities to which Mr Graham refers. It emphasises that in order to make a reduction to a scale costs award, the successful party must have failed in relation to a cause of action or issue “which significantly increased the costs of the party opposing costs”. Shabor says that pursuit of the CCLA cause of action did not “significantly” increase Mr Graham’s costs. In this context, Shabor submits that Mr Graham’s proposal that that scale costs are reduced by half, and then further reduced by another 30 percent, is unrealistic and unprincipled.
[20] Shabor also says that the reduction of the damages award on the FTA claim by 30 percent does not justify a reduction in costs. It says that the “flipside” of that reduction is that it recovered 70 percent of the damages claimed, which is plainly substantial success overall.
[21] On disbursements, Shabor submits that to reduce the hearing fee by 50 percent would be unprincipled. In relation to Mr Beetham’s fees, Shabor reiterates many of the points made in its primary submissions.
[22] As to the costs of the cost application, Shabor says that Mr Graham failed to engage on costs before submissions were due, and that the submissions on behalf of Mr Graham have been unrealistic and contrary to principle, necessitating reply submissions.
Discussion
[23] As noted, there is no dispute that a costs award ought to be made in Shabor’s favour. In light of the Court of Appeal’s judgment, it was the successful party overall.
[24] For the reasons which follow, I am not persuaded that a substantial reduction in costs should be made to reflect the fact that Shabor was unsuccessful on its CCLA cause of action, or that the FTA damages award was reduced.
[25] While as I noted in my substantive judgment, Shabor advanced the CCLA cause of action as its primary claim (no doubt because of the higher damages claim attaching to that cause of action),11 a very significant proportion of the evidence and hearing time was devoted to the farm’s actual carrying capacity, an issue requiring determination under both causes of action. Nevertheless, evidence (including expert evidence) was called and submissions made on the CCLA damages claim, and legal research was no doubt conducted and submissions made on the enforceability of the no reliance/disclaimer clause under the CCLA. I consider a, say, 5 or 10 percent reduction to the costs award would be appropriate to reflect these matters.
11 HC judgment, above n 1, at [4].
[26] I am reinforced in this view by the fact that the outcome of Shabor’s claims, namely a damages award of $371,000, casts the proceeding in a quite different light than an originally brought, when Shabor claimed approximately $1 million on each cause of action. The outcome is only marginally outside the jurisdiction of the District Court. Had the claim been limited to the FTA cause of action and with recognition of the flexibility under that statute as to damages awards, there might have been a prospect of the matter resolving without a lengthy High Court trial.
[27] Nevertheless, given the focus of the hearing and evidence on issues common to both causes of action, the reduction ought to be modest. I reduce the scaled costs award by 10 percent.
[28] I am also satisfied that it is appropriate to include in the award the costs of the summary judgment application. I accept the submission made on behalf of Shabor that all having been successful on both the interlocutory application and then substantively at trial, it ought to be awarded costs of that application.
[29] I do not agree with Mr Graham that the fees associated with Mr Beetham’s evidence ought to be excluded as a disbursement. Mr Beetham’s evidence was in part directed to the carrying capacity of the farm, and indeed I found Mr Beetham’s evidence of particular of assistance on that issue. The fact that his evidence was directed to an issue on which Shabor was unsuccessful (the CCCLA damages claim) is not a proper basis to exclude his fees. For the purposes of r 14.2, a disbursement “must” be included in the costs awarded if, among other matters, it is specific to the conduct of the proceeding, was reasonably necessary for the conduct of the proceeding and is reasonable in amount. The fees for Mr Beetham meet these criteria.
[30] Finally, I am also unpersuaded that there should be any reduction to the hearing fee. Again, this is a disbursement which meets the criteria of r 14.12(2)(a)(ii) and therefore must be included in the costs award.
[31] There is accordingly a costs award in Shabor’s favour in the amount of and for those matters set out in Appendix A to Shabor’s reply costs submissions dated 19 November 2021. This includes the costs of the costs application. Shabor has
succeeded in its costs application, and I agree that aspects of the approach suggested on Mr Graham’s behalf were somewhat unrealistic and unprincipled. For the avoidance of doubt, the 10 percent reduction ordered at [26] above does not apply to disbursements or the costs of the costs application.
Fitzgerald J
0
7
0