Simpson v BB's New Zealand Limited HC Auckland CIV 2005-404-6877
[2007] NZHC 2039
•23 August 2007
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV 2005-404-6877
BETWEEN PETER GRAHAM SIMPSON First Plaintiff
AND CORSA COFFEE LIMITED Second Plaintiff
AND BB'S NEW ZEALAND LIMITED First Defendant
AND BRAMWELL JOHN MILNE Second Defendant
Hearing: On the papers
Appearances: A Clemow for Plaintiffs
D J Clark for Defendants
Judgment: 23 August 2007 at 5:00pm
JUDGMENT OF ANDREWS J [re. Costs]
This judgment was delivered by Justice Andrews on
23 August 2007 at 5:00pm
pursuant to r 540(4) of the High Court Rules.
…………………………………… Registrar/Deputy Registrar
Date: ………………………
Solicitors:
Gaze Burt, PO Box 91-345, Auckland (for Plaintiffs)Wilson McKay, PO Box 38-347, Remuera, Auckland (for Defendants)
P G SIMPSON AND ANOR V BB'S NZ LTD AND ANOR HC AK CIV 2005-404-6877 23 August 2007
[1] On 5 June 2007 I gave judgment in favour of the defendants in this proceeding. The parties have not agreed as to costs payable by the plaintiffs.
[2] The defendants seek orders as to:
a) The quantum of scale costs payable by the second plaintiff. b) Payment by the second plaintiff of costs above scale.
c) Payment of $15,000 being security for costs given by the second plaintiff.
d)Under s40(5) of the Legal Services Act 2000, specifying the amount the first plaintiff would have been ordered to pay, but for s 40.
Assessment of scale costs
[3] I refer only to those claims that are disputed.
Item 4.7: Inspection of documents
[4] Schedule 3 of the High Court Rules allows 1.5 days for inspection of documents in Category 2B proceedings (the parties had earlier agreed that 2B applied). Rather than filing one verified list of documents the plaintiffs completed discovery in a piece-meal fashion, filing six separate lists. The defendants argued that they were therefore entitled to 1.5 days for inspection in respect of each list: nine days in all. This claim is opposed by the plaintiffs on the grounds that while the defendants inspected documents included in six separate lists, that did not mean there were “six full separate inspections of documents”, warranting a separate allocation for each.
[5] It is appropriate to look at costs for inspection on a global basis. Had the plaintiffs listed all their documents in one verified list the defendants would, subject
to any claim for increased costs, have been entitled to only 1.5 days for inspection. The plaintiffs suggested that an uplift of 50% over the scale allowance was sufficient compensation. I accept that that is appropriate.
Item allowed under item 4.7: $3,262.50
4.11: Appearance at case management conference on 31 October 2006
[6] The defendants have withdrawn their claim for attendance at a conference on
31 October 2006.
Amount allowed under item 4.11: $1,280.00
4.14 and 4.15: Preparation for and attendance at a settlement conference before
Associate Judge Faire
[7] The defendants claim costs as if the settlement conference were a defended interlocutory application. The plaintiffs oppose the claim on the grounds that no provision is made for settlement conferences in Schedule 3. The plaintiffs argued that the absence of settlement conferences from Schedule 3 is a deliberate policy, to encourage parties to attend and participate in settlement conferences without being concerned about adverse consequences in costs, should settlement not be reached.
[8] Neither counsel referred me to any authority on the point. The commentary in McGechan at HR 442.05 notes (without citing any authority) that costs orders are not normally made in relation to judicial settlement conferences, although provision for payment of costs may be a term of any settlement agreement reached. I note that
in his decision as to costs in Greentank Limited v IAG New Zealand Limited1,
Associate Judge Gendall described a request for costs in respect of a settlement conference as novel.
[9] I have concluded that it is not appropriate to make any award of costs in respect of the settlement conference. I accept the plaintiffs’ policy argument, but I
also apply the reasoning set out in [20] – [22] below, in which I reject the defendants’ argument, advanced in support of their claim for increased costs, that the plaintiffs failed without reasonable justification to accept a settlement offer.
Amount allowed: Nil
[10] The effect of the above orders is to reduce the defendants’ claim under
Schedule A to $50,577.50.
Witnesses costs and disbursements
[11] The defendants claim witnesses expenses for their two expert witnesses, Mr Fletcher and Mr Appleby. The dispute is as to whether the plaintiffs should pay the full amount claimed, which includes days when each expert attended at Court to hear the evidence of the plaintiffs’ experts, as well as when they gave their own evidence.
[12] The plaintiffs referred me to the judgment of Ronald Young J in AFFCO New Zealand Limited v ANZCO Foods Waitara Limited2 at [22] and [23] where the Judge made an adjustment to the amount claimed, to allow for “modest over-counting” in respect of days observing at Court.
[13] It is appropriate that there be some reduction for time spent observing rather than giving evidence. Mr Fletcher submitted two invoices to the defendants’ solicitors, totalling $13,350.06. The second invoice ($4,795.31) included his attendances at Court on 18, 20 and 23 April 2007. He gave evidence on 23 April. Mr Appleby also submitted two invoices, totalling $15,533.39. His second invoice ($5,903.44) includes his attendances at Court to hear the evidence of Mr Jones (the plaintiffs’ accounting expert) and to give evidence.
[14] I have concluded that there should be a reduction of three hours on each claim. For Mr Fletcher, this is a reduction of $1,008.13 (GST inclusive) and for Mr Appleby, a reduction of $1,350 (GST inclusive).
Disbursements allowed:
Mr Fletcher: $12,341.93
Mr Appleby: $14,183.39
[15] The effect of the reduced allowance for witnesses expenses is to reduce the defendants’ claim for witness costs and disbursements under Schedule B to
$27,345.32.
Claim for increased costs
[16] The defendants seek an order for increased costs under r 48C, on the grounds that the plaintiffs contributed unnecessarily to the time or expense of the proceeding by taking or pursuing an unnecessary step or argument that lacks merit, failing to admit facts, evidence, documents, etc, failing to comply with an order for discovery, and failing to accept an offer of settlement.
[17] The specific matters referred to by the defendants are set out below.
Taking or pursuing an argument that lacked merit
[18] The defendants argued that the plaintiffs pursued a cause of action against the second defendant, Mr Milne, that lacked merit. The defendants argued that they indicated to the plaintiffs, at an early stage of the proceeding, that this cause of action had no merit. They further argued that although the plaintiffs’ argument was tenuous and not supported by authority, it caused the defendants to incur considerable costs in preparing a defence for Mr Milne.
[19] I am not satisfied that this cause of action added unnecessarily to the time or expense of the proceeding. The bulk of my judgment was concerned with whether Mr Milne had made alleged representations and, if so, whether they were misrepresentations. As I found that there were no misrepresentations, I was not required to consider whether any representation or conduct by Mr Milne could be attributed to the first defendant. In very large part any work done on Mr Milne’s
behalf was necessarily focused on the factual issues. The issue as to personal liability should not have materially added to the cost.
The plaintiffs’ approach to damages
[20] I do not accept the defendants’ argument that the plaintiffs’ damages claim was totally without merit, as mitigation and quantification were not properly explored by the plaintiffs. Mr Simpson gave evidence as to steps taken by him to mitigate loss and the plaintiffs proceeded on the basis of a quantification set out by their expert witness. The fact that the plaintiffs failed at the earlier stage (that is, in failing to satisfy the Court that there was no reasonable substratum of fact) does not mean that they unreasonably increased the time and costs of the proceeding by pursuing the damages claim they believed they were entitled to.
[21] Further, I accept Mr Simpson’s evidence that the late discovery of his diary was a genuine oversight. The plaintiffs note in their submissions that there was late discovery of various items by the defendants, also.
Failure to comply with order for discovery
[22] The defendants point to the plaintiffs’ six separate lists of documents. This matter has been adequately allowed for by the additional award under item 4.7, and does not justify an order for increased costs overall.
Failure without reasonable justification to accept an offer of settlement
[23] As noted earlier, there was a settlement conference before Associate Judge Faire in October 2006. Following that conference, the defendants offered $50,000 in settlement. Counsel for the defendants submitted that this was an offer of an ex gratia payment, to “make the matter go away”. At that time, the plaintiffs would have accepted $340,000.
[24] I cannot conclude that it was unreasonable for the plaintiffs to refuse the offer of $50,000. It was so far short of what the plaintiffs considered acceptable as to be patently unattractive. I note that at $50,000 it is more than $43,000 less than the
defendants have claimed for scale costs and disbursements (before their claim for increased costs). I accept the plaintiffs’ argument that the offer was simply too low to consider.
[25] Further, I do not accept that, with the first plaintiff being legally aided, the plaintiffs had no incentive to consider litigation risk. I accept the plaintiffs’ submission that, as is common, legal aid to the first plaintiff was an advance, not a grant. It is expected to be repaid.
[26] Accordingly, I do not find that an increase in cost is justified and I decline to order increased costs.
Costs payable by the second plaintiff
[27] The defendants have submitted that costs awarded in this proceeding should be awarded against the second plaintiff. I so order.
[28] The defendants have noted that the second plaintiff is “basically insolvent” and unlikely to be able to satisfy the costs award. However the plaintiffs’ solicitors are holding the sum of $15,000, paid by the second plaintiff as security for costs. The defendants sought an order that this sum of $15,000 be paid to the defendants’ solicitors.
[29] In their submissions, the plaintiffs state that as soon as costs are quantified, and the costs order is sealed, the plaintiffs’ solicitors will provide a trust account cheque for $15,000 made out to the first defendant, care of its solicitors.
[30] In the circumstances, I do not perceive it to be necessary to make an order for the payment of the $15,000 held as security for costs.
Costs against the first plaintiff; legal aid
[31] Mr Simpson was in receipt of legal aid for the proceeding. The defendants seek an order pursuant to s 40(5) of the Legal Services Act 2000.
[32] It should first be noted that s 40(2) provides that no order for costs may be made against an aided person unless the Court is satisfied that there are “exceptional circumstances”. The defendants have not contended that there are exceptional circumstances that would justify an award of costs against Mr Simpson.
[33] However, s 40(5) provides that if no order for costs is made against Mr Simpson, an order may be made specifying what order would have been made, had s 40 not affected his liability. If such an order is made, the defendants may apply to the Legal Services Agency for payment by the Agency of some or all of the costs the defendants would have been entitled to, but for s 40.
[34] It is appropriate to make an order under s 40(5). The amount that the first plaintiff would have been ordered to pay, but for the effect of s 40, is costs in the
sum of $50,577.50, and witness costs and disbursements in the sum of $27,345.32.
Andrews J
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