Wilson v Parua Bay Farms Limited
[2019] NZHC 1355
•14 June 2019
IN THE HIGH COURT OF NEW ZEALAND WHANGAREI REGISTRY
I TE KŌTI MATUA O AOTEAROA WHANGĀREI-TERENGA-PARĀOA ROHE
CIV-2015-488-000106
[2019] NZHC 1355
BETWEEN ALLAN ANDREW WILSON and JOAN CECELIA WILSON
PlaintiffAND
PARUA BAY FARMS LIMITED
Defendant
Hearing: 25-29 June, 3-4 December 2018 Appearances:
R A Rosser for Plaintiffs S R Carey for Defendant
Judgment:
14 June 2019
JUDGMENT OF COURTNEY J
[Costs]
This judgment was delivered by Justice Courtney On 14 June 2019 at 3 pm
pursuant to r 11.5 of the High Court Rules Registrar / Deputy Registrar
Date……………………..
WILSON v PARUA BAY FARMS LIMITED [2019] NZHC 1355 [14 June 2019]
Introduction
[1] In my decision of 27 February 2019 (reissued on 16 May 2019), I gave judgment for the plaintiffs, Mr and Mrs Wilson, for $200,276.1 I gave judgment for the defendant, Parua Bay Farms Ltd (PBF) on its counterclaim for $55,586.09. Each party seeks costs.
[2] The Wilsons’ claim and PBF’s counterclaim both arose from contractual arrangements under which the Wilsons leased a farm from PBF for three years (the Land Lease) and at the end of the lease agreed to sell some of their herd and lease the rest to PBF for three years (the Stock Agreement).2 Despite extensive alternative pleadings by the Wilsons, both claim and counterclaim were properly determined as straightforward contract cases.
[3] The issues arising from the Land Lease and the Stock Agreement respectively accounted for roughly one-third and two-thirds of the time and attention at trial.3 The Wilsons claimed a total of $346,643.32 and obtained a judgment sum of $200,276 (58 per cent of their claim). By comparison, PBF claimed a total of $424,592 but secured a judgment sum for only $55,586.09 (13 per cent of its claim).
[4] The litigation has a long history, which has resulted in much higher costs to the parties than should have been necessary. There have been many interlocutory applications. The first trial date was vacated. The second trial was adjourned part-heard. Both parties claim to have succeeded overall. Both seek increased costs. The Wilsons consider that they should have costs and not be required to pay costs on the counterclaim. PBF says that costs ought to be fixed and payable by each party on their respective claim and counterclaim.
[5] Rule 14.16 of the High Court Rules 2016 deals with the situation where both a claim and counterclaim have been established:
1 Wilson v Parua Bay Farms Ltd [2019] NZHC 275 at [134]–[137].
2 I treated the Stock Agreement as encompassing the arrangements pleaded separately by the Wilsons as the Cow Bailment Agreement. In addition there was another minor claim pleaded as the Gates Agreement.
3 The Gates Agreement accounted for a negligible amount of time and attention at trial.
The court must award costs as if each party had succeeded in an independent proceeding, unless, in the court’s opinion, the justice of the case otherwise requires, if—
(a)the plaintiff succeeds in his or her proceeding; and
(b)the defendant succeeds in a counterclaim.
[6] I have concluded that the justice of the case requires a departure from the usual position contemplated by r 14.16. It was evident to me that the parties’ claim and counterclaim were both advanced with the objective of ensuring that, if nothing else, neither would ultimately have to pay the other anything. However, I find that this strategy was pursued more vigorously by PBF. At an early stage in the dispute, when PBF was being pressed for payment of the purchase price and lease fees due under the Stock Agreement, it intimated that it would likely have a claim against the Wilsons that exceeded their claim for those amounts and suggested that both claims be set off against one another. At that stage PBF had not quantified its counterclaim and, indeed, did not do so until close to trial. Ultimately it could not prove any such loss. I take the view that PBF’s strategy was to advance an in terrorem claim to deter the Wilsons from pursing their claim.
[7] Moreover, the most contentious issue at trial was the condition of the herd at the start of the Stock Agreement term, which was an essential part of PBF’s counterclaim. PBF’s counterclaim involved very extensive expert evidence as to the health of the Wilsons’ cows and the loss claimed to have been suffered as a result of breaches by the Wilsons of conditions relating to the health of the cows. PBF succeeded on liability on this issue but failed to prove any loss. It submits that its modest recovery under the Land Lease counterclaim and proof of liability on the Stock Agreement counterclaim justifies it being treated as a successful party and entitled to costs in the usual way. I do not accept this. It is uncontroversial that “success on more limited terms is still success”.4 However, I do not accept that success on liability alone can, realistically, be viewed as success for the purposes of costs. To the contrary, success on liability alone, in this case at least, meant that the parties devoted significant time and expense towards an issue that had caused no recoverable loss to the claimant.
4 Weaver v Auckland Council [2017] NZCA 330, (2017) 24 PRNZ 379 at [26].
[8] I therefore propose to deal with costs on the basis that the Wilsons were the successful party overall but that their costs award should be reduced to reflect a number of the objections raised by PBF.
Calculation of scale costs
[9] The Wilsons calculate costs on a 2B basis at $96,559.5 However, PBF raises a number of objections to specific items claimed for.
[10] The first is the interlocutory application for abridgment of time and for an injunction (item 22): the Wilsons’ injunction application to which these costs relate was withdrawn on 3 September 2015 with no issue as to costs. This was not resisted by the Wilsons’ counsel in reply. I accept that it ought to be excluded from the Wilsons’ costs claim.
[11] Secondly, the cost of filing a defence to counterclaim (item 2): the Wilsons claim $4,460 for this item but PBF asserts that the Wilsons were the unsuccessful party in PBF’s counterclaim and should receive no costs. This assertion is based on the fact that PBF succeeded on the liability issue in relation to the Stock Claim. For the reasons already discussed, I do not accept that approach as valid. In my view, the Wilsons were substantially successful in defending the PBF counterclaim. PBF’s modest success on the Land Lease claim can be recognised through a 30 per cent reduction in this item.
[12] Thirdly, the interlocutory application in respect of non-party documents and associated telephone conference (items 22 and 12). These items relate to an application made after the close of pleadings seeking discovery of Fonterra, LIC, NAIT and Kamo Veterinary records relating to the herd. Despite initial opposition to all aspects of the application, PBF ultimately opposed only the production of the LIC records. Edwards J made orders for production of the Fonterra, NAIT and Kamo Veterinary documents and granted leave to make a formal application for non-party orders in relation to the LIC records.6 In doing so, she made the observation that she
5 Schedule B of counsel’s memorandum of costs 13 March 2019.
6 Wilson v Parua Bay Farms Ltd HC Whangarei CIV-2015-488-106, 24 January 2017 (Minute of Edwards J).
was “not currently persuaded that the records from LIC are relevant to the issues in the proceeding”. As is evident from my decision, I did regard those records as relevant but it appears that Edward J’s comments caused the Wilsons not to pursue that issue. In these circumstances, given that PBF opposed only the LIC records so that the application would have been required in any event, I do not see any basis on which to exclude or reduce the costs associated with that application.
[13] Fourthly, wasted costs in respect of the adjourned 2017 trial (items 30, 31, 33): the matter was scheduled for trial on 27 February 2017 but adjourned on the Wilsons’ application on the basis that documents relied on by PBF’s expert witness, Dr Irwin, had not been discovered (these being LIC and Fonterra documents). They sought to have the trial adjourned to allow their expert witness, Dr Wakelin, to review the documents. PBF opposed the adjournment on the basis that the documents were not in its possession, that Dr Irwin had not relied on the LIC document and had only relied on one column of one Fonterra document, which was, in any event, among the non-party discovery the Wilsons had obtained from Fonterra. In fact, at trial, it emerged that Dr Irwin had several hundred documents of LIC herd test data that he had used to prepare a summary of documents on which the joint report by him and Dr Wakelin was produced.7 It is fair to say that the LIC records did assume considerable significance at trial and were relevant to both the Wilsons’ claim that the cows were returned without adequate identification records and the allegations by PBF about the state of the records when the cows were first sold and leased to it. Moreover, herd test results were relied on by both parties to show the level of infection at the start of the Stock Agreement.
[14] In addition, at a telephone conference before Woodhouse J on 24 February 2017 the Wilsons sought to have PBF produce a summary of its cows from 2014. That request was not resisted but nor were the documents produced before the trial date. The delay was attributed to the pressure of milking (which the Wilsons do not accept). In any event, it was recognised by both parties that it would not be possible to analyse the further information before trial with the result that the February trial date was vacated by consent.
7 Ultimately I declined to place weight on the joint report because Dr Wakelin had never been provided with the source documents.
[15] It seems to me that the adjournment of the trial was due in part to the very late request by the Wilsons for additional information, and in part by the defendant’s failure to provide documents used by its expert, which ought to have been produced as part of his evidence. However, I accept PBF’s submission that there was limited wastage because most of the evidence prepared to that point remained unchanged, as did opening submissions. I decline to exclude this item altogether but do reduce it by 50 per cent.
[16] Fifthly, application to amend defence to counterclaim (item 22): PBF resists this item on the basis that r 7.77(8) requires the party filing an amended pleading to bear the costs of and occasioned by the original pleading. PBF says that the Wilsons’ application to amend their pleadings was made after the close of pleadings date and to the extent they were permitted to amend (minor and with PBF’s consent) they received an indulgence and ought not receive costs. Further, the substantive amendments that PBF opposed were not permitted by Woolford J.8 The Wilsons did not respond to this objection. I accept that this item ought not be allowed.
[17] Sixthly, the cost of second counsel (item 35): PBF objects to the claim for second counsel on the basis that it was not a case that required second counsel and that, to the extent the matter was complex, it was largely made so by the breadth of the Wilsons’ pleading, most of which was unnecessary and unsuccessful. I do not accept this. Although this case was capable of being run as a straightforward contractual argument involving two parties that did not seem so clear at the outset of the trial. The contractual arrangements were not properly recorded. A good deal of time was spent addressing the issues arising from the health of the cows and PBF’s claimed loss of profits, neither of which resulted in any financial gain by PBF. Moreover, the fact that many witnesses were not local meant that counsel required additional logistical support. I am satisfied that second counsel was justified.
8 Wilson v Parua Bay Farms Ltd HC Whangarei CIV-2015-488-106, 18 June 2018 (Minute of Woolford J).
Costs reduction
[18] PBF raises a number of issues relating to the conduct of the Wilsons’ claim that it says ought to be recognised in the costs award. It had sought to have these issues recognised by an uplift in its own claim for costs on the counterclaim but, given the approach I am taking, this is a matter that is better addressed by a reduction in the Wilsons’ costs.
Over-pleading
[19] The first point is PBF’s complaint that the Wilsons unnecessarily added to the time and expense of the proceeding by significantly over-pleading. The Wilsons filed four statements of claim over the course of the proceeding. In March 2018 they filed their third amended statement of claim pleading a further 11 causes of action. PBF asserts that the Wilsons failed in at least 12 of the causes of action ultimately pleaded. The Wilsons say that the majority of the causes of action were simply alternatives, to provide the Court with a full “toolbox” of legal principles in dealing with the difficult and incomplete nature of the parties’ contractual arrangements.
[20] In my view, the latter is right. As a result of a “do it yourself” effort by the parties to record their contractual arrangements, the Court was left with the task of identifying what should have been a straightforward contract from a variety of documents; none of which proved to have a reliable provenance and none of which properly addressed all of the outstanding issues between the parties. Moreover, no additional evidence was required to advance any of the additional causes of action.
[21] It is, however, true that additional work would have been required in submissions to address these issues, although I do not criticise counsel for taking a cautious approach in pleading, nor do I think that PBF ought to meet the full cost of addressing those numerous causes of action. I accordingly reduce the scale costs by five per cent to recognise this aspect.
The IT evidence
[22] PBF also asserts that an adjustment in costs should be made to recognise the Wilsons’ request for time to adduce additional evidence from an IT expert. PBF asserts that this evidence related to a claim that had been pleaded from the outset (the terms of the Land Lease) and that it was unnecessary because, in the event, nothing turned on the new evidence. This issue related to the Wilsons’ assertion, based on a draft lease, that the Land Lease required PBF to meet the Wilsons’ outgoings. However, it was PBF itself that suggested that the Wilsons had altered the draft sent by Mr Blakely of PBF during negotiations. I accept that in those circumstances they were entitled to seek expert evidence to support their assertion that they were not sufficiently sophisticated computer-users to make that alteration. Unfortunately, however, the expert evidence did not satisfactorily explain the point. On the other hand, it did not take up much time at trial. I consider the most appropriate course is to reduce the extent to which the Wilsons can claim the cost of the expert witness’ fee by 50 per cent.
The Gates Agreement and the Cow Bailment Agreement
[23] PBF asserts that because five of the causes of action relating to the Land Lease, three relating to the Gates Agreement and four to the Dairy Cow Bailment all failed there should be a significant recognition in costs. This reflects the earlier point of the nature of the Wilsons’ pleading. I am not inclined to reduce the scale costs on account of this point. First, the over-pleading has already been recognised in the earlier reduction. Secondly, although the claim under the Gates Agreement failed it was an extremely minor point that took up little time in evidence or submissions. Thirdly, it cannot be said that, in substance, the Dairy Cow Bailment failed. This is because I treated it as effectively part of the Stock Agreement and allegations based on the terms of that Agreement were proven. I therefore decline to make any adjustment on this account.
The jurisdictional point relating to the Land Lease
[24] PBF says that there ought to be recognition of the Wilsons’ allegation in its third amended statement of claim that the Court did not have jurisdiction to decide
PBF’s claims for maintenance under the Land Lease agreement, which failed but forced PBF to respond to it. This issue forms part of the dispute over the terms of the Land Lease and does not warrant a separate adjustment.
The Wilsons resisting the allegation that the cows were in poor condition
[25] PBF also says that there ought to be recognition of the Wilsons’ unreasonable maintaining of its position that the cows it supplied were healthy. Whilst I have previously declined to treat PBF’s success on liability under the Stock Agreement counterclaim as success in a substantive sense, I accept that the state of health of the cows was a point on which the Wilsons took an unreasonable position. A significant amount of time and effort was put into addressing the health of the stock on this issue and the Wilsons failed on it. I recognise that this question was only in issue because PFB had asserted a substantial loss of profits resulting from the condition of the cows and, ultimately, could not prove that it had suffered any loss of profit as a result of it. However, I agree that a reduction should be made to recognise that the Wilsons did act unreasonably in resisting PBF’s assertions about the level of mastitis in the cows. I reduce the Wilsons’ costs by 10 per cent on this account.
Settlement offers
[26] Rule 14.6 permits the court to award increased or indemnity costs against a party for failing, without reasonable justification, to accept a settlement offer, whether or not made in the form provided for in r 14.10 (written and without prejudice save as to costs).9 In this case, offers to settle on a “without prejudice except as to costs” basis were made by both parties.10 Under r 14.11(1) the effect of such offers is at the discretion of the court. Subject to that provision, r 14.11(3) provides that the party who makes an offer is entitled to costs on the steps taken in the proceeding after the offer is made if they offered a sum of money that exceeded the amount of a judgment obtained by the other party or which would have been more beneficial to the other party than the judgment obtained by the other party. Under r 14.11(4), if the offer does not have either of those effects, it may still be taken into account if it was close to the value or benefit of the judgment.
9 High Court Rules 2016, r 14.6(3)(b)(v).
10 Rule 14.10.
[27] PBF asserts that the Wilsons failed without reasonable justification to accept settlement offers that provided greater benefit than the judgment obtained. Specifically, on 19 June 2018, a week before the start of the trial, PBF offered the Wilsons $75,000 and to forego costs the Wilsons owed on setting aside a statutory demand and costs on PBF’s successful opposition to the Wilsons’ application to amend its defence to the counterclaim. PBF puts the total value of that offer at $92,435.40. On 24 June 2018, PBF made another offer, on the same basis as the last but increasing the cash portion to $85,000, bringing the total value of the offer to $102,435. The Wilsons rejected both offers.
[28] PBF says that although the Wilsons received more than $92,435 by way of a judgment sum they received a lesser benefit in terms of r 14.11(3)(b), which provides that:
(3)Party A is entitled to costs on the steps taken in the proceeding after the offer is made, if party A —
…
(b)makes an offer that would have been more beneficial to party B than the judgment obtained by party B against party A.
[29]This assessment is based on the fact that:
(a)the Wilsons should be entitled to interest only from the filing of the second amended statement of claim in August 2017;11
(b)the Wilsons are still liable to PBF for costs in relation to the statutory demand ($12,621.55); and
(c)the Wilsons likely spent more on legal fees for the trial than the additional sum they would have obtained above the value of these offers.
[30] Although r 14.11(3)(b) refers only to the effect of the judgment obtained by the party who rejected a settlement offer, the circumstances of this case mean that
11 Which is correct: see my minute of 3 May 2019 correcting the judgment.
the Wilsons’ post -trial position needs to take account of the modest judgment obtained by PBF. Taking that into account the Wilsons recovered a net amount of $144,689.91.
[31] I do not accept that the Wilsons acted unreasonably in rejecting the offers that PBF made just before trial. At that late stage a substantial amount would already have been expended in preparation for trial. The fact that more costs would be expended in conducting the trial is not a matter to include in the assessment whether the offers would have placed the Wilsons in a better position than proceeding to trial.12 Even treating the value of the offers as including the costs associated with the statutory demand, the Wilsons still obtained much more than the amount offered.
[32] The Wilsons, in turn, point out that they made five offers to settle prior to June 2018 and that they would have put PBF in a better position than it is now. All but one included the return of the cows which were valued under the Stock Agreement at a total of $300,000. The offers that were made were:
(a)$87,551 plus the return of 200 cows in December 2015 (total value of
$387,551);
(b)$23,000 plus the return of 200 cows in August 2016 (total value of
$323,000);
(c)$94,000 plus the return of 160 cows in February 2017 (total value of
$240,000); and
(d) $202,784 in May 2018.
[33] PBF says that it was not unreasonable for it to reject settlement the offers up to February 2017 because they all required the return of the herd, which was an income producing asset for PBF. There is some irony in that position, given its claim at trial to have suffered a loss of profit of some $400,000 as a result of the condition of the herd. PBF has, throughout, blown hot and cold on this issue; at times it asserted that the herd had no value but at other times declined to hand the herd back because it
12 Tower Insurance Ltd v Kilduff [2019] NZCA 82 at [35].
did have value. Nevertheless, in declining to return the herd and pay any of the cash amounts the Wilsons indicated they would accept to that point, PBF was not acting unreasonably. Nor, having regard to that fact that the Wilsons’ net recovery was less than the May 2018 settlement offer, was PBF unreasonable to reject that offer.
[34] As a result, I decline to place any weight on the various settlement offers made for the purposes of fixing costs.
Disbursements
[35] The Wilsons claim a total of $34,854.91 in disbursements. PBF objects to a number of these as follows:
(a)Filing fees for the original and first two amended statements of claim on the basis that r.7.77(8) provides that the party filing an amended pleading must bear all the costs of the original pleading unless the court otherwise orders. In my view the Wilsons should be able to claim the filing fee for the original and the third amended statement of claim; the nature of the claim clearly required updating after June 2017 when the Stock Agreement came to an end.
(b)Filing fee on the injunction application: I allow the Wilsons to claim this item because, although the application was ultimately withdrawn, that withdrawal was in the context of a settlement agreement under which PBF agreed to make various payments (which it later reneged on).
(c)Filing fee for the Wilsons’ statement of defence to PBF’s counterclaim: the Wilsons are entitled to this because, as already discussed, I consider that they were, overall, the successful party on the counterclaim having regard to PBF’s extremely modest recovery.
(d)Filing fee for non-party discovery orders: I have already discussed this application and, for the same reasons, I allow the disbursement claim in relation to it.
(e)Filing fee for substituted service. It was not apparent what this item referred to. I therefore disallow it.
(f)Filing fee for application to amend statement of defence to counterclaim out of time: I allow this disbursement because minor amendments were permitted and the refusal of other amendments sought is already reflected in the adjustment to the scale costs.
(g)Filing fee for the amended statement of defence: I allow this.
(h)The hearing fees: PBF resists meeting the whole of the hearing fees, given that it did have some success. I accept that. I allow a recovery of 70 per cent of the hearing fees.
(i)Title searches: this is resisted because there is no explanation given for it and I accept that concern. This item is disallowed.
(j)Subpoenas: these were costs reasonably incurred in the conduct of the claim and I allow them.
(k)NAIT invoice: PBF resists this on the basis that the non-party discovery was an indulgence. I do not accept that. Non-party discovery was a legitimate step, which PBF ultimately did not oppose and the fact that leave was required to obtain the order out of time does not preclude the cost being recoverable now.
(l)The expert fees of Mr Cronje: I have already indicated that this disbursement is only recoverable to the extent of 50 per cent.
(m)Counsel travel costs: PBF fairly acknowledges that this item can be recovered but notes that there is no evidence as to the amount incurred. I allow the item in full upon production of receipts.
(n)Fees of Dr Wakelin: this item is resisted on the basis that Dr Wakelin did not actually provide much support for the Wilsons’ position as to
the health of the cows and that the Wilsons acted unreasonably in taking the position they did. I agree and I disallow this item.
(o)Plaintiffs accommodation and food costs: this item is not claimable.
Result
[36] Because of the intertwined nature of the claim and counterclaim and the very modest judgment sum obtained by PBF, it is appropriate to depart from r 14.16 and allow costs to the Wilsons as the successful party overall, with reductions as appropriate.
[37] The Wilsons will accordingly have costs in accordance with this judgment. I leave it to counsel to make the necessary calculations.
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