AIG INSURANCE NEW ZEALAND LIMITED v CNZ (AUCKLAND) LIMITED (IN LIQUIDATION) [2023] NZHC 2104

AIG INSURANCE NEW ZEALAND LIMITED v CNZ (AUCKLAND) LIMITED (IN LIQUIDATION) [2023]NZHC 2104 [9 August 2023]IN THE HIGH COURT OF NEW ZEALANDAUCKLAND REGISTRYI TE KŌTI MATUA O AOTEAROATĀMAKI MAKAURAU ROHECIV-2019-404-1443[2023] NZHC 2104BETWEEN AIG INSURANCE NEW ZEALANDLIMITEDPlaintiffAND CNZ (AUCKLAND) LIMITED(IN LIQUIDATION)First DefendantASK METRO LIMITEDSecond DefendantQBE INSURANCE (AUSTRALIA)LIMITEDThird DefendantHAMPTON JONES PROPERTYCONSULTANCY LIMITEDThird PartyHearing: On the papersCounsel: Mathew J Francis/Hugh W King for the PlaintiffNicola Faulkner for the First and Third DefendantsDianna Fotiades for the Second DefendantMelissa Russell for the Third PartyGuy Tompkins for John and Chantal Liggins, non-partiesJudgment: 9 August 2023COSTS JUDGMENT OF ASSOCIATE JUDGE C B TAYLORThis judgment was delivered by me on 9 August 2023 at 3:00pmpursuant to Rule 11.5 of the High Court Rules.Registrar/Deputy Registrar[1] The plaintiff, AIG Insurance New Zealand Limited (AIG) filed aninterlocutory application for orders allowing it to use in these proceedingscommunications subject to privilege, being privilege jointly held by AIG and variousnon-parties:(a) the Liggins;(b) Mr Hall;(c) Focus Construction Limited (Focus)[2] None of the parties to this proceeding or interested non-parties opposed theapplication, although counsel for the Liggins filed a memorandum dated 12 May 2023seeking costs incurred by Liggins responding to it. Nothing further is required inrelation to Mr Hall.[3] On 15 Jun 2023, the Court made the orders AIG sought in its application andinvited memoranda on costs by 29 June 2023. The following memoranda have beenfiled:(a) a memorandum by counsel for the first to third defendants and the thirdparty dated 22 June 2023;(b) a memorandum by counsel for the Liggins, dated 29 June 2023;(c) a memorandum by counsel for AIG dated 29 June 2023.Issues to be determined[4] The issues to be determined in this judgment are:(a) whether AIG should be liable for the reasonable costs of the Liggins, asa non-party, incurred in connection with the application, specified incounsel's memorandum of 29 June 2023 as $10,614.50;(b) whether AIG can pass on to the defendants the costs of its applicationand any non-party costs for which it might be liable.The Liggins' costs[5] Counsel for the Liggins seeks full indemnification costs in respect of costswhich the Liggins have incurred as a result AIG's application. The grounds on whichthe reimbursement of their costs from AIG are sought are:(a) They are not a party to this proceeding and have no interest in theproceeding or in AIG's application.(b) They have acted reasonably and responsibly in response to theapplication (including by not opposing it).(c) The application was entirely unnecessary so far as it related to theLiggins. Liggins had already advised AIG that they were willing toconsent to AIG's use of the privileged communications if AIG agreedto reimburse them for their reasonable costs in assessing the documentsand attending to confidentiality arrangements (which had been offeredby AIG). No response was received to the offer but instead AIG filedthe application.(d) The costs incurred by Liggins are reasonable and are necessary toconsider AIG's application, the various documents and evidence filedas a consequence of AIG's application, and responsibly advise theCourt as to the Liggins' position.(e) The Court has a discretion as to all matters of costs incidental to aproceeding, the objective being to achieve an outcome which bestmeets the interests of justice.(f) Rule 14.16(4)(d) recognises that an order for indemnity costs isgenerally appropriate if a person in whose favour the order of costs ismade is not a party to the proceeding and has acted reasonably.(g) An analogy can be drawn to applications for non-party discovery whereit is well established that "third parties brought in as by a side windshould not be left meeting their own expenses".1 Non-parties areentitled to their costs for both responding to an application andcomplying with the orders made.[6] Counsel for AIG submits that the Court should not exercise its discretion infavour of awarding costs to the Liggins for the following reasons:(a) the Liggins never agreed that they would consent to AIG's request touse "without prejudice" communications if AIG paid their costs. Theirproposal was that the Liggins would "consider" AIG's request beforeconfirming consent;(b) the analogy drawn with non-party discovery is inapt: the collation ofdocuments and the preparation of an affidavit is a time-consuming andexpensive process. It cannot be compared with AIG's simple requestto use "without prejudice" documents in this proceeding, particularlywhen:(i) the Liggins and their counsel must have been aware of andfamiliar with the relevant documents already, given WilsonHarle had been acting for the Liggins in the dispute since6 December 2017;(ii) the relevant law is clear and straightforward: use of "withoutprejudice" communications to prove that a party has acted1 Commerce Commission v Telecom Corporation of NZ Ltd (1994) 8 PRNZ 200 (HC).reasonably to mitigate losses is a well known exception to the"without prejudice" rule;2(iii) the Liggins could not reasonably have had concerns about thewider use of the relevant communications outside theproceeding, given High Court Rule 8.30(4).[7] In summary, counsel for AIG submits that the Liggins' costs wereunreasonable.Conclusion in relation to the Liggins' costs[8] Having considered the respective memoranda filed by counsel, my views areas follows:(a) the application was necessary as in my view the communication fromcounsel for the Liggins did not amount to consent (as submitted bycounsel for the Liggins at [3](c) of his memorandum of 29 June 2023);(b) AIG is correct in its view that a "without prejudice" communicationshould be able to be used to demonstrate that the party has actedreasonably to mitigate loss and this is a well established exception ofthe "without prejudice" rule, relying on the authorities of Miller vLinsley & Mortimer and Sheppard Industries Ltd.3 Accordingly itshould have been clear to Liggins' counsel that the law was clear andstraightforward on this point;(c) given Wilson Harle have acted for the Liggins in the matter since 2017,counsel for AIG's assertion that they should have been familiar with therelevant documents is reasonable;2 Miller v Linsley & Mortimer [1994] EWCA Civ 39 (CA); Sheppard Industries Ltd v SpecialisedBicycle Components Inc [2011] NZCA 346 at [24].3 Above, n 2.(d) I accept the submission made by counsel for AIG at 6.2 of hissubmissions that the comparison of the consent sought to use "withoutprejudice" communications with non-party discovery is not a validcomparison, and consenting to the use of without prejudicecommunications should be straightforward;(e) it is reasonable that AIG make some contribution to Liggins' costs asthe Liggins were non-parties.[9] In my view, a fair contribution would be 50 per cent of the Liggins' actualcosts, amounting to $5,307.25. An order is made below accordingly.Passing of costs to the defendants[10] Counsel for the first to third defendants and third party submit that the costs ofthe application, both AIG's costs and those awarded to non-parties (namely the costsawarded to Liggins), should be borne by AIG for the following reasons:(a) the application was unnecessary, AIG already having the right to usethe communications in this proceeding according to the memorandumof counsel for Liggins dated 15 May 2023;(b) in any event the application was avoidable had AIG:(i) included a standard disclosure provision in the three settlementoffers it provided (two of which were recorded in signedsettlement agreements drafted by AIG) with the three non-parties;(ii) AIG should have sought an order when a discovery order wasmade in this proceeding on 17 October 2019 by Associate JudgeBell.[11] Counsel for AIG submits it is unnecessary and/or inappropriate for the Courtto determine now a contingent cost question. He submits whether AIG is entitled topass on the costs of its application for the defendants would only fall to be determinedif AIG succeeds with its substantive claim and unless and until that time comes it isnot necessary for the Court to determine the question and to do so would not beconsistent with r 1.2 of the High Court Rules. He submits that AIG reserves the rightsto seek costs from the defendants if it is ultimately successful in the substantiveproceeding.[12] Counsel for AIG also submits that the position taken by the defendants and thethird party is without basis for the following reasons:(a) the application (as against the Liggins) was necessary because theLiggins conditioned any consent to use the documents on their prior toconsideration of the matter;(b) whether at the time of settling the claims with non-parties those non-parties would have consented to AIG's use in this proceeding of"without prejudice" communications is speculative;(c) it is unlikely a Court, in a standard case management conference, wouldhave made, without allowing the non-party to be heard, discoveryorders requiring disclosure of "without prejudice" communicationssubject to a joint privilege held by a non-party to the proceeding.Conclusion in relation to passing of costs to the defendants[13] I am of the view that counsel for AIG's submission is correct, in that it isunnecessary and inappropriate for the Court to determine the passing on to thedefendants the costs in relation to the application (both AIG's costs and the costsawarded to Liggins) at this stage. This issue will be dealt with at the conclusion of thesubstantive claim. Accordingly, no order is made in this respect.The position of Focus[14] Nothing has been filed in relation to costs by counsel for Focus.[15] I accept the submissions of counsel for AIG at [11] of his memorandum of29 June 2023 that Focus does not appear to have incurred any costs. Accordingly noorder is made in respect of Focus.Orders[16] I order that AIG is to pay costs to the Liggins of $5,307.25.[17] No order is made in relation to liability of the defendants in respect of AIG'scosts on the application or the costs awarded to the Liggins in respect of AIG'sapplication...Associate Judge TaylorSolicitors:Wotton & Kearney (Mathew J Francis/Hugh W King), Auckland, for the PlaintiffRobertsons (Michael Robertson/Nicola Faulkner), Auckland, for the First and Third DefendantPrice Baker Berridge (Dianna Fotiades), Henderson, Auckland, for the Second DefendantKennedys Law (Melissa Russell/Mark Dennett), Auckland, for the Third PartyWilson Harle (Guy Tompkins), Auckland, for John and Chantal Liggins (non parties)