HENDERSON v WALKER [2019] NZHC 3020

HENDERSON v WALKER [2019] NZHC 3020 [20 November 2019]IN THE HIGH COURT OF NEW ZEALANDCHRISTCHURCH REGISTRYI TE KŌTI MATUA O AOTEAROAŌTAUTAHI ROHECIV-2014-409-45[2019] NZHC 3020BETWEEN DAVID IAN HENDERSONPlaintiffAND ROBERT BRUCE WALKERDefendantOn the papersCounsel: J Moss and H M Weston for PlaintiffR J B Fowler QC and S B McCusker for DefendantJudgment: 20 November 2019JUDGMENT OF THOMAS J(COSTS)[1] Mr Henderson sued Mr Walker for misuse of his private information obtainedfrom a laptop (Laptop) Mr Walker acquired in his role as liquidator of severalcompanies of which Mr Henderson was formerly a director. On 3 September 2019, Iissued my decision upholding aspects of Mr Henderson's claims in breach ofconfidence and invasion of privacy, and ordering Mr Walker to pay $5,000 indamages.1 I dismissed Mr Henderson's remaining claims in conversion, misfeasancein public office, breach of statutory duty and contempt of court.[2] I said Mr Henderson was entitled to some measure of costs.2 The parties havebeen unable to resolve costs between themselves.1 Henderson v Walker [2019] NZHC 2184.2 At [321].[3] The parties agree the proceeding is appropriately categorised on a 2B basis andthere is no objection to certification for second counsel. Mr Henderson's costs on ascale 2B basis amount to $43,039.3 Mr Henderson also claims disbursements totalling$15,431. Mr Henderson shared his legal costs with Mr Hyndman, who brought asimilar case that was heard together with his. Mr Henderson's counsel, Mr Moss, whorepresented both Mr Henderson and Mr Hyndman, suggests a fair allocation of costsis 80 per cent to Mr Henderson and 20 per cent to Mr Hyndman. He says this is basedon how much time was spent on each matter. The above figures are based on thatassumption.[4] I agree with Mr Moss that it is appropriate to allocate 80 per cent of the coststo the Henderson proceeding. Mr Fowler QC submits on behalf of Mr Walker that60 per cent is more appropriate. My view is that figure overplays the relative time andexpense that would have been incurred by the Hyndman proceeding. The factualnarrative concerning Mr Henderson's claim was complex and detailed. Bycomparison, the relevant events concerning Mr Hyndman were limited in number andperipheral in nature. In my assessment, costs of legal research likely formed a farsmaller component of the costs than the factual work. I also note Mr Hyndman didnot advance a claim for conversion, so that legal work is solely attributable toMr Henderson's claim. Finally, an 80/20 split corresponds with the time spent on eachclaim at the hearings before me.Calderbank offers[5] The central issue of dispute between the parties concerns a series ofCalderbank offers exchanged between the parties between April and June 2018.Mr Walker seeks costs on an increased basis from 13 April 2018, the expiry date ofhis first Calderbank offer.4 Mr Henderson also seeks increased costs as a result of hisCalderbank offers.[6] On 4 April 2018, Mr Walker's solicitors wrote to Mr Henderson's solicitorsoffering $10,000 in full and final settlement of the proceeding and all related claims3 This amount is said to exclude steps taken prior to March 2017, before which Mr Henderson wasrepresenting himself, although I address a discrepancy in this regard at [22] below.4 High Court Rules 2016, r 14.6(3)(b)(v) and 14.11.that might have been brought by Mr Henderson. The offer was made without prejudicesave as to costs and was open for acceptance until 13 April 2018.[7] In response, on 24 April 2018, Mr Henderson's solicitors made a counter offerof $10,000 for damages and $5,000 plus GST for costs. The offer required Mr Walkerto provide an acknowledgement of invasion of privacy in simple words to be agreedbetween the parties at a later stage. The offer was made without prejudice save as tocosts and was open for acceptance until 1 May 2018.[8] On 14 May 2018, Mr Walker's solicitors replied that Mr Walker was preparedto agree to "the essential terms of that offer" but that it would be necessary to agreeon the terms of the acknowledgment at the same time as payment terms. Mr Walkerproposed to settle for a total payment of $15,750 and an acknowledgment in thefollowing terms:Mr Walker acknowledges that the documents provided for inspection to thedefendants in the Walker v Forbes proceeding (CIV-2012-409-2486) inFebruary 2016 included documents which were not relevant in thatproceeding, and which contained information relating to Mr Henderson.These documents ought not to have been provided to the defendants in thatproceeding.Any information about the "existence and terms" of the settlement was to be keptconfidential and not disclosed to any person except to the extent necessary to allowenforcement of the settlement. Mr Henderson could also disclose the information toa legal advisor "with a clear and legitimate need to use the information". The offerwas made without prejudice save as to costs and was open for acceptance until21 May 2018.[9] On 22 May 2018, Mr Henderson's solicitors made a final counter offer for thesame amount of $15,750. Mr Henderson objected to the inclusion of terms that werenot part of the offer he made on 24 April, namely the confidentiality clause. He alsoobjected to the limited scope of the acknowledgement, and proposed the following inits place:Mr Walker acknowledges that in 2011 he obtained from the Police a personallaptop and a tape drive and in 2011 and 2012 he distributed information anddocuments from the laptop and/or tape drive to individuals, the IRD, and theOfficial Assignees office, without notice to Mr Henderson, and without lawfulright to do so.Mr Walker also acknowledges that in 2016 he provided documents from thelaptop and/or tape drive for inspection in the proceeding (CIV-2012-409-2486) that were personal to Mr Henderson and were not relevant to theproceeding, without notice to Mr Henderson, and without any lawful right todo so.The acknowledgement was not to be confidential. The offer was made withoutprejudice save as to costs and was open for acceptance until 29 May 2018.[10] Finally, on 15 June 2018, Mr Walker's solicitors repeated Mr Walker's earlieroffer dated 14 May 2018 and extended the deadline for acceptance until 22 June 2018.No reference was made to Mr Henderson's offer dated 22 May 2018.[11] None of the offers were accepted.[12] Rule 14.11 provides the effect of a Calderbank offer on costs:14.11 Effect on costs(1) The effect (if any) that the making of an offer under rule 14.10 has onthe question of costs is at the discretion of the court.(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 aproceeding (party A) to another party to it (party B).(3) Party A is entitled to costs on the steps taken in the proceeding afterthe offer is made, if party A—(a) offers a sum of money to party B that exceeds the amount ofa judgment obtained by party B against party A; or(b) makes an offer that would have been more beneficial to partyB than the judgment obtained by party B against party A.[13] Rule 14.11 is an important device to provide defendants with an economicmeans of limiting their exposure to the risk of litigation costs and to encourage partiesto settle disputes outside court.5 However, as r 14.11(1) makes clear, the Court has adiscretion whether to reverse the ordinary rule that costs are awarded to the successfulparty because of the existence of a rejected Calderbank offer. As the Court of Appealhas recently explained, this discretion is broad, and all relevant circumstances must beconsidered, including whether rejection of the offer or offers was reasonable.6Reasonableness is assessed as at the time the offer was made.7[14] Mr Moss submits that it was reasonable to reject Mr Walker's Calderbankoffers because they did not include an acknowledgement of the main invasions ofprivacy involving the Laptop. Mr Moss suggests Mr Henderson's claim was neverabout the money and emphasises the parties had agreed on the monetary figure in anyevent. The dispute was about the terms of the acknowledgement and Mr Hendersonwas within his rights to reject the offer made on 14 May 2018.[15] Mr Fowler submits the offers were reasonable in amount, contained adequaterecognition of Mr Henderson's costs to date, were made at a time when most of thepreparation for trial had not yet been undertaken and adequately recognisedMr Henderson's desire for vindication. Mr Fowler refers to Bluestar Print Group (NZ)Ltd v Mitchell, where the Court of Appeal minimised the relevance of a desire forvindication and said a "steely" approach to Calderbank offers is required.8 The Courtalso said monetary compensation "might well be regarded as conveying a distinctelement of vindication to the plaintiff".9[16] Mr Walker's Calderbank offers were undeniably for a sum of money thatexceeds the amount of the judgment obtained by Mr Henderson, even after factoringin any entitlement to costs Mr Henderson had generated by that stage.10 That said,when viewed in context, I do not consider Mr Henderson acted unreasonably byrefusing those offers. First, these offers must be viewed together as a series of counteroffers in an attempt to negotiate a settlement rather than in isolation. When seen in5 Moore v McNabb (2005) 18 PRNZ 127 (CA) at [58].6 Tower Insurance Ltd v Kilduff [2019] NZCA 82 at [33].7 Samson v Mourant [2016] NZHC 1119 at [44].8 Bluestar Print Group (NZ) Ltd v Mitchell [2010] NZCA 385, [2010] ERNZ 446 at [20].9 At [19].10 This amount being comparatively small because Mr Henderson was self-represented until March2017 and most of the costs were incurred after the Calderbank offers were made.that light, Mr Henderson cannot be said to have acted unreasonably. He continued toattempt negotiation in order to reach a settlement suitable to both parties. In fact, itwas Mr Walker who never responded to Mr Henderson's offer of 22 May 2016.[17] Secondly, Mr Moss is correct to point out the sticking point of the negotiationswas the terms of the acknowledgement. Regardless of whether Mr Henderson's claimwas properly characterised as a monetary claim, it was certainly in large part about thevindication of wrongdoing by Mr Walker. In fact, in relation to privacy, the remedyachieved by Mr Henderson consisted solely of a declaration. In that respect, this caseis distinguishable from Bluestar Print Group (NZ) Ltd v Mitchell, where, although theplaintiff said she wished to achieve vindication, it appears from the Court of Appeal'sjudgment she had only claimed for damages.11 In those circumstances, the Court'sremark that monetary compensation could be regarded as conveying an element ofvindication makes sense. However, where a declaration of wrongdoing is sought as aremedy, it is fair for a plaintiff to insist on an acknowledgment of the same as part ofany settlement. That is especially the case for torts concerning dignity, where damagesare likely to be low and not representative of the legitimate personal importance of theclaim to the plaintiff. Accordingly, although Mr Henderson may have achieved abetter monetary outcome by accepting Mr Walker's offers of settlement, it cannot besaid those offers would have been "more beneficial" to Mr Henderson than thedeclarations (and lesser damages) he ultimately received.[18] Lastly, in terms of the money, although Mr Henderson ultimately achieved lessthan the settlement figure, he could not reasonably be expected to have appreciatedthat likelihood at the time he rejected the offers. Mr Henderson's claim raised manynovel issues, not least of which concerned the quantification of damages for invasionof privacy. As I noted in my judgment, this was the first senior court decision whereit was necessary to squarely address the issue of damages in a privacy context. Inthose circumstances, it was entirely legitimate for Mr Henderson to test the waters onthis issue.11 See Bluestar Print Group (NZ) Ltd v Mitchell, above n 8, at [1].[19] On the whole, I am not satisfied Mr Henderson acted unreasonably in rejectingthe Calderbank offers and, in my view, it would not therefore be appropriate to awardcosts against Mr Henderson in this proceeding. As a final observation, sight shouldnot be lost of the fact the privacy tort is still in its nascency in this country and it wouldbe unfortunate if development of the law in this area were hindered by punitive costsawards against claimants.[20] Equally, however, Mr Henderson is not entitled to increased costs because ofhis Calderbank offers. The application of r 14.6(3)(b)(v) of the High Court Rules toplaintiffs was recently discussed by Cooke J in Mainzeal Property and ConstructionLtd (in liq) v Yan (No 2):12[59] Offers made by successful plaintiffs are in a different category fromoffers made by unsuccessful defendants that exceed what the plaintiff isentitled to. The latter category is subject to separate rules in rr 14.10 and 14.11which contemplate that a defendant offering more than the plaintiff is entitledto get costs from the point of the offer. That rationale does not arise in therejection of offers made by the plaintiffs. A defendant who defends aproceeding is putting the plaintiff to the cost of it, and normally no increasedcosts are caused because the defendant does not accept an offer to settle forless than is claimed.[60] The principle in r 14.6(3)(b)(v) recognises, however, there will besituations where the refusal to settle can demonstrate that the party is actingwithout reasonable justification, and causing unnecessary expense to theclaiming party. It has a similar rationale to the other uplift grounds in r 14.6.A plaintiff may offer to accept less than it is entitled to try and convince anobdurate defendant not to put the parties to the cost of a trial, and the failureto accept such an offer may justify an uplift. Without seeking to circumscriber 14.6(3)(b)(v) that seems to me what the rule is generally directed to.[21] I am far from satisfied Mr Walker caused unnecessary expense toMr Henderson in refusing to accept his offers of settlement. As I have said, this wasa novel claim, and Mr Walker was entitled to put Mr Henderson to the cost of it.Reductions in costs[22] That leaves three issues that might warrant reductions in the costs awarded toMr Henderson. First, Mr Walker objects to the inclusion of $6,690 for commencementof the proceeding, as Mr Henderson accepts he was self-represented at this stage of12 Mainzeal Property and Construction Ltd (in liq) v Yan [2019] NZHC 1637.the proceeding. I agree Mr Henderson cannot claim legal costs for a step taken at thetime he was self-represented, so I disallow that amount.[23] Secondly, Mr Walker seeks a 25 per cent uplift in costs against Mr Hendersonfor his failure to comply with various timetabling orders. Given that I have declinedto award costs to Mr Walker, I have treated this as a request for decreased costs. Rule14.7(f)(i) and (iv) allow the Court to reduce the costs otherwise payable if the partyclaiming costs has "contributed unnecessarily to the time or expense of theproceeding" by "failing to comply with these rules or a direction of the court" or by"failing, without reasonable justification, to comply with an order for discovery, anotice for further particulars, a notice for interrogatories, or other similarrequirement".[24] On 5 March 2015, Associate Judge Osborne (as he then was) directedMr Henderson to provide within 20 working days further and better particulars of eachdisclosure by Mr Walker alleged to constitute an invasion of privacy. On 19 May2015, Associate Judge Osborne recorded in a minute that Mr Henderson had failed tocomply and directed him to file amended pleadings no later than 2 June 2015.Mr Henderson filed an amended statement of claim on 2 June but, on 23 June 2015,Associate Judge Osborne held that it still did not comply with the requirements of hisjudgment dated 5 March 2015. Mr Henderson was directed to file a further amendedstatement of claim by 14 July 2015. By 18 August 2015, Mr Henderson still had notfiled a further amended statement of claim. He was directed to do so by 31 August2015. Mr Henderson filed the further amended statement of claim on 11 September2015, although on 4 March 2016, Associate Judge Osborne continued to criticise theparticularisation of Mr Henderson's claim.[25] It is apparent from this series of events that Mr Henderson contributedunnecessarily to the time of the proceeding by repeatedly failing to comply both withthe requirement to provide further particulars and the timetabling orders in respect ofproviding them. On the other hand, the expenses incurred by Mr Walker as a resultappear to have been limited to the preparation of memoranda and appearances at casemanagement conferences. In those circumstances, only a minor reduction in costs isappropriate.[26] Finally, although Mr Walker does not raise this issue, Mr Moss acknowledgesit might be appropriate to decrease Mr Henderson's costs in light of the failure on hisalternative causes of action. That was a proper concession to make. Rule 14.7(d)allows the Court to reduce the costs otherwise payable if the party claiming costs,although having succeeded overall, has "failed in relation to a cause of action or issuewhich significantly increased the costs" of the other party. As Mallon J explained inStrathboss Kiwifruit Ltd v Attorney-General:13[12] It is common for a successful party to fail on some aspects of theirclaim. Whether this should reduce the costs award depends on whether thatfailure "significantly increased the costs of the party opposing costs." Thisrequirement ensures that in most cases it is not necessary to dissect theproceeding issue by issue, or cause of action by cause of action, to determinecosts. It is only when the party who succeeded overall significantly increasedthe costs of the unsuccessful party, because of issues or causes of action onwhich the successful party failed, that any reduction in the costs award is tobe made. [27] Mr Henderson was ultimately seeking vindication for the misuse of hispersonal information in one form or another. The various causes of action representeddifferent ways of conceptualising the wrongdoing by Mr Walker. Some of those weresuccessful while others were not, but at the end of the day Mr Henderson wasvindicated for the misuse of his information. In those circumstances, any reduction incosts should be small. That said, I am satisfied the plenitude of unsuccessful claimslikely increased Mr Walker's costs to a significant degree. The length of thesubstantive judgment should be indication enough of that fact. Some discount istherefore appropriate, although this should be small because, as I have already said,the main cost in this proceeding was likely to have been in relation to the factualmaterial rather than the legal research, and the factual material was relevant to allcauses of action.[28] Taking these two issues together, I am satisfied a global discount of 12 per centis appropriate.[29] Mr Henderson also requests an uplift in costs as a result of various findingsmade in the substantive judgment about the propriety of Mr Walker's conduct. It is,13 Strathboss Kiwifruit Ltd v Attorney-General [2019] NZHC 62 (footnote omitted).however, well established the role of costs is not to punish parties for their behaviouroutside their conduct of the proceedings.14Result[30] Mr Walker is to pay Mr Henderson reduced costs of $31,987.12, plusdisbursements of $15,431.Thomas JSolicitors:Canterbury Legal, Christchurch for PlaintiffLuke Cunningham Clere, Wellington for Defendant14 Thames-Coromandel District Council v Coromandel Heritage Protection Society Inc [2009]NZCA 204, (2009) 19 PRNZ 365 at [10] and [13].