Soma v Nath

[2019] NZHC 2119

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2017-404-1647

[2019] NZHC 2119

BETWEEN

HERA SOMA

Plaintiff

AND

SUNIL RAMENDRA NATH

First Defendant

A1 CARS 2014 LTD

Second Defendant

Hearing:

(On the papers)

Counsel:

D A Jaques for Plaintiff

D J Rooke for Defendants

Judgment:

27 August 2019

COSTS JUDGMENT OF BREWER J

This judgment was delivered by me on 27 August 2019 at 4:00 pm pursuant to Rule 11.5 High Court Rules.

Registrar/Deputy Registrar

Solicitors:

Legal Associates (Auckland) for Plaintiff David Rooke Law (Auckland) for Defendants

SOMA v NATH [2019] NZHC 2119 [27 August 2019]

Introduction

[1]This is a costs judgment.

[2]        The plaintiff had three causes of action. The first was against the first defendant, Mr Nath, and the second defendant, A1 Cars 2014 Ltd, which was nominally their joint business vehicle. The plaintiff claimed the first defendant behaved improperly as director of the second defendant, causing the plaintiff loss of

$800,000. The second cause of action was brought against the second defendant. The plaintiff claimed he advanced it three loans totalling $106,553.50 which had not been repaid despite demands. Alternatively, he claimed against the first defendant for the recovery of the loans. The third cause of action was against the second defendant for recovery of a HiAce van the plaintiff left at its premises or for damages of $24,000. The first defendant counterclaimed against the plaintiff.

[3]        In my judgment1 I dismissed the first cause of action. I dismissed the second cause of action against the second defendant but entered judgment for the plaintiff for

$85,000 against the first defendant. On the third cause of action I entered judgment for the plaintiff against the second defendant for $11,000 plus interest. I dismissed the first defendant’s counterclaim.

[4]        The first cause of action was not well founded. The parties gave partial truths, at best, rather than clear evidence. I was left with the overall view that the second defendant was largely a fictional cover for a car sales business run on a cash basis by the other two parties for tax purposes. The dispute was driven by emotion rather than rational business decision-making.

[5]        The plaintiff seeks costs on a 2B basis. For the reasons that follow I award him costs on a High Court 2B basis reduced by 50 per cent.

1      Soma v Nath [2019] NZHC 1088.

Law

[6]        Costs are at the discretion of the Court.2 However, this discretion is qualified by the specific costs rules as well as certain fundamental principles.

[7]        One such principle is that costs go to the party who succeeds.3 Success on limited terms is still regarded as success for costs purposes.4

[8]        However, r 14.7(d) of the High Court Rules 2016 allows the Court to reduce or refuse an award of costs which would otherwise be awarded, on the basis that that party failed in respect of a cause of action or issue which significantly increased the costs of the party opposing costs. The approach taken by the Court of Appeal in Weaver v Auckland Council and Water Guard Ltd v Midgen Enterprises Ltd is to award reduced costs where appropriate to reflect only partial success.5 This should not generally require a highly detailed scrutiny of what happened in the case.6

[9]        In Weaver the appellants had succeeded on roughly half of their full damages claim.7 The Court on appeal considered a 50 per cent reduction on costs appropriate. In Water Guard a plaintiff had succeeded on only two of its five claims, which occupied about 25 per cent of the trial time spent.8 The parties then settled before the damages quantum hearing. The Court of Appeal considered that, while the plaintiff had still been successful enough that it would normally be entitled to some costs, because it acted unreasonably in declining settlement offers costs were to lie where they fall.9

Submissions

[10]      The plaintiff has provided two alternate scales of costs, one seeking an award on a 2B District Court basis and the other on a 2B High Court basis. He submits that this is an appropriate case for High Court 2B costs in terms of the complexity of the

2      High Court Rules 2016, r 14.1(1).

3      High Court Rules 2016, r 14.2(a).

4      Weaver v Auckland Council [2017] NZCA 330 at [26].

5      Water Guard Ltd v Midgen Enterprises Ltd [2017] NZCA 36.

6      Weaver at [24].

7 At [26].

8      Water Guard at [5].

9      At [12]–[19].

hearing required. That complexity, and the lack of daily records kept by the first defendant, made it difficult to assess how much loss he could prove – hence the claim for $800,000 which is what brought this case into the High Court’s jurisdiction.

[11]      The defendants have filed a single memorandum. They seek an award for High Court costs on a 2B basis in respect of the first cause of action, on which the plaintiff was defeated. They note that the proceedings were filed in the High Court on the basis of the particular remedies sought and the quantum of $800,000 claimed in the first cause of action. Given that cause of action failed totally they submit that, at best, the plaintiff is entitled to costs on a District Court 2B basis for one to two days’ hearing to reflect his success in the two smaller claims, which would otherwise have been brought in the District Court.

[12]      The defendants also seek to rely on an ultimately unsuccessful settlement agreement, which was initially filed with the Court on 3 October 2017. The settlement agreement was on the basis that the first defendant would personally pay the plaintiff

$80,000 in total by way of instalments, the company bank accounts would be unfrozen, and the plaintiff would resign as director and transfer his shares in the company to the first defendant. The agreement was also conditional on Mr Nand (a third party) withdrawing his claim relating to the business against the first defendant from the District Court. The agreement did not take effect.

[13]      Mr Nath seeks to waive his privilege regarding the negotiations around that settlement agreement in order to put them in evidence for costs purposes. Section 57 of the Evidence Act 2006 applies privilege to communications between parties in connection with an attempt to settle a dispute. That privilege is held between the parties and cannot be waived unilaterally by one of them.10

[14]      There is nothing that indicates the parties’ settlement negotiations were on a non-privileged or “without prejudice except as to costs” basis. The defendants cannot rely on them without the plaintiff also agreeing to waive the privilege. I will not consider them. I am not influenced by the unsuccessful settlement negotiations.

10See Elisabeth McDonald and Scott Optican (eds) Mahoney on Evidence (4th ed, Thomson Reuters, Wellington, 2018) at [EV57.07].

Discussion

Level of success

[15]      At best the plaintiff can be regarded as having partial success in the proceeding. He succeeded on two claims which were small enough that they could have appropriately been brought in the District Court. He did not succeed on the major claim, which nominally justified this being a High Court proceeding. The defendants also did not succeed and are not entitled to costs.

[16]      The plaintiff claimed a total of $930,553.50. I awarded him $96,000, approximately 10 per cent what he claimed. $800,000 of the total claimed was by the unsuccessful first cause of action. While that figure was unrealistic from the start, and as such is an imperfect yardstick for assessing the plaintiff’s actual percentage of success, I have no doubt that the defendant’s costs were substantially increased by defending that claim. It was the main focus at the trial, given the other two claims were comparatively factually narrow. It also brought the proceeding into the High Court. This exposed the defendants to paying the High Court recovery rates rather than the lower District Court rates. I bear in mind r 14.13 which provides that where a plaintiff is successful on proceedings that were within the jurisdiction of the District Court, the plaintiff’s costs must not exceed District Court costs.

[17]      It would be artificial to attempt to estimate the precise cost attributable to each claim and make orders reflecting specific wins and losses on the basis of the appropriate court scales. Instead I consider it appropriate to make an order for costs on a High Court 2B basis as listed in the plaintiff’s schedule, subject to a reduction of 50 per cent. In my view such an order adequately reflects that the plaintiff has enjoyed some success but caused the defendants significant unnecessary expense on the major claim.

[18]The High Court 2B scale costs listed in the plaintiff’s memorandum total

$45,269. Reduced by 50 per cent that is $22,634.50.

Result

[19]I order that the defendants are to pay the plaintiff $22,634.50 in costs plus the

$3,737.20 disbursements listed in the plaintiff’s schedule.

Brewer J