Tudhope v McEwan (2003) Limited - [2010] NZCA 166

IN THE COURT OF APPEAL OF NEW ZEALAND
CA416/2009
[2010] NZCA 166
BETWEENSHARP TUDHOPE

Appellant

ANDMCEWAN (2003) LIMITED

Respondent

Hearing:20 April 2010

Court:Ellen France, Gendall and Cooper JJ
Counsel:F B Barton for Appellant

J M Holmes for Respondent

Judgment:5 May 2010 at 10.30 am

JUDGMENT OF THE COURT

AThe appeal is allowed and the question of costs in the High Court is remitted back to that Court.
BNo order for costs in this Court.

REASONS OF THE COURT
(Given by Ellen France J)

Introduction
[1]        The respondent, McEwan (2003) Ltd (McEwan), was buying a motel business from another company, Donnelly Holdings Ltd (Donnelly). When issues arose about the viability of the business, McEwan and Donnelly went to mediation. They reached an agreement, part of which involved Donnelly’s directors guaranteeing settlement. The appellant, Sharp Tudhope, a firm of solicitors, advised McEwan in relation to the settlement agreement.
[2]        Donnelly did not perform its part of the bargain and the directors of Donnelly disputed that they had any personal obligations to complete settlement. McEwan initially brought proceedings against the directors. However, those proceedings came to an end and McEwan brought proceedings claiming $417,000 in damages against Sharp Tudhope for negligence in relation to the settlement agreement.
[3]        McEwan’s claim against Sharp Tudhope went to trial. Heath J determined that Sharp Tudhope had acted negligently in not ensuring that enforceable guarantees were given as part of the settlement. Judgment in the sum of $100,000 was entered in favour of McEwan together with interest at the applicable rates under the Judicature Act 1908 from the date of issue of the proceeding to the date of judgment. Heath J also awarded costs in favour of McEwan on a 2B basis together with disbursements.[1]
[1]      McEwan (2003) Ltd v Sharp Tudhope HC Tauranga CIV-2007-470-654, 15 June 2009.
[4]        Sharp Tudhope now appeals against the order for costs. Its appeal is based on a “without prejudice except as to costs” offer to settle the proceedings for “$100,000 all up” which they made some five months before trial (the Calderbank letter). When Heath J made the order for costs against Sharp Tudhope as part of his judgment determining the claim he was not aware of the Calderbank letter.
The parties’ contentions
[5]        On appeal, Sharp Tudhope say costs incurred after the date of the Calderbank letter (25 November 2008) should be awarded to them. Those costs are in the order of $20,000. Mr Barton for Sharp Tudhope says the settlement offer was a factor relevant to the costs award in terms of r 48GA of the High Court Rules which then applied.
[6]        McEwan’s response is that in all the circumstances the Judge’s award of costs was appropriate. McEwan argues that r 48GA is not applicable because the rule only applies when the settlement offer exceeds the amount of the judgment obtained. Mr Holmes for McEwan submits that when interest and costs are taken into account the “all up” offer of $100,000 was less than the judgment obtained.

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2010] NZCA 166
Decision Date: 5 May 2010

CaseChat Overview and Summary

In the case of Tudhope v McEwan (2003) Limited, the appeal was brought by Sharp Tudhope, a firm of solicitors, against the decision of the High Court which had awarded damages of $100,000 to McEwan (2003) Ltd and costs to McEwan. The basis of the claim was that Sharp Tudhope had been negligent in their advice regarding a settlement agreement between McEwan and Donnelly Holdings Ltd. The central legal issue in the appeal was whether the High Court should have taken into account a settlement offer made by Sharp Tudhope in determining the costs awarded to McEwan.

The Court of Appeal found that the settlement offer, known as a Calderbank letter, should have been considered by the High Court when making the costs award. The offer was made five months before the trial and proposed settling the matter for $100,000 "all up". The Court held that while the offer did not exceed the amount of the judgment, it was sufficiently close to warrant consideration under r 48D of the High Court Rules. The Court concluded that the High Court Judge should have been aware of the offer and it could have influenced the costs decision. Therefore, the appeal was allowed, and the matter was remitted back to the High Court for reconsideration of the costs issue.

The Court of Appeal did not make an order for costs in this Court, as it was deemed fair for each party to bear its own costs. The Court also noted the importance of informing the Court of any settlement offers when costs are being fixed, so they may be taken into account. This case underscores the necessity of transparency regarding settlement offers and their potential impact on costs in litigation.

Orders