Strathboss Kiwifruit Ltd v Attorney-General

[2019] NZHC 62

IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY

I TE KŌTI MATUA O AOTEAROA TE WHANGANUI-A-TARA ROHE

CIV 2014-485-11493

[2019] NZHC 62

BETWEEN

STRATHBOSS KIWIFRUIT LIMITED

First Plaintiff

SEEKA LIMITED
Second Plaintiff

AND

ATTORNEY-GENERAL

Defendant

On the papers
Judgment:	4 February 2019

JUDGMENT OF MALLON J

(Costs)

Table of contents

Introduction  [1]

Should costs be deferred?  [5]

Global reduction?  [10]

Increased costs?  [19]

Additional counsel  [21]

Costs in the cause  [24]

Briefs of evidence  [26]

Preparation for trial  [31]

Responding to particulars  [35]

Discount on expert fees?  [40]

Counsel and Committee disbursements?  [49]

GST on disbursements?  [58]

Security  [64]

Costs on costs  [66]

Result  [67]

STRATHBOSS KIWIFRUIT LIMITED v ATTORNEY-GENERAL [2019] NZHC 62 [4 February 2019]

Introduction

[1]                  Strathboss (the first plaintiff, representing a class) and Seeka (the second plaintiff) brought a claim against the defendant alleging personnel of the former Ministry of Agriculture and Forestry (MAF, now the Ministry for Primary Industries or MPI) were negligent in the performance of their functions under the Biosecurity Act 1993. The claim arose out of an incursion of a bacterial pathogen known as Psa which affected kiwifruit orchards beginning in early November 2010.

[2]                  In accordance with pre-trial directions, the claim was divided into two stages. The first stage concerned whether a duty of care was owed, whether it was breached, whether the breach caused the Psa incursion and whether the defendant had the benefit of a statutory immunity.

[3]                  Strathboss succeeded on these issues and the plaintiffs now seek their costs and disbursements for stage one.1 They claim costs of $1,715,088 and disbursements of

$900,723.64. The disbursements include expert fees which total $449,124.69. The costs claim is calculated on a category 3 basis with various items at band A, B or C, depending on the nature of the item.2 For some items, increased costs above band C are claimed.

[4]                  The defendant contends costs should not be determined pending the determination of appeal(s). If costs are to be determined, the defendant contends payment should be deferred or paid only in part pending the appeal(s). The defendant does not contest the category 3 and band allocations but contends there should be global reductions of the costs and disbursement claims. He also takes issue with some items that make up the plaintiffs’ claim.

Should costs be deferred?

[5]                  The defendant has filed an appeal against my decision on the stage one issues on issues of law and fact. Strathboss and Seeka have filed a cross-appeal on certain aspects of my decision. The appeal and cross-appeal are scheduled for a two-week

1      Strathboss Kiwifruit Ltd v Attorney-General [2018] NZHC 1559.

2      High Court Rules 2016, r 14.3 and Schedule 3.

hearing in the Court of Appeal commencing on 11 March 2019. An appeal to the Supreme Court may follow.

[6]                  The defendant accepts there is no presumption that a costs determination should be deferred until an appeal is heard. He says the complexity of the costs and their quantum make a determination now inefficient because that determination may need to be revised following the appeal(s), and there is no prejudice to the plaintiffs if the determination is deferred. The defendant also refers to the factors that are relevant to whether a stay pending an appeal should be granted, which provide a useful cross- check.3 He says that, other than whether an appeal may be rendered nugatory if a stay is not granted, these factors favour deferring the determination.

[7]                  I do not accept these submissions. The parties have already incurred the time and cost of putting forward their respective submissions on costs and disbursements so that time and cost is sunk. There is some inefficiency in my determining costs now if any part of that determination requires reconsideration following the appeal(s). That inefficiency, if it arises, is outweighed by the benefit to Strathboss (or its funder, LPF) in receiving some payment towards the substantial costs it has incurred in achieving its success on the stage one issues.

[8]                  The defendant says Strathboss is not prejudiced if costs are deferred because it was funded by LPF. He says LPF is not prejudiced if costs are deferred because it is an experienced litigation funder. As such, the defendant says LPF ought to have factored into its commercial decision-making that any returns from funding this case were unlikely to be realised until after a lengthy litigation and appeal process.

[9]                  I do not accept this submission. Strathboss as the successful party is entitled to a costs order. That it is funded by LPF, which may be able to bear the costs of a lengthy litigation process, is not a reason for deferring the successful party’s entitlement. There is no other sufficient reason why costs should not follow the event.

3      Yan v Mainzeal Property and Construction Ltd (in rec and in liq) [2014] NZCA 86, (2014) 22 PRNZ 296 at [25]: whether the appeal may be rendered nugatory in the absence of a stay; the bona fides of the applicant in prosecuting an appeal; whether the successful party will be injuriously affected by the stay; the effect on third parties; the novelty and importance of the questions involved; the public interest in the proceeding; the overall balance of convenience; and the apparent strength of the appeal.

The plaintiffs have paid a substantial sum by way of security and it is not suggested they will be unable to repay the costs and disbursements award should the defendant’s appeal succeed. Should some members of the class represented by Strathboss fail to establish an entitlement to damages at stage two, that will be relevant to the costs determination at that stage.

Global reduction?

[10]               The defendant submits the plaintiffs’ costs claim should be reduced by 30 per cent. This is because the plaintiffs failed on two aspects of their claim:

(a)First, Seeka’s claim, in its capacity as a post-harvest operator, failed because I found the defendant did not owe a duty to take reasonable care to avoid economic loss to it.

(b)Secondly, the plaintiffs’ claim alleged two causes of action. The first cause of action contended the defendant breached a duty to take reasonable care in carrying out MAF’s pre-border functions. This cause of action was successful. The second cause of action contended the defendant breached a duty of care because a MAF inspector failed to take reasonable care when clearing a consignment at the border. This cause of action failed because I found the plaintiffs had not established that reasonable care would have stopped the consignment from reaching its destination.

[11]               The defendant says these two aspects occupied a fair amount of time and resources to defend. The defendant says he called nine witnesses to address these aspects of the claim, which occupied about five working days of the trial, and 62 pages of the 353 pages of the defendant’s primary closing submissions were devoted to issues on which he was successful.

[12]               It is common for a successful party to fail on some aspects of their claim. Whether this should reduce the costs award depends on whether that failure

“significantly increased the costs of the party opposing costs.”4 This requirement ensures that in most cases it is not necessary to dissect the proceeding issue by issue, or cause of action by cause of action, to determine costs. It is only when the party who succeeded overall significantly increased the costs of the unsuccessful party, because of issues or causes of action on which the successful party failed, that any reduction in the costs award is to be made. In my view, this was not the case here.

[13]               Seeka’s claim in its capacity as post-harvest operator could not have materially increased the costs to the defendant in defending the claim. This is because, regardless of whether Seeka brought its claim, it was necessary for me to understand the kiwifruit industry and the place of the post-harvest operators within it. This was necessary because a key submission for the defendant was that neither growers nor post-harvest operators were distinctly vulnerable so as to give rise to sufficient “proximity” for a duty of care to be recognised. Similarly, the defendant contended a duty of care should not be recognised on policy grounds because it would give rise to indeterminate liability. The claim by a post-harvest operator, and the evidence and submissions in support of it, was relevant to Strathboss’ claim through providing an important test of whether and where the boundaries of a duty of care lay. Moreover, in the context of a trial lasting three months, the time devoted to Seeka’s specific claim was minimal.

[14]               It is correct that the plaintiffs failed on their second cause of action. Again, however, it was necessary to understand MAF’s systems and processes for discharging its functions under the Biosecurity Act. The evidence covered MAF’s approach pre- border, at the border, and post-border. The evidence about the volume and task at the border, and how MAF’s systems and processes at the border operated, was necessary context for understanding why the biosecurity regime’s efficacy in preventing risks from materialising was very reliant on the pre-border stage.

[15]               Further, to the extent the border clearance evidence focussed on the anthers consignment in particular, it was relevant to tracking the passage of the consignment from China to Kiwi Pollen’s premises in Te Puke. That evidence was relevant to whether the anthers in the consignment caused the incursion. Again, in the context of

4      High Court Rules 2016, r 14.7(d).

a trial lasting three months, minimal time was devoted to whether the consignment would not have reached Te Puke if reasonable care at the border had been exercised (the step in the cause of action on which Strathboss’ claim failed).

[16]               Looked at overall, the plaintiffs’ case was that MAF personnel were negligent in allowing the consignment of anthers into the country and this negligence caused the Psa incursion. Strathboss entirely succeeded in that claim. The fact that the plaintiffs were unsuccessful on particular aspects within this claim is unsurprising in the context of a factually and legally complex, significant and novel claim. Those aspects did not impinge on its ultimate success.5

[17]               The defendant notes the plaintiffs failed on a number of discrete issues, such as the meaning of “reasonable cause” under s 163 of the Biosecurity Act and whether that section applied to the alleged acts or omissions relied on for the second cause of action.  I consider no reduction in the costs award is appropriate on this basis.   The  s 163 submissions were in response to an affirmative defence raised by the defendant. It was for the defendant to establish this defence and he did not do so. This was a difficult area of the law and the plaintiffs’ arguments on the statutory immunity issues, although in the event not entirely accepted by me, assisted me to reach my conclusions on them.

[18]               I therefore conclude a global reduction on the costs award is not appropriate because, to the extent the plaintiffs failed on some issues or aspects of their claim, this did not “substantially” increase the defendant’s costs. I do, however, take this into account when considering the plaintiffs’ claim for increased costs as discussed further below.

Increased costs?

[19]               The reasonable time for any step in the proceeding is the time specified for it in Schedule 3 of the High Court Rules 2016, or a time determined by analogy with

5      Compare with, for example, Weaver v Auckland Council [2017] NZCA 330 at [26] where the plaintiffs succeeded in half of what they claimed and the Court accepted the time and resources necessary for the defendant to meet ultimately unsuccessful arguments significantly increased the defendant’s costs.

that schedule if it does not apply.6 However, the Court may increase costs if “the nature of the proceeding or the step in it is such that the time required by the party claiming costs would substantially exceed the time allocated under band C.”7

[20]               The plaintiffs claim increased costs for discovery, inspection, preparing their briefs, preparing for trial, additional counsel and responding to particulars. The defendant accepts the increased time claimed for discovery and inspection. He disputes the increased time as initially claimed by the plaintiffs for additional counsel. He also disputes the increased time claimed for preparing briefs, preparing for trial and responding to particulars.

Additional counsel

[21]               The plaintiffs initially claimed costs for the appearance of second, third and fourth counsel for the trial (at the rate of 50 per cent of the allowance for principal counsel). The defendant accepts certification of second and third but not fourth counsel. The plaintiffs are content to confine their claim to three counsel. Accordingly, the claim for fourth counsel is to be removed from the total claimed.

[22]               The plaintiffs initially claimed for second counsel for interlocutory hearings including case management appearances. The defendant accepts the claim for second counsel for the interlocutory hearing on 3 June 2015 (the Court has already certified this) and for the case management conferences on 5 August 2016 and 26 October 2016, both of which dealt with substantial matters. He does not accept the claim for second counsel for the remaining case management conferences.

[23]               In addition to the 3 June 2015 hearing and the 5 August 2016 and 26 October 2016 conferences, the plaintiffs are content to confine their claim for second counsel to the hearing on 3 February 2016 before Dobson J. This concerned the contested question of the issues to be heard at stage one, the defendant’s request for further information from the plaintiffs, discovery to be given by the defendant and other matters. It resulted in a 17-page judgment delivered on 18 February 2016.8 I accept

6      High Court Rules 2016, r 14.5.

7      Rule 14.6(3)(a).

8      Strathboss Kiwifruit Ltd v Attorney-General [2016] NZHC 206.

in these circumstances second counsel should be certified for this hearing as well as the hearings and conferences accepted by the defendant as warranting two counsel.

Costs in the cause

[24]               In a judgment dated 9 October 2015, Dobson J made costs on the plaintiffs’ interlocutory applications “in the cause”.9 Costs in the cause means “the costs of those interlocutory proceedings are to be awarded according to the final award of costs in the action.”10 The defendant says this means at the end of stage two. The plaintiffs submit there is no reason why the costs of this application should be treated any differently to the other costs of stage one. The issues at stage one have been determined.

[25]               I accept the plaintiffs’ position on this. The interlocutory applications concerned leave for the plaintiffs to bring the proceedings as a representative action on a funded basis, approval of the funding arrangements, setting a deadline for additional claimants to opt in to the proceedings, security for costs and a direction to provide further particulars of the claimants’ circumstances. Strathboss has succeeded in establishing the claim on behalf of the group it represents. It may well be that some members of the group will not succeed because they do not have property rights in the vines and crops or an interest in them that is otherwise sufficiently direct or closely associated with those rights. However other members of the group will succeed because they have such rights or interests and will have suffered loss. Stage one of the proceeding has in this sense finally determined that they have succeeded in their claim. It is apparent Dobson J envisaged the costs would become payable “on the substantial outcome”.11 I consider that “costs in the cause” in these circumstances meant when stage one had been determined. They are therefore properly included in the plaintiffs’ costs claim.

9      Strathboss Kiwifruit Ltd v Attorney-General [2015] NZHC 2482.

10     J T Stratford & Son Ltd v Lindley (No 2) [1969] 3 All ER 1122 at 1123.

11     Strathboss Kiwifruit Ltd v Attorney-General, above n 9, at [24].

Briefs of evidence

[26]               The plaintiffs’ counsel advises that a total of 186.5 eight-hour days were spent preparing the plaintiffs’ briefs of evidence. The briefs totalled over 500 pages. They included 23 primary briefs, nine reply briefs, nine will-say statements, and a supplementary brief. A number of the briefs involved complex and technical scientific evidence. A number of witnesses were uncooperative and this presented additional challenges for plaintiffs’ counsel on top of what was already a complex and challenging undertaking. Strathboss claims two-thirds of their actual time spent, or

124.33 days (a little under four days per brief).

[27]               The defendant submits the approach under the rules is not to provide for two- thirds of actual costs and a more nuanced response is required. The defendant refers to the approach adopted in Trustpower Ltd v Commissioner of Inland Revenue where the Court allowed seven days for some witnesses, and five and three days respectively for others.12 The  defendant  also  says  Strathboss  cannot  claim  for  the  brief  of Mr Michael Franks whose evidence was called in support of Seeka’s claim. On this basis it proposes an allowance of 86 days rather than the 124.33 claimed.

[28]               The plaintiffs respond that the actual time spent on a step in the proceeding is relevant to determining the reasonable time for that step.13 They say the seven, five and three day allowances in Trustpower Ltd v Commissioner of Inland Revenue were considered appropriate in the circumstances of that case, but what is required is an analysis of the circumstances of this case. They also say that Mr Franks’ brief would have been required even if Seeka had not brought its claim in its capacity as a post- harvest operator.

[29]               I accept the plaintiffs’ submissions. I consider, for example, that seven days for the preparation of each of the briefs of Dr Mazzaglia, Mr Balestra, Dr Poulter and Dr Beckett is considerably less than the time that reasonably would have been involved. Although those witnesses largely would have prepared their briefs, experienced counsel have a significant role in overseeing that preparation: for

12     Trustpower Ltd v Commissioner of Inland Revenue [2014] NZHC 3072.

13 At [22].

example, identifying the areas on which expertise is necessary in light of the factual and legal issues of the case, identifying relevant witnesses with the necessary expertise, instructing the experts, identifying the relevant documents for their instruction, reviewing drafts to ensure they address the relevant matters and in a manner appropriate for the Court’s understanding and so on. The genetic evidence was particularly complex and reasonably would have required substantial time on the part of counsel.

[30]               In my assessment, there was no overkill with the plaintiffs’ briefs. The number and range of witnesses was appropriate to the case and efficiently compiled. The briefs of evidence were largely concise and to the point. I consider the claim at a little under four days per brief to be a reasonable contribution to the plaintiffs’ costs for this step. I consider the claim should be rounded down to 124 days, from 124.33 days, to take into account that it is possible (although not certain) that some minor portion of the work on Mr Franks’ brief may not have been required if Seeka had not been a party in its capacity as a post-harvest operator.

Preparation for trial

[31]               The plaintiffs’ counsel advises that a total of 136.68 eight hour days were spent preparing for trial – including preparing opening submissions, trial presentation materials, cross-examination preparation, and preparatory work for closing submissions. This work was carried out by both senior and junior lawyers. The plaintiffs claim 90.2 days, being two-thirds of the actual time spent.

[32]               The plaintiffs say this is a modest amount for the scale and complexity of the proceeding and for a trial which took 57 days. They contrast their claim with: the former costs regime pursuant to which  the  scale  entitlement  would  have  been  114 days; Trustpower Ltd v Commissioner of Inland Revenue where the plaintiff’s lawyers spent 116.2 days preparing for a 19 day trial involving five witnesses and the Court awarded 30 days preparation;14 Sovereign Assurance Co Ltd v Commissioner of Inland Revenue where the trial lasted 21 days, the Commissioner claimed 60 days of

14     Trustpower Ltd v Commissioner of Inland Revenue, above n 12.

the 100 days preparation incurred and the Court awarded 50 days;15 and Kidd v van Heeran, where a complex interlocutory hearing occupied five days, counsel spent

64.36 days preparing written submissions and the Court awarded 50 days for this step.16

[33]               The defendant submits these authorities show that often what is considered a reasonable time is significantly less than two-thirds of the actual time spent. He notes the comparison with Sovereign Assurance Co Ltd v Commissioner of Inland Revenue may not be accurate because both the actual time incurred of 100 days and the 50 days allowed was for several steps. He submits the current regime intentionally shifted away from the approach of the old regime under which preparation time was calculated by doubling the trial duration. The proper approach is to examine the complexity of the case and apply a reasonable allocation to reflect the likely effort expended.17 The defendant submits a reasonable allocation for this step is 70 days, which represents slightly more than 50 per cent of the time actually spent by the plaintiffs on this step and amounts to about 1.34 days of preparation per day of trial.

[34]               I consider 90 days (rounded down slightly from the claim for 90.2 days) is a reasonable allocation for this step. This was a particularly complex case, made up of a number of parts that were themselves complex. Many of the defendant’s witnesses gave technical and specialist evidence – cross-examination of them would have required detailed and time-consuming preparation. The time counsel actually spent on preparation strikes me as being reasonable and efficient. It compares favourably with the cases the plaintiffs have referred to. It approximates to 1.5 days preparation for each day of the trial. The minor rounding down takes into account the possible minor extent to which some of the preparation related to work that might not have been necessary if the unsuccessful claims had not been advanced. In the circumstances of this case, an allocation of approximately two-thirds of the actual (efficiently incurred) time is reasonable.

15     Sovereign Assurance Co Ltd v Commissioner of Inland Revenue [2012] NZHC 3573.

16     Kidd v van Heeren [2015] NZHC 3191.

17     Body Corporate 160361 v BC 2004 Ltd [2015] NZHC 2979 at [82].

Responding to particulars

[35]               On 8 July 2015 the Court ordered the plaintiffs to provide extensive particulars about the plaintiffs and the represented claimants.18 On 18 February 2016 the Court ordered the plaintiffs to provide further information about each claimant.19 Schedule 3 to the High Court Rules does not provide a time allocation for the provision of particulars. The plaintiffs submit the responses they provided were akin to interrogatories and, by analogy with the item for interrogatories in the Schedule, it claims for this step.

[36]               The plaintiffs’ counsel advises that the work involved 67.6 eight-hour days. The work was primarily carried out by junior counsel. For that reason the plaintiffs seek 35 per cent of actual time spent, being 23.7 days. Counsel contrasts this with a claim for 212 interrogatories at category 3, band A, which would amount to

84.8 days.20

[37]               The defendant does not accept the particulars were akin to interrogatories. The nature and purpose of interrogatories differ. While particulars are to assist in defining the issues and to inform the parties of the case they have to meet, interrogatories are intended to elicit material that will help the interrogating party’s case.21 The provision of particulars is a fundamental requirement of a statement of claim. The defendant submits there should be no allowance for this.

[38]               I accept that there is ordinarily no allowance for the provision of particulars because they are part and parcel of a proper statement of claim. This, however, was not an ordinary case. The particulars ordered were extensive. They were partly necessitated because of the representative nature of the claim and the different groups within the represented class. The judgment dated 8 July 2015 categorised some of the information as “particulars to be pleaded” and others as “particulars which may be provided by discovery and interrogatories”. The judgment dated 18 February 2016

18     Strathboss Kiwifruit Ltd v Attorney-General [2015] NZHC 1596.

19     Strathboss Kiwifruit Ltd v Attorney-General, above n 8.

20 I query whether this is correct. The stated allowance is for “interrogatories”. It is not my understanding that this allowance applies to each individual interrogatory provided, if that is how the plaintiffs have derived their 212 number.

21     Consolidated Alloys (NZ) Ltd v Edging Systems (NZ) Ltd [2012] NZHC 2818, (2012) 21 PRNZ 306 at [9].

described the information as “further information I have directed is to be provided.” To the extent the information provided was in the nature of particulars, they time spent on them indicates that an uplift to the allocation for preparing the statement of claim would be available if a separate allowance is not allowed for this.

[39]               I therefore consider the costs award should make some allowance for the provision of these particulars/further information. The allowance for the provision of interrogatories is four days for band C. Interrogatories are the closest analogy but this allowance is inadequate given the extensive nature of the information provided as confirmed by the actual time incurred. The actual time incurred by the plaintiffs’ counsel (less than two weeks) seems reasonable. The amount claimed (at 35 per cent) is reasonable given the work was primarily carried out by junior counsel. Absent any better measure, I accept the plaintiffs’ claim for 23.7 days as a reasonable allowance for the costs incurred in providing the particulars and further information.

Discount on expert fees?

[40]               The defendant submits the plaintiffs have failed to discharge its onus to establish the expert fees were reasonably necessary and reasonable in amount. The defendant submits it is insufficient to merely provide copies of the experts’ invoices particularly when, in some instances, these invoices do not provide any detail of the work.

[41]               Further, the defendant considers two of the experts strayed from their area of expertise. Specifically, the defendant says Dr Poulter’s evidence traversed a wide range of personal opinions, some of which were outside his expertise and were not substantially useful to the court, and he was not independent because he acknowledged that he wanted the claimant’s case to succeed. The defendant also says that Dr Beckett gave evidence outside his expertise in that he commented on 20 briefs of evidence but when cross-examined he accepted at various points that he did not have expertise on the matters. The defendant also submits the amounts claimed by Dr Poulter and Dr Beckett are not reasonable in amount and are disproportionate.

[42]               The defendant submits a reduction of 50 per cent of the expert fees claimed is appropriate. He says this is consistent with the approach of the High Court in

Auckland Waterfront Development Agency Ltd v Mobil Oil New Zealand Ltd, where the party seeking payment failed to discharge its onus to establish that the expert witness fees charged were reasonable.22

[43]               The plaintiffs submit they have provided sufficient information to establish that the expert fees were “specific to the conduct of the proceeding”, “reasonably necessary for the conduct of the proceeding”, “reasonable in amount”, and not “disproportionate in the circumstances of the proceeding”.23 They note that: the defendant has all the plaintiffs’ expert briefs and details of the DNA sequencing carried out; the invoices already identify the rates at which the experts’ time was charged; and the defendant will know the costs of its own experts who responded to these briefs. The plaintiffs’ counsel have provided further details in its memorandum dated 5 December 2018.

[44]               The plaintiffs refer to MPI’s response to an Official Information Act request made by a journalist in September 2018. Reportedly, as at July 2018, the costs paid to consultants and experts engaged directly by MPI totalled over $400,000 excluding GST. The plaintiffs note it is unclear whether Crown Law engaged some experts directly, but even if it did not, that figure is comparable to the plaintiffs’ claim.

[45]               I agree this provides a useful comparison absent any other information about the expert fees engaged by the defendant. I acknowledge it is for the plaintiffs to establish their expert fees meet the requirements of r 14.12, but that does not absolve the defendant of putting forward some basis for why the expert fees claimed by the plaintiffs should not be accepted, especially given the detail the plaintiffs have now provided about them. As the plaintiffs submit, the defendant responded to the plaintiffs’ experts with its own experts. I would be surprised if the defendant’s expert fees were not at least around the amount the plaintiffs incurred given the range and calibre of the defendant’s experts. In my experience there is nothing out of the ordinary about the rates and hours claimed that suggests some form of independent verification, as Auckland Waterfront Development Agency Ltd v Mobil Oil New Zealand Ltd suggested is appropriate in some cases, is necessary in this case.

22     Auckland Waterfront Development Agency Ltd v Mobil Oil New Zealand Ltd [2015] NZHC 470, (2015) 23 PRNZ 200.

23     High Court Rules 2016, r 14.12.

[46] I do not accept that the criticisms the defendant makes of Dr Poulter’s and Dr Beckett’s evidence warrant any reduction in the amounts claimed for their work. I do not accept Dr Poulter’s evidence was unhelpful either on the grounds that it strayed outside his expertise or that over time he had come to be aligned to the plaintiffs’ case. I addressed this criticism of his evidence in my substantive judgment at [1138].

[47]               Dr Beckett is an epidemiologist with particular expertise in biosecurity and disease modelling. Part of his brief involved reviewing relevant literature on Psa, presenting this is in a coherent way for the Court, and drawing his conclusions about MAF’s actions in light of this. Although Dr Beckett was not an expert in Psa, or plant pathology in particular, his particular skill set qualified him to give the evidence he did. As stated in my substantive judgment at [1380], I considered the evidence of all of the experts helpful.

[48]               Looked at overall, the plaintiffs called evidence from seven experts (including Dr Everett under subpoena). Their evidence covered epidemiology and biosecurity, plant pathology, genetics, economics, and statistics. The amount incurred of around

$450,000 inclusive of GST equates to less than $65,000 inclusive of GST per expert. In a case of the complexity and scale of this one, I am satisfied the amounts were specific to the conduct of the proceeding, reasonably necessary for the conduct of the proceeding, reasonable in amount, and not disproportionate in the circumstances of the proceeding.

Counsel and Committee disbursements?

[49]               The plaintiffs claim “travel/accommodation/sustenance in Wellington” for counsel and for the plaintiffs’ committee. They also claim $36,845.25 for “Thistle Inn office costs”.

[50]               The defendant submits it is not reasonable for the plaintiffs to claim disbursements for expenses incurred by out of town counsel. The defendant relies on two authorities that have taken the view that the travel and accommodation expenses of out of town counsel are not normally recoverable unless there is special

justification.24 The defendant submits engaging out of town counsel was not reasonably necessary in this case, particularly when the plaintiffs had originally engaged a Wellington firm of solicitors in the early stage of the proceedings.

[51]               Additionally, the defendant says counsel’s expenses wrongly included alcoholic beverages in the sum claimed. The plaintiffs accept the costs for alcoholic beverages are not recoverable. They were inadvertently included and should be removed. I agree.

[52]               As to counsel’s travel, accommodation and food expenses, the plaintiffs say the authorities relied on by the defendant are out-dated. The plaintiffs refer to more recent cases where such expenses have been allowed.25 They say this was the largest trial in New Zealand for many years. The plaintiffs made the decision to instruct their current solicitors and counsel once the size and complexity of the proceeding, and the necessary level of resourcing, became apparent. The market for litigation teams to conduct litigation on this scale is small. The available alternatives were large firms with, the plaintiffs’ say, higher charge out rates. The plaintiffs did not engage a Queen’s Counsel or other external counsel. Additionally, Strathboss, Seeka, the majority of the represented claimants and a number of the witnesses were based in the Bay of Plenty. This meant that witness briefing and trial preparation was more conveniently and efficiently conducted by solicitors and counsel based in Auckland than in Wellington.

[53]               I accept the size and complexity of the proceeding made it reasonably necessary for the plaintiffs to have a litigation team of their choosing. This was not the kind of proceeding where the plaintiffs’ choice of team should have been confined to the region in which the trial was held. The plaintiffs’ choice would have been influenced by their perception of expertise, capacity and resourcing, efficiency and charge out rates. This was the kind of litigation where the reasonable travel, accommodation and sustenance expenses of out of town counsel were reasonably

24   Russell v Taxation Review Authority (2000) 14 PRNZ 515 at [24]–[25]; and Air New Zealand Ltd v Commerce Commission (2005) 17 PRNZ 786 at [84].

25 Commerce Commission v Bay of Plenty Electricity Ltd HC Wellington CIV-2001-485-917, 4 December 2008 at [49]–[50]; and Turners & Growers Ltd v Zespri Group Ltd HC Auckland CIV- 2009-404-4392, 29 October 2010 at [22]. See also Arnold v Stuff Ltd [2018] NZHC 1641 at [42].

necessary for the conduct of the proceedings. I therefore accept that these expenses are properly claimed as disbursements.

[54]               The Thistle Inn office costs were for an operating office with computers and printers/copiers in Wellington. The defendant objects to those costs because they would not have been incurred if the plaintiffs had instructed Wellington solicitors. In my view, because I have accepted that it was reasonably necessary for the plaintiffs to have a litigation team of their choosing, the Thistle Inn costs were also reasonably necessary for the conduct of the proceeding. I therefore accept that these expenses are properly claimed as disbursements.

[55]               The defendant submits the costs incurred by the plaintiffs’ committee were not reasonably necessary for the conduct of the proceeding. The defendant submits they are akin to a party’s internal costs and such costs are not recoverable. The defendant provides the example of the travel and accommodation costs of Commerce Commission staff in litigation, which have been held not to be recoverable.26 The defendant contrasts this with the situation in Houghton v Saunders where the committee members were sued in their individual capacities.27

[56]               The plaintiffs submit the committee expenses were reasonably necessary. The committee represented Strathboss, Seeka and over 200 represented claimants. The committee attended the hearing to monitor the evidence and to contribute to the instructions to counsel. It was efficient to have committee members attend the hearing rather than individual plaintiffs and claimants and, in a representative action, this type of attendance is reasonably necessary. The plaintiffs also say the amount claimed ($27,354.47) is modest and reasonable in the context of a three-month trial of significant magnitude.

[57]               I am not persuaded that the committee’s expenses are recoverable. I agree with the defendant that they are analogous with a party’s own travel, accommodation and food expenses when they attend a trial in a place other than their usual place of residence. Such expenses would not “ordinarily be charged for separately from legal

26     Air New Zealand Ltd v Commerce Commission, above n 24, at [86].

27     Houghton v Saunders [2015] NZHC 548 at [86]–[88].

professional services in a solicitor’s bill of costs”.28 The party would incur them rather than be charged for them in a solicitor’s bill of costs. I therefore disallow the claim for this disbursement.

GST on disbursements?

[58]               The plaintiffs have claimed all of their disbursements on a GST-inclusive basis. The defendant submits this is wrong. The defendant submits the Court of Appeal has held that, if a plaintiff is GST registered, disbursements are to be sought on a GST- exclusive basis.29 In a representative claim, costs awards are made in favour of the representative plaintiffs not the members of the representative class.30 The defendant says the issue is whether the representative plaintiffs in this case, Strathboss and Seeka, are GST registered. If they are then all recoverable disbursements should be GST-exclusive.

[59]               The plaintiffs say the issue is whether any of the plaintiffs are able to input tax credits as a matter of tax law. It refers to Dunedin Catering Supplies Ltd v Mr Chips Ltd which concerned the recoverability of GST on indemnity costs awards and disbursements.31 It was held that GST is recoverable in a bill of costs if the plaintiff is not registered for GST, or if the subject of the dispute does not for other reasons lend itself to a GST input credit.

[60]               The plaintiffs advise that they took tax advice from BDO at the outset of the proceeding. They were advised that the services to be procured (legal costs and disbursements) were acquired by all the claimants and not just Strathboss and Seeka. This is because they agreed under the litigation funding and committee agreements that they would all be responsible for paying the costs of the litigation. They were advised that, given the number of claimants, it was unworkable and impractical for them each to claim their fractional share of input credits on the legal costs and disbursements incurred in the proceeding. Therefore, even though most of them are

28     High Court Rules 2016, r 14.12(1)(a); and Air New Zealand Ltd v Commerce Commission, above n 24.

29     New Zealand Venue and Event Management Ltd v Worldwide NZ LLC [2016] NZCA 282, (2016) 23 PRNZ 260 at [17].

30     Houghton v Saunders (2011) 20 PRNZ 509 (HC) at [211]; and Houghton v Saunders HC Christchurch CIV-2008-409-348, 26 May 2010 at [37] and [40].

31     Dunedin Catering Supplies v Mr Chips Ltd [2013] NZHC 1815 at [67].

GST registered, they have not been able to claim input credits for the disbursements they now seek against the defendant.

[61]               The plaintiffs sought further advice, this time from PwC, following the defendant’s submissions on this issue. PwC has confirmed the BDO advice that it would not be possible for Strathboss and Seeka to claim input tax credits in respect of litigation costs incurred by the plaintiffs (including the represented claimants) as a whole. The plaintiffs submit that if the defendant does not pay the GST component of the disbursements they will be left out of pocket. They say this contravenes the indemnity approach to reasonable disbursements. They say the Crown will receive a windfall because it will have received the GST on the disbursements but will not have given any input credits for them.

[62]               The plaintiffs submit it is theoretically possible that following final determination of all issues some or all of the claimants may be able to claim their respective shares of the GST credits on the costs and disbursements they have incurred. To guard against the possibility of double recovery, the plaintiffs are willing to undertake that they will return to the defendant the GST element on any disbursements awarded in their favour that they are eventually able to recover.

[63]               I consider the better approach is to reserve the question of whether the GST component on disbursements is recoverable. The plaintiffs are granted leave to have the issue determined once the final GST position is known or at some other suitable point in time. At that time the parties may make further submissions on the issue. In the meantime, the disbursements award is to be paid exclusive of GST.

Security

[64]               The defendant submits that, if costs are ordered to be paid, a portion of the award should be held as security. The plaintiffs say there is no basis for this. They note the plaintiffs’ solicitors are already holding substantial security.

[65]               If the defendant considers his position is inadequately protected, despite the substantial security already in place, and that the defendant is not presently required

to pay the GST component on the disbursements, he can consider whether it is necessary to apply for increased security.

Costs on costs

[66]               The  plaintiffs’ position  on  costs  has  been substantially upheld.    They are therefore entitled to costs on their costs submissions.

Result

[67]               The defendant is to pay costs and disbursements as claimed in the plaintiffs’ memorandum dated 25 October 2018 but with the adjustments necessary in light of this judgment and the concessions the plaintiffs have made in their reply memoranda.

Mallon J