Watson v Whitehead
[2015] NZHC 1679
•20 July 2015
IN THE HIGH COURT OF NEW ZEALAND WHANGAREI REGISTRY
CIV-2013-488-000359 [2015] NZHC 1679
BETWEEN DENIS ERIC WATSON AND MERYL
JOY WATSON (AS TRUSTEES OF THE SALEM CHARITABLE TRUST)
First Plaintiffs
WATSON & SON LIMITED Second Plaintiff
AND
JOHN EDWARD WHITEHEAD AND ROSALEEN MARIE WHITEHEAD AND EDWARD IVAN WHITEHEAD (AS TRUSTEES OF THE J AND R WHITEHEAD TRUST)
First Defendants
SHILOH CHARITABLE TRUST Second Defendant
Hearing: On the papers Appearances:
K P Sullivan for First and Second Plaintiffs
M C Black for First and Second DefendantsJudgment:
20 July 2015
COSTS JUDGMENT OF WYLIE J
This judgment was delivered by Justice Wylie on 20 July 2015 at 3.30pm
pursuant to r 11.5 of the High Court Rules
Registry/Deputy Registrar
Date:
WATSON v WHITEHEAD & ANOR [2015] NZHC 1679 [20 July 2015]
Introduction
[1] I issued an interim judgment dealing with liability in this matter on 27
November 2014. I invited the parties to file memoranda as to quantum and recorded that once final judgment had issued, I would invite further memoranda as to costs.
[2] There was delay by the parties in filing memoranda as to quantum. They eventually did so, and I issued a final judgment dealing with quantum on 17 April
2015.
[3] In the final judgment, I recorded that both parties had had a measure of success in the proceedings, and that both had failed in other respects. I invited counsel to reach agreement as to costs, but put in place a timetable for the filing of memoranda in the event that they were unable to do so.
[4] Counsel were unable to reach agreement. I have now received lengthy memoranda from both dealing with costs. I summarise the submissions made below.
Procedural history
[5] I dealt with this in my interim judgment of 27 November 2014. I will recap briefly, focussing primarily on the way in which costs have been dealt with to date.
[6] The plaintiffs - (Mr and Mrs Watson as trustees of the Salem Charitable Trust (“Salem”) and Watson & Son Limited (“WSL”)) – initially sued only the first defendants – the Whiteheads as trustees of the J and R Whitehead Trust (“JRWT”). They claimed that they had a right of first refusal to purchase all non-medical grade Manuka honey produced from 2,300 hives which they had leased to JRWT. They sought an injunction to prevent JRWT from selling that honey to any other party.
[7] The application was called before Heath J on 25 June 2013. Counsel then filed a joint memorandum recording that JRWT had agreed not to sell the honey the subject of the claim pending a further hearing. Heath J reserved costs at that stage. The application was next called before Brewer J on 11 July 2013. Again, a joint memorandum was filed. The memorandum advised that the honey was being sold
by JRWT to the plaintiffs. Counsel asked for an adjournment to enable that transaction to take place. This request was granted. Brewer J made various directions, including that counsel should advise whether there was any issue as to costs. The application next came before Andrews J on 25 July 2013. She recorded that the application for interim injunction filed by the plaintiffs had been resolved, the undertakings given were discharged, and costs in respect of the application were reserved. By this point, JRWT had filed a statement of defence to the plaintiffs’ claim, together with a counterclaim in which judgment was sought for approximately
$1.2 million in respect of other honey supplied to the plaintiffs. JRWT was applying for summary judgment against the plaintiffs on its counterclaim. Andrews J put in place a timetable to deal with this application.
[8] In response to the counterclaim, two amended statements of claim were filed by the plaintiffs, the first on 24 July 2013, and the second on 17 April 2014. The first amended statement of claim joined Shiloh Charitable Trust (“Shiloh”) to the proceedings, but the scope of the proceedings remained relatively narrow. The second amended statement of claim was a much more extensive pleading. The defendants filed statements of defence to both amended statements of claim, and amended their counterclaim.
[9] The application for summary judgment was called before Heath J on 11
November 2013. JRWT then decided to abandon its application for summary judgment. Heath J made various procedural directions designed to bring the substantive proceeding on to trial. Again, costs were reserved.
[10] There were then a series of interlocutory skirmishes, in particular in relation to discovery. Initially Woolford J reserved costs in relation to these skirmishes in a minute dated 13 June 2014. I subsequently heard the outstanding disputes on 5
August 2014. I recorded that both parties had succeeded in part, and that there would be no order as to costs.
[11] The substantive trial commenced on 18 August 2014 and went through until
29 August 2014. There was a further hearing to give the parties the opportunity to speak to their written submissions on 22 October 2014.
[12] Both parties have sought costs in respect of the injunction proceedings, the summary judgment proceedings and the substantive proceedings.
Interim injunction/summary judgment applications
[13] I can dispose of costs in relation to the interim injunction application and the summary judgment application relatively simply.
[14] The interim injunction application was resolved by consent. From the plaintiffs’ perspective, they obtained the honey which JRWT had been threatening to sell to another party. From JRWT’s perspective, it was paid approximately $1.3 million for that honey. I cannot see that either party is entitled to an award of costs. There was no hearing. Neither party was successful. Rather it was a situation where the filing of the application for interim injunction brought matters to a head, and enabled the parties to agree a solution which satisfied both. I make no order for costs in relation to this aspect of the matter.
[15] The application for summary judgment filed by the defendants is in a rather different category. The counterclaim and the application for summary judgment were filed on 21 August 2013. The plaintiffs took various steps to resist the same. A notice of opposition was filed, and affidavits were filed by Mr Watson and Ms Mitchell. A memorandum was filed on the plaintiffs’ behalf. A supplementary affidavit was also filed by Mr Watson. The defendants took no steps over this period. Rather they withdrew the application for summary judgment on 11
November 2013.
[16] While the application did not proceed to hearing, the plaintiffs were the successful party in regard to this aspect of the matter. The situation is akin to that where a party files a notice of discontinuance.1 In the present case there was no agreement as to costs. Rather JRWT unilaterally abandoned the application. In my view it should pay the costs of the parties who resisted.
[17] I order that the plaintiffs are entitled to their costs from JRWT on a 2B basis in relation to the steps they took to resist the summary judgment application. By my
1 See High Court Rules, rr 15.21(2) and 15.23.
calculation, costs in this regard total $1,990.2 The plaintiffs are also entitled to their reasonable disbursements incurred in relation to this aspect of the matter. If there is any disagreement in this regard, the same is to be referred to the Registrar.
[18] I now turn to consider the substantive proceedings.
Matters at issue in the substantive proceedings
[19] I discussed the pleadings and the matters at issue in the substantive proceedings at some length in the interim judgment. I there recorded that the pleadings were prolix and difficult to follow. This has bedevilled this matter and resulted in it taking much longer than it should have.
[20] Given the way in which the matter had evolved, the primary proceeding was
the defendants’ counterclaim.
(a) The defendants relied upon a deed of arrangement which had been entered into between the parties. They asserted that the plaintiffs had failed to meet their obligations under that deed, and they claimed that
$897,250 was owing to them. Alternatively they sought an accounting under Part 16 of the High Court Rules.
(b)The defendants also sought damages for breach of two of the various agreements which they had entered into with the plaintiffs, together with outstanding interest. Again an accounting was sought in the alternative.
(c) The defendants asserted that the plaintiffs had breached another agreement – the second agreement for hire of hives - by cancelling it. They asserted that they were thereby deprived of their entitlement to derive honey from the hives and sites, and they sought an inquiry into
the amounts due to them as a consequence of this breach.
2 Mr Sullivan for the plaintiffs sought to recover an additional $796 for filing a memorandum for the hearing before Andrews J. I do not consider that this is appropriate. The hearing before Andrews J was focused largely on the interim injunction application.
(d)Finally, the defendants claimed moneys said to be due under an agreement for sale and purchase of honey. They claimed $690,694.04 in this regard, together with interest at the rate of 18 per cent. They also sought judgment for an additional $495,912.75, for additional supplies of honey which remained unpaid, together with interest at the rate of 5 per cent. They also sought solicitor-client costs in regard to both of these amounts.
[21] All of these various claims were denied by the plaintiffs.
(a) They admitted that they did not pay moneys due under the deed of arrangement, but said that this was because the defendants had refused to offset these moneys against rental due and owing to them.
(b)They denied that there were any moneys owing under either of the two agreements relied on by the defendants.
(c) They denied breaching the second agreement for the hire of hives.
(d)They admitted that they had received honey from the defendants, but asserted that the honey supplied was not of an acceptable quality for the price paid. They said that if any moneys were owing to the defendants for honey, they were entitled to set off against those moneys such sums as were owed to them.
[22] The plaintiffs also filed a second amended statement of claim. Broadly, it asserted that the purchase price the plaintiffs paid for honey under the agreement for sale and purchase of honey was at least $5 per kg higher than the market rate at the time for Manuka honey, assuming that the honey was of good quality (which was denied). It was asserted that the prices of hives which were purchased by the plaintiffs from the defendants was at least $1,000 plus GST per hive more than the hive was worth. Various breaches of the key agreements were pleaded. In particular, it was asserted as follows:
(a) that the defendants did not have agreements in place with land owners for the sites on which the hives were placed;
(b) that the plaintiffs had paid the defendants a sum of $2 million plus
GST more than the hives were worth;
(c) that JRWT had failed to pay rental under the second agreement for the hire of hives;
(d)that Shiloh had refused to deliver up the 900 hives the subject of another agreement - the third agreement;
(e) that when the 900 hives were finally delivered to the plaintiffs, at least
20 per cent were in poor condition;
(f) that JRWT failed to deliver to the plaintiffs the manuka honey produced by the 900 hives during the 2012/2013 season;
(g)that the defendants wrongly repudiated the second agreement for hire of hives by failing to pay rental;
(h)that settlement for the purchase of hives from the defendants was contingent on JRWT continuing to pay rental;
(i)that JRWT paid Shiloh the sum of approximately $900,000 when that sum was owing to the plaintiffs;
(j) that JRWT sought to attach conditions to the release of hives to WSL;
and
(k)that Shiloh repudiated the deed of arrangement and sold the hives back to JRWT for $450 (plus GST) per hive.
[23] Total losses of some $5.7 million were claimed.
[24] The defendants denied these various allegations. They relied on the documentation negotiated and entered into between the parties.
[25] As noted in the interim judgment, at the commencement of the hearing Mr Sullivan for the plaintiffs advised me that allegations relating to the quality of honey supplied by JRWT would not be pursued, but that the plaintiffs did not resile from their assertion that they paid too much for the honey supplied by JRWT given its quality. Notwithstanding this advice, the quality of the honey supplied was an issue which continued to cast a long shadow over the hearing.
Conclusions reached in the substantive proceedings
[26] I found as follows:3
(a) That Mr Watson and WSL were jointly and severally liable to JRWT in the sum of $690,694.10 in respect of honey supplied pursuant to the agreement for sale and purchase of honey. In addition they were liable for interest at the rate of 18 per cent on that sum;
(b)That WSL was liable to JRWT in the sum of $495,912.75 in respect of additional honey supplied, together with interest at the rate of 5 per cent;
(c) That Mr and Mrs Watson were liable to pay JRWT the sum of
$2,754.36 being interest due in respect of late payments made under the third agreement;
(d) That JRWT was liable to pay to Salem/WSL:
(i)$27,346.76 in respect of rental due for a specific period under the second agreement for the hire of hives;
(ii)$461.96 in respect of rental due under the second agreement for the hire of hives over a different period;
3 See Watson v Whitehead [2015] NZHC 739 (quantum judgment) at [24].
(e) That JRWT was liable to pay Salem/WSL the sum of $595,125, together with interest at the rate of 5 per cent, being further rental due under the second agreement for the hire of hives;
(f) That JRWT was liable to pay Salem/WSL the sum of $336,553 being rental payable in respect of the 1,400 hives the subject of the first and fourth agreements, together with interest at the rate of 5 per cent;
(g)That JRWT was liable to pay Salem/WSL the sum of $207,000 being rental in respect of the 900 hives the subject of the third agreement, together with interest at the rate of 5 per cent; and
(h)That Shiloh was liable to pay WSL the sum of $13,140 for the cost of putting 180 hives supplied back in good condition.
[27] All other claims made by the parties were dismissed.
Submissions
[28] The defendants claimed costs on a solicitor-client basis in relation to the whole of the proceedings. The solicitor-client costs incurred totalled $382,782.84 (inclusive of GST). The defendants proposed a discount of 25 per cent, to recognise that the plaintiffs succeeded on some of their claims. The amount claimed on account of solicitor-client costs was therefore $287,087.20. In addition, the defendants sought disbursements, including witness expenses - $22,278.00 for Mr Martin – a specialist tax lawyer, and $21,087.25 for Mr Lane – a forensic accountant.
[29] The defendants asserted that the amounts claimed by them were properly incurred, and were attributable to the conduct of the plaintiffs both prior to and during the trial. They accused the plaintiffs of “over discovery” of unnecessary and irrelevant documents. They accepted that the interim judgment upheld the plaintiffs’ claims for rent in respect of the hives, but asserted that the plaintiffs had cast their net much wider, and that most of their claims were unsuccessful. They asserted that, as a consequence, they had to call expert evidence from Mr Martin and from their solicitor, Mr Hockly. They submitted that this should have been unnecessary. They
said that their counterclaim was primarily focused on the agreement for sale and purchase of honey, and that they had succeeded in that regard. They pointed to the fact that the agreement contained a clause recording that WSL, and Mr Watson pursuant to his guarantee, would pay solicitor-client costs incurred in enforcing the agreement. They argued that the plaintiffs’ claims unnecessarily complicated the core issues, that they made preparation much more complex and that they unnecessarily extended the trial duration.
[30] The plaintiffs denied the defendants’ costs claim. Rather they said that they should be entitled to increased costs, because they made a Calderbank offer to the defendants which exceeded the value of any judgment the defendants could have obtained at the time the offer was made. The plaintiffs acknowledged that costs ordinarily follow the event where there is both a claim and counterclaim. They pointed out that they succeeded with their claim for rental, and in part with their damages claim. They also asserted that they succeeded in their claim that rental owed to them should be set off against the honey debt payable to the defendants. They asserted the defendants had succeeded only in their claim to recover moneys for the supply of honey, and said that this entitlement was undisputed. They acknowledged that the quantum judgment favoured the defendants from a financial perspective, but they said that this is only because of the differential interest rates applicable to various aspects of the overall judgment. The plaintiffs asserted that the defendants had failed to provide sufficient information to the court to enable it to properly assess their claim for solicitor-client costs, and they submitted that there is no proper basis on which the defendants can claim such costs.
[31] The plaintiffs sought costs on a 2B basis, together with an uplift under r 14.6. They sought $17,487 in relation to the steps taken by them prior to the Calderbank offer, $47,362 for steps taken thereafter, an uplift on trial costs of a further $22,681, and disbursements in the sum of $108,469.10.
[32] The defendants filed a memorandum in reply. They referred to rr 14.6, 14.10 and 14.11. They argued that the plaintiffs were seeking to revisit issues determined at the hearing, and denied that the moneys owing in respect of honey supplied were not disputed. They referred to the Calderbank offer. They denied that it applied, or
that it was of any significance. Alternatively, they submitted that it needed to be considered in context.
[33] The plaintiffs then filed a memorandum in reply dated 15 July 2015. I decline to read that memorandum as leave was not granted in the quantum judgment to allow the plaintiffs to respond to the defendants’ memorandum in reply. There simply has to be an end to the “tit for tat” battle the parties to this proceeding have waged.
Analysis
[34] I start by observing that all matters in relation to costs are at the discretion of the court – r 14.1.
[35] While it is tempting to simply order that costs should lie where they fall, given that the parties have each had a measure of success in some respects and failed in other respects, I accept that the costs regime detailed in the High Court Rules is regulatory in nature, and that it is important that its integrity should be maintained. Any departure from the rules must be a considered and particularised exercise of the
discretion.4
[36] One of the general principles applicable to the determination of costs, is that a party who fails should pay costs to the party who succeeds – r 14.2(a).
[37] Where, as here, there are claims and cross-claims, and both succeed, the rules require that the court should award costs as if each party has succeeded in an independent proceeding, unless, in the court’s opinion, the justice of the case otherwise requires – r 14.16.
[38] In the present case, both parties succeeded on some of their claims. The defendants succeeded on their primary claims in relation to moneys owing for the supply of honey under the agreement for the sale and purchase of honey and in respect of the supply of additional honey. The plaintiffs succeeded in respect of their
primary claims for rental owing under the various agreements for the hire of hives.
4 Manukau Golf Club Inc v Shoye Venture Ltd [2012] NZSC 109, [2013] 1 NZLR 305 at [7] and
[16]; Glaister v Amalgamated Dairies Ltd [2004] 2 NZLR 606 (CA) at [22].
The parties have not argued that r 14.16 should not apply, and I cannot see that the justice of the case requires me to ignore it.
[39] It follows that both the defendants and the plaintiffs are entitled to their costs, at least in part, incurred in making out their successful claims. There are however different mechanisms in place for calculating those costs and different considerations apply to the claims for disbursements.
[40] I deal first with the defendants’ entitlement to costs.
[41] The agreement for the sale and purchase of honey provided that WSL, and Mr Watson as guarantor, were liable for solicitor-client costs incurred in enforcing the agreement.
[42] Rule 14.6(4)(e) provides the court can order a party to pay indemnity costs, if the party claiming costs is entitled to indemnity costs under a contract or deed. I can see no reason why this provision should not apply in the present case. The plaintiffs argued that the defendants’ claims in this regard were not disputed. I do not accept that. The debt owing was not paid by the plaintiffs. The defendants had to sue for it. There were very significant disputes raised by the plaintiffs to resist the claims, e.g. as to the price paid, the quality of the honey supplied (albeit that this was supposed to be abandoned), and who owned the honey supplied. The latter issue in particular occupied significant time at the hearing.
[43] The principle that one party may contractually bind itself to pay the other party’s full solicitor-client (indemnity) costs is well established.5 Indemnity costs are defined in the rules as being the actual costs, disbursements and witness expenses “reasonably incurred” by a party – r 14.6(1)(b). This does not import a discretion in the usual sense.6 Rather, assessing whether indemnity costs claimed under a contract are reasonable, involves a court making an objective assessment of whether the tasks
undertaken were reasonably necessary and were covered by the contract, whether the
5 Gibson v ANZ Banking Group (NZ) Ltd [1986] 1 NZLR 556 (CA); Watson & Son Ltd v Active
Manuka Honey Association [2009] NZCA 595.
6 Frater Williams & Co Ltd v Australian Guarantee Corporation (NZ) Ltd [1994] 2 NZ ConvC
191,873 (CA) at 191,887.
tasks undertaken were contemplated by the contract, whether the steps undertaken were reasonably necessary in pursuance of those tasks, whether the charge out rate or rates were reasonable, and whether any other general contract law principles should deny the claimant his or her prima facie right to costs.7
[44] Here no attempt has been made by the defendants to put before the court any information on which it can make an objective assessment of the reasonableness of the solicitor-client costs claimed. All invoices rendered have been tendered to the court but no attempt has been made to explain which invoices or parts of invoices relate to JRWT’s attempts to recover the moneys due under the agreement for sale and purchase of the honey. No attempt has been made to link the work undertaken and the entitlement to solicitor-client costs contained in the agreement. No attempt has been made to advise the court of the relevant charge out rates being claimed.
[45] I am satisfied that JRWT is entitled to its reasonable solicitor-client costs incurred in enforcing its entitlement under the agreement for sale and purchase of the honey, but only up until the date of the Calderbank offer – 17 June 2014.8 I do not however have sufficient information before me to conclude what those costs should be. Accordingly, the best I can do is to make an order requiring WSL, and Mr Watson pursuant to his guarantee, to pay to JRWT its reasonable solicitor-client costs, incurred in relation to such steps as were properly taken to recover the moneys owing under the agreement for sale and purchase for honey from the time that the summary judgment application was abandoned up until 17 June 2014. I so order. I
direct JRWT to provide the plaintiffs with an account itemised in sufficient detail as to steps taken, time spent, and rates charged so that a Registrar taxing the costs would have a proper understanding of how they were calculated. This award of costs is subject to taxation. If the plaintiffs do not accept JRWT’s calculation of its reasonable solicitor-client costs, the plaintiffs can request that the costs sought be taxed pursuant to rr 14.18 – 14.21 and 14.23. JRWT will then have to establish its
entitlement to costs through the taxation process.9
7 Black v ASB Bank Ltd [2012] NZCA 384 at [80]; Frater Williams, above n 6; Watson & Son Ltd v Active Manuka Honey Association, above n 5, at [20].
8 See below at [49]-[58].
9 And see, Black v ASB Bank Ltd, above n 7, at [82]; Fernyhough v The Freight People Ltd [2012] NZHC 2638 at [55]; Maydanoz NZ Ltd v Poppelwell [2012] NZHC 2223 at [23]-[24].
[46] JRWT is also entitled to recover its reasonable disbursements, but not all of the witness fees claimed by it. Mr Martin and Mr Hockly were witnesses of fact – not experts. I make no order for reimbursement of their invoices. I do however order that JRWT is entitled to recover 25 per cent of Mr Lane’s fees (exclusive of GST). He was an expert. His brief went well beyond the amounts owing in respect of honey, but in part it related to this issue as well. This order covers only Mr Lane’s invoices dated 25 September 2014 and 18 August 2014. It does not extend to his invoice dated 16 March 2015. If there is any dispute as to the quantum of disbursements claimed, the same is to be referred to the Registrar.
[47] JRWT is also entitled to recover its costs and reasonable disbursements in recovering the moneys owing in respect of additional honey supplied, again from the date of abandonment of the summary judgment application up until the date of the Calderbank offer. There is no contractual entitlement to solicitor-client costs in this regard and I am not persuaded that r 14.6(4) is engaged. In my view it is appropriate to order costs on a 2B basis in regard to this aspect of the proceedings. Mr Black for JRWT has not endeavoured to calculate these costs. He is to do so. He is to present the calculation to the plaintiffs. If there is any dispute as to the amounts claimed, the same is to be referred to the Registrar.
[48] I can see no justification for an uplift. While some of the factors identified in r 14.6(3) are engaged, and might in other circumstances justify an uplift, I do not grant an uplift to JRWT. Nor do I grant an uplift to Salem/WSL when I deal with their entitlement to costs. I consider that both sides advanced arguments that lacked merit. Both sides failed, without reasonable justification, to admit facts and evidence and to accept reasonable legal arguments, and that both unnecessarily drew the proceedings out by taking points which were untenable. By way of example I note Shiloh’s claims to damages for breach of the first and fourth agreements and the subsequent resale to JRWT (see paras [205] to [210] of the interim judgment). I note WSL’s argument that it owned the honey (see paras [75] to [101] of the interim judgment). Rather than award both parties increased costs, it seems to me that it is much more efficient and simpler to award neither increased costs.
[49] I consider that JRWT’s entitlement to costs in respect of its honey claims terminated as from the date the Calderbank offer was made.
[50] The Calderbank offer was made on 17 June 2014. WSL offered to pay to JRWT, or Shiloh, or to any charity as directed, the sum of $250,000 along with costs on a 2B basis incurred in the proceedings up until that date (excluding the interim injunction application, and the summary judgment application). The offer was to be in full and final settlement of the issues raised by the proceedings. The deed of arrangement and the other contracts between the parties were to be at an end, WSL would acknowledge that it no longer had a right of first refusal to buy honey produced from the hives that were to be purchased; WSL would abandon all of its claims relating to the sale and purchase of hives, the lease arrangements, and the quality of honey that had been supplied. There would be no admission of liability, and the terms of settlement would be confidential to the parties and their advisors. It was suggested that the court proceedings could be discontinued on this basis, with no issue as to costs.
[51] The offer would have resolved all matters in dispute between the parties. It was unconditional. Shiloh/JRWT did not respond to it.
[52] While Shiloh/JRWT have now asserted that the amount they have recovered in respect of the debts owing for the supply of honey exceeds the Calderbank offer, this assertion ignores the fact that Salem/WSL were suing them for rental, and other moneys due under the contractual arrangements, and that Salem/WSL have partially succeeded in this regard. The offer was an “all in” offer. It would have resolved all issues.
[53] Shiloh/JRWT in their submissions asserted that the proceedings were well advanced, and that substantial work had been undertaken to get ready for trial.
[54] Again, I do not accept this submission. It ignores the fact that as part of their offer, Salem/WSL offered to pay costs on a 2B basis up until the date of the offer. The offer was made some two months before trial.
[55] I am also satisfied that the amount of the offer substantially exceeded the amount which JRWT/Shiloh were entitled to, as at the date the offer was made.
[56] I have endeavoured to calculate the effect of the judgment, as at 17 June
2014. So have counsel. Mr Sullivan for the plaintiffs suggested that as at 20 June
2014, the net sum due to JRWT and Shiloh on the basis of the findings which I have made, was $210,657. Mr Black calculated the figure as at 17 June 2014 at
$211,159.07. The difference is irrelevant, because either sum is well below the amount offered.
[57] Rule 14.11 provides as follows:
14.11 Effect on costs
(1) The effect (if any) that the making of an offer under rule 14.10 has on the question of costs is at the discretion of the court.
(2) Subclauses (3) and (4)—
(a) are subject to subclause (1); and
(b) do not limit rule 14.6 or 14.7; and
(c) apply to an offer made under rule 14.10 by a party to a proceeding (party A) to another party to it (party B).
(3) Party A is entitled to costs on the steps taken in the proceeding after the offer is made, if party A—
(a) offers a sum of money to party B that exceeds the amount of a judgment obtained by party B against party A; or
(b) makes an offer that would have been more beneficial to party B than the judgment obtained by party B against party A.
…
[58] Notwithstanding r 14.11(2)(b), in my view the effect of the offer made was to foreclose any entitlement JRWT had to costs (whether solicitor-client costs or scale costs) in respect of the honey debt as from the date the offer was made. The courts have accepted that parties must have a means of limiting their exposure to costs.10 It would be illogical if an entitlement to costs continued after a Calderbank offer is
made, where the amount ultimately recovered is less than the sum offered. There would be no incentive to settle.
[59] I now turn to consider Salem/WSL’s entitlement to costs. As noted, they succeeded in their claims in respect of rental owing under the various agreements. They also obtained damages on account of the poor condition of some of the hives.
[60] As the successful parties, Salem/WSL are entitled to costs from JRWT in respect of the rental claims. They seek costs on a 2B basis, together with a 50 per cent uplift. They also seek costs, again on a 2B basis with an uplift on the balance of the proceedings, pursuant to r 14.11(3).
[61] Mr Sullivan has calculated costs on a 2B basis prior to the Calderbank offer. Those costs total $17,487. Costs incurred after the Calderbank offer total $47,362. There are two difficulties with these figures:
(a) they are for all work incurred in relation to the proceeding, not simply for steps taken in relation to the recovery of rental owing;
(b) they assume that r 14.11(3) applies.
[62] I am not persuaded that it is appropriate to apply r 14.11(3) in full. The effect of a Calderbank offer is at the discretion of the court – r 14.11(1), and a court is not bound to award costs to a party who made an offer that exceeded the judgment sum when it would be unjust to do so.11
[63] In my view, in the circumstances of this case, Salem/WSL are not entitled to recover its costs in full for steps taken after the Calderbank offer was made. They advanced a number of claims which were either patently untenable or tenuous at best. These claims took a disproportionate amount of time at the hearing. The amount recovered by Salem/WSL fell a long way short of the $5.7 million claimed. An offer is not the sole consideration and all relevant circumstances need to be
considered.12 In my view, bearing in mind all the material features of this case, it would be unjust to apply r 14.11(3) in its full rigour.
[64] Rather, I consider it appropriate to award 50 per cent of the costs calculated on a 2B basis. This reduction allows both for the fact that the steps taken related to everything in issue and not simply the claims for outstanding rental, and for the plaintiffs’ conduct during the proceeding notwithstanding the Calderbank offer.
[65] I am not prepared to order increased costs, for the reasons I have set out above in [48].
[66] It follows that I award costs to Salem/WSL in the sum of $32,424.50.
[67] Salem/WSL are also entitled to recover their reasonable disbursements. In this regard I make an order permitting Salem/WSL to recover 25 per cent of Mr Vance’s costs. Mr Vance was a forensic accountant, who gave extensive evidence in relation to the rental and other damages claimed. That evidence (while in part misconceived because it proceeded on an erroneous premise) was necessary, to quantify the amounts owing in respect of unpaid rental under the various contracts. The evidence went beyond that and that is why I make an order only in respect of 25 per cent of the invoices rendered. Mr Vance’s total invoice for his work up to and at trial was $45,025.96 (exclusive of GST). I direct that JRWT is to pay 25 per cent of that sum - $11,256.49. I do not allow Salem/WSL any recovery in respect of the balance of Mr Vance’s invoices, or of Mr Gross’ invoice. Mr Gross’ evidence related to an aspect of the claim that failed. If there is any dispute in relation to disbursements claimed, the same is to be referred to the Registrar.
[68] Finally in this regard, I do not award costs to Salem/WSL in respect of its claim in relation to the condition of the hives. The claim in this regard was poorly pleaded; it was not supported by direct evidence; it was inadequately argued and it was only partially successful. I do not consider it is appropriate to make an award of
costs in the circumstances.
12 Rodgers v Advanced Creative Technologies Ltd [2013] NZHC 1095 at [34]; Gauld v Waimakariri District Council [2014] NZHC 956 at [24], affirmed on appeal, Waimakariri District Council v Gauld [2015] NZCA 200.
[69] Nor do I make an award of costs to either party in respect of all of the other multi-various matters which were advanced at trial and which failed. Many of the arguments were unmeritorious, and in some cases, simply untenable. Rather than seek to apportion costs between them, it seems to me more sensible to make no award of costs in favour of either party in respect of these matters.
Summary
[70] For the reasons I have set out, I award costs as follows:
(a) in respect of the abandoned summary judgment application, in favour of Salem/WSL, and against JRWT, in the sum of $1,990, together with reasonable disbursements incurred in relation to that aspect of the matter;
(b)in respect of the judgment entered for moneys owing under the agreement for sale and purchase of honey, in favour of JRWT and against WSL and Mr Watson, for JRWT’s reasonable solicitor-client costs, from the time that the summary judgment application was abandoned up until 17 June 2014. JRWT is to provide the plaintiffs with an itemised account. If the plaintiffs do not accept JRWT’s calculation of its reasonable solicitor-client costs, the plaintiffs can require that the costs sought be taxed. JRWT is also entitled to recover its reasonable disbursements incurred in relation to this aspect of the matter. It is not entitled to recover in respect of the invoices rendered by Messrs Martin and Hockly. It is entitled to recover 25 per cent of Mr Lane’s fees (exclusive of GST), rendered in Mr Lane’s invoices dated 25 September 2014 and 18 August 2014. If there is any dispute the same is to be referred to the Registrar;
(c) in respect of additional honey supplied, in favour of JRWT and against WSL, on a 2B basis from the date that the summary judgment application was abandoned up until the date of the Calderbank offer. JRWT is to calculate these costs, and present the calculation to the
plaintiffs. If there is any dispute the same is to be referred to the
Registrar; and
(d)in respect of the judgment entered for rental owing under the various agreements entered into between the parties, in favour of Salem/WSL and against JRWT, in the sum of $32,424.50. Salem/WSL are also entitled to recover their reasonable disbursements incurred in relation to this aspect of the matter, including the sum of $11,256.49 in respect of Mr Vance’s fees. If there is any dispute the same is to be referred to the Registrar.
[71] There are no other costs ordered against any of the parties in respect of any of the other matters raised in the proceedings.
Wylie J
Solicitor for 1st and 2nd plaintiffs – Michael Bale, Wellington Counsel for 1st and 2nd plaintiffs – Kevin Sullivan, Wellington Solicitor for 1st and 2nd defendants – Gaze Burt, Auckland Counsel for 1st and 2nd defendants – Michael Black, Auckland
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