White v Allen
[2020] NZHC 1156
•28 May 2020
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2017-404-2478
[2020] NZHC 1156
BETWEEN CAROLINE RUTH WHITE
Plaintiff
AND
RICHARD VIVIAN MARSH ALLEN
Defendant
Hearing: On the papers Appearances:
Plaintiff in person
H M Twomey and N Faulkner for the Defendant
Judgment:
28 May 2020
JUDGMENT OF GAULT J
(Costs)
This judgment was delivered by me on 28 May 2020 at 4:00 p.m. pursuant to r 11.5 of the High Court Rules 2016.
Registrar/Deputy Registrar
……………………………………
Solicitors / Counsel / Parties:
The Plaintiff
Ms H M Twomey and Ms N Faulkner, Robertson, Auckland
WHITE v ALLEN [2020] NZHC 1156 [28 May 2020]
[1] In my interim judgment on costs dated 28 April 2020, I concluded that the parties had not reached a binding agreement as to costs in November 2019.1
[2] In the absence of such agreement, Mr Allen seeks costs on a 2B basis until 10 July 2018, then a 75 per cent uplift on scale costs until 17 June 2019, and indemnity costs thereafter, together with disbursements, totalling $120,758.41.
[3] I gave Ms White a final opportunity to address the costs to be fixed in the absence of agreement. After a short extension of time, Ms White submitted that the quantum of costs should be fixed by the Court at $91,430.16 as per the (non-binding) agreement, which was said to reflect scale costs until 10 July 2018 and a 75 per cent uplift on scale costs thereafter. Ms White also requested that the due date for payment reflect the COVID-19 pandemic bank lending restrictions.
Increased costs and indemnity costs
[4] In support of the increased / indemnity costs sought, Mr Allen claims that Ms White acted unreasonably in the proceeding and in rejecting settlement offers. Mr Allen relies on the following paragraphs of the High Court Rules 2016:
14.6 Increased costs and indemnity costs
…
(3)The court may order a party to pay increased costs if—
…
(b)the party opposing costs has contributed unnecessarily to the time or expense of the proceeding or step in it by—
…
(ii) taking or pursuing an unnecessary step or an argument that lacks merit; or
…
(iv)failing, without reasonable justification, to comply with an order for discovery, a notice for further particulars, a notice for interrogatories, or other similar requirement under these rules; or
1 White v Allen [2020] NZHC 819.
(v)failing, without reasonable justification, to accept an offer of settlement whether in the form of an offer under rule 14.10 or some other offer to settle or dispose of the proceeding;
…
(4)The court may order a party to pay indemnity costs if—
(a)the party has acted vexatiously, frivolously, improperly, or unnecessarily in commencing, continuing, or defending a proceeding or a step in a proceeding; or
…
(f) some other reason exists which justifies the court making an order for indemnity costs despite the principle that the determination of costs should be predictable and expeditious.
[5] As the Court of Appeal said in Bradbury v Westpac Banking Corporation, the distinction between standard scale costs; increased costs; and indemnity costs may be summarised broadly as follows:2
(a)standard scale applies by default where cause is not shown to depart from it;
(b)increased costs may be ordered where there is failure by the paying party to act reasonably; and
(c)indemnity costs may be ordered where that party has behaved either badly or very unreasonably.
[6] In the context of indemnity costs, the Court of Appeal said that “unnecessarily” takes its meaning from the adverbs which precede it: “vexatiously, frivolously, improperly”.3 The Court elaborated, saying that indemnity costs, which depart from the predictability of the Rules Committee’s regime, are exceptional and require exceptionally bad behaviour. That is why to justify an order for such costs the misconduct must be flagrant.4
2 Bradbury v Westpac Banking Corporation [2009] NZCA 234, [2009] 3 NZLR 400 at [27].
3 At [26].
4 At [28].
[7] While noting the categories in respect of which the discretion to award indemnity costs are not closed, the Court of Appeal endorsed the following list of circumstances in which indemnity costs have been ordered:5
(a)the making of allegations of fraud knowing them to be false and the making of irrelevant allegations of fraud;
(b)particular misconduct that causes loss of time to the court and to other parties;
(c)commencing or continuing proceedings for some ulterior motive;
(d)doing so in wilful disregard of known facts or clearly established law;
(e)making allegations which ought never to have been made or unduly prolonging a case by groundless contentions, summarised in French J’s “hopeless case” test.6
[8] Where increased as opposed to indemnity costs are warranted, they are approached by way of an uplift from scale costs. As counsel for Mr Allen acknowledged, increases in scale costs above 50 per cent are unusual. This reflects the fact that scale costs are designed to deliver to the successful party approximately two-thirds of the daily rate considered reasonable once the proceeding has been placed in its appropriate category for complexity and significance and then in the appropriate band for time. Thus, as the Court of Appeal observed in Holdfast NZ Ltd v Selleys Pty Ltd:7
An increase of 50 percent on scale costs should grant the costs-claiming party a fair recovery for the step unnecessarily forced on it, assuming that the time allocated to the step has been reasonably calculated… Any greater recovery than that would mean that the party paying costs is contributing to the other party’s choice of special counsel.
5 Bradbury v Westpac Banking Corporation [2009] NZCA 234, [2009] 3 NZLR 400 at [29]. See also Slater v Blomfield [2019] NZCA 664 at [13].
6 J-Corp Pty Ltd v Australian Builders Labourers Federation Union of Workers, Western Australian Branch (No 2) (1993) 46 IR 301 at 303.
7 Holdfast NZ Ltd v Selleys Pty Ltd (2005) 17 PRNZ 897 (CA) at [47].
[9] That is not to say an uplift of more than 50 per cent can never be justified, as there may be circumstances where the Court considers a higher award of increased costs to be justified.8
[10] The onus is on Mr Allen to persuade the Court that an award of increased or indemnity costs is justified.
Discussion
[11] In support of the claim for indemnity costs, Mr Allen relies on the following factors:
(a)the Grafton Road Trust (GRT) claim was unnecessary and ought not to have been pursued as a separate claim, given the same issues had already been canvassed (and Ms White’s factual account not accepted) in the Madeg proceeding;
(b)the manner in which the GRT’s case was conducted put Mr Allen to unnecessary expense; and
(c)the GRT unreasonably rejected a settlement offer made by Mr Allen dated 13 June 2019 which was on terms that were significantly more favourable to the GRT than the result achieved at trial.
[12] I accept that Mr Allen has been put to additional expense as a result of this claim being pursued as a separate proceeding. I record paragraph [63] of my substantive judgment:9
I should observe that, absent explanation, it appears quite unsatisfactory to have re-litigated in this proceeding key issues that arose in the Madeg proceeding (including that Ms White signed the agreement on 3 November 2011, clause 6 was deleted after the GRT had signed, and Ms White was not aware of the issues with the building) given that Moore J recorded that the trial of the Madeg proceeding scheduled to commence on 2 October 2017 was adjourned by Downs J on 29 September 2017 because the GRT indicated they intended to join Mr Allen. He considered it would be undesirable for the same set of facts to be dealt with in separate trials, particularly when the provenance
8 Holdfast NZ Ltd v Selleys Pty Ltd (2005) 17 PRNZ 897 (CA) at [48].
9 White v Allen [2019] NZHC 2717.
of clause 6 assumed such significance in both. Despite that stated intention to join Mr Allen, no such steps were taken.10
[13] There was no subsequent explanation. I note this proceeding was commenced very soon after the adjournment on the eve of trial in the Madeg proceeding. Mr Allen accepts that if he had been joined to the Madeg proceeding he would have incurred litigation costs. It is difficult to quantify the additional expenditure incurred by reason of the separate proceeding. But I accept his costs would not have been as high as those that were occurred in the separate proceeding. I consider the difference would be substantial albeit difficult to quantify.
[14] On behalf of Mr Allen, it is also submitted that once the decision in the Madeg proceeding had been delivered and Ms White had a determination that clause 6 was deleted before she signed it and that she was aware of the issues with the building,11 she should have reconsidered her continued pursuit of Mr Allen. I accept that Ms White sought to appeal that decision (unsuccessfully as it turned out) and I do not consider that this of itself justifies indemnity costs. I consider it does, however, support the claim for increased costs on the basis that Ms White pursued an argument that lacked merit.
[15] Mr Allen also relies on particular failings in the way the proceeding was conducted: Ms White’s late service of briefs of evidence resulting in receipt of the common bundle very close to trial, which caused Mr Allen to incur further costs in having to commence preparations for trial without the common bundle referencing available; the common bundle and chronology were incomplete and non-compliant, also leading Mr Allen to incur significant further costs; Ms Allen served a lengthy reply brief which resulted in a large number of admissibility challenges; and aspects of the claim were also not pursued at trial. I accept these issues would have inevitably led to some additional expense, although it is difficult to quantify. Alone, these would only warrant a modest uplift to the individual cost items.
10 Brkic v White [2018] NZHC 1458 at [50]-[51].
11 At [66] and [71].
[16] Mr Allen also relies on two Calderbank letters. The July 2018 Calderbank letter invited Ms White to discontinue her claim with no issue as to costs. At that stage, scale costs were $18,063. This was soon after the judgment of Moore J in the Madeg proceeding. On 13 June 2019 a second Calderbank letter offered to pay Ms White $100,000 in full and final settlement. No response was received to the offers, seeking to justify the GRT’s rejection.
[17] The result at trial was significantly less favourable to the GRT than acceptance of either settlement offer. Even if Ms White acted reasonably in not accepting the first Calderbank offer, I am satisfied that increased costs are warranted as a result of not accepting the second Calderbank offer.
[18] While each of the above factors may warrant increased costs, the particular combination of the additional unnecessary costs incurred as a result of pursuing Mr Allen in a separate proceeding rather than in the Madeg proceeding, pursuing the claim after an adverse judgment in that proceeding and unreasonably refusing to accept the second Calderbank offer, warrants at least a substantial increase in costs. While there may not be a stand out instance of flagrant misconduct, the latter two factors together may well fall within the last of the recognised categories warranting indemnity costs referred to above, that is unduly prolonging a case by groundless contentions, the “hopeless case”, at least from 13 June 2019.
[19] Mr Allen’s indemnity costs for this latter period were $73,426.50. This is well above 2B scale costs for the period ($23,415) and even a 75 per cent uplift ($40,976.25). Acknowledging Mr Allen’s choice of special counsel here, I would be reluctant to award indemnity costs of $73,426.50 for this period without further detail.
[20] Even if indemnity costs for the latter period were not warranted, I consider the combination of factors, including the substantial wasted costs as a result of the separate proceeding, make this an exceptional case justifying an uplift of more than 50 per cent. By my calculation, an uplift of 75 per cent on 2B scale costs after 10 July 2018 amounts to $85,576.25 plus disbursements of $2,731.91, totalling $88,308.16.
[21] While I might have apportioned the uplift slightly differently over the periods and awarded reasonable indemnity costs for the latter period, I consider that in the interests of finality the quantum of costs proposed by Ms White is appropriate.
[22]I also decline to defer the date for payment.
Result
[23]The defendant is entitled to costs and disbursements of $91,430.16.
Gault J
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