Victoria Quarter no.1 Limited (as trustee of the Victoria Quarter no.1 Trust) v FBB Holdings Limited

[2016] NZHC 1597

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2014-404-001218 [2016] NZHC 1597

BETWEEN

VICTORIA QUARTER NO. 1 LIMITED

(AS TRUSTEE OF THE VICTORIA QUARTER NO. 1 TRUST)

Plaintiff

AND

FBB HOLDINGS LIMITED First Defendant

AND

DAVID ROBERT DANIEL MCGRATH Second Defendant

On the papers
Judgment:	14 July 2016

COSTS JUDGMENT OF HINTON J

This judgment was delivered by me on 14 July 2016 at 4.30 pm pursuant to Rule 11.5 of the High Court Rules

……………………………………………………………………

Registrar/Deputy Registrar

Counsel/Solicitors:

D Grove, Barrister, Auckland

A R Davie, Treadwells, Wellington

VICTORIA QUARTER NO. 1 LTD (as Trustee of the Victoria Quarter No. 1 Trust) v FBB HOLDINGS LTD [2016] NZHC 1597 [14 July 2016]

Introduction

[1]      The plaintiff was successful in its claim against the first defendant, obtaining judgment in the sum of $372,886.77, but unsuccessful against the second defendant. Therefore both the plaintiff and the second defendant are successful parties for costs purposes.

[2]      It  is  agreed  that  the  plaintiff  is  entitled  to  scale  costs  against  the  first defendant in the sum of $39,990 plus disbursements calculated at $8,218.

[3]      In this decision, I consider:

(a)      whether   the   second   defendant   is   entitled   to   scale   costs   for successfully defending the plaintiff’s claim against him and if so, whether they should be paid by the first defendant under a Sanderson order, and

(b)       whether the plaintiff and/or second defendant are entitled to increased

scale costs for the other’s failure to accept a settlement offer.

Scale costs for second defendant

[4]      The second defendant seeks costs on a 2B basis for successfully defending

the plaintiff’s claim.

[5]      The plaintiff says the second defendant’s costs claim should not succeed because there was little work required on the part of the second defendant in defending the claim.  The plaintiff also relies on the no-profit rule, pointing to the fact that, first, the second defendant has not quantified the amount sought, and secondly, it is likely that any costs actually incurred by the defendants, will have been met by the first defendant, being the trading entity.

[6]      If scale costs are awarded to the second defendant, the plaintiff submits they should be paid by the first defendant (inside of the plaintiff) on the basis of a Sanderson order.

[7]      I disagree with the plaintiff’s submission that there was little effort involved in defending this claim.  The complaints against the second defendant were separate to that of the first defendant, requiring the Court to enquire into a different set of issues, including the enforceability of guarantees and part performance.

[8]      Subject  to  the  following  comments,  the  second  defendant  is  prima  facie entitled to scale costs in the normal way.

[9]      The second defendant has not quantified the amount of scale costs sought.  It should file a memorandum scheduling the scale costs calculation.  Also, given the “no profit” point taken by the plaintiff, counsel for the second defendant will also need to confirm that the costs sought do not exceed the costs actually incurred by the second defendant.

Sanderson order

[10]     The plaintiff then says that the first defendant (not the plaintiff) should pay any costs awarded in favour of the second defendant, on the basis of a Sanderson order.  Such an order is appropriate when the plaintiff is unsure which of the parties is the “guilty” one, so brings a joined claim.1   But here, the issues were different, not the  same,  as  typically  applies  in  joinder  cases.    I therefore  decline  to  make  a Sanderson order.   The plaintiff is liable to pay costs to the second defendant, in whatever quantum is ultimately fixed.

Increased costs as a result of Calderbank offers

[11]     The arguments here turn on the settlement offers, which I set out below.

[12]     The plaintiff made a Calderbank settlement offer of $200,000 on 11 March

2015.

1      See Sanderson v Blythe Theatre Co. [1903] 2 KB 533. The Court’s discretion to order one defendant to contribute to the costs of another defendant is a broad one and depends on where the overall justice of the case lies. The relevant factors to the Court’s discretion to make such an order are set out in Lane Group Ltd v D I & L Patterson Ltd [2000] 1 NZLR 129 (CA) at [83]-[84].

[13]     This  was  rejected  by  the  defendants  on  20  March,  who  made  a  joint counter-offer of $25,000.

[14]     On 27 March, the plaintiff rejected the defendants’ settlement offer.   The plaintiff made another settlement offer in the sum of $175,000.  Having not heard from the defendants, the plaintiff followed up with a further settlement offer of

$100,000 on 8 May 2015.

[15]     On 20 May 2015, the defendants offered to pay $60,000 in full and final settlement.

[16]     On 22 May 2015, the defendants made, by telephone call to the plaintiff’s

counsel, an offer of $100,000 to be paid on 1 November 2015.

[17]     As is clear, all settlement offers were rejected by the other side.

[18]     The plaintiff seeks an uplift of scale costs from 11 March 2015, being the date of the plaintiff ’s first settlement offer.  The uplift brings the amount sought to

$49,949 plus disbursements of $8,218.

[19]     I  agree  that  the  plaintiff  is  entitled  to  increased  costs  against  the  first defendant from 11 March 2015, which is the date of the plaintiff’s first Calderbank offer.   This offer was materially less than the amount awarded in the plaintiff’s favour and I see no reason to depart from the usual rule that increased costs apply.2

The first defendant does not actually contend otherwise.

[20]    Counsel for the defendants, Mr Davie, argues instead that since a joint settlement  offer  was  made  by  the  defendants  on  22  May  2015,  and  since  the plaintiff’s case against the second defendant was unsuccessful, the second defendant should be awarded a 50 per cent uplift of scale costs.   Mr Davie submits that

standing back and looking at the circumstances as a whole, I should then hold that

2      See r 14.6(3)(v) and r 14.10 of the High Court Rules.  Also, Holdfast NZ Ltd v Selleys Pty Ltd

(2005) 17 PRNZ 897 (CA), and Todd v Hillary HC Auckland CIV-2005-412-294, 20 August
2007.

each of the parties’ costs claim offsets the other.  The result sought, as I understand it, is that costs would lie where they fall.

[21]     Had either of the defendants’ offers been made by the second defendant alone, in respect of the claim against him, it could have led to an increased costs award in his favour.  The problem for the second defendant is that the defendants’ offers were made by them jointly.  As against the defendants jointly, the plaintiff has fared significantly better than each of the offers.  The plaintiff would not have been better off to have accepted the defendants’ offers.  I therefore decline to order any increased costs in favour of the second defendant.

Result

[22]     For the reasons given, the plaintiff is entitled to increased costs against the first defendant in the sum of $49,949, plus disbursements at $8,218.

[23]     The second defendant is entitled to 2B costs, provided that (i) the second defendant files a memorandum within seven days quantifying acceptable scale costs, with an appended schedule, and (ii) confirms with the Court that the scale costs do not exceed the costs actually incurred by him.  I shall then issue a minute setting out final orders as to costs.  No costs are payable by any party until then.

Interest

[24]     Mr Grove, for the plaintiff, in his submission “costs and interest” has brought to my attention that I did not deal with the issue of interest in my substantive decision.

[25]     I note that a claim for interest was included in the statement of claim, but it was not addressed before me in submissions.  In a case such as this, where interest is discretionary, I am not prepared to visit that point now.  I decline to award interest.

----------------------------------------------- Hinton J