Sherman Limited v Harlow
[2014] NZHC 1697
•21 July 2014
IN THE HIGH COURT OF NEW ZEALAND HAMILTON REGISTRY
CIV-2008-419-000877 [2014] NZHC 1697
BETWEEN SHERMAN LIMITED
Plaintiff
AND
ROY J HARLOW and NANCY JEAN HARLOW Defendants
Hearing: [On the Papers] Counsel:
D J Taylor for the Plaintiff
D Delic for the DefendantsJudgment:
21 July 2014
JUDGMENT OF DUFFY J [Re Costs]
This judgment was delivered by Justice Duffy on 21 July 2014 at 4.00 pm, pursuant to
r 11.5 of the High Court Rules
Registrar/Deputy Registrar
Date:
Counsel: D J Taylor, Hamilton
Solicitors: McBreens (J C G Cochrane), Hamilton
Fletcher Law Limited, Hamilton
SHERMAN LTD v HARLOW [2014] NZHC 1697 [21 July 2014]
[1] The defendants were unsuccessful in this Court. They successfully appealed against the decision, and the Court of Appeal’s decision set aside the decision of this Court. At [47] of the Court of Appeal judgment, there is an order that the plaintiff must pay the defendants costs in the High Court. The Court of Appeal directed that:
In the absence of agreement, costs must be fixed in the High Court, in light of this judgment.
[2] The parties have been able to agree on most aspects of the costs award in this Court. However, they have been unable to agree on the question of whether the defendants are entitled to payment of disbursements for expert witness fees.
[3] The issue in dispute raises the question of whether parties that enjoy success on narrower grounds than they advanced at trial should be entitled to an award of costs and, as in this case, disbursements that includes those that arise from the grounds on which they were not successful.
[4] The trial Judge has now retired. The costs application has recently been given to me for determination.
[5] When the experts’ fees were first sought as a disbursement payable by the plaintiff, the defendants were unable to provide invoices of those fees. They sought a ruling in principle on their entitlement to be reimbursed for those costs. They have since provided an updated memorandum that attaches copies of the relevant invoices. Since that memorandum was provided, the plaintiff has not disputed the quantum of the experts’ fees.
[6] The defendants called two expert witnesses at the trial: a valuer, John Sweeney; and a surveyor, Tony Tynan. Mr Tynan’s evidence was not challenged by the plaintiff at the trial; Mr Sweeney’s evidence was.
[7] The plaintiff contends that it should not be liable for the costs of the defendants’ expert witnesses because the issues on which they gave evidence were not the subject of the appeal. The plaintiff argues that this means that the findings of this Court on those issues, which were favourable to the plaintiff, remain relevant, particularly in regard to costs. They contend that the reference at [47] of the Court
of Appeal’s judgment to costs being fixed in this Court “in light” of their judgment is an indication that matters properly falling outside the scope of that judgment should not be included in an award of costs.
[8] The plaintiff submits that r 14.12 of the High Court Rules, which provides for recovery of disbursements, has primacy. It provides:
14.12 Disbursements
(1) In this rule,—
disbursement, in relation to a proceeding,—
(a) means an expense paid or incurred for the purposes of the proceeding that would ordinarily be charged for separately from legal professional services in a solicitor’s bill of costs; and
(b) includes—
(i) fees of court for the proceeding:
(ii) expenses of serving documents for the purposes of the proceeding:
(iii) expenses of photocopying documents required by these rules or by a direction of the court:
(iv) expenses of conducting a conference by telephone or video link; but
(c) does not include counsel’s fee.
relevant issue, in relation to a disbursement, means the issue in respect of which the disbursement was paid or incurred.
(2) A disbursement must, if claimed and verified, be included in the costs awarded for a proceeding to the extent that it is—
(a) of a class that is either—
(i) approved by the court for the purposes of the proceeding; or
(ii) specified in paragraph (b) of subclause (1); and
(b) specific to the conduct of the proceeding; and
(c) reasonably necessary for the conduct of the proceeding; and
(d) reasonable in amount.
(3) Despite subclause (2), a disbursement may be disallowed or reduced if it is disproportionate in the circumstances of the proceeding.
(4) A Judge or an Associate Judge may direct a Registrar to exercise the powers of the court under subclause (2) or (3).
(5) When considering whether a disbursement paid or payable for an expert witness's fee or expenses is reasonable for the purposes of subclause (2)(d), a Judge or an Associate Judge may—
(a) call for a report or an assessment from a professional organisation or otherwise; and
(b) make any incidental order considered just, including an order as to the cost of that report or assessment.
[9] The plaintiff argues that the experts’ fees were not “reasonably necessary” for
determination of a relevant issue in the proceeding.
[10] The plaintiff relies on r 14.7(d), which provides:
14.7 Refusal of, or reduction in, costs
…
(d) although the party claiming costs has succeeded overall, that party has failed in relation to a cause of action or issue which significantly increased the costs of the party opposing costs; …
[11] On the other hand, the defendants contend that the Court of Appeal judgment reversed the judgment of this Court and so they should be entitled to be treated as having been successful on all fronts in this Court.
[12] I have the disadvantage of not being the trial Judge. However, I have carefully read the judgments of this Court, the Court of Appeal and the pleadings. The evidence of Mr Sweeney and Mr Tynan appears to me to be particularly relevant to the counterclaims that they made regarding alleged misrepresentations as to the boundaries and other matters, all of which were alleged to affect the value of the subject property. This is set out in the first amended statement of defence to first amended statement of claim and second amended counterclaim.
[13] The counterclaims did not feature in the appeal. The expert evidence had little or nothing to do with the defence of the plaintiff’s claim against the defendants.
It may be that there was some overlap with the plaintiff’s claim insofar as some of the answers to the allegations in the statement of claim also refer to the alleged misrepresentations, but their force was expressed in the counterclaims; it had no bearing on the issue on which the defendants were successful on appeal.
[14] In this Court, the defendants were unsuccessful on the counterclaims. They did not appeal their failure to prove the counterclaims.
[15] As noted in McGechan on Procedure (online looseleaf ed, Brookers) at [HR 4.1.01], whilst a counterclaim has the same CIV number as the main proceeding, in substance it is an independent proceeding. This suggests that there may be occasions when the assessment of costs for issues relating to an unsuccessful counterclaim is best separated from the question of costs arising from a successful defence.
[16] The assessment of entitlement to an award of disbursements is based on whether incurring the costs of the item was reasonably necessary. In this case, I consider that the expert witness fees were: (a) so unrelated to the issue on which the defendants ultimately succeeded; and (b) so bound up with the counterclaims on which they failed that the defendants should not be entitled to include them in the disbursements award that they seek.
[17] It follows that I find the defendants are not entitled to claim their expert witness fees as a disbursement. In all other respects, I understand the parties have resolved the question of costs themselves.
[18] If there are any outstanding issues, the parties have leave to return to this
Court within 10 days of delivery of this judgment.
Duffy J
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