JUHASZ v MEDICAL LIFE ASSURANCE SOCIETY LIMITED [2018] NZHC 147

JUHASZ v MEDICAL LIFE ASSURANCE SOCIETY LIMITED [2018] NZHC 147 [14 February 2018]IN THE HIGH COURT OF NEW ZEALANDWELLINGTON REGISTRYI TE KŌTI MATUA O AOTEAROATE WHANGANUI-Ā-TARA ROHECIV-2016-485-760[2018] NZHC 147BETWEEN EVA SUSAN JUHASZFirst PlaintiffEVA JUHASZ LIMITEDSecond PlaintiffAND MEDICAL LIFE ASSURANCE SOCIETYLIMITEDDefendantHearing: On the papersCounsel: C Meechan QC and W D Buckham for PlaintiffsE Horner and L Tidey for DefendantJudgment: 14 February 2018JUDGMENT OF CHURCHMAN J(COSTS)[1] I gave a judgment dated 23 November 2017 declining a claim for damages byDr Juhasz and Eva Juhasz Limited (the plaintiffs) and awarding Medical LifeAssurance Society Ltd (MAS) its counterclaimed amount of $46,539.53.1[2] The defendant has submitted that the proceedings should be categorised asstandard 2B proceedings and the plaintiff has taken no issue with this. Thiscategorisation is appropriate.1 Juhasz v Medical Life Assurance Society [2017] NZHC 2866.[3] MAS seeks costs and disbursements of $129,064.68 in relation to theproceedings and also seeks the recall, amendment and reissue of the 23 November2017 judgment to award interest.[4] The plaintiffs' submissions do not address the application for recall and re-issue of the judgment with the inclusion of interest, so I will treat that as unopposedand will address it in a separate minute.[5] The parties have been unable to reach agreement on three discrete aspects ofthe costs claims:• items on the costs schedule;• the costs to be awarded for expert witness fees; and• whether an uplift from scale costs is necessary.[6] I consider each issue in turn.Items on the costs scheduleAnswers to interrogatories and preparation by MAS of list of authorities and commonbundle[7] The plaintiffs do not accept item 17 on the costs schedule, arguing that theanswers to interrogatories were not referred to in either opening or closingsubmissions, nor was the Court taken to the answers to interrogatories at any stage.[8] MAS states that the answers to interrogatories were referred to in paras 10 and58 of its closing submissions.[9] The plaintiffs do not accept item 32 on the costs schedule, arguing that MAS'scontribution to the common bundle was insignificant and many of its prepared bundlesof authorities were not referred to in opening or closing submissions. An adjustmentis therefore requested taking this into account.[10] MAS states that its contribution to the preparation of the common bundle wasnot insignificant, amounting to 14 pages of additional documents. Only threereferences were not referred to during opening and closing submissions.[11] I accept MAS's submissions on these points and award costs accordingly.Second counsel[12] The plaintiffs do not accept item 35 on the cost schedule, arguing that secondcounsel did not participate during the 2.25 days they were in Court and that theduration of the hearing was relatively short. However, the hearing did cover five days.The issue of whether the case was an appropriate one for second counsel is notdetermined by whether second counsel actually addressed the court. I note that theplaintiff was represented by two counsel throughout the hearing and junior counsel forthe plaintiff did not address the court either.[13] MAS accepts that second counsel did not appear after the morning session on16 October 2017, nor on 18 October. It submits that a reduction of 0.875 of a daywould be reasonable, reducing the item 35 claim to $2787.50. This is an appropriateconcession.[14] Awarding of costs for second counsel is at the Court's discretion. This was acase of sufficient complexity to warrant second counsel. MAS accepts that noallowance for second counsel should be granted for time she was not present in Courtand therefore this element of the costs is reduced accordingly.Costs to be awarded for expert witness feesRecovery of GST on Dr Kenny's fee[15] The plaintiffs disagree with the full award of Dr Kenny's expert fee, arguingthat the GST component of this fee should be deducted as MAS will have claimed aninput credit.[16] The invoices provided show that the disbursement was GST-inclusive.However, a GST-registered party will generally recover a GST input credit for the GSTpaid to its solicitor, and therefore costs on disbursements should be GST-exclusive.2[17] Costs on Dr Kenny's fees are awarded on a GST-exclusive basis.Dr Kenny's travel[18] An amount of $690.68 has been claimed for Dr Kenny's travel. However, nodetails of what the $690.98 specifically relates to have been included. Some travellingcosts such as travelling time and airport parking have been included in the invoicefrom Dr Kenny. In the absence of details about the $690.68, this part of the costsapplication is declined.Reduction in costs in the award of Deloitte's fees[19] The plaintiffs challenge the amount claimed in respect of the Deloitte fee,arguing that the claimed sum of $52,345.13 was unreasonable.[20] Under r 14.12(2) of the High Court Rules 2016, a disbursement must bespecific to the conduct of the proceeding, reasonably necessary for the conduct of theproceeding, and reasonable in amount.[21] In Auckland Waterfront Development Agency Ltd v Mobil Oil New ZealandLtd, Katz J held that the party claiming costs:3 bears the onus of satisfying [the Court], on the balance of probabilities, thatthe expert disbursements it seeks to recover were reasonably necessary for theconduct of the proceeding and reasonable in amount.[22] Katz J followed a broad approach in assessing the reasonableness of Mobil'sexpert costs:4(a) Determine whether a particular attendance (or category ofattendances) was reasonably necessary for the conduct of the2 New Zealand Venue and Event Management Ltd v Worldwide NZ LLC [2016] NZCA 282 at [6].3 Auckland Waterfront Development Agency Ltd v Mobil Oil New Zealand Ltd [2015] NZHC 470at [50].4 At [44].proceeding. This requires a sufficient description of the particularwork undertaken. A supporting affidavit from an independent expertpractising in the same field may be necessary or appropriate when thequantum claimed is significant.(b) Consider the amount of time claimed for the relevant attendance (orcategory of attendances) and whether it is reasonable, allowing for thesignificance and complexity of the particular work. A table showingthe various steps taken and the costs associated with each step mayassist.(c) Consider the hourly rate charged for each author and whether that isreasonable, relative to the experience of that author and thecomplexity of the work undertaken.(d) Consider any additional evidence which is relied upon to show thatthe rate charged is a reasonable one (or that the overall costs arereasonable). Again, in some cases (such as where the quantumclaimed is particularly large) it may be necessary to file a supportingaffidavit from an independent person practising in the same field asthe relevant expert(s), deposing that the hourly rates claimed areappropriate and in accordance with industry standards.[23] In Kelly v Lasque Construction Ltd, Woolford J had to consider thereasonableness of an expert's fees and the recoverability of the fees charged by hisfirm.5 In that case, the first invoice showed one lump sum charged, with no hourlybreakdown, and then a charge for 22.5 hours' work by one expert and 26.5 hours' workby another, indicating that the work carried out was reviewing meetings, and doing acomparative review and progress on the compilation of the brief of evidence. A secondinvoice indicated that several experts had contributed in providing services but nospecific description was provided of the work involved.6[24] Woolford J stated that while comparative evidence showing the general ratesof quantity surveyors would have been helpful in establishing reasonableness, the ratescharged did not appear to be high, with the charge per hour for the most senior expertbeing around $220 per hour.7 Additionally, the quantum claimed for costs was onlyfive per cent of the overall quantum sought in the litigation.8[25] In this case, the first invoice from Deloitte of $19,949.63 states that it is for:5 Kelly v Lasque Construction Ltd [2015] NZHC 3368.6 At [11]–[12].7 At [18].8 At [22].Time costs incurred in the period 20 July to 31 August 2017 in analysinginformation and preparing our report for Phase 1 of the Juhasz matter.There is no breakdown of the hours required to complete this analysis and preparation,nor is there any information who undertook the work.[26] The second invoice of $2,432.25 states that it is for:Time costs incurred in the period 1 to 30 September in finalising our reportand brief of evidence for the Juhasz matter.Again, no detail is provided of the hours involved or who undertook the work.[27] The third invoice of $29,963.25 does provide more detail, not only stating thenature of the work undertaken, but also detailing the hours of each expert involved.The total hours for each expert were:• Barry Jordan – 22.5 at $650 per hour• Mel Maddox – 20.4 at $650 per hour• Ben Colwell – 2 at $150 per hour[28] For the plaintiffs, Ms Meechan QC argues that while Mr Jordan would havespent time preparing to give evidence and three hours in Court giving his evidence, itis difficult to determine what work the other Deloitte members completed.[29] It is therefore not possible to ascertain exactly how the fees were calculated orwhat they were for precisely. MAS has therefore failed to prove that Deloitte's feesin the sum claimed were reasonable.[30] Where the party seeking expert witness fees has failed to satisfy the Court, onthe balance of probabilities, that the fees it seeks to recover are reasonable, a reductionin costs in the award of those fees is appropriate. In Auckland Waterfront, where Katz Jwas unable to determine from the invoices provided how the fees were calculated orwhat precisely they were for, a reduction of 30 per cent of the total expert costsclaimed was deemed appropriate.9 A more modest reduction of 10 per cent was foundto be reasonable in Kelly v Lasque Construction Ltd, given that the quantum claimedfor costs was just five per cent of the overall quantum sought in the litigation.10[31] On the facts of the present case, a reduction of 30 per cent, in line with that ofAuckland Waterfront, would be justified. That reduces the claim in respect ofDeloitte's fees by $15,703.54 to $36,641.59.Uplift from scale costs[32] Under the r 14.10(1) of the High Court Rules 2016, a party to a proceedingmay 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.[33] Rule 14.6(3)(b)(v) provides that increased costs may be awarded where a partyfails to accept an offer of settlement without reasonable justification, with the resultthat they contribute unnecessarily to the time or expense of the proceeding or any stepin it.[34] In Weaver v HML Nominees Ltd, Katz J identified a number of factors whichwould impact on whether increased costs should be awarded.11 These included theamount of preparation for trial already undertaken, whether the parties were in aposition to assess the merits when the offer was received, and the timing of the offer.[35] Having found in that case that the offer was a reasonable one, Katz Jdetermined that given the proceedings had been underway for some time and extensivepreparation had been undertaken, the plaintiffs would have been in a position toundertake a realistic assessment of the offer.12 Furthermore, the offer was made three9 Auckland Waterfront Development Agency Ltd v Mobil Oil New Zealand Ltd, above n 3, at [54].10 Kelly v Lasque Construction Ltd, above n 5, at [22].11 Weaver v HML Nominees Ltd [2016] NZHC 473 at [30].12 At [31].months before trial and the plaintiffs behaved unreasonably in refusing to engage withthe offer. An uplift of 50 per cent was granted.13[36] In Kelly v Lasque Construction Ltd, where a sum of $100,000 was offered bythe defendants, and it was found that the plaintiffs had little prospect of succeeding,an uplift of 20 per cent was awarded. In that case, the offers had been made aconsiderable time before the hearing commenced.14[37] The rule permits an offer "at any time", but the later the offer is made, the lessimpact it will have on costs awarded. In Strachan v Denbigh Property Ltd, an offermade by 30 November for a hearing on 2 December was disregarded for costspurposes.15 However, in Health Waikato Ltd v Van der Sluis, an offer made 12 daysbefore a hearing was held to be sufficient.16[38] In this case, an initial offer was made by MAS on 10 November 2016, in whichMAS indicated it had a counterclaim but would be willing to settle on the basis thatthe plaintiffs discontinue the proceeding with there being no question as to costs.[39] A similar offer was repeated on 9 October 2017, a week before the hearing wasto commence, in which MAS offered to settle on the basis that each party discontinuedtheir claims and bore their own costs.[40] A third offer was made on 12 October 2017, four days before the hearing, inwhich MAS offered to settle on the basis that:(a) MAS would honour the plaintiffs' claim to date if they did not seekinterest or general damages, and with each party bearing their owncosts;(b) MAS would continue to assess the insured's partial disability inaccordance with the policy going forward; and13 At [34].14 Kelly v Lasque Construction Ltd, above n 5, at [32] and [34].15 Strachan v Denbigh Property Ltd HC Palmerston North CIV-2010-454-232, 3 June 2011 at [21].16 Health Waikato Ltd v Van der Sluis (1997) 10 PRNZ 514, [1997] ERNZ 236 (CA) at 245.(c) for the purpose of MAS being able to accurately and properly assessthe claim going forward, the plaintiffs must provide full and accuratedisclosure of all relevant information when requested by MAS.[41] MAS submits that it was unreasonable of the plaintiffs not to accept theCalderbank offers of 9 and 12 October 2017, and therefore sought an uplift of50 per cent of scale costs for the preparation for hearing and appearance at hearing forprincipal counsel together with second counsel.[42] The plaintiffs submit that these two Calderbank offers were made very closeto the hearing, by which point a significant amount of time and money had alreadybeen invested. If the Court is minded to grant uplift, it should be significantly lessthan the 50 per cent claimed.[43] The two offers made by MAS were reasonable and, although by October 2017a significant amount of time and money had been invested by the plaintiffs in theproceedings, this should have meant they had a clear picture of whether their claimwould succeed or not. The claim failed on all counts. However, the offers (particularlythat of 12 October 2017) were very close to trial and, unlike in Weaver v HMLNominees Ltd, there is nothing to suggest that the plaintiffs refused to engage with theoffer. Therefore an uplift in the vicinity of 30 per cent is appropriate.Interest on judgment sum[44] MAS was awarded the sum counterclaimed by it in full. An award of intereston overpaid benefits from the date on which the benefits were paid was sought at theprevailing rate in the Judicature Act 1908.[45] My judgment did not address whether interest in respect of the counterclaimaward was to be awarded or not.[46] An omission to award interest may be corrected by the Court by a recall,amendment and reissue of the judgment pursuant to r 11.9 of the High Court Rules2016, which provides:11.9 Recalling judgmentA judge may recall a judgment given orally or in writing at any time before aformal record of it is drawn up and sealed.[47] The omission to award interest to MAS in respect of the counterclaim was anoversight on my part. In a separate minute, I have therefore recalled my judgment andamended it to provide for interest to be awarded accordingly.Costs claim by MAS[48] On 1 December 2017, MAS wrote a letter to the plaintiffs setting out its costsand other disbursements as:Scale costs on a 2B basis $60,098.50 (as claimed by MAS)Second counsel (item 35) – MAS accepts that thisshould be reduced from $5017.50 to $2787.50. Thisbrings scale costs down from $60,098.5 to $57,868.50.Scale costs = $57,868.50Uplift for items 33-35 inclusivedue to Calderbank offers madeon 10 November 2016, 9 October2017 and 12 October 2017Uplift of 30% granted = $5,853.75Expert witness fees of:Dr Kenny (fees)Dr Kenny (travel)Deloitte (Barry Jordan)$56,750.01 (as claimed by MAS)$3,715.10 – GST-exclusive = $3,230.52$690.68 – Dr Kenny's travel expenses were notdetailed, therefore $0$52,345.13 – reduced by 30 per cent, this is $36,641.59Total expert witness fees awarded = $39,872.11Disbursements $1,644.00Total $105,238.36Conclusion[49] Accordingly, judgment is given in favour of MAS in the following sums:(a) costs and disbursements totalling $105,238.36;(b) in respect of the counterclaim, the sum of $46,539.53 plus interest offive percent per annum:(i) From 24 June 2015 to the date of payment in respect of$20,537.59; and(ii) From 28 July 2015 to the date of payment in respect of$26,001.94._____________________________Churchman JSolicitors:Shieff Angland, Auckland for PlaintiffsMahony Burrowes Horner, Wellington for Defendant