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Water Guard NZ Ltd v Midgen Enterprises Ltd

Water Guard NZ Ltd v Midgen Enterprises Ltd

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IN THE COURT OF APPEAL OF NEW ZEALAND

CA385/2016
[2017] NZCA 36

BETWEEN	WATER GUARD NZ LIMITED Appellant
AND	MIDGEN ENTERPRISES LIMITED First Respondent
AND	DAVID JAMES MIDGEN Second Respondent

Hearing:	9 February 2017
Court:	Randerson, Harrison and Winkelmann JJ
Counsel:	M J Fisher and K J Ng for Appellant D W Grove for Respondents
Judgment:	2 March 2017 at 3.30 pm

JUDGMENT OF THE COURT

AThe appeal is allowed in part.
B The costs order in favour of the first and second respondents in the High Court is set aside.
CCosts in the High Court are to lie where they fell.
DThe respondents are ordered to pay the appellant costs in this Court for a standard appeal on a band A basis and usual disbursements.

____________________________________________________________________

REASONS OF THE COURT

(Given by Harrison J)

Introduction

Water Guard NZ Ltd (WGL) sued Midgen Enterprises Ltd (Midgen) for damages for contractual breaches which it quantified shortly before trial at $511,100. WGL alleged that Midgen had misrepresented sales figures when selling its New Zealand distribution business for water filtration units in 2013 (“the misrepresentation claims”). Additionally or alternatively, WGL alleged that the units were not fit for purpose or of merchantable quality (“the defects claims”).
Asher J dismissed WGL’s misrepresentation claims in a comprehensive judgment delivered in September 2015 after an eight-day trial in the High Court at Auckland.[1] He also dismissed two of WGL’s five defects claims but found Midgen liable on the remaining claims. He was unable to determine damages because WGL’s claim was not satisfactorily apportioned between the three surviving defects claims. He adjourned WGL’s damages claim for trial at a later date. In December 2015 WGL amended its damages claim to $108,000. On the eve of that trial scheduled for July 2016, the parties consented to entry of judgment in WGL’s favour for $67,527.97. Costs were reserved.
[1]Water Guard NZ Ltd v Midgen Enterprises Ltd [2015] NZHC 2227. The total trial lasted for 12 days but incorporated two related claims which were heard together. Of the total hearing time, trial of this proceeding occupied eight days.
In his subsequent costs judgment, Asher J awarded: (1) Midgen costs calculated on a 2B basis but for one counsel for a six-day hearing on the liability trial together with full disbursements (Costs Order (1)); (2) directed that costs incurred subsequent to the liability judgment were to lie where they fell (Costs Order (2)); and (3) declined to award costs on the costs argument (Costs Order (3)).[2]
[2]Water Guard NZ Ltd v Midgen Enterprises Ltd [2016] NZHC 1546.
WGL now appeals against the first two orders on the grounds that costs should lie where they fall under Costs Order 1 but that costs should be awarded in its favour under Costs Order 2.

High Court

In summary, Asher J decided Costs Order (1) on two grounds. First, on an overall perception he was satisfied that WGL was for the most part unsuccessful and Midgen was for the…

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: [2017] NZCA 36
Decision Date: 2 March 2017 at 3.30 pm

CaseChat Overview and Summary

In the Court of Appeal of New Zealand, Water Guard NZ Ltd (WGL) appealed against the costs orders made by the High Court in its proceedings against Midgen Enterprises Ltd (Midgen). WGL sued Midgen for damages for alleged breaches of contract and claimed $511,100. The High Court dismissed WGL's misrepresentation claims but found Midgen liable on the defects claims. However, the court was unable to determine damages because WGL's claim was not apportioned between the three surviving defects claims. The court later set aside the previous costs orders and ordered that costs in the High Court were to lie where they fell. WGL now appeals against the High Court's costs orders on the grounds that costs should lie where they fall under Costs Order 1 but that costs should be awarded in its favour under Costs Order 2.

The Court of Appeal found that the High Court erred in making Costs Order (1) as it failed to give sufficient weight to WGL's ultimate success on and subsequent to the liability trial. The court held that WGL was the successful party as it was affirmed by Midgen’s later consent to judgment being entered against it for $67,527.97. The Court of Appeal also found that it was open to the Judge to sever off the 25 per cent of WGL’s claim, on which he found it was successful, and displace its entitlement by its unreasonable approach to settlement. This approach reflects Mr Fisher’s proper acceptance that no costs order should be made in favour of either party if Costs Order (1) is set aside.

The Court of Appeal did not accept Mr Fisher's submission that Asher J erred by not awarding costs in WGL’s favour on the subsequent events leading up to the damages judgment. It was open to the Judge to find that, on this aspect of the proceedings, costs should lie where they fall. WGL's success was not decisive. It was open to the Judge to find that WGL's approach following trial, in failing to recognise the realistic parameters of its recoverable loss, was an obstacle to a reasonable settlement. When viewed in the round, allowing the burden of costs to lie where they fall in what was fruitless and uneconomic litigation accords with the overall justice of the case.

The appeal is allowed in part. The costs order in favour of the first and second respondents in the High Court is set aside. Costs in that Court are to lie where they fell in all respects. The respondents are ordered to pay WGL’s costs for a standard appeal on a band A basis together with usual disbursements.

Orders