Strack v Grey

[2018] NZHC 1651

IN THE HIGH COURT OF NEW ZEALAND DUNEDIN REGISTRY

I TE KŌTI MATUA O AOTEAROA ŌTEPOTI ROHE

CIV-2015-012-162

[2018] NZHC 1651

UNDER

the Contractual Remedies act 1979

IN THE MATTER

of an agreement for sale and purchase of real estate dated 24 February 2014 between Matthew Francis Strack, Tracey Leigh Strack and WMC Trustee Limited as vendors and David Harvey Grey as purchaser

BETWEEN

MATTHEW FRANCIS STRACK, TRACEY LEIGH STRACK AND WMC TRUSTEE LIMITED

Plaintiffs

AND

DAVID HARVEY GREY

Defendant

Hearing:	(On the Papers)
Counsel:	D R Tobin and R M Reeve for Plaintiffs L A Andersen and R Reeve for Defendant
Judgment:	5 July 2018

JUDGMENT OF NICHOLAS DAVIDSON J (COSTS)

[1]Judgment was delivered on 31 May 2018.1 The disposition reads:

[132]    The defendant is liable to the plaintiffs in breach of contract. No  loss is proven. Judgment is entered for the plaintiffs for nominal damages of

$100.00.

1      Strack v Grey [2018] NZHC 1254.

STRACK & ORS v GREY [2018] NZHC [5 July 2018]

[133]    Costs are reserved for memoranda to be filed within two weeks of delivery of this judgment.

[2]        Both the plaintiffs and the defendant seek costs, and counsel agree that they should be categorised and banded according to Scale 2B.

The plaintiffs’ costs submission

[3]        Mr Tobin for the plaintiffs correctly submit that the primary legal issue at trial was whether Mr Grey validly cancelled the Agreement for Sale and Purchase (“the agreement”), and says that  judgment  vindicated  the  plaintiffs’  contention  that Mr Grey was in repudiatory breach when he purported to do so.

[4]        Mr Tobin referred to the joint memorandum of experts and their agreement that Mr Vaughan Linwood’s letter to Mr Grey did not constitute a “full building report”. However, that much was obvious and the real question was whether it was a report as contemplated by the agreement. The judgment held it was not.

[5]        The plaintiffs say Mr Grey took the position that it was for them to prove that he would have obtained finance and the agreement would have become unconditional. The alleged advice from Mr Grey’s bank manager, that it would have been unlikely that finance would have been approved, came “late in the piece”, not until some months after the initial disclosure and subsequent discovery.

[6]        Mr Tobin submits that Mr Grey should not be entitled to benefit by a costs award given erroneous positions taken by him on critical issues determined at trial. He says that Mr Grey was given the chance to withdraw his purported cancellation  of 26 February 2014 and obtain a building report of the kind the agreement contemplated, which may have lead him to continue with the contract, or to cancel on proper grounds. His lawyer, Ms Cummings, advised Mr Grey to do this, to obtain “an actual building report” which would have resolved the issue, but the judgment held that Mr Grey jumped the gun when he did not take that advice.

[7]        Although the plaintiffs succeeded on this question of cancellation, they obtained only nominal damages as a result of Mr Grey’s breach. Mr Tobin submits that it would be wrong now to award costs in Mr Grey’s favour because that would

effectively vindicate him, when, contractually, he was held to be in the wrong, and would send a message that a material and unlawful breach of contract carries no consequences.

[8]        Mr Tobin submits that the parties incurred legal and other fees because  of  Mr Grey’s intransigence and the plaintiffs should have scale costs, which would not fully compensate them for their litigation efforts, but would reflect that they established Mr grey was in breach of contract. Alternatively, he submits that costs should be left to lie where they fall.

[9]        Should Mr Grey be awarded costs, Mr Tobin submits that they should be calculated on the District Court measure, where jurisdiction lay. High Court costs  are submitted inappropriate because the plaintiffs have been drawn into this jurisdiction only because of Mr Grey. I am not clear why this case was transferred to the High Court as Mr Grey required, because it seems to be a case eminently within the province of the District Court, unless its appellate potential was brought to account given the significance of the case to an everyday aspect of New Zealand property law and practice.

[10]The plaintiffs seek $55,147.80 costs on a Scale 2B basis and disbursements of

$11,005.50, giving a total of $66,153.30. Those costs are set out in Schedule One to this judgment calculated on a Scale 2B basis and include an appearance fee for lead counsel.

Mr Grey’s costs submissions

[11]      Counsel Mr Anderson seeks Scale 2B costs for Mr Grey in terms of  Schedule Two to this judgment because he submits he is the successful party. It  seeks costs and disbursements in the sum of $48,721.75, also with an appearance fee for lead counsel.

[12]      Mr Anderson maintains that Mr Grey has been the successful party because the plaintiffs did not secure damages as they sought, but only nominal damages, and they should have accepted a Calderbank offer. The two points link. This stands against the plaintiffs’ submission that there was no finding on any question of law to

favour Mr Grey’s legal position maintained from the outset of the dispute, whereas the plaintiffs’ position was upheld in that regard, after strong contest at trial.

[13]      Mr Anderson says  the  Calderbank  offer  of  17  December  2015  means  Mr Grey is entitled to costs because the plaintiffs’ claim to damages failed. The judgment held that the plaintiffs would not, on the evidence, have received the benefit of an unconditional  contract,  necessary to  establish  recoverable  loss.  If Mr Grey is not deemed the overall successful party, $33,753.25 is sought, for costs incurred after 17 December 2015, when the offer was made.

[14]      Mr Anderson relies first on r 14.2 of the High Court Rules (“HCR”) which states that a party who fails should pay the costs for the party who succeeds. As to “success”, Mr Anderson cites in support a judgment of Brown J.2 I considered the measuring of success in a judgment arising out of the Canterbury earthquake sequence, Driessen v Earthquake Commission.3

[22]      Mr Ferguson submits correctly that a commonsense approach should be taken as to which party has succeeded, whether in whole or in part. The success of the plaintiff is here said to lie in the fact that the proceedings resulted in recovery of (much) more money than she was able to achieve without bringing the proceedings. Counsel refers  to  authority  including Fox v Foundation Piling Ltd.

[23]      The fact that a party came up short of what it claimed does not negate a costs order. Success may be reflected in a complete win, or a win in the sense that viewed overall, one party substantially succeeded. There may have been legitimate contest. Often a successful party will not succeed in all respects.

[24]      A costs judgment is not to be reached simply by identifying which party pays money to another. It depends on what was claimed, the position taken in the litigation and the result. …

[footnotes omitted]

[15]      If Mr Grey is held to be only partially successful under “Discussion” below, Calderbank rules apply, whereby under HCR 14.10 a written offer may be made without prejudice save as to costs, and while subject to the Court’s overall discretion, HCR 14.11 provides as follows:

2      Lawrence v Glenbrook 2001 Ltd [2015] NZHC 1005.

3      Driessen v Earthquake Commission [2016] NZHC 1048.

14.11   Effect on costs

(1)The effect (if any) that the making of an offer under rule 14.10 has on the question of costs is at the discretion of the court.

(2)Subclauses (3) and (4)—

(a)are subject to subclause (1); and

(b)do not limit rule 14.6 or 14.7; and

(c)apply to an offer made under rule 14.10 by a party to a proceeding (party A) to another party to it (party B).

(3)Party A is entitled to costs on the steps taken in the proceeding after the offer is made, if party A—

(a)offers a sum of money to party B that exceeds the amount of a judgment obtained by party B against party A; or

(b)makes an offer that would have been more beneficial to party B than the judgment obtained by party  B  against  party A.

(4)The offer may be taken into account, if party A makes an offer that—

(a)does not fall within paragraph (a) or (b) of subclause (3); and

(b)is close to the value or benefit of the judgment obtained by party B.

[16]      The Calderbank offer made on 17 December 2015 was for $25,000.00 and this on the face of the Rule the plaintiffs’ potential entitlement to any costs ends at 17 December 2015, and Mr Grey should have costs after that date, subject to the exercise of overall discretion. Hence, Mr Anderson makes a calculation based on  that proposition, under Schedule B to his submissions (Schedule Three to this judgment), by which the plaintiffs would have $1,340.40 disbursements for their filing fee but they would be liable for the statements of defence to the amended statements of claim, a net credit of $1,120.00. Mr Anderson calculates the net amount payable to Mr Grey applying the Calderbank provisions as:

(a)	Net award of costs	$31,717.00
(b)	Less credit for disbursements	$ 1,120.00
(c)	Plus expert witness costs	$ 3,156.75
$33,753.25

Discussion

[17]      On the face of it, the Calderbank offer should here have some application to costs. I infer that it was pitched without assessment of the probability of nominal damages,  as  there  was   no   specific   assertion   to   that   effect   in   the   letter   of 17 December 2015. However, it came close in his letter, Mr Anderson said that even if the plaintiffs succeeded in establishing Mr Grey’s contractual breach, they faced two essential problems, first that Ms Cummings’ fax of 26 February 2014 did not constitute a repudiation but asserted cancellation because of an unsatisfactory building report. While the case at trial was that this was not a repudiation sufficient to justify the vendors’ own cancellation  which  followed,  I  rejected  that  part  of Mr Grey’s case.

[18]      The second problem to which Mr Anderson referred was for the plaintiffs to prove the loss claimed. He said even if they were right about cancellation, no loss was suffered because the agreement was subject to finance and it was unlikely that finance would have been approved. He said that the plaintiffs bore the onus of proving that finance would have been approved. That is so as a matter of law, but an evidential onus applied because the evidence in that regard was within Mr Grey’s knowledge, although discovery of correspondence and Insurer’s records were relevant. On this point, Mr Grey was thus successful in the outcome, but wrong in not recognising his evidential onus. The judgment reads:

[128] I am satisfied that the likelihood of Mr Grey obtaining finance pursuant to the contract was so remote as to be negligible. In the terms of The Golden Victory there was no "real possibility" of finance being  obtained.  In reaching this conclusion  I take into account the evidence of  Mr Ross and the fact that the valuation was to be unavailable to the bank as a result of Mr Red's refusal to readdress it. While Mr Grey would have been bound under the contract to take all reasonable steps to obtain finance, and may have on refusal turned elsewhere, I am conscious that the contract anticipated finance being arranged within ten working days. After  that period Mr Grey would have been entitled to withdraw. Given the substantial hurdles in the way of obtaining finance on the terms Mr Grey the likelihood of the contract proceeding in that time was so low that I am unable to sensibly assign a percentage amount to the lost chance. As a result, Dr and Mrs Strack have not suffered any loss and can only be entitled to nominal damages.

[19]      The Calderbank offer of $25,000.00 was made on the basis of “unrecoverable costs”, so it was not pitched as an assessment of risk, and was not set against the

possibility of nominal damages. While the Calderbank offer was predicated on what I held to be an erroneous legal proposition as to repudiatory breach, I upheld the second point made in the Calderbank letter, that damages would not be and in the end were not established.

[20]      On the issue which dominated the trial, the plaintiffs undoubtedly succeeded. On the damages claim, Mr Grey succeeded, and the Calderbank offer must have some application. The plaintiffs seemed not to sufficiently recognise that the bargain they struck was uncertain as to a conveyancing settlement outcome, as they pursued their fundamental argument of repudiatory breach with determination and success.

[21]      This is an unusual case where in the exercise of discretion I bring to account that the plaintiffs were successful on the principal issue and Mr Grey succeeded on a lesser part of the case, albeit an important part as to outcome, and the Calderbank offer. That offer was at least in part predicated on the proposition upheld at trial, that the plaintiffs could not prove actual loss.

[22]      It is a broad estimate, but about 90 per cent of engagement at trial involved whether Mr Grey was in breach. The balance related to the damages claim. By this measure, overall the plaintiffs did succeed, and indeed they did obtain judgment, but for nominal damages only. Thus, despite their signal success in regard to the purported cancellation, after a keenly fought contest, they failed to prove the loss they claimed. The evidence regarding Mr Grey’s ability to obtain finance was quite limited, but on the balance of probabilities, I found that Mr Grey had done enough in evidence to establish that it was not at all likely finance would have been obtained and therefore no loss had been suffered by the plaintiffs. There was limited time to obtain finance, and he had not sold his own home.

[23]      By the reasoning to this point, ignoring the Calderbank offer, I would therefore have awarded a substantial part of the costs claimed by the plaintiffs, but for the residual element of the claim where they failed in damages, I would have allowed a significant deduction for that. From that position, I then recognise the Calderbank offer, which while it does not bind the Court, in this case must have some influence on the outcome.

[24]      In the exercise of discretion, I do not think these several considerations are adequately reflected simply by adopting a  “pure”  Calderbank  approach  so  that  Mr Grey should have his costs from the time of his offer, and its rejection.   Rather,   I consider the proper outcome is that costs should lie where they fall and I so order.

Disposition

[25]Neither party is awarded costs which will lie where they fall.

……………………………………..

Nicholas Davidson J

Solicitors:

Solomons Solicitors, Dunedin

A D Paterson, Solicitor, Dunedin

Copy to counsel:

L A Anderson, Barrister, Dunedin D R Tobin, Barrister, Dunedin

NOTE: Schedule additions made by the Court in red

SCHEDULE ONE

(Plaintiffs)

PLAINTIFFS’ PROPOSED SCHEDULE OF COSTS AND DISBURSEMENTS

Costs

Item	Activity	Allo cati on	@$2,230 per diem (i.e. 2B), per Schedule 2 HCR
2	Commencement of claim by Plaintiffs	3	$6690.00
3	Reply	0.8	$1784.00
9	Reply to Amended Statement of Defence	0.6	$1338.00
9	Reply to Second Amended Statement of Defence	0.6	$1338.00
10	Preparation for first case management conference	0.4	$892.00
11	Filing memorandum for first case management conference	0.4	$892.00
13	Appearance at first management conference	0.3	$267.60
10	Preparation for second case management conference	0.4	$892.00
11	Filing memorandum for second case management conference	0.4	$892.00
13	Appearance at second management conference	0.3	$267.60
10	Preparation for third case management conference	0.4	$892.00
11	Filing memorandum for third case management conference	0.4	$892.00
13	Appearance at third management conference	0.3	$267.60
14	Appearance at and preparation for issues	0.5	$1115.00

conference
15	Preparation for and appearance at pre-trial conference	0.5	$1115.00
16	Notice to answer interrogatories	1	$2230.00
17	Answer to interrogatories	1	$2230.00
20	List of documents on discovery	2.5	$5575.00
21	Inspection of documents	1.5	$3345.00
30	Plaintiffs’ preparation of briefs or affidavits	2.5	$5575.00
32	Plaintiffs’ preparation of list of issues, authorities and Common Bundle	2.5	$5575.00
33	Preparation for hearing	3	$6690.00
34	Appearance at hearing for principal counsel	2.5	$5575.00
35	Appearance at hearing for principal counsel	1.25	$2787.50
29/36	Sealing order	0.2	$446.00
Total Costs	$55,147.80

Disbursements

Disbursement	Value
Statement of Claim filing fee (District Court)	$200.00
Amended Statement of Claim (High Court)	$110.00
Photocopying / binding	$82.50
Flanders Marlow Construction and Cladding Reports	$920.00
Flanders Marlow Expert witness fees	$3,243.00
Scheduling fee	$1600.00
Hearing fee for 3 days	$4800.00
Order sealing fee	$50.00
Total Disbursements	$11,005.50

SCHEDULE TWO

(Defendant)

“SCHEDULE A

2B SCALE COSTS IF [DEFENDANT] PLAINTIFF SUCCESSFUL”

items	Description	time	rate	cost
Pleadings
2	commencement of defence	2	$1,990	$3,980
9	statement of defence to amended statement of claim 10/3/16	0.6	$2,230	$1,338
9	statement of defence to second amended statement of claim 21/2/17	0.6	$2,230	$1,338
Case management
10	Preparation first case management conference	0.4	$2,230	$892
11	Joint memorandum for first case management conference 4/11/15	0.4	$2,230	$892
11	Memorandum for case management conference 14/3/16	0.4	$2,230	$892
11	Memorandum for case management conference 22/2/17	0.4	$2,230	$892
12	Telephone conference with Davidson J 5/7/17	0.2	$2,230	$446
Interrogatories discovery and inspection
16	Notice to answer interrogatories 19/02/16	1	$2,230	$2,230
17	Answer to Plaintiff’s interrogatories 10/3/16	1	$2,230	$2,230
20	List of documents on discovery 22/12/15	2.5	$2,230	$5,575
21	Inspection of documents	1.5	$2,230	$3,345
Trial Preparation and appearance
30	Defendant’s preparation of briefs	2.5	$2,230	$5,575
32	Defendant’s preparation of list of issues, authorities and common bundle	2	$2,230	$4,460
33	Preparation for hearing	3	$2,230	$6,690
34	Appearance at hearing for principal counsel full day 18/9/17 and half days 19/9/17 and 20/9/17	2	$2,230	$4,460
TOTAL	45,235
Plus Disbursements
Three filing fees in respect of the original statement of defence and the two amended statement of defences	$330.00
Expert witness’ expenses of	$3,156.75
Total	$3,486.75	$3,486.75
TOTAL	$48,721.75

SCHEDULE THREE

(Defendant)

“SCHEDULE B

2B SCALE COSTS APPLYING CALDERBANK RULES”

items	Description	time	rate	cost
Pleadings
1	Plaintiffs commencing proceedings	-3	$1,990	-$5,970
9	statement of defence to amended statement of claim 10/3/16	0.6	$2,230	$1,338
9	statement of defence to second amended statement of claim 21/2/17	0.6	$2,230	$1,338
Case management
10	Plaintiffs’ preparation first case management conference	-0.4	$2,230	-$892
11	Joint memorandum for first case management conference 4/11/15	-0.4	$2,230	-$892
11	Memorandum for case management conference 14/3/16	0.4	$2,230	$892
11	Memorandum for case management conference 22/2/17	0.4	$2,230	$892
12	Telephone conference with Davidson J 5/7/17	0.2	$2,230	$446
Interrogatories discovery and inspection
16	Notice to answer interrogatories 19/02/16	1	$2,230	$2,230
17	Answer to Plaintiff’s interrogatories 10/3/16	1	$2,230	$2,230
20	List of documents on discovery 22/12/15	2.5	$2,230	$5,575
21	Inspection of documents	1.5	$2,230	$3,345
Trial Preparation and appearance
30	Defendant’s preparation of briefs	2.5	$2,230	$5,575
32	Defendant’s preparation of list of issues, authorities and common bundle	2	$2,230	$4,460
33	Preparation for hearing	3	$2,230	$6,690
34	Appearance at hearing for principal counsel full day 18/9/17 and half days 19/9/17 and 20/9/17	2	$2,230	$4,460
TOTAL	$31,717
Plus Nett Disbursements	$1,120.00
Plus expert witness costs	$3,156.75
Total	$4,276.75	4,276.75
TOTAL	$35,993.75