Triastra Limited v The Proprietors of Taharoa "C" Block
[2021] NZHC 251
•23 February 2021
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2015-419-318
[2021] NZHC 251
BETWEEN TRIASTRA LIMITED
Plaintiff
AND
THE PROPRIETORS OF TAHAROA “C” BLOCK
Defendant
Hearing: On the papers Appearances:
BD Gustafson and FD Porteous for plaintiff AJ Horne and JJK Spring for defendant
Judgment:
23 February 2021
JUDGMENT OF FITZGERALD J
[as to costs]
This judgment was delivered by me on 23 February 2021 at 2.30pm, pursuant to Rule 11.5 of the High Court Rules.
Registrar/Deputy Registrar
Date……………
Solicitors: Rainey Law, Auckland (G Grant)
MinterEllisonRuddWatts, Auckland
TRIASTRA LIMITED v THE PROPRIETORS OF TAHAROA “C” BLOCK [2021] NZHC 251 [23 February 2021]
Introduction
[1] In these proceedings, the plaintiff (Triastra) originally sought damages from the defendant (Taharoa) of some $2 million, largely comprising what it said was a project “success fee” due to it. By the time of the hearing before me, however, Triastra had abandoned its claim in relation to the success fee, which reduced the claim to approximately $155,000.
[2] In my substantive judgment determining the claims, I concluded that Taharoa had breached the relevant contractual arrangement between the parties by giving two weeks’ notice of termination of that arrangement, rather than the required one month’s notice.1 Triastra was accordingly entitled to damages, though as I observed in my judgment, they would likely be relatively nominal in amount. In the event, the parties agreed damages of approximately $7,900.00.
[3] In the course of determining Triastra’s contractual causes of action, I rejected a number of arguments advanced on its behalf as to the status and nature of the arrangements between the parties, and I also dismissed Triastra’s alternative cause of action in estoppel.
[4] I encouraged the parties to agree costs. Given the overall result in the litigation, I gave an indicative and non-binding view that an appropriate outcome might be that costs lie where they fall. The parties have been unable to agree on costs. Memoranda have been filed and this judgment accordingly determines what costs are payable.
Summary of the parties’ submissions
Triastra’s submissions
[5] Referring to authorities such as AL Barnes v Timetalk2 and Water Guard NZ Limited v Midgen Enterprises Limited,3 counsel for Triastra notes that (reduced) scale costs were awarded in those cases to the plaintiff, even though the plaintiff was only
1 Triastra Ltd v Proprietors of Taharoa "C" Block [2019] NZHC 2230.
2 AL Barnes Ltd v Time Talk (UK) Ltd [2003] EWCA Civ 402.
3 Water Guard NZ Ltd v Midgen Enterprises Ltd [2017] NZCA 36.
partially successful on its pleaded claims (and failed on other claims). This is on the basis that success to a limited extent is nevertheless success, and it would be wrong in principle to award costs to the “losing” party.
[6] On the basis it was partially successful on one of its causes of action, Triastra says it was the successful party overall and thus costs should follow the event in the ordinary way. Recognising, however, that it was unsuccessful on a number of aspects of its claims, Triastra proposes a 2B costs award, but reduced to 33.3% of scale. On Triastra’s calculations, this results in a costs award in its favour of $25,384.83 (excluding GST and disbursements).
[7] Counsel submits that such an award is appropriate because at trial, Taharoa did not call evidence from what Triastra characterises as a key witness. This “unexplained failure” meant that the best evidence on crucial points had to be inferred from other witnesses. Counsel further submits that to establish its position, Taharoa called two witnesses with little or no direct knowledge about the events in question, a matter on which I commented in my substantive judgment.4 Counsel for Triastra says this is relevant to the Court’s overall discretion on costs, in that it counts against any further reduction in the scale costs award in its favour.
[8] Triastra acknowledges that Taharoa made a “without prejudice save as to costs” (Calderbank) offer in July 2017 to pay one week’s consultation fees in full and final settlement of Triastra’s claims. This would have resulted in a payment of about half of what Triastra secured through trial, thus around $4,000. Counsel submits that as of July 2017, Triastra had incurred considerable costs in pleading its claim, completing discovery and inspection and arguing a security for costs application. Counsel notes that had Taharoa hypothetically admitted liability for the one week of consultancy fees and taken no further steps at that time, the plaintiff would have been entitled to costs on a 2B basis of $30,328.00 (plus GST and disbursements). Triastra accordingly submits that the Calderbank offer ought not to affect the costs award in its favour, and does not justify a costs award in Taharoa’s favour.
4 Triastra Ltd v Proprietors of Taharoa "C" Block [2019] NZHC 2230 at [17].
Taharoa’s submissions
[9] Taharoa submits that all factors point towards a costs award in Taharoa’s favour.
[10] First, counsel submits that all Triastra’s pleaded claims failed at trial, the only one succeeding being a very small claim for a two week reasonable notice period that was introduced (with the leave of the Court) for the first time on the third day of trial. Counsel for Taharoa seeks to distinguish authorities such as Water Guard on the basis they were predicated on pleaded claims succeeding in part at trial, whereas in this case, Triastra’s success was on a claim introduced mid-trial.
[11] Counsel further notes that Triastra’s damages award represents around 5% of the total value of its claim at the start of the trial, and only 0.03% of the value of Triastra’s original claim when filed in 2015. Counsel submits that claims of that type ought to be brought in the Disputes Tribunal and on these amounts, Triastra cannot claim to be the “winner” overall. On this basis, counsel says the position is quite different to that in cases such as Water Guard, in which the plaintiff had partial but nevertheless meaningful success, obtaining an award of damages which totalled some 63% of the total claim.
[12] As to its Calderbank offer, counsel emphasises that the offer was made relatively early in the proceedings (unlike the offer in Water Guard, which was made just before trial), and in the event proved to be very close to the ultimate value of the judgment.
[13] Counsel also refers to Geary v Accident Compensation Corporation, which is said to be analogous to the present circumstances.5 In that case, Mr Geary succeeded on only about 20% of his claim, and ACC had to undertake significant work addressing the claims which resulted in extended hearing time and wasted costs. ACC made a Calderbank offer of $15,000, which Mr Geary “beat” in a $21,135.84 judgment in his favour on appeal. As Mr Geary had succeeded on only a small proportion of his claim, and even though the settlement offer was slightly less than the amount awarded, the
5 Geary v Accident Compensation Corporation [2014] NZHC 1037.
High Court awarded ACC one half of its costs from the date of the offer. Counsel for Taharoa submits that the facts in the present case point even more strongly to an award in Taharoa’s favour, as Triastra succeeded in a much lower percentage of its claim.
[14] Counsel for Taharoa also emphasises that Triastra caused Taharoa substantial wasted costs by pleading claims that were either abandoned shortly before trial or that failed at trial. Taharoa also submits that it did not increase costs by its decision to respond to Triastra’s evidence with evidence of its own (namely the two witnesses referred to at [7] above).
[15]On this basis, Taharoa says a costs award in its favour should follow. It seeks:
(a)2B scale costs totalling $65,450.50, or alternatively;
(b)if the Court is minded to award costs only from the point of the July 2017 settlement offer, 50 per cent of 2B scale costs from the date of that offer.
[16] If costs are awarded to Triastra, Taharoa says Triastra has incorrectly calculated scale costs and that any scale costs award would need to be reduced accordingly.
Applicable principles
General principles
[17] The starting principle is that the successful party is entitled to an award of costs in the ordinary way. This is so even though there has been partial, and indeed relatively modest, success only. As the Court of Appeal stated in Weaver v Auckland Council, success on more limited terms is still success.6 In that context, the Court referred to the Supreme Court’s judgment in Shirley v Wairarapa District Health Board, in which the Court made clear that “the loser and only the loser pays, unless there are exceptional reasons”.7 The Court in Weaver stated:
6 Weaver v Auckland Council [2017] NZCA 330, (2017) 24 PRNZ 379 at [26].
7 Shirley v Wairarapa District Health Board [2006] NZSC 63, [2006] 3 NZLR 523 at [15].
[21] Recourse may then be had in search of such reasons to r 14.7(d) of the High Court Rules, which gives the Court discretion “despite rr 14.2 to 14.5” to refuse to award costs to the successful party if, notwithstanding overall success, “that party has failed in relation to a cause of action or issue which significantly increased the costs of the party opposing costs.” The same rule also empowers the Court to reduce costs in such circumstances.
[18] In Weaver, Ms Weaver had succeeded in her claims but only to roughly half the extent pleaded. She had also failed to accept a Calderbank offer substantially greater than the amount she was awarded at trial. The offer was close to the total amount claimed, and twice what was ultimately awarded in the High Court.8 For the period up to the Calderbank offer, the Court of Appeal concluded that Ms Weaver was entitled to scale costs, but with the award reduced by 50 per cent to reflect that she had failed on a number of its claims. As to the period following the Calderbank offer, the Court agreed with the High Court’s analysis that on orthodox principles, Auckland Council was entitled to costs following the making of the offer. The Court also agreed with the High Court’s conclusion that the Council was entitled to a 50 per cent uplift, given the size of the Calderbank offer (vis-à-vis the claims) and thus Ms Weaver’s unreasonable behaviour in refusing to engage meaningfully in settlement initiatives.
[19] In Water Guard, the High Court found liability established as to 25 per cent of the plaintiff’s claim, and the case settled for approximately $67,500 on the eve of the damages quantum hearing.9 That was against an original claim of $511,100. The defendant had made pre-liability trial Calderbank offers of $40,000 and $50,000 respectively, the latter being reasonably close to what was ultimately agreed to be payable. The High Court had awarded the defendant 75 per cent of its costs but declined to award the plaintiff 25 per cent of its costs, given its unreasonable approach to settlement. For the period following the liability trial but pre-settlement, the High Court ordered that costs lie where they fell.
[20] On appeal, the Court of Appeal quashed the award of costs in favour of the defendant, on the basis that the award was contrary to the principle that costs follow the event.10 It held that the defendant was properly characterised as the unsuccessful
8 Weaver v HML Nominees Ltd [2015] NZHC 2080 at [197]-[199].
9 Water Guard NZ Ltd v Midgen Enterprises Ltd [2016] NZHC 2347.
10 Water Guard NZ Ltd v Midgen Enterprises Ltd [2017] NZCA 36.
party, “that is, the party which was adjudged liable to pay money to the other”.11 The Court went on to state that:12
We disagree with the Judge that WGL lost [its status as successful party] because it failed on most of its claims which in turn occupied most of the trial. That factor can be properly recognised in other ways, such as reducing costs otherwise payable or ordering costs to lie where they fall.
Calderbank offers
[21] The effect of Calderbank offers on costs is specifically addressed in r 14.11. Pursuant to r 14.11(3), a party who makes a Calderbank offer that exceeds the amount awarded at trial is presumptively entitled to their costs for steps taken after the offer was made. This is, however, subject to the Court’s overall discretion.13 And where a Calderbank offer is less than but “close” to the amount awarded at trial, r 14.11(4) permits (though does not mandate) such an offer being taken into account on the question of costs.
[22] In Craig v Donaldson, it was held that the effect of r 14.11(4) was not to entitle the unsuccessful party to costs, but rather to enable the court to discount or cancel out the costs that the successful party would otherwise have been entitled to.14 It is certainly clear that unless the offer exceeds the amount secured at trial, the party making the offer has no presumptive entitlement to an award of costs. But I am not persuaded that the effect of r 14.11(4) is limited to discounting or cancelling out costs otherwise payable to the successful party. That ability is already provided for through r 14.7, which permits a court to reduce (including to zero) costs otherwise payable to the successful party, including for failing, without reasonable justification, to accept a Calderbank offer.15 For that reason, I consider that in an appropriate case, r 14.11(4) permits the Court to make a costs award in favour of the unsuccessful party, where it has made a settlement offer that was close to (but did not exceed) the actual outcome. In such a case, all relevant circumstances must be taken into account.
11 At [13].
12 At [13].
13 Rule 14.11(1).
14 Craig v Donaldson [2012] NZHC 3100 at [17].
15 Rule 14.7(f)(v).
[23] Geary v Accident Compensation Corporation, as relied on by Taharoa, is an example of an unsuccessful party being awarded costs as a result of r 14.11(4).16 As noted earlier, Mr Geary had succeeded to about 20 per cent of his claims, though Gendall J observed that “the success which the appellant had in this proceeding was very largely if not entirely due to the efforts and co-operation of the respondent and the independent accountant appointed by the Court…”.17 The Judge also noted that for virtually all of the proceeding, Mr Geary had been self-represented. For these reasons, the Judge stated that “the proper starting point is that costs lie where they fall.”18
[24] Taking into account the Calderbank offer made by the respondent, which was less than but “close” to the amount ultimately awarded to Mr Geary, Gendall J stated:
[102] Applying these principles here, it does seem that the Court is unlikely to be in a position where it should directly take into account and apply the April 2013 Calderbank offer made by the respondent in reaching a decision to award costs to the respondent, as the amount of that offer did not exceed the final recovery the appellant is now to achieve. But in my view the true benefit or value of that offer is close to the ultimate judgment the applicant will obtain here.
[103]And, other matters need also to be considered here as well.
[25] Gendall J accordingly also took into account a subsequent offer made by the respondent which, although not strictly a Calderbank offer, was higher than the damages award to Mr Geary. The Judge also took into account other factors, including that Mr Geary had made claims which had been “entirely unsupportable and unreasonable”,19 and the work and effort the respondent had put into the proceedings. The combination of these factors led Gendall J to make a costs award in the respondent’s favour of 50 per cent of scale costs for steps taken after its Calderbank offer.
16 Geary v Accident Compensation Corporation [2014] NZHC 1037.
17 At [86].
18 At [88].
19 At [107].
Discussion
[26] Applying these principles to the present case, I conclude that Triastra was the successful party overall, given it ultimately secured a damages award in its favour. But that award was so nominal, particularly against its original claim of some
$2 million, that the appropriate starting point is that costs are to lie where they fall. This is reinforced by the shifting nature of Triastra’s claim, including its abandonment of a very significant aspect of its claim four months before trial; that it was unsuccessful on most aspects of its claim (which undoubtedly resulted in Taharoa incurring significantly increased and wasted costs); and that the point on which it was successful was only added to the pleading (with the Court’s leave) part way through the substantive hearing itself.
[27] What then of Taharoa’s Calderbank offer? Does it provide sufficient grounds to make an award of costs in Taharoa’s favour?
[28] As a preliminary point, I do not consider it appropriate to take the Calderbank offer into account across the whole of the proceedings, i.e. in the context of costs for steps taken by the parties before it was made. The general thrust of r 14.11 is that a Calderbank offer which exceeds the amount secured by a plaintiff at trial will primarily be relevant to the costs of steps taken after the offer has been made.20 It seems hard to justify an offer which is equal to or less than the amount awarded at trial having a broader effect.
[29] Plainly Taharoa has no presumptive entitlement to costs for steps taken after its offer was made. But in my view, the offer was “close” to the amount actually secured by Triastra and thus may be taken into account pursuant to r 14.11(4). Other relevant factors that also ought to be taken into account are that:
(a)In a judgment on security for costs in June 2017 (so shortly before the Calderbank offer), Doogue J indicated that there might be difficulties with some aspects of Triastra’s contractual claims.21 Triastra had thus
20 High Court Rules 2016, r 14.11(3).
21 Triastra Ltd v The Proprietors of Taharoa “C” Block [2017] NZHC 1229 at [102].
had a “signal” from the Court at a relatively early stage that the merits of its claims might not be particularly strong.
(b)It seems that for some time after this, Triastra maintained its view that it was entitled to significant contractual damages, evidenced by, for example, its offer in April 2018 (at a time when it said its “main claims” totalled some $1.1 million) to resolve the proceedings upon payment by Taharoa of $595,000, plus a contribution of $220,000 towards “interest and legal costs”. It was not until December 2018 that it made a further Calderbank offer in what might be considered a more realistic amount, namely $100,000. I accept, however, that Triastra was nevertheless prepared to consider settling at differing times during the proceedings, and thus unlike the scenario existing in Weaver. I am also not aware of Taharoa making any further settlement offers other than that made in July 2017.
(c)Some of Triastra’s claims were, in my view, misconceived, and as noted, the only successful claim was added part way through the substantive trial.
(d)Taharoa’s Calderbank offer, in the context of the scale of the claims then on foot, effectively amounted to a “walk-away” offer. I am conscious of observations in authorities such as Easton Agriculture Ltd v Manawatu-Wanganui Regional Council (in which increased costs were sought on the basis of a failure to accept a Calderbank offer) that the reasonableness of a rejection of a settlement offer is to be assessed at the time of the rejection, not only against the subsequent result at trial.22 As Kós J (as he then was) observed in Easton, “the Court is conventionally cautious in awarding increased costs where the successful party had made only a walk-away (or “drop hands”) offer”.23 This is because such an offer effectively values the opponent’s claim,
22 Easton Agriculture Ltd v Manawatu-Wanganui Regional Council, HC Palmerston North CIV- 2008-454-31, 22 December 2011 at [12].
23 At [16].
the opponent’s prospects of success, and their own litigation risk all at nil. Kós J observed “[i]t will be a rare case where it was unreasonable for a plaintiff to take a more optimistic view of their own prospects than ‘zero percent’”.24
[30] Taking Taharoa’s Calderbank offer and the above factors into account, I am not persuaded this is one of those cases where costs ought to be awarded to the unsuccessful party. In the event, Triastra secured an amount of damages that, while nominal, was more than Taharoa had offered to pay. Triastra no doubt incurred not insignificant costs of its own in doing so, including in the period prior to the offer being made. Further, for the reasons set out in Easton, it was not unreasonable in July 2017 for Triastra to consider its claims had more than a zero per cent chance of success. And at least in the more latter stages of the proceedings, it was prepared to make a settlement offer that was a more realistic reflection of the litigation risks involved. I am also conscious not to “double count” the effect of those factors which mean it is appropriate to reduce Triastra’s own costs award to zero.
Result
[31] For these reasons, costs are to lie where they fall. The exception to this is an amount of $4,237 in costs plus disbursements of $187, said in Taharoa’s costs memorandum to be costs to which it is “entitled” (and which have apparently been agreed in principle to be payable to Taharoa), plus costs (said to be “not yet determined”) for repleading to Triastra’s amended statement of claim. Taharoa’s costs memorandum and supporting materials do not provide sufficient information for me to make any order as to costs on these matters.25
[32] Ordinarily, Taharoa ought to have put forward sufficient information for me to deal with these amounts in this judgment. That said, to the extent agreement has been reached as to the payment of these costs, and/or that Taharoa is entitled under the Rules
24 At [17].
25 For example, in correspondence annexed to an affidavit filed in support of Taharoa’s costs submissions the amount that appears to have been agreed “in principle” between counsel is $1,561, rather than $4,237.
to the costs on repleading, my order that all other costs are to lie where they fall ought not to cut across these matters.
[33] I strongly encourage the parties to finalise this aspect of costs without further recourse to the Court. The amounts are, in the scheme of things, minimal. There has also been significant delay already in costs being resolved.
[34] In the event the parties cannot agree, however, a joint memorandum is to be filed within 10 working days of this judgment setting out each party’s position on the costs referred to at [31] above, following which I will determine the matter on the papers.
Fitzgerald J
0
9
0