Thompson v Continental Car Services Limited

[2018] NZHC 2009

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2016-404-3124

[2018] NZHC 2009

BETWEEN

MARTYN LLOYD THOMPSON

Plaintiff

AND

CONTINENTAL CAR SERVICES LIMITED

Defendant

On the papers:

Counsel:

E St John for Plaintiff

D Bullock for Defendant

Judgment:

8 August 2018

JUDGMENT OF CHURCHMAN J (COSTS)

[1]                  I gave a judgment dated 22 June 2018 in which I awarded the plaintiff damages of $130,000. I invited the parties to agree costs but, in the absence of agreement, the plaintiff had 14 days to file submissions and the defendant 14 days from service of the plaintiff’s submissions to reply.1

[2]                  The plaintiff seeks costs and disbursements of $62,908.25 in relation to the proceedings and interest on the judgment sum from the date of the breach to the date of judgment totalling $12,460.00. He also seeks an uplift of 50 per cent on scale costs.

[3]                  The defendant, while taking no issue with the payment of disbursements and accepting that the plaintiff is entitled to costs following the event, disputes several aspects of the costs claim. It submits that:

1      Thompson v Continental Car Services Ltd [2018] NZHC 1507 at [265].

THOMPSON v CONTINENTAL CAR SERVICES LIMITED (COSTS) [2018] NZHC 2009 [8 August 2018]

(1)a “B” time allocation is not appropriate for all steps claimed and some items should be allocated to time band “A” because they involved a comparatively small amount of time;

(2)as the proceedings should have been brought in the District Court, costs should only be awarded on the District Court scale;

(3)certain steps in the proceeding resulted in it incurring wasted costs that should be taken into account; and

(4)although the hearing was scheduled for 4 days, the parties were not in Court for that full time and an appearance costs allocation of 4 days is, therefore, not justified.

District Court costs

[4]                  The defendant submits that, as the proceedings should have been brought in the District Court, the plaintiff’s costs entitlement should be calculated under the District Court Rules. This submission is made in reliance on r 14.13 of the High Court Rules, which provides as follows:

14.13   Proceedings within jurisdiction of District Court

Costs ordered to be paid to a successful plaintiff must not exceed the costs and disbursements that the plaintiff would have recovered in the District Court if the proceeding could have been brought there, unless the court otherwise directs.

[5]                  The plaintiff says it was necessary to bring the proceedings in the High Court because specific performance was sought which could not be ordered by the District Court for an issue in excess of its monetary jurisdiction. However, in his oral opening submissions the plaintiff confirmed that specific performance was no longer being sought and that he was only seeking damages in the sum of $130,000. A claim for a sum of that amount would have been well within the jurisdiction of the District Court.

[6]                  The plaintiff argues that it is quite conventional to leave an election between specific performance and damages until opening submissions. In response to the defendant’s assertion that specific performance could never have succeeded as it was impossible for the defendant to perform the alleged contract as it did not own the vehicle,2  the plaintiff states that there is no legal proposition to say that a plaintiff

2      Relying on McKay v Collins Paper Haulage Ltd (2006) 7 NZCPR 954 (HC) at [57] per Asher J: “Specific performance cannot be ordered while land is vested in a third party… All parties accept that I cannot order specific performance when this will require co-operative actions by such a third

cannot seek specific performance of a contract for the purchase of goods owned by a third party. In any case, the plaintiff asserts that it did not seek specific performance of that precise vehicle but just of one identical and no independent evidence was produced saying that this would have been impossible to perform.

[7]                  Even though the plaintiff did not seek recovery of land and the case was not directly on all fours with McKay v Collins Paper Haulage, the notion that the Court might have ordered specific performance when the defendant did not own the vehicle in question was unrealistic in the extreme. Neither is the plaintiff assisted by the argument that he wanted specific performance by way of supply of a similar vehicle. The evidence was that this vehicle, with its particular specifications, was unique. There was no way a similar vehicle could have been obtained, even if the defendant had tried to get one. Specific performance will not be ordered when compliance is not possible.

[8]                  It was entirely appropriate that the claim for specific performance was abandoned. It should not have been brought. The proceedings as actually advanced  at trial should have been brought in the District Court. It is, therefore, my view that this is an appropriate case in which to order that costs should be calculated under the District Court Rules.

Step allocations

[9]                  The defendant submits that the plaintiff’s costs claims for a number of steps ought to be allocated the time band “A” because they involved a comparatively small amount of time:3

(a)List of documents on discovery (Step 20) – the plaintiff’s discovery contained only 46 open documents which is a very small amount of

person.” It also relied on the principle that equity will not enforce that which cannot be undone: Andrew Butler (ed) Equity and Trusts in New Zealand (2nd ed, Thomson Reuters, Wellington, 2009) at [24.4.12]; Mortimer v Baylis (1991) 1 NZ ConvC 190,846 at 190,850.

3The equivalent steps under the District Court Rules, Schedule 3 are: HCR Step 20 = DCR Step 9.5

HCR Step 21 = DCR Step 9.7 HCR Step 31 = DCR Step 9.13

documents for a civil proceeding, requiring a comparatively small amount of time to prepare.

(b)Inspection of documents (Step 21) – the defendant’s discovery contained only 48 documents, which is a very small amount of documents for a civil proceeding, requiring a comparatively small amount of time to inspect.

(c)Plaintiff’s preparation of list of issues, authorities, and common bundle (Step 31) – the common bundle was a little over 100 pages, which is very short for a civil proceeding, requiring a comparatively small amount of time to prepare (it simply included the bulk of the discovered documents). Additionally, many of the authorities contained in the plaintiff’s bundle of authorities related to its claim for specific performance, which was not pursued at trial.

[10]              The plaintiff did not address the issue of step allocations in his reply submissions, although he did state that, where an issue was not addressed, it should not be seen as accepting the point. However, in the absence of argument to the contrary, the defendant’s submissions on step allocations appear reasonable and are, therefore, accepted, with the District Court Rules equivalents of steps 20, 21 and 31 to be allocated time band “A”.4

Trial time

[11]              The plaintiff is claiming an appearance costs allocation of four days. However, while the hearing was scheduled for four days, it was adjourned for much of Tuesday afternoon to facilitate expert conferencing, and the parties were not in Court at all on Friday morning.

[12]              Step 34 in Schedule 3 of the High Court Rules refers to “the time occupied by the hearing measured in quarter days”. While I am prepared to allow appearance costs for the Tuesday afternoon, as counsel were required to attend the afternoon session

4      Step 9.6 will also be allocated time band “A”.

(albeit for a brief period of time and they did not actually attend at the expert conference), I will not allow appearance costs for Friday morning. Although the plaintiff may have spent the Friday morning preparing for trial, trial preparation has a separate costs allocation (step 33), and awarding costs for this time under appearance costs would constitute double-dipping.

[13]The plaintiff is, therefore, allowed to claim an appearance costs allocation of

3.5 days.

Increased costs

[14]              Under r 14.6(3)(b)-(d) of the High Court Rules, the Court may order a party to pay increased costs in certain circumstances:

14.6     Increased costs and indemnity costs

…

(3)       The court may order a party to pay increased costs if—

…

(b)the party opposing costs has contributed unnecessarily to the time or expense of the proceeding or step in it by—

(i)      failing to comply with these rules or with a direction of the court; or

(ii)     taking or pursuing an unnecessary step or an argument that lacks merit; or

(iii)    failing, without reasonable justification, to admit facts, evidence, documents, or accept a legal argument; or

(iv)    failing, without reasonable justification, to comply with an order for discovery, a notice for further particulars, a notice for interrogatories, or other similar requirement under these rules; or

(v)     failing, without reasonable justification, to accept an offer of settlement whether in the form of an offer under rule 14.10 or some other offer to settle or dispose of the proceeding; or

(c)the proceeding is of general importance to persons other than just the parties and it was reasonably necessary for the party claiming costs to bring it or participate in it in the interests of those affected; or

(d)some other reason exists which justifies the court making an order for increased costs despite the principle that the determination of costs should be predictable and expeditious.

[15]The corresponding provision in the District Court Rules is as follows:

14.6     Increased costs and indemnity costs

…

(3)       The court may order a party to pay increased costs if—

…

(b)the party opposing costs has contributed unnecessarily to the time or expense of the proceeding or step in the proceeding by—

(i)      failing to comply with these rules or a direction of the court; or

(ii)     taking or pursuing an unnecessary step or an argument that lacks merit; or

(iii)    failing, without reasonable justification, to admit facts, evidence, or documents or accept a legal argument; or

(iv)    failing, without reasonable justification, to comply with an order for discovery, a notice for further particulars, a notice for interrogatories, or any other similar requirement under these rules; or

(v)     failing, without reasonable justification, to accept an offer of settlement, whether in the form of an offer under rule 14.10 or some other offer to settle or dispose of the proceeding; or

(c)the proceeding is of general importance to persons other than just the parties and it was reasonably necessary for the party claiming costs to bring the proceeding or participate in the proceeding in the interests of those affected; or

(d)some other reason exists that justifies the court making an order for increased costs despite the principle that the determination of costs should be predictable and expeditious.

[16]              The plaintiff seeks an increase of 50 per cent on scale costs on the grounds that the defendant:

(a)failed, without reasonable justification, to accept an offer of settlement in the form of an offer under r 14.10;

(b)failed, without reasonable justification, to comply with an order for discovery; and

(c)took or pursued an unnecessary step or an argument that lacks merit.

Settlement offers

[17]              When assessing whether the failure to accept a settlement offer is reasonable, the Court must assess a broad range of factors including: the offer, its timing, the reasonable expectations of the party who refuses the offer, the preparation for trial already undertaken, the information available to the party receiving the offer, and whether the parties were in a position to assess the merits when the offer was received.5 The reasonableness of a party’s rejection of an offer must be assessed at the time the offer was declined, not against the subsequent result.6

[18]              On 16 May 2018, the defendant offered to settle for $20,000 which was predicated, the defendant said, on its unrecoverable costs. The plaintiff submits that this was an unreasonable rejection by the defendant that it had any risk at trial. However, such an offer is irrelevant to the question of costs. It is not an offer flowing from the plaintiff to the defendant that the defendant rejected. The defendant cannot be penalised for making a settlement offer.

[19]              In a letter of 17 May 2018, the plaintiff offered to settle for $130,000, to which the defendant responded the following day, repeating its offer from 16 May.

[20]              This letter of 17 May was not in the form of a Calderbank letter. It did not actually contain an offer but instead invited the defendant to make an offer to the plaintiff, with no guarantee that such an offer would be accepted by the plaintiff were it to be made. As the defendant has pointed out, declining to make an offer, as invited by that letter, is not a failure to accept an offer of settlement.7 Moreover, the premise of the offer was expert evidence which had not yet been served.

5      Weaver v HML Nominees [2016] NZHC 473 at [30].

6      Sullivan v Wellsford Properties Ltd [2018] NZHC 129 at [38].

7      Nandro Homes Ltd v Datt HC Auckland CIV-2008-404-6676, 13 July 2009 at [13].

[21]              The plaintiff then made an offer of $85,000 on 25 May 2018, to which he received no reply. This letter, though, was received by the defendant at 3.14pm on Friday 25 May and remained open for just over 1 working day (until 4pm on Monday 28 May).

[22]              Although the plaintiff ultimately recovered more than $85,000 at trial, in the circumstances it was not unreasonable for the defendant to have rejected this offer. It was made just one week out from trial and was only open for one working day; a significant amount of preparation for the trial would have already been undertaken; and the defendant, having been unconvinced by the evidence of Mr Hatch, an expert valuer called for the plaintiff, felt it was in a relatively strong position. Given the information available to the defendant at the time the offer was made, it was not unreasonable for it to decline the offer.8

Discovery issues

[23]              In terms of failing to discover relevant documents, the plaintiff notes that the defendant failed to discover:

(a)documents relating to its communications with Malaysia and/or Australia when those documents were plainly relevant to the defendant’s assertions of the difficulties in obtaining the vehicle; and

(b)sales figures which were plainly relevant and which had been supplied to at least one of the defendant’s expert witnesses.

[24]              The plaintiff further notes that, at [232] of my judgment, I concluded that the defendant had deliberately failed to disclose documents which would not have assisted its case. The plaintiff submits that the absence of empirical data meant less reliable evidence had to be relied upon which took up much of the Court’s time, leading to increased time and costs. The plaintiff also claims that the defendant called evidence reliant upon information not disclosed to the other party or to the Court.

8      Strachan v Denbigh Property Ltd HC Palmerston North CIV-2010-454-222, 3 June 2011 at [21].

[25]              The defendant responds to that criticism by stating that it believed that the case advanced by the plaintiff, as pleaded, was that the market value of the vehicle was its MSRP, and that the plaintiff never took issue with its discovery until cross- examination of the defendant’s witnesses, nor did he seek particular discovery. While the defendant acknowledges the criticism of its discovery by the Court, it submits that the discovery issues were caused in part by confusion created by how the claim was pleaded and substantial changes in the plaintiff’s theory of loss at trial. If the plaintiff had raised any of its discovery issues earlier than during cross-examination, the issues could have been addressed well in advance of trial. Finally, the defendant argues that it is not clear that had discovery been made of the documents now identified by the plaintiff, that the time or expense of the trial would have materially changed.

[26]              While this failure to disclose documents most likely did increase the time spent in determining the plaintiff’s loss, it is not my view that this was such as to warrant an uplift in costs. There is force in the submission that if the plaintiff had been dissatisfied with the defendant’s discovery, the proper way to address that would have been to make application for further and better discovery. The difficulties with determining the plaintiff’s loss also flowed from the fact that the plaintiff, even during the course of the hearing, changed his theory of loss.

Lack of merit/refusal to accept legal argument

[27]              The plaintiff submits that the defendant’s case throughout lacked objective analysis and pursued untenable arguments, all of which occupied much of the time at hearing.

[28]              The defendant, however, does not accept that its arguments were meritless and not properly arguable, noting that a party that is ultimately unsuccessful is nevertheless entitled to defend a claim against it.9 It further notes that the ordinary consequence of an unsuccessful defence is scale costs, relying on the High Court’s decision in Gough v Strahl:10

9      Bloor v IAG New Zealand Ltd CIV-2004-463-425 HC Rotorua, 3 February 2011 at [18].

10     Gough v Strahl [2014] NZHC 1038 at [23].

The ordinary consequence of advancing an unsuccessful claim or defence is an  adverse  award  of  scale  costs.  An  important  principle,  expressed  in  r 14.6(3)(d), is that the determination of costs should be predictable and expeditious. That principle would not be promoted if it was routinely necessary to embark on a further analysis of the overall position taken by the unsuccessful party, to decide whether that position was unmeritorious. An award above scale because of an overall lack of merit is, in general terms, justified  only  in  an  obvious  case,  which  falls  to  be  considered  under   r 14.6(4)(a) for indemnity costs.

[29]              It is my view that it is not clear that the defendant’s arguments were without merit and, as such, it was entitled to defend the claim. I am not prepared to award an uplift in costs on this basis.

Wasted costs

[30]              The defendant submits that it incurred wasted costs in relation to Mr Hatch’s late evidence and the plaintiff’s abandoned adjournment application that should be taken into account.

[31]              Mr Hatch’s brief was served a little over a week from trial and took a different approach to determining loss from that pleaded, requiring the defendant to urgently re-brief all but one of its witnesses. The defendant submits that, had Mr Hatch’s evidence been served in accordance with the timetable fixed by the Court, the defendant would only have needed to brief its witnesses once. This wasted cost is further amplified by the fact that Mr Hatch, in his evidence-in-chief, retreated almost entirely from his brief of evidence, meaning that the defendant’s supplementary briefs became largely redundant.

[32]              The defendant therefore seeks a set-off of the costs arising from having to re- brief its witnesses, noting that the jurisdiction of the court to make orders in relation to wasted costs is well established, and orders have been made in respect of costs arising from redoing briefs.11

11 See, for example, Thomson v Earthquake Commission [2015] NZHC 1037 at [7]-[8]; Jeffreys v Morgenstern [2013] NZHC 1361 at [31]-[32]; and Opua Coastal Estate Ltd (in liq) v Mulholland [2014] NZHC 1467 at [21].

[33]              The plaintiff also made an informal application by memorandum to adjourn or split the trial because Mr Hatch was going to be on holiday and therefore unavailable to give evidence at trial or participate in an experts’ conference. While this informal adjournment application was subsequently withdrawn, the defendant incurred costs filing a memorandum on this issue at short notice and also incurred costs filing a memorandum seeking to enforce Associate Judge Sargisson’s directions for an experts’ conference. The defendant therefore seeks a set-off of costs for these memoranda.

[34]              The defendant also submits that it is entitled to costs for its statement of defence to the plaintiff’s amended statement of claim, which arises regardless of outcome of the proceeding.

[35]              While the plaintiff admits that the argument that the lateness of Mr Hatch’s evidence and that this evidence changed at trial which caused increased costs and delays, meaning that the defendant is entitled to costs for preparing supplementary briefs in response, may have force on its face, it overlooks that the root cause of late and shifting valuation evidence was the defendant’s deliberate decision not to reveal its records. Mr Hatch should have been entitled to his valuation on empirical evidence.

[36]              I accept that the defendant is entitled to costs for its statement of defence to the plaintiff’s amended statement of claim, but as to the other wasted costs, it is my view that these were incurred as a direct result of the defendant failing to discover documents necessary for Mr Hatch to arrive at an accurate valuation figure.

Interest

[37]              Although the plaintiff sought interest in the amended statement of claim, it was not awarded by the Court, which the plaintiff assumes was an oversight. However, the power to award interest is discretionary, such discretion to be exercised as the justice of the case requires.12

12     Worldwide NZ LLC v NZ Venue and Event Management Ltd [2014] NZSC 108, [2015] 1 NZLR 1 at [70] and [76].

[38]              The Supreme Court in Worldwide NZ LLC v NZ Venue and Event Management Ltd addressed the principles applying to awards of interest under s 87 of the Judicature Act 1908, which applies in this proceeding, finding that:13

The rationale under s 87(1) for the awarding of interest is that the defendant has had the use of money which should have been available to the plaintiff for that period and that the plaintiff should be compensated for that.

[39]              This case, however, involved damages for loss of bargain in a claim for an undelivered good for which the plaintiff never paid. The defendant has, therefore, never had the use or benefit of the plaintiff’s money, save for the deposit. As stated in my judgment, the purpose of the damages award was to put the plaintiff in the position he would have been in had the contract been performed.14 The award of $130,000 was the difference between the contract price and the market value of the vehicle in question at the time the contract was formed. Had the contract been performed, rather than increasing, the difference between the contract price and the market value would have depreciated over time. It is my view, therefore, that awarding interest in these circumstances would not be appropriate.

Conclusion

[40]Accordingly, costs under the District Court Rules of $25,187 (as per schedule

1) and disbursements of $17,639.25 are awarded in favour of the plaintiff. There is to be no uplift on costs.

[41]No interest is awarded on the judgment sum.

Churchman J

Solicitors:

Vodanovich Law Limited, Auckland for Plaintiff

Lee Salmon Long, Barristers and Solicitors, Auckland for Defendant

13     At [23], citing Day v Mead [1987] 2 NZLR 443 (CA) per Cooke P at 452-453 and Somers J at 463-464.

14     Thompson v Continental Car Services Ltd, above n 1, at [255].

Schedule 1 - Plaintiff’s costs under District Court Rules

Item	Description	Cat 2	Time A	Time B	Total
1	Preparing statement of claim (receiving instructions, researching facts and law, and filing and serving that document)	$1,780	1.5	$2,670
9.5	List of documents on discovery	$1,780	0.5	$890
9.6	Production of documents for inspection	$1,780	0.5	$890
9.7	Inspection of documents	$1,780	0.4	$712
9.8	Filing and serving memorandum in anticipation of judicial conference	$1,780	0.25	$445
9.9	Appearance at judicial conference	$1,780	0.3	$534
9.16	Sealing order or judgment	$1,780	0.2	$356
17.1	Preparation for hearing	$1,780	7	$12,460
18.1	Appearance at hearing	$1,780	3.5	$6,230
$25,187