Zheng v Lyndon

[2023] NZHC 3476

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2016-044-1425

[2023] NZHC 3476

BETWEEN

LU ZHENG and HIBISCUS INDEPENDENT TRUSTEES 2008
LIMITED as trustees of the ZHENG FAMILY TRUST

First Plaintiffs

ZHENG LU HOLDINGS LIMITED
Second Plaintiff

AND

DAVID JULIAN RICHARD LYNDON, JENNIFER ROBYN LYNDON and LISA MICHELLE ARCHER

Defendants

Hearing:	On the papers
Counsel:	P J Dale KC for the Plaintiffs S J Tee for the Defendants
Judgment:	1 December 2023

JUDGMENT OF GAULT J

(Costs)

This judgment was delivered by me on 1 December 2023 at 2:30 pm pursuant to r 11.5 of the High Court Rules 2016.

Registrar/Deputy Registrar

……………………………………

Solicitors / Counsel:

Mr P J Dale KC, Barrister, Auckland

Mr J M Skinner, Skinners Law, Auckland Mr S J Tee, Morton Tee Ltd, Auckland

ZHENG and HIBISCUS INDEPENDENT TRUSTEES 2008 LTD as trustees of the ZHENG FAMILY TRUST v LYNDON, LYNDON and ARCHER [2023] NZHC 3476 [1 December 2023]

[1]                 Following my judgment of 27 September 2023,1 the parties have been unable to reach agreement on costs.

Background

[2]                 The plaintiffs claimed damages in nuisance in relation to a row of poplar trees on the defendants’ driveway which ran along the plaintiffs’ boundary near to the plaintiffs’ commercial greenhouse.

[3]The defendants’ counterclaimed in trespass.

[4]                 The plaintiffs pleaded loss of profits of approximately $1.1 million but at trial the claimed loss reduced to $712,500 plus interest.

[5]                 The defendants claimed $78,000 for loss of amenity in the trees due to the trees being cut down, $1,356 for the cost of removal and $50,000 for distress, upset and loss of privacy.

[6]                 I found that the second plaintiff was entitled to judgment on the claim in nuisance for damages of $45,278 plus interest.

[7]The defendants’ counterclaim was dismissed.

[8]                 My judgment indicated that while the plaintiffs had succeeded in part, given the reduced damages awarded and in all the circumstances of this unfortunate dispute, I was inclined to make no order as to costs. Of course, at that stage I was unaware of any offers made without prejudice except as to costs.

Costs sought

[9]                 The defendants seek costs on the basis that they made two written offers without prejudice save as to costs, dated 28 February and 20 April 2023. They also raise other matters. The defendants seek a 30 per cent uplift on 2B costs, totalling

$38,060.75, plus expert costs of $56,165 for steps taken since 28 February 2023 on

1      Zheng v Lyndon [2023] NZHC 2679.

the basis that they became the successful party due to their settlement offer. Alternatively, they seek costs calculated on the same basis since 20 April 2023, totalling $25,632.75, plus expert costs of $15,541.64.

[10]             In response, the plaintiffs say they were the successful party and are entitled to costs. The plaintiffs’ costs, calculated on a 2B basis, total $48,766.50 plus disbursements of $163,669.98.

The without prejudice except as to costs offers

[11]             On 28 February 2023, the defendants offered $50,000 to settle on a without prejudice save as to costs basis. The letter on behalf of the defendants said that they were for the first time able to properly consider the merits of the claim and previous settlement offers. It said their overriding concern was that the claim was grossly overstated and did not justify the cost of a four day High Court hearing. The offer was open for acceptance until 4pm on 3 March 2023 (three days).

[12]On 20 April 2023 (one working day before trial), the defendants offered

$100,000 to settle on a without prejudice save as to costs basis. That offer was open for acceptance until 5pm the same day.

[13]Later that day, the plaintiffs declined the defendants’ offer and offered to accept

$250,000 on a without prejudice save as to costs basis. That offer was open for acceptance until 12pm the next day (the Friday before trial).

Applicable principles

[14]             A key general principle applying to  the  determination  of  costs  in  the  High Court Rules 2016 is that the party who fails with respect to a proceeding should pay costs to the party who succeeds.2 Another general principle is that costs should be assessed by applying the appropriate daily recovery rate to the time considered reasonable for each step reasonably required,3 that is applying the scale in the Rules.

2      High Court Rules 2016, r 14.2(1)(a).

3      Rule 14.2(1)(c).

[15]             However, the Court may order a party to pay increased costs if the party opposing costs has contributed unnecessarily to the time or expense of the proceeding or a step in it by 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 onus is on the party seeking increased costs to persuade the Court that an award of increased costs is justified.

[16]             Similarly, the Court may refuse to make an order for costs or may reduce costs if the party claiming costs has contributed unnecessarily to the time or expense of the proceeding or a step in it by 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.5

[17]             In assessing whether a failure to accept a settlement offer is reasonable, the Court’s assessment is a broad one taking into account, amongst other matters, the offer, its timing, its size, the reasonable expectations of the party who refuses the offer, and whether the parties were in a position to assess the merits when the offer was received.6 The reasonableness of a party’s rejection of a settlement offer must be assessed at the time of the rejection, not against the subsequent result.

[18]Rule 14.10(1) provides:

A party to a proceeding may make a written offer to another party at any time that—

(a)is expressly stated to be without prejudice except as to costs; and

(b)relates to an issue in the proceeding.

[19]Rule 14.11 provides:

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.

4      High Court Rules 2016, r 14.6(3)(b)(v).

5      Rule 14.7(f)(v).

6      Samson v Mourant [2016] NZHC 1119 at [44] citing Weaver v HML Nominees Ltd [2016] NZHC 473 at [30].

(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.

(4)The offer may be taken into account, if party A makes an offer that—

(a)does not fall within paragraph (a) or (b) of subclause (3); and

(b)is close to the value or benefit of the judgment obtained by party B.

Discussion

[20]             Mr Tee, for the defendants, submitted that the defendants were the successful party having made settlement offers that exceed the amount of the judgment or are close to the value of the judgment.   Since the defendants claim only costs after      28 February 2023, I apprehend Mr Tee did not mean that they were the successful party for all purposes. Rule 14.11 applies only to steps after the offer; it does not make the offeror the successful party more generally for the purposes of r 14.2.

[21]             The starting point is that the plaintiffs were the successful party, both in relation to their claim and the defendants’ counterclaim, although the plaintiffs’ damages award was very modest compared with the damages claimed. It was not claimed or shown that the plaintiffs, while succeeding overall, failed in relation to an issue which significantly increased the defendants’ costs.7 I refer to the expert evidence further below.

7      High Court Rules 2016, r 14.7(d).

[22]             Turning to the impact of the offers made without prejudice except as to costs, the plaintiffs’ position is that the defendants’ offers came too late and should not be taken into  account,  citing  Strachan  v  Denbigh  Property  Ltd.8  By  the time  the 28 February 2023 settlement offer was made, the plaintiffs had incurred significant costs. Mr Dale KC, for the plaintiffs, also relied on the earlier open settlement offers referred to at trial.

[23]             In terms of r 14.11, the defendants’ 28 February 2023 offer did not exceed the judgment including interest. Whether it was close to the value of the judgment and therefore may be taken into account under r 14.11(4) depends on the interest calculation. The total judgment sum, including interest to the date of judgment, is between approximately $58,000 and $59,740 applying simple interest or compound interest (annually) respectively.  In the context of the plaintiffs’ much higher claim,  I accept the 28 February 2023 offer may be taken into account. However, I do not consider it reverses the prima facie entitlement to costs from 28 February 2023.

[24]             The defendants’ 20 April 2023 offer did exceed the judgment and therefore, subject to the Court’s discretion, the defendants are entitled to costs on the steps taken after that offer.

[25]             In terms of whether scale costs should be increased or reduced due to the settlement offers, I do not consider the plaintiffs’ entitlement to costs from 28 February to 20 April 2023 should be reduced. I consider they did not fail, without reasonable justification, to accept the 28 February 2023 settlement offer. At that date (when reasonableness must be assessed), based on the available briefs of evidence on causation and quantum issues, I consider the plaintiffs had a reasonable justification for not accepting the defendants’ offer.

[26]             From 20 April 2023, I consider the defendants are entitled to costs, but I do not consider those costs should be increased on the basis that the plaintiffs failed, without reasonable justification, to accept the 20 April 2023 settlement offer. The offer was open for less than a day and, at that date (when reasonableness must be assessed),

8      Strachan v Denbigh Property Ltd HC Palmerston North CIV-2010-454-232, 3 June 2011.

based on the briefs of expert evidence on causation and quantum issues, I consider the plaintiffs had a reasonable justification for not accepting the defendants’ offer.

[27]             As indicated in my judgment, even at trial the expert evidence was somewhat unsatisfactory. In that regard, only 50 per cent of the disbursements for expert costs are allowed, however allocated.

[28]             Aside from the settlement offers, Mr Tee pointed to the fact that the outcome achieved by the plaintiffs is within the District Court jurisdiction and submitted that the transfer of the proceedings was unreasonable and an unnecessary step which added to expenditure. He also submitted that the defendants incurred wasted expenditure, particularly expert costs in establishing that shading was not a basis for liability  –    a point eventually conceded by the plaintiffs. The defendants also relied on their counsel’s letter dated 14 March 2023 inviting the plaintiffs to abandon their $30,000 claim for physical damage. This was not acknowledged, but the claim was not pursued at trial. Mr Tee also submitted that the fact the defendants failed on their counterclaim did not significantly increase the costs of the party opposing.

[29]             Mr Dale submitted that the Court in exercising its broad discretion should also take into account the serious tax allegations advanced by the defendants and the significant work undertaken by the plaintiffs’ family to remove the roots.

[30]             I do not consider these other matters, which are unrelated to the settlement offers, are sufficiently material to warrant departing from the general principles identified. I am not persuaded the plaintiffs acted unreasonably in relation to the transfer to this Court or otherwise such that the plaintiffs’ costs prior to 20 April 2023 should be refused or reduced or the defendants’ costs thereafter should be increased. Each side bears responsibility for this unfortunate dispute.

[31]             Accordingly, I consider the plaintiffs are entitled to 2B costs and disbursements for the period to 20 April 2023 and the defendants are entitled to 2B costs and disbursements thereafter. I will leave counsel to do the offsetting calculation but note that:

(a)the four days for hearing preparation is to be split two days each given the timing of the 20 April 2023 offer; and

(b)expert costs (reduced by 50 per cent) are to be allocated according to when the work was done rather than invoiced.

Result

[32]             The plaintiffs are entitled to  2B  costs and disbursements for the period  to  20 April 2023 and the defendants are entitled to 2B costs and disbursements thereafter as indicated. I reserve liberty to apply in relation to the calculation in the unlikely event that is necessary.

Gault J