Williams v Tellen Systems NZ (2013) Limited
[2021] NZHC 2916
•29 October 2021
IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY
I TE KŌTI MATUA O AOTEAROA ŌTAUTAHI ROHE
CIV-2018-409-727
[2021] NZHC 2916
BETWEEN SIMON ANDREW WILLIAMS
Plaintiff
AND
TELLEN SYSTEMS NZ (2013) LIMITED
Defendant
CIV-2018-409-803 BETWEEN
TELLEN SYSTEMS NZ (2013) LIMITED
PlaintiffAND
SIMON ANDREW WILLIAMS
First Defendant
SIMON ANDREW WILLIAMS, MELANIE JANE WILLIAMS and ROSTOCK TRUSTEES LIMITED
Second Defendant
Hearing: On the papers Counsel:
G Cooper for the Plaintiff in CIV-2018-409-272 and Defendants in CIV-2018-409-803
B Gustafson and G Grant for the Defendant in CIV-2018-409-727 and the Plaintiff in CIV-2018-409-803
Judgment:
29 October 2021
JUDGMENT OF GAULT J
(Costs)
This judgment was delivered by me on 29 October 2021 at 4:00 pm pursuant to r 11.5 of the High Court Rules 2016.
Registrar/Deputy Registrar
……………………………………
WILLIAMS v TELLEN SYSTEMS NZ (2013) LTD [2021] NZHC 2916 [29 October 2021]
[1] Following my substantive judgment in these two proceedings,1 Mr Williams and the trustees of his family trust seek increased costs (50 per cent uplift on 2B costs) against Tellen Systems NZ (2013) Ltd (Tellen).
[2] Tellen accepts that Mr Williams was the successful party in his proceeding and that 2B costs should be awarded (although it disputes the amount claimed) but says that Tellen was the successful party in its proceeding and seeks costs in that proceeding on a 2B basis.
The proceedings
[3]The two proceedings were summarised in my judgment as follows:
[12] In the CIV-2018-409-727 proceeding, Mr Williams claimed that Tellen breached the [Sale and Purchase Agreement (SPA)] because it failed to pay the second instalment of $425,000 due on 1 May 2018 and $300,000 for non-payment of contractual services provided by Mr Williams. The services claim was abandoned at trial. Mr Williams also claimed, pursuant to an indemnity in the [Shareholders’ Agreement (SHA)], payment of 67 per cent of his obligations to various third parties as a guarantor of Sedco.
[13] Tellen responded that it was not liable to pay the second instalment of the purchase price because Mr Williams had breached the SPA and SHA. Tellen also raised a set-off affirmative defence alleging that Mr Williams had breached warranties in the SPA and fiduciary obligations in the SHA. Tellen also raised a counterclaim for breach of the Fair Trading Act 1986 (FTA) seeking $650,000.
[14] Tellen also commenced a separate proceeding (CIV-2018-409-803) against Mr Williams and the trustees in relation to these alleged breaches:
1.Against Mr Williams, Tellen claimed breach of warranties in the SPA, breach of good faith and disclosure obligations in the SHA, and breach of the FTA. In terms of relief, Tellen claimed that the breaches of the SPA entitled Tellen to cancel, and sought an order that it has no obligation to pay any outstanding sum plus damages of $648,829,48 (refund of the
$425,000 paid plus $223,829.48 advanced to Sedco between 25 May 2017 and 7 February 2018). As the parties agreed the two proceedings should be heard together, no issue was taken about any duplication in these claims.
2.Against the trustees, Tellen claimed they were liable for knowing receipt and dishonest assistance.
1 Williams v Tellen Systems NZ (2013) Ltd [2021] NZHC 1199.
[4]The result was summarised in my orders:
[160] I make the following orders:
1.Tellen’s SPA claim for breach of warranty is dismissed;
2.Mr Williams is to pay Tellen $137,094.80 (plus statutory interest) for breach of the SHA; and
3.Tellen is to pay Mr Williams $425,000 (plus contractual interest of 15 per cent per annum from 1 May 2018);
4.Tellen is to pay Mr Williams $143,429.45 (plus statutory interest), and 67 per cent of further payments made by Mr Williams to Sedco’s creditors under his personal guarantee and notified to Tellen;
5.Tellen’s claim against the trustees is dismissed.
Issues
[5]Four issues arise:
(a)whether costs should be determined separately in each proceeding or globally;
(b)whether increased costs should be awarded;
(c)the quantum of scale costs; and
(d)disbursements.
Approach to costs when two proceedings heard together
[6] Both parties calculated scale costs separately for each proceeding. That was appropriate since the Court is addressing the costs of (or incidental to) a proceeding.2 Even counterclaims are treated as separate.3 Here, the two proceedings were not consolidated. The issue is that Mr Cooper submits, for Mr Williams, that in Tellen’s proceeding, it failed to a significant extent – it had some minor success on its SHA
2 High Court Rules 2016, r 14.1(1).
3 Rule 14.16.
claim (22 per cent of the amount claimed) and failed in relation to all other relief. Hence, Mr Cooper submitted that Mr Williams was the successful party overall.
[7] As Ms Grant submitted, for Tellen, success in Tellen’s proceeding needs to be assessed separately from success in Mr Williams’ proceeding. The principle that costs follow the event is reflected in the phrase: the party who fails “with respect to a proceeding” should pay costs to the party who succeeds.4 Tellen was partly successful in its proceeding. Ms Grant submitted that the percentage of the claim awarded is irrelevant; that success on more limited terms is still success, relying on Weaver v Auckland Council.5 I accept that submission. But, as in Weaver, a reduction is then appropriate in accordance with r 14.7(d) for time pursuing ultimately unsuccessful arguments. In the circumstances, and based on the time spent at trial, I consider a reduction of 50 per cent is appropriate in the Tellen proceeding on this basis. Tellen partly succeeded in its SHA claim but failed in its primary SPA claim and in its FTA claim.
[8] There are two further complications in this case. First, Tellen’s proceeding overlapped substantially with its defence and counterclaim in Mr Williams’ proceeding. Mr Gustafson for Tellen had explained that Tellen had already drafted its proceeding when Mr Williams filed first, and as Tellen had added the trustees the proceedings were filed against both defendants. That resulted in unnecessary pleading in the Tellen proceeding that duplicated Mr Williams’ proceeding. It also meant that Tellen’s partial success was effectively duplicated across its counterclaim and its proceeding, but there is no double-counting here as Tellen does seek costs on its counterclaim. In the circumstances, rather than fully disallowing the duplicated pleading in Tellen’s proceeding, I reduce the amount claimed for commencement of proceeding to the amount for a counterclaim (1.6 days rather than 3 days).
[9] Secondly, where proceedings are heard together there may well be efficiency gains in relation to some steps in the proceedings and care is needed to avoid double counting. Here, at least once it came to evidence and hearing time, the duplication inherent in the overlapping proceedings was rationalised. There was common
4 High Court Rules 2016, r 14.2(1)(a).
5 Weaver v Auckland Council [2017] NZCA 330, (2017) 24 PRNZ 379 at [26].
evidence and the 7.25 day trial was for the two proceedings heard together. If the proceedings were heard sequentially, the hearing time could be split. But consideration of apportionment is unnecessary here given that the substantial overlap between the proceedings led to common evidence and rationalisation inherent in hearing the proceedings together.
Increased costs
[10] Mr Williams seeks a 50 per cent uplift from scale costs on the basis that significant time and costs were spent on:
(a)Tellen’s unsuccessful claims;
(b)Tellen’s accusations of dishonesty against Mr Williams; and
(c)collateral attacks against counsel during Tellen’s closing submissions regarding cross-examination duties under s 92 of the Evidence Act 2006.
[11] The trustees also seek a 50 per cent uplift on the basis of Tellen’s accusations of dishonesty against Mr Williams which extended to him in his capacity as a trustee.
[12] In accordance with r 14.6(3), increased costs may be ordered where there is failure by the paying party to act reasonably.6 The onus is on an applicant for increased costs to persuade the Court that such an award is justified.
[13] I accept that Tellen’s unsuccessful claims were factually intensive. That is reflected in scale costs insofar as it added to the hearing time. But lack of success on a factually intensive claim does not itself warrant increased costs. Increased costs may be justified where allegations of dishonesty caused increased costs to be incurred, at least where allegations of dishonesty lacked merit;7 that is, the allegations were unreasonably pursued. In relation to the dishonesty claim’s lack of merit, Mr Cooper simply submitted that the Court noted there was no such cogent evidence and
6 Bradbury v Westpac Banking Corp [2009] NZCA 234, [2009] 3 NZLR 400 at [27].
7 High Court Rules 2016, r 14.6.(3)(b)(ii).
Mr Williams had not acted dishonestly. My reference to cogent evidence reflected the need for such evidence to prove dishonesty.8 It was not a criticism. The Court will scrutinise allegations of dishonesty, but Mr Cooper’s submission does not satisfy me that an award of increased costs is justified in favour of either Mr Williams or the trustees.
[14] I also do not consider that Mr Gustafson’s reliance on s 92 in closing warrants an award of increased costs. Again, it does not necessarily follow from the Court’s rejection of the argument that increased costs are justified. Nor did it lead to increased costs – it merely extended closings for a short time.
[15] Finally, Mr Cooper characterised the filing of the Tellen proceeding as an abuse of process. I have already addressed why Mr Williams is not entitled to costs in the Tellen proceeding and made a reduction to Tellen’s costs for the duplication.
2B scale costs
[16] In Mr Williams’ proceeding, I agree that the 2B costs payable to Mr Williams should be adjusted as indicated in Tellen’s revised schedule. The revised total is
$86,721.
[17] In Tellen’s proceeding, costs are payable to Tellen on a 2B basis, but reduced as indicated, to $41,449.50.9 Costs payable to Tellen are to be offset against the costs payable to Mr Williams.10
[18]The trustees are entitled to 2B costs of $75,763 in the Tellen proceeding.
Disbursements
[19] Tellen proposed that each party’s expert witness and some other costs be halved to reflect the fact that the evidence was given in relation to one proceeding in which the party won and one in which they lost. Whether or not that is consistent with my earlier conclusion regarding common evidence and rationalisation inherent in hearing
8 Williams v Tellen Systems NZ (2013) Ltd [2021] NZHC 1199 at [154].
9 $86,021 – $3,122 = $82,899 x 50% = $41,449.50.
10 High Court Rules 2016, r 14.17.
the proceedings together, I agree it is appropriate to reduce the allowance for each party’s expert costs by 50 per cent, to reflect what was reasonably necessary in the context of this case. My judgment indicates limited reference to the expert evidence. Other disbursements are allowed as claimed by each party.
Result
[20] Tellen is to pay Mr Williams’ 2B scale costs of $86,721 (plus Mr Williams’ allowed disbursements) less $41,449.50 (plus Tellen’s allowed disbursements).
[21]Tellen is to pay the trustees 2B costs of $75,763 plus disbursements of $330.
Gault J
Solicitors / Counsel:
Mr G Cooper, Cavell Leitch, Christchurch Mr B Gustafson, Barrister, Auckland
Ms G Grant (plaintiff’s instructing solicitor), Grant & Co., Auckland
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